Which of the Following Statements Is FALSE

question 21

Multiple Choice

Which of the following statements is FALSE?

• A)The method of payment (cash or shares)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)Any goodwill created in a merger deal can be amortised for tax purposes over 15 years.
• C)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.
• D)Many transactions are carried out as acquisitive reorganisations under the tax law. These structures allow the target shareholders to defer their tax liability on the part of the payment made in acquirer shares but they do not allow the acquirer to step up the book value of the target assets.

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Definitions:

Demand Curve

A graphical representation showing the relationship between the price of a good or service and the quantity demanded for a given period.

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

Price Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good.

Marginal Revenue

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