Question Question 1 3 / 3 points

29 Jun Question Question 1 3 / 3 points

Question
Question 1 3 / 3 points

A business combination in which the acquired company’s assets and liabilities are combined with those of the acquiring company into a single entity is defined as:

a) Stock acquisition

b) Leveraged buyout

c) Statutory Merger

d) Reverse statutory rollup

Question 2 3 / 3 points

In which of the following situations do accounting standards not require that the financial statements of the parent and subsidiary be consolidated:

a) A corporation creates a new 100 percent owned subsidiary

b) A corporation purchases 90 percent of the voting stock of another company

c) A corporation has both control and majority ownership of an unincorporated company

d) A corporation owns less-than a controlling interest in an unincorporated company

Question 3 3 / 3 points

Which of the following situations best describes a business combination to be accounted for as a statutory merger?

a) Both companies in a combination continue to operate as separate, but related, legal entities.

b) Only one of the combining companies survives and the other loses its separate identity.

c) Two companies combine to form a new third company, and the original two companies are dissolved.

d) One company transfers assets to another company it has created.

Question 4 3 / 3 points

A statutory consolidation is a type of business combination in which:

a) one of the combining companies survives and the other loses its separate identity.

b) one company acquires the voting shares of the other company and the two companies continue to operate as separate legal entities.

c) two publicly traded companies agree to share a board of directors.

d) each of the combining companies is dissolved and the net assets of both companies are transferred to a newly created corporation.

Question 5 3 / 3 points

Rivendell Corporation and Foster Company merged as of January 1, 20X9. To effect the merger, Rivendell paid finder’s fees of $40,000, legal fees of $13,000, audit fees related to the stock issuance of $10,000, stock registration fees of $5,000, and stock listing application fees of $4,000.

Based on the preceding information, under the acquisition method, what amount relating to the business combination would be expensed?

a) $72,000

b) $19,000

c) $53,000

d) $63,000

Question 6 3 / 3 points

Rivendell Corporation and Foster Company merged as of January 1, 20X9. To effect the merger, Rivendell paid finder’s fees of $40,000, legal fees of $13,000, audit fees related to the stock issuance of $10,000, stock registration fees of $5,000, and stock listing application fees of $4,000.

Based on the preceding information, under the acquisition method:

a) $72,000 of stock issue costs are treated as goodwill.

b) $19,000 of stock issue costs are treated as a reduction in the issue price.

c) $19,000 of stock issue costs are expensed.

d) $72,000 of stock issue costs are expensed.

Question 7 3 / 3 points

Burrough Corporation paid $80,000 to acquire all of Helyar Company’s net assets. Helyar reported assets with a book value of $60,000 and fair value of $98,000 and liabilities with a book value and fair value of $23,000 on the date of combination. Burrough also paid $3,000 to a search firm for finder’s fees related to the acquisition. What amount will be recorded as goodwill by Burrough Corporation while recording its investment in Helyar?

a) $0

b) $5,000

c) $8,000

d) $13,000

Question 8 3 / 3 points

Which of the following observations is (are) consistent with the acquisition method of accounting for business combinations?

I. Expenses related to the business combination are expensed.

II. Stock issue costs are treated as a reduction in the issue price.

III. All merger and stock issue costs are expensed.

IV. No goodwill is ever recorded.

a) III

b) IV

c) I and II

d) I, II, and IV