In the CVS Acquisition of Longs Drug,the SEC Concluded That

question 68

Multiple Choice

In the CVS acquisition of Longs Drug,the SEC concluded that the purchase price accounting (PPA) was not in compliance with GAAP because:

• A)The amount did not reflect current use of Longs personal property at the acquisition date
• B)CVS used an overly-aggressive technique to value Longs
• C)CVS did not account for its use of Long's assets to generate revenue after the acquisition date
• D)All of the above

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Definitions:

Finishing Department

A stage in manufacturing where products undergo final processes such as polishing, painting, or packaging before being ready for sale.

Predetermined Overhead Rate

A rate calculated at the beginning of the fiscal period to estimate indirect costs based on a certain activity, such as machine hours or labor hours.

Direct Labor-Hours

The cumulative amount of time spent working directly in the production of a good or the delivery of a service.

Job-Order Costing

A cost accounting system that accumulates costs per job rather than process, suitable for firms producing unique or custom products.