Which of the Following Is Not True of Purchase Accounting

question 85

Multiple Choice

Which of the following is not true of purchase accounting?

• A) Total purchase price paid for the target firm is reflected on the books of the combined companies
• B) All liabilities are transferred at the NPV of their future cash payments
• C) The cost of the acquired entity becomes the new basis for recording the acquirer's investment in the assets of the target company.
• D) Goodwill equals the difference between the purchase price paid for the target firm and the book value of acquired assets.
• E) Goodwill must be reduced if it is believed to be impaired.

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