2. Which of the following is the best theoretical justification for consolidated financial statements? a. In form the companies are one entity; in substance they are separate b. In form the companies are separate; in substance they are one entity c. In form and substance the companies are one entity d. In form and substance the companies are separate. (AICPA) LO 2-3 3. What is a statutory merger? Page 73 a. A merger approved by the Securities and Exchange Commission b. An acquisition involving the purchase of both stock and assets. c. A takeover completed within one year of the initial tender offer d. A business combination in which only one company continues to exist as a legal entity LO 2-S 4. FASB ASC 805, "Business Combinations," provides principles for allocating the fair value of an acquired business. When the collective fair values of the separately identified assets acquired and liabilities assumed exceed the fair value of the consideration transferred, the difference should be: a. Recognized as an ordinary gain from a bargain purchase. b. Treated as negative goodwill to be amortized over the period benefited, not to exceed 40 years. c. Treated as goodwill and tested for impairment on an annual basis. d. Applied pro rata to reduce, but not below zero, the amounts initially assigned to specific noncurrent assets of the acquired firm