The Purchase Accounting Method for Mergers Require That

question 44

Multiple Choice

The purchase accounting method for mergers require 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:

Compounded Semiannually

An interest calculation method where the interest is added to the principal twice a year, leading to interest on interest in the subsequent periods.

Compounded Monthly

A method where interest earnings are calculated and added to the principal sum each month, effectively earning interest on the interest from the previous month.

Compounded Semiannually

A different phrase for interest calculation done two times a year, where interest is added to the principal for future interest calculation.

Compounded Monthly

A method of calculating interest where the accumulated interest is added back to the principal sum each month.