Purchase accounting affects only the cash flow of the combined firms but not the reported net income.

Name: Purchase accounting affects only the cash flow of the combined firms but not the reported net income.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Purchase accounting affects both the cash flow and the reported net income of the combined firms. This is because the assets and liabilities of the acquired company are recorded at fair value, which may result in changes to depreciation, amortization, and other expenses that impact net income.

Purchase Accounting Affects Only the Cash Flow of the Combined