In a Transaction Accounted for Using the Purchase Method Where

question 93

Multiple Choice

In a transaction accounted for using the purchase method where cost exceeds book value,which statement is true for the acquiring company with regard to its investment?

• A)Net assets of the acquired company are revalued to their fair values and any excess of cost over fair value is allocated to goodwill.
• B)Net assets of the acquired company are maintained at book value and any excess of cost over book value is allocated to goodwill.
• C)Assets are revalued to their fair values.Liabilities are maintained at book values.Any excess is allocated to goodwill.
• D)Long-term assets are revalued to their fair values.Any excess is allocated to goodwill.

---

Definitions:

Computerized Assembly Line

A production line in which computers control the assembly of products, enhancing efficiency, precision, and consistency.

Iron Ore

A natural resource that is mined and used primarily in the production of steel.

Tax Policy

Government guidelines that determine the collection and management of taxes within a jurisdiction, affecting how wealth is distributed among the population.

Production Possibilities Frontier

A curve demonstrating the maximum achievable output levels for two or more goods, given a set of inputs and technology.