1. Which of the following are commonly used to close the gap between what the seller wants and what the buyer is willing to pay?

1. Consulting contracts offered to the seller
2. Earn-outs
3. Employment contracts offered to the seller
4. Giving seller rights to license a valuable technology or process
5. All of the above.

1. Which of the following is not true about purchase accounting?

1. For financial reporting purposes, all M&As must be recorded using the purchase method of accounting.
2. Under the purchase method of accounting, the excess of the purchase price over the targets net asset value is treated as goodwill on the combined firms balance sheet.
3. Goodwill may be amortized up to 40 years.
4. If the fair value of the targets net assets later falls below its carrying value, the acquirer must record a loss equal to the difference.
5. None of the above

2. Which of the following is true about purchase accounting?

a. Cash and accounts receivable, reduced for bad debt and returns, are valued at their values on the books of the target before the acquisition..

b. Marketable securities are valued at their realizable value after transactions costs.

c. Property, plant and equipment are valued at fair market value.

d. Intangible assets are booked at their appraised values.

5. All of the above.