The Purchase Accounting Method Requires That

question 15

Multiple Choice

The purchase accounting method 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 for financial statement purposes.
• 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:

Myxedema

A severe type of hypothyroidism that is most common in women older than 50.

Thyroid Gland

An endocrine gland in the neck that produces hormones regulating the body's metabolic rate as well as heart and digestive function, muscle control, brain development, and bone maintenance.

Thyroid Hormones

Chemical substances produced by the thyroid gland; important in regulating the body's metabolism, energy production, and overall physiological functions.

Adequate Amounts

Sufficient quantities to meet a specific requirement or need.