Which of the Following Is an Advantage of a Spin-Off

question 71

Multiple Choice

Which of the following is an advantage of a spin-off versus selling a subsidiary and distributing the cash?

• A) A spin-off increases the transaction costs associated with selling the subsidiary.
• B) Shareholders must immediately pay capital gains taxes versus ordinary income taxes on the value of the spin-off.
• C) A spin-off guarantees a lower cost of capital.
• D) The spin-off is not taxed as a cash distribution.

---

Definitions:

Post-Closing Trial Balance

A list of all the account balances of a business after closing entries for the accounting period have been made, ensuring the accounts are ready for the next period.

Financial Statements

Comprehensive reports created to communicate the financial performance, position, and cash flows of a business to external and internal stakeholders.

Adjusting Entries

Accounting records entries recorded at the conclusion of an accounting cycle to apportion revenues and expenditures to the time period they truly took place.

Adjusted Trial Balance

A financial statement listing all accounts and their balances after adjusting entries have been made, ensuring the total debits equal total credits.