The Purchase Accounting Method for Mergers Requires That

question 68

Multiple Choice

The purchase accounting method for mergers 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 amortized on a yearly basis.
• 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:

Staff Department

A unit that provides services, assistance, and advice to the departments with line or other staff responsibilities.

Line Responsibilities

Duties and tasks directly involved in the operations of an organization and its core business functions.

Services

Economic activities that result in the production of non-physical goods and benefits, such as consulting, banking, or education.

Managerial Accounting

The process of identifying, measuring, analyzing, and interpreting financial information for the purpose of improving management decision-making.