write a page answer the questions, references the accounting code

write a page answer the questions, references the accounting code

ATTACHMENT PREVIEW

Download attachment

As the CFO of General Dynamo, you are very excited as you have just completed the
negotiations related to the purchase of Apex Systems, a complimentary business to General
Dynamo.
The sole shareholder of Apex has agreed to either of the following purchase offers:
A:
General Dynamo will pay $10,000,000 for 100% of the outstanding stock of Apex
OR
B:
General Dynamo will pay $11,000,000 for 100% of the “net assets” of Apex, which
includes all tangible and intangible assets as well as all recorded liabilities.
The fair value of the acquired assets and liabilities is as follows:
Current Assets (Tangible)
$2,500,000
Long Term Assets (Tangible)
$4,000,000
Liabilities
$3,500,000
Net Tangible Assets Acquired
$3,000,000
Based solely on the “net after-tax” cost of the acquisition, which purchase offer should
you choose: A or B?
Why?
Why does the seller require a higher price to be paid for acquiring “net assets” versus
“stock”?
What internal revenue service code section addresses how sales of assets versus
sales of stock are taxed?
What are the significant differences?
What period may the
goodwill be deducted for tax purposes?
Why do you think the Internal Revenue Service
treats these two purchase offers differently?

Leave a Comment