Which of the Following Is Not True About Purchase Accounting

question 60

Multiple Choice

Which of the following is not true about purchase accounting?

• A) For financial reporting purposes, all M&As must be recorded using the purchase method of accounting.
• B) Under the purchase method of accounting, the excess of the purchase price over the target's net asset value is treated as goodwill on the combined firm's balance sheet.
• C) Goodwill may be amortized up to 40 years.
• D) If the fair value of the target's net assets later falls below its carrying value, the acquirer must record a loss equal to the difference.
• E) None of the above

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Definitions:

Maximize Profits

The process or strategy used by businesses to ensure they achieve the highest possible profit from their operations.

Ethical Investing

Ethical investing involves making investment decisions based on ethical principles, including environmental sustainability, social justice, and corporate governance.

Proprietorship

A business structure owned by a single individual who is responsible for its liabilities and entitled to its profits.

Taxed

The imposition of a financial charge or other levy upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.