QUESTION 18 Which of the following comments is most accurate as it relates to a typical transaction where the following payments were made? Cash Paid 100,000,000 Fair Value of Stock Consideration, Rounded 325,600,000 Fair Value of Earnout 48,970,000 Total "X" 474,570,000 A. Payments under Eamout provisions are contingent upon events subsequent to the closing. Accordingly, the Total "x" above need deduct the Fair Value of the Eamout to identify the total paid for the target company to be allocated among the assets acquired. 8 The Total "X" above, less the estimated fair value of the identifiable current, fixed and other tangibles assets, provides a rough estimate of the intangible assets and goodwill. OC. The Total "X" above does not typically represent the total purchase price to be allocated to the assets and additional amounts typically would need to be considered to identify the total to be allocated to the assets. OD. The costs associated with payments to Investment bankers, attomeys and accountants need to be added to the costs shown above to define the total price to be allocated to the assets. QUESTION 19 Consider the statement: "A bargain purchase occurs when the fair value of all of the assets purchased of a company exceeds the purchase price for the company and in this circumstance, the buyer records a gain on purchase for the amount by which the fair value of assets exceeds the purchase price." Which of the following best describes the circumstances surrounding a bargain purchase? A. Bargain purchases occur frequently and offer acquiring companies an opportunity to recognize "gains" at the time of acquisition B. Some valuation specialists have commented that auditors will typically accept analysis by valuation professionals that indicates a Bargain Purchase for a company as long as the price paid in the transaction equals the appraised value of the enterprise. C. Bargain purchases are only allowed in natural resources Industries such as mining, ol and natural gas where the underlying asset value net of labilities typically exceed the value of the equity OD. Bargain purchases are considered to be exceedingly "rare." QUESTION 20 Choose the best answer to complete the following statement When focusing on fair value issues for financial statement purposes, following the acquisition of a company, a Business Enterprise Valuation Analysis... A...Js needed to assure consistency with the proper valuation of intangible assets, in part to assure that buyer specifics synergies are excluded from the cash flows used to value the intangible assets. OB...is performed at time of acquisition to consider whether the acquisition of the new entity has created impairment in the value of the reporting units of the acquiring company adversely affected by the deal. OC...provides results that are used by the auditors to assess whether management's decision on the purchase price paid was fair and equitable. OD...is used to provide the foundation for comparison between the target company's expected performance and its historical performance.