Identify Which of the Following Statements Is True

question 29

Multiple Choice

Identify which of the following statements is true.

• A)The total basis of the target corporation's assets following a Sec. 338 election in general equals the amount paid for the target corporation's stock minus the target corporation's liabilities.
• B)The residual method ensures that any premium paid for the target stock is reflected in depreciable assets.
• C)The allocation of the total basis of the target corporation's assets to the individual assets following a Sec. 338 election occurs under the residual method.
• D)All of the above are false.

---

Definitions:

Incremental Changes

Minor adjustments or improvements made to a product, process, or system over time.

Net Cash Outlays

Net cash outlays is a term used to describe the total cash expenditures a company makes, minus any cash inflows.

Additional Assets

Additional resources or properties acquired by a firm or individual which can be utilized for generating revenue or held as an investment.

Incremental Cash Flow

The additional cash flow generated by a company from undertaking a new project or making a business decision, used to analyze the profitability of that decision.