Company a Wishes to Acquire Control of Company B as Cheaply

question 8

Multiple Choice

Company A wishes to acquire control of Company B as cheaply as possible. For economic reasons, a consultant recommended that Company A can do this through purchase of assets, rather than purchase of shares. Which of the following statements regarding the above scenario is correct?

• A) Company A must purchase all of Company B's assets and liabilities.
• B) Company A only needs to acquire control of Company B's net assets.
• C) Company A only needs to acquire control of Company B's fixed assets.
• D)The consideration given by Company A must exceed 50% of the fair market value of Company B's net assets.

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Definitions:

Exception

A deviation from the norm or a case that does not follow the general rule.

Standard Costs

Predetermined costs assigned to goods and services, used as benchmarks to measure performance by comparing them with actual costs.

Factory Overhead

The sum of all indirect costs of manufacturing, including expenses related to the operation of factories such as utilities and rent, articulated with different phrasing.

Predetermined Rate

A rate established in advance to apply overhead costs to products or job orders, usually based on estimated costs and activity levels.