Which of the Following Questions Is False

question 9

Multiple Choice

Which of the following questions is false?

• A) The method of payment (cash or stock) affects how the value of the target's assets is recorded for tax purposes and it affects the combined firm's financial statements for financial reporting.
• B) The combined firm must mark up the value assigned to the target's assets on the financial statements by allocating the purchase price to target assets according to their fair market value.
• C) Any goodwill created in a merger deal can be amortized for tax purposes over 15 years.
• D) Many transactions are carried out as acquisitive reorganizations under the tax code. These structures allow the target shareholders to defer their tax liability on the part of the payment made in acquirer stock but they do not allow the acquirer to step up the book value of the target assets.

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Definitions:

Additional Unit

An extra item or piece beyond the current production or stock, often considered in decision-making regarding costs and prices.

Marginal Revenue

The extra revenue earned by selling an additional unit of a product or service.

Marginal Revenue

The additional income generated from selling one more unit of a product or service.

Lump Sum

A significant amount of money paid all at once, as opposed to smaller payments or installments over time.