Morin Co Acquired All the Shares of Lightfoot Ltd

question 4

Multiple Choice

Morin Co. acquired all the shares of Lightfoot Ltd. Lightfoot has a number of amortizable capital assets and has properly recorded the related deferred income taxes on its books.
- At the time of acquisition, the fair values of these assets were higher than their carrying values and their tax bases. In Morin's consolidation each year, it must adjust for the deferred taxes that resulted from these temporary differences. Which of the following statements is true?

• A)The consolidation adjustment will always result in an increase in the deferred tax liability.
• B)The consolidation adjustment will always result in a decrease in the deferred tax liability.
• C)The consolidation adjustment can result in either an increase or a decrease in the deferred tax liability.
• D)The consolidation adjustment is required only if the tax basis changes.

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Definitions:

Correlation

A statistical measure that indicates the extent to which two or more variables fluctuate together.

Vivid Events

Highly memorable and intensely detailed occasions that stand out in one's memory, often due to their emotional impact or significance.

Relationship

A connection, association, or involvement between two or more individuals, groups, or entities, often characterized by emotional or social ties.

Overestimated

Overestimation refers to the assessment of something as more significant or larger than it actually is in reality.