The incremental cash flows of a merger can relate to changes in which of the following?

The purchase accounting method requires that:    A.  the excess of the purchase price over the fair market value of the target firm be recorded as a one-time expense on the income statement of the acquiring firm. B.  goodwill be amortized on a yearly basis for financial statement purposes. C.  the equity of the acquiring firm be reduced by the excess of the purchase price over the fair market value of the target firm. D.  the assets of the target firm be recorded at their fair market value on the balance sheet of the acquiring firm. E.  the excess amount paid for the target firm be recorded as a tangible asset on the books of the acquiring firm. Refer to section 26.3

33.

For financial statement purposes, goodwill created by an acquisition:    A.  must be amortized on a straight-line basis over 10 years. B.  must be reviewed each year and amortized to the extent that it has lost value. C.  is expensed evenly over a 20-year period. D.  never affects the profits of the acquiring firm. E.  is recorded in an amount equal to the fair market value of the assets of the target firm. Refer to section 26.3

34.

The pooling of interests method of accounting: I. creates an account called goodwill which is recorded on the balance sheet of the merged firm. II. consists of simply combining the balance sheets of the acquiring and the target firm. III. is currently the accounting method required by FASB for all cash acquisitions. IV. recognizes the excess of the purchase price over the fair market value and records that excess as an asset of the acquiring firm.    A.  I only B.  II only C.  I and IV only D.  II and III only E.  I, II, and IV only Refer to section 26.3

35.

The incremental cash flows of a merger can relate to changes in which of the following? I. revenue II. capital requirements III. operating costs IV. income taxes    A.  I and II only B.  II, III, and IV only C.  I, III, and IV only D.  I, II, and III only E.  I, II, III, and IV Refer to section 26.4