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Question 7

The two types of statutory mergers include which of the following:

A business combination in which one company obtains all of the assets, and often the liabilities, of another company.

A business combination in which one company obtains all of the capital stock of another company. The acquiring company must gain 100 percent control of all shares of stock before legally dissolving the company.

Each company remains in existence as an incorporated operation

Both 1 and 2

Question 8

Any business combination in which only one of the original companies continues to exist

statutory consolidation

variable interest entity (VIE)

statutory merger.

control without dissolution

Question 9

occurs when two or more companies transfer either their assets or their capital stock to a newly formed corporation

statutory consolidation

variable interest entity (VIE)

statutory merger.

control without dissolution

Question 10

Both original companies are dissolved, leaving only the new organization in existence

statutory consolidation

variable interest entity (VIE)

statutory merger.

control without dissolution

Question 11

business entity does not involve a majority voting stock interest or direct ownership of assets

statutory consolidation

variable interest entity (VIE)

statutory merger.

control without dissolution

Question 12

Although control is present, no dissolution takes place; each company remains in existence as an incorporated operation

statutory consolidation

variable interest entity (VIE)

statutory merger.

control without dissolution

Question 13

control is exercised through contractual arrangements with a sponsoring firm that, with rights to its residual profits. These contracts can take the form of leases, participation rights, guarantees, or other interests

statutory consolidation

variable interest entity (VIE)

statutory merger.

control without dissolution

Question 14

Business combinations are created in many distinct forms.

True

False

Question 15

as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation.

True

False

Question 16

Control of one firm by another is most often achieved through the acquisition of voting shares

True

False

Question 17

Fair value, as defined by GAAP, is the price that would be received from selling an asset or paid for transferring a liability in an orderly transaction between market participants at the measurement date.

True

False

Question 18

When one company gains control over another, a business combination is established, and financial data gathered from the individual companies are then brought together to form a single set of consolidated statements

True

False

Question 19

If separate incorporation is maintained, only the financial statement information (not the actual records) is consolidated

True

False

Question 20

If dissolution takes place, appropriate account balances are physically consolidated in the surviving companys financial records.

True

False

Question 21

if the collective fair value of the net identified assets acquired and liabilities assumed exceeds the consideration transferred, the acquirer recognizes a loss on bargain purchase.

True

False

Question 22

When one company gains control over another, a business combination is established all of the following must be reported EXCEPT

the financial position

results of operations

cash flow

stockholders equity

Question 23

When the consideration transferred exceeds the acquisition-date net amount of the identified assets acquired and the liabilities assumed, the acquirer recognizes the asset goodwill for the excess

True

False

Question 24

Applying the acquisition method involves using fair value to recognize and measure which of the following

The consideration transferred for the acquired business and any noncontrolling interest.

The separately identified assets acquired and liabilities assumed.

Goodwill, or a gain from a bargain purchase

All of these

Question 25

Regardless of whether the acquired firm maintains its separate incorporation or dissolution takes place, GAAP require the acquisition method to account for business combinations using the fair-value method

True

False

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