Morin Co Acquired All the Shares of Lightfoot Ltd

question 3

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.
- What deferred income tax adjustment must Morin make for its consolidated financial statements?

• A)Adjustment for any changes in temporary differences due to the difference between carrying values and tax bases of Lightfoot's depreciable capital assets
• B)Adjustment for any changes in temporary differences due to the amortization of fair value increments
• C)Adjustment for any changes in temporary differences due to the amortization of goodwill
• D)No adjustment is necessary.

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Definitions:

Adjusting Entries

Entries recorded at the conclusion of an accounting period to adjust the account balances prior to the creation of financial statements.

Revenue And Expense

Key components of an income statement, with revenue representing income earned and expense depicting costs incurred in generating that income.

Correcting Entries

Journal entries made in accounting to correct previously made errors or adjustments in the financial statements.

Accrual Basis

An accounting method that records revenues and expenses when they are earned or incurred, regardless of when cash is exchanged.