Foster Ltd

question 2

Multiple Choice

Foster Ltd. acquired 100% of Benson Ltd. The carrying values of Benson's capital assets differed from their fair values and their fair values differed from their tax bases. Which of the following statements is true?

• A)The difference between Benson's carrying values and its fair values created a deferred tax asset or liability that is part of the allocation of the acquisition cost.
• B)The difference between Benson's fair values and its adjusted cost bases for tax purposes creates a deferred tax asset or liability that is part of the allocation of the acquisition cost.
• C)The difference between Benson's carrying values and its adjusted cost bases for tax purposes created a deferred tax asset or liability that is part of the allocation of the acquisition cost.
• D)No deferred tax asset or liability arises from the above situation.

---

Definitions:

Capitalism

An economic system characterized by private ownership of the means of production and the creation of goods or services for profit.

Entrepreneurship

The process of designing, launching, and running a new business or enterprise, particularly one that is characterized by innovation and risk.

Physical Facilities

The buildings, spaces, and related equipment owned or leased by an organization to support its operations.

Capital

Financial resources or assets owned by an individual or organization, used for investment, production, or other economic purposes.