Which of the following represent potential tax benefits that can directly result from an acquisition?
I.an increase in depreciation expense
II.an increase in surplus funds
III.the use of net operating losses
IV.an increased use of leverage
A)I and IV only
B)II and III only
C)I, III, and IV only
D)II, III, and IV only
E)I, II, III, and IV

Question

Quizplus · Accepted Answer

I. An increase in depreciation expense: Depreciation increases when a company acquires assets due to the purchase price allocation. This can result in tax savings as depreciation reduces the taxable income. 
II. An increase in surplus funds: Surplus funds do not directly result in tax benefits. 
III. The use of net operating losses: If the acquired company has net operating losses, these can be used to offset the acquiring company's taxable income, resulting in tax savings. 
IV. An increased use of leverage: This does not directly result in tax benefits, but can result in interest expense deductions, which reduce taxable income.

Which of the Following Represent Potential Tax Benefits That Can