AICPA CPA-Business Exam - Topic 1 Question 73 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 73
Topic #: 1

Under the Revised Model Business Corporation Act, following what type of corporate acquisition does the acquiring corporation automatically become liable for all obligations of the acquired corporation?

AA leveraged buyout of assets.

BAn acquisition of stock for debt securities.

CA cash tender offer.

DA merger.

Show Suggested Answer

Suggested Answer: A

Choice 'a' is correct. 7.0 percent cost of funds from retained earnings.

The cost of retained earnings is equal to the rate of return required by the firm's common shareholders (or, in effect, the return 'lost' by them when the firm chooses to fund with retained earnings). While oftentimes this rate is somewhat subjective, we are given the facts to exactly answer the question in this case. The stock is currently selling for $100/share, and the dividend is given at $7/share.

$7 / $100 = 7%

Choices 'b', 'c', and 'd' are incorrect, per the above Explanation:/calculation.

by Nana at Aug 05, 2023, 07:28 PM

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Clemencia

5 months ago

I thought it was more complicated than that!

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Jeannetta

5 months ago

Definitely D, that’s standard practice in corporate law.

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Lorrie

5 months ago

Wait, are you sure it’s just a merger? Sounds too simple.

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Cherilyn

5 months ago

Totally agree, D is the right choice!

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Lynda

6 months ago

A merger is when the acquiring company takes on all liabilities.

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Oneida

6 months ago

I thought a leveraged buyout might also involve liability transfer, but now I’m leaning towards a merger as the clear choice.

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Raina

6 months ago

I practiced a question like this, and I feel like it was definitely about mergers. But I’m a bit confused about the other options.

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Denny

6 months ago

I'm not entirely sure, but I remember something about stock acquisitions not automatically transferring liabilities. Could it be a merger?

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Elena

6 months ago

I think a merger is the right answer because it usually involves the acquiring company taking on all liabilities of the acquired company.

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Jacquelyne

6 months ago

This seems straightforward. The organization administrators are responsible for configuring the Okta AD Agents, so I'll select option A.

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Simona

6 months ago

This looks like a complex question with multiple parts. I'll need to carefully read through the details and think about the different patterns that could be applied to solve the problems.

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Zack

6 months ago

Hmm, I think the key here is to try to reach an agreement with the team. Facilitating a session to discuss the options seems like the best approach to me.

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Charisse

6 months ago

Okay, I think I've got a handle on this. The key is to implement practices that will catch issues earlier in the development lifecycle and make the deployment process more reliable. I'd go with the code review and automated testing options - those seem like they'd have the biggest impact on reducing recovery time.

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Stevie

6 months ago

I'm a bit confused by the wording of the question. I'll need to re-read it a few times to make sure I understand what they're asking.

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Charlie

11 months ago

Ah, the joys of corporate acquisitions. I bet the legal team at the acquiring company is just thrilled to take on all those obligations. It's like a surprise party, but with more paperwork.

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Leontine

11 months ago

D. Merger, of course! It's the old 'you break it, you buy it' rule, but for entire companies. I wonder if they offer a corporate layaway plan?

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Malcom

9 months ago

D) A merger.

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Malika

10 months ago

D. Merger, of course! It's the old 'you break it, you buy it' rule, but for entire companies. I wonder if they offer a corporate layaway plan?

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Silva

10 months ago

D) A merger.

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Jutta

10 months ago

C) A cash tender offer.

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Carolann

10 months ago

B) An acquisition of stock for debt securities.

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Kiley

10 months ago

A) A leveraged buyout of assets.

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Tonette

11 months ago

Well, if I'm not mistaken, in a merger, the acquiring company inherits all the obligations of the acquired company. It's like a corporate game of 'pass the debt'.

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Mable

10 months ago

That's right. It's important to consider all the liabilities before going through with a merger.

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Marsha

10 months ago

So, it's like a package deal - you get the assets and the debts when you merge with another company.

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Gearldine

10 months ago

Yes, you're correct. In a merger, the acquiring company takes on all the obligations of the acquired company.

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Tasia

11 months ago

Hmm, a merger you say? Sounds like a corporate takeover gone wild - like a game of corporate Tetris, but with more lawyers and fewer video game sound effects.

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