How Should the Cost of Issuing Debt in an Acquisition

question 4

Multiple Choice

How should the cost of issuing debt in an acquisition be recognized?

• A)Expensed
• B)Amortized over the term of the debt
• C)Deducted from the value of the debt
• D)Deducted from shareholders' equity

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Definitions:

JIT

Just-In-Time, a management strategy that aligns raw-material orders from suppliers directly with production schedules to improve efficiency and decrease waste.

Credit Policy Variable

An element that defines the guidelines under which credit is extended to customers, including terms of payment and interest rates.

Credit Period

The duration of time a buyer is allowed to pay for goods or services received, before interest or penalties begin accruing.

Collection Policy

The specific strategies and methods a company uses to manage the collection of its accounts receivable.