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Question
Which of the following is not true of purchase accounting?
a. Total purchase price paid for the target firm is reflected on the books of the combined companies
b. All liabilities are transferred at the NPV of their future cash payments
c. The cost of the acquired entity becomes the new basis for recording the acquirers investment in the assets of the target company.
d. Goodwill equals the difference between the purchase price paid for the target firm and the book value of acquired assets.
e. Goodwill must be reduced if it is believed to be impaired.
Answer
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