Which One of the Following Statements Is Correct

question 20

Multiple Choice

Which one of the following statements is correct?

• A)Firms with large net operating losses tend to be acquiring firms rather than target firms.
• B)The leverage associated with an acquisition increases the tax liability of the acquiring firm.
• C)If either an increase or a decrease in the level of production causes the average cost per unit to increase then the firm is currently operating at its optimal production level.
• D)Firms can always benefit from economies of scale if they increase the size of their firm through acquisitions.
• E)If a firm uses it surplus cash to acquire another firm then the shareholders of the acquiring firm immediately incur a tax liability related to the transaction.

Understand the concept and application of depletion in accounting for natural resources.

Identify and calculate different methods of depreciation for tangible assets.

Recognize and report the accumulated depletion and depreciation on the balance sheet.

Understand the role of residual value in the calculation of depreciation and its impact on the asset's book value.

---

Definitions:

Monopolistically Competitive

A market structure where many firms sell products that are similar but not identical, allowing for some degree of market power and price setting.

Long-Run Equilibrium

A state in which all inputs can be adjusted by firms, market supply equals demand, and there is no incentive for economic actors to alter their behavior.

Excess Capacity

The condition where a business produces less than the maximum amount possible, often leading to inefficiency.

Average Total Cost

The total cost of production divided by the quantity produced, taking into account both fixed and variable costs.