Which of the Following Is a Possible Reason Why Security

question 43

Multiple Choice

Which of the following is a possible reason why security prices were found to respond to changes from pooling to purchase accounting for combinations?

• A)A change from pooling to purchase accounting does not affect cash flow.
• B)Differences between purchase and pooling accounting affect only book income.
• C)The change could have affected dividend distribution because of debt covenants.
• D)Income would normally be higher under purchase accounting than pooling.

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Definitions:

Balance Sheet

A document detailing a corporation's assets, debts, and owner's equity at a certain point in time.

Marital Status

A legal or social recognition of a person's relationship status, such as single, married, divorced, or widowed.

Unemployment Tax

Taxes imposed on employers by government agencies to fund unemployment insurance and compensation programs for workers who have lost their jobs.

Social Security Tax

Taxes collected by governments from employees and employers to fund the social security program, supporting retirees, disabled persons, and survivors.