At the Date of Acquisition There Is No Recognition of a Deferred

question 11

Multiple Choice

At the date of acquisition there is no recognition of a deferred tax item in respect to goodwill because it is a residual amount and the recognition of a deferred tax item would:

• A) decrease the profit on consolidation.
• B) increase the profit on consolidation.
• C) increase the carrying amount of goodwill.
• D) decrease the carrying amount of goodwill.

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Definitions:

Operating Income

Earnings before interest and taxes (EBIT), representing the profit a company makes from its operations.

Unit Selling Price

The price at which an individual unit of a product is sold to customers.

Unit Variable Costs

These are the costs that change directly with the level of production or service activity, such as materials and labor.

Break-even Sales

The amount of revenue required to cover total fixed and variable costs, resulting in neither profit nor loss.