_____ Under purchase accounting,
A) The business combination is automatically a taxable event.
B) Goodwill cannot exist.
C) Assets of the acquiring company (as compared with the target company) are revalued to their current values.
D) A fusion of equity interests is deemed to occur.
E) None of the above.

Question

Quizplus · Accepted Answer

Under purchase accounting, a business combination is not automatically a taxable event, goodwill can exist and is recognized if the purchase price exceeds the fair value of net identifiable assets, assets of the acquired company (not the acquiring company) are revalued to their current values, and a fusion of equity interests is not deemed to occur. Instead, the acquiring company records the acquisition at the purchase price, allocating the cost to the assets acquired and liabilities assumed at their fair values.

_____ Under Purchase Accounting