Impact of Acquisition on Balance Sheet Analysis

Very Hard Financial Statements Balance Sheet

XYZ Technology Corp. has issued a statement indicating that it is in the process of re-evaluating its balance sheet presentation following a recent acquisition. The acquisition involved significant intangible assets such as patents and trademarks, which are subject to amortization. As financial analysts, you are tasked with evaluating how the balance sheet impacts the understanding of the company’s financial position.

Which of the following correctly states the impact of the acquisition on XYZ Technology Corp.'s balance sheet?

The acquisition will solely increase the total equity on the balance sheet without any impact on total assets or liabilities.

The acquisition will increase both total assets and total liabilities on the balance sheet, reflecting the new intangible assets and any debt incurred.

The acquisition will increase total liabilities while decreasing total assets, reflecting the immediate expenses related to the acquisition.

Hint

Submitted7.7K

Correct3.6K

% Correct47%