The Purchase Accounting Method Requires That

question 311

Multiple Choice

The purchase accounting method requires that:

• A) The excess of the purchase price over the fair market value of the target firm be recorded as a one-time expense on the income statement of the acquiring firm.
• B) Goodwill be included as a current liability.
• C) The equity of the acquiring firm be reduced by the excess of the purchase price over the fair market value of the target firm.
• D) The assets of the target firm be recorded at their fair market value on the balance sheet of the acquiring firm.
• E) The excess amount paid for the target firm be recorded as a tangible asset on the books of the acquiring firm.

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Definitions:

Competitive Market

A market structure characterized by many buyers and sellers, free entry and exit, and a product for which each unit is identical to every other unit.

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Fish

Aquatic vertebrates that are typically covered with scales and equipped with fins for swimming.

Workbook Problems

Exercises or tasks within a workbook designed to practice or test knowledge on a specific subject.