Which One of the Following Statements Is Correct

question 79

Multiple Choice

Which one of the following statements is correct?

• A) The shareholders of an acquired firm are generally given a choice of accepting either cash or shares of stock when the acquisition is tax free.
• B) To be a tax-free acquisition, the shareholders of an acquired firm must receive shares in the acquiring firm that are equal to 25 percent or less of the value of the shares held in the acquired firm.
• C) The assets of an acquired firm are recorded on the books of the acquiring firm at their current book value regardless of the tax status of the acquisition.
• D) Target firm shareholders demand a higher selling price when an acquisition is a nontaxable event.
• E) If the assets of a firm are written up as part of the acquisition process, the increase in value is considered to be a taxable gain.

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Definitions:

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A method in financial accounting that provides a snapshot of a company's financial condition at one point in time by listing its assets, liabilities, and equity.