Which of the Following is NOT a Method for Calculating or Ascertaining the Amount of Purchase Consideration?
By BYJU'S Exam Prep
Updated on: November 9th, 2023
A) Net Payment Method
B) Net Assets Method
C) Gross Receipts Method
D) Share Exchange Method
Gross Receipts Method is not a method for calculating or ascertaining the amount of purchase consideration. There are various methods used for ascertaining the purchase consideration. Gross Receipts Method is the method used to find the gross of all expense in cash where no subtraction of any kind of cost is done.
Table of content
Method for Calculating Amount of Purchase Consideration
The purchase consideration is the calculation of the payments made by the beneficiary business to the company’s shareholders in cash or other forms of assets. There are four major methods to calculate the ascertaining the amount of purchase consideration. The methods of Purchase Consideration are listed below:
- Net Payment Method
- Net Assets Method
- Lump Sum Method
- Shares Exchange Method
In the lump sum method, the transferee pays a gross amount to the transferor. The Net Assets method is also known as the Net Worth method and the Shares Exchange method is called as the Intrinsic Value method. Only the issuance of stocks and money is to be used to discharge the Purchase Consideration.
Summary:
Which of the following is NOT a Method for Calculating or Ascertaining the Amount of Purchase Consideration?
The method which is not used for calculating or ascertaining the amount of purchase consideration is Gross Receipts Method. The Inherent Worth of the company’s share is the foundation for the Exchange Ratio. The lump sum method and net payment methods are majorly followed while calculating the amount.
Related Questions:
