National Geographic Is Replacing an Old Printing Press with a New

question 9

Multiple Choice

National Geographic is replacing an old printing press with a new one. The old press is being sold for $350,000 and it has a net book value of $75,000. Assume that National Geographic is in the 40% income tax bracket. How much will National Geographic pay in income taxes from the sale?

• A) $140,000
• B) $45,000
• C) $110,000
• D) $87,010

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Definitions:

Consolidated Financial Statements

Financial reports that display the economic condition, operational outcomes, and cash movements of a parent company and its subsidiary companies as one consolidated entity.

Pooling-of-interests Method

A merger accounting method where the assets and liabilities of merging companies are combined using their book values.

Acquisition Method

An accounting approach used to consolidate the financial statements of two companies when one company acquires control over the other.

Purchase Method

An accounting method used in mergers and acquisitions where the assets and liabilities of the acquired company are added to the acquirer's balance sheet at their fair market values.