Which of the following is true about purchase accounting?
A. Cash and accounts receivable, reduced for bad debt and returns, are valued at their values on the books of the target before the acquisition..
B. Marketable securities are valued at their realizable value after transactions costs.
C. Property, plant and equipment are valued at fair market value.
D. Intangible assets are booked at their appraised values.
E. All of the above.
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Which of the following is not true about purchase accounting?
A. For financial reporting purposes, all M&As must be recorded using the purchase method of accounting.
B. Under the purchase method of accounting, the excess of the purchase price over the target's net asset value is treated as goodwill on the combined firm’s balance sheet.
C. Goodwill may be amortized up to 40 years.
D. If the fair value of the target's net assets later falls below its carrying value, the acquirer must record a loss equal to the difference.
E. None of the above
Which of the following is not true about mergers and acquisitions and taxes?
A. Tax considerations and strategies are likely to have an important impact on how a deal is structured by affecting the amount, timing, and composition of the price offered to a target firm.
B. Tax factors are likely to affect how the combined firms are organized following closing, as the tax ramifications of a corporate structure are quite different from those of a limited liability company or partnership.
C. Potential tax savings are often the primary motivation for an acquisition or merger.
D. Transactions may be either partly or entirely taxable to the target firm's shareholders or tax-free.
E. None of the above
Form of payment can involve which of the following:
A. Cash
B. Stock
Cash and stock
D. Rights, royalties and fees
E. All of the above
A holding company may be used as a post-closing organizational structure for all but which of the following reasons?
A portion of the purchase price for the target firm included an earn-out
B. The target firm has a substantial amount of unknown liabilities
C. The acquired firm's culture is very different from that of the acquiring firm
D. Profits from operations are not taxable
E. The transaction involves a cross border transaction
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