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MULTIPLE CHOICES-THEORETICAL 1. Two methods of aming business combinations: Merger and consolidation Meryer and acquisition of stock Acquisition and uniting of interests Consolidation and acquisition
MULTIPLE CHOICES-THEORETICAL 1. Two methods of aming business combinations: Merger and consolidation Meryer and acquisition of stock Acquisition and uniting of interests Consolidation and acquisition of stock 2. A business combination must be accounted for as: Anaquisition A pooling A merger d A consolidation 3. The excess of the price paid over the fair value of net identifiah's assets acquired should be recognized as: Goodwill to be amortized periodically for 20 years. Expenses immediately Goodwill not subject to amortization but subject to impairment d. Goodwill to be amortized for 40 years. b 4. In an acquisition-type combination, the appropriate accounting for the excess of fair values of net assets acquired over the price paid is to: 1. Recognize as income in the books of the acquirer b. Recognize as additional paid-in capital in the books of the acquirer Reduce proportionately current fair values assigned to the acquiree's non- current assets and recognize any remaining excess as a deferred credit d. Reduce proportionately current fair values assigned to the acquiree's non- current assets other investments in marketable securities and recognize any remaining excess as a deferred credit 5. The cost of registering equity securities in a business combination should be recorded a. An income of the period b. An expense of the period Deduction from additional paid in capital d. Part of the cost of the stock acquired C. Business Combinations 33 a. c. 6. Under the acquisition method the retained earnings of the acquirer after the combination is equal to: The sum of the retained earnings of the acquiree and the acquirer. b. The retained earnings of the acquirer plus any income from acquisition. The retained earnings of the acquirer only. d. The retained camnings of the acquirer less any amortization of goodwill. 7. Which of the following is included as part of the consideration given? Direct and indirect acquisition costs attributable to the acquisition. b. Indirect costs and contingent consideration. Contingent consideration. d. All expenses and liabilities relating to the acquisition. a. c. a. 8. Which of the following is not included in the price paid in an acquisition type business combination? Cash paid b. Fair value of shares issued c. Investment banker's finder's fee for the combination d. Contingent consideration a. 9. Which of the following is not true of a business combination classified as acquisition? The acquirer continues to exist as a separate legal entity b. The acquiree ceases to exist as a separate legal entity Both companies continue their legal existence d. One company acquires the assets and liabilities of one or more other companies in exchange for stock, cash, or other consideration C. a 10. Shares issued as consideration in an acquisition are recorded at: Their fair value as at the date when the acquirer obtains control over the net assets and operations of the acquiree. b. At cost. At cost or fair value whichever is lower. d. At cost or fair value whichever is higher
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