Castle Ltd

question 4

Multiple Choice

Castle Ltd. acquired 100% of Bello Ltd. At the time of acquisition, Bello had assets with a tax value of $700,000, carrying value of $800,000, and fair value of $950,000. Both Castle and Bello are subject to a tax rate of 40%. What is the effect of recognizing the deferred tax in accounting for the acquisition?

• A)Increase in liabilities and goodwill
• B)Decrease in liabilities and goodwill
• C)Decrease in liabilities and increase in goodwill
• D)Increase in liabilities and decrease in goodwill

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Definitions:

Important

Having significant value, meaning, or influence, often affecting the outcome of a situation or the overall quality of something.

Drawbacks

Refers to disadvantages or negative consequences associated with a decision, action, or strategy.

Listening

The active process of receiving, interpreting, and responding to verbal and non-verbal messages, essential for effective communication.

Maureen Chiquet

A former global CEO of Chanel, known for her leadership in the fashion industry and authorship on the subject of leadership and personal development.