what about the question where they asked for the profit margin or gross margin after the acquisition, did you guys reduce the acquirers earnings by the additional depreciation of $1.4m? they didn’t give any guidance on the how the target depreciated its fixed assets so I was torn but you would have to take into consideration right? I chose B, it was slightly lower than C which excluded the additional depreciation
i dont remember this question - may be you had a diff exam.
I subtracted the interest expense and that got me to the right answer I think.They said in the vignette that the aquisition value was for book value so there would not have been extra depreciation.
gross margins are not affected by depr or interest charges.
I agree with nirjraina.
It was not depreciation, it was the inventory that was written up so it would have been COGS. Thats why they didnt mention anything about the depreciation methods. Either way I think we needed to include the additional charge of $1.4
now I remember, that is what I did, I added the extra cost of the inventory not interest.
yeah sorry for the confusion on the dep.