11 Occurs when a new corporation is formed to take over the assets and operations of two or more separate business entities and dissolves the previously separate entities

A- Legal consolidation

B- Legal merger

C- Acquisition

D- Trading securities

12 T Corporation acquired a 40% interest in K Corporation at book value several years ago. K declared $50,000 dividends in 2011 and reported its income for $300,000. Ts Investment in K account for 2011 should increase by:

a-

$ 75,000

c-

$ 90,000

b-

$ 80,000

d-

$100,000

13 On March 31, 2010, P Corporation acquired for $1,000,000 cash all the outstanding common stocks of S company when S's balance sheet showed net assets of $1,100,000 at the FMV. Out-of-pocket cost of the business combination was $100,000 indirect costs and $200,000 direct costs. The goodwill is ---------------

a-

$300,000 negative goodwill

c-

$300,000 positive goodwill

b-

$100,000 positive goodwill

d-

$100,000 negative goodwill

14- The realized gains or losses that related to the stock investment- long term [18%] securities will be treated:

a-

In the retained earnings

c-

In the balance sheet.

b-

In the stockholders equity.

d-

In the cash flows statement.

15 On Jan 1, 2011, X Company acquired 15% of the voting common stocks of Z Company for $200000. The intent of X is to hold the shares for five years. Z Company achieved $100000 net income and announced $80000 cash dividends. On December 31, 2011. The account of "stock investment in Z" will be:

a-

$203,000

c-

$220,000

b-

$200,000

d-

$212,000

16 B Co. acquires all of the voting stock of N Co. for $900,000 cash. The book values of Ns assets are $850,000, but the fair value of Ns net assets $820,000. Goodwill from the combination is computed as?

a-

$800,000.

c-

$30,000

b-

$80,000.

d-

8000.

17 X acquires 80% of Y net assets. The carrying value of stock investment in Y voting common stocks is $1000,000 and the fair market value of Y net assets is $1,100,000 . The goodwill is

a-

$100,000

c-

$120,000

b-

$0

d-

$325,000.

18 S Corporation owns 92% of the outstanding common stock of H company; the other 8% is owned by Z Corporation. In the consolidated financial statements of S Corporation and subsidiary, Z is considered:

A

An investor

C

An affiliate

B

An investee

D

A minority interest

19 In a statutory merger, a new corporation is formed to issue its common stock for the common stock of two or more existing corporations, which then are liquidated

A

True

B

False

20 Legal fees for bourse registration of business combination are direct costs.

A

True

B

False