A business combination may be legally structured as a merger, a consolidation, or an acquisition. Which of the following describes a business combination that is legally structured as a merger? OA parent-subsidiary relationship is established The surviving company is one of the two combining companies. The surviving company is neither of the two combining companies. An investor-investee relationship is established.
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- Which of the following situations best describes a business combination to be accounted for as a statutory merger? Select one: a. Two companies combine to form a new third company, and the original two companies are dissolved. b. One company transfers assets to another company it has created c. Both companies in a combination continue to operate as separate, but related, legal entities. d. Only one of the combining companies survives and the other loses its separate identityWhich of the following is NOT true with regard to the statutory consolidation form of business combination? a. The combining entities both cease to exist after the combination. b. A new corporation must be formed. c. Control of the net assets of the combining entities must be acquired by the new entity. d. The net assets of the combining entities must be acquired with assets of the new corporation.A parent-subsidiary relationship is formed when: A. The acquirer firm is dissolved. B. The acquired firm is not dissolved. C. Both acquirer and acquired firms are dissolved. D. The acquired firm is dissolved.
- Which of the following is not true with regard to a business combination accomplished in the form of a stock acquisition? a. Two companies remain in existence after the combination b. A parent-subsidiary relationship is said to exist c. Consolidated financial statements are normally required d. All of the above statements are trueWhich one of the following statements correctly applies to a merger? Multiple Choice The acquiring firm does not have to seek approval for the merger from its shareholders. The shareholders of the target firm must approve the merger. The acquiring firm will acquire the assets but not the debt of the target firm. The merged firm will have a new company name. The titles to individual assets of the target firm must be transferred into the acquiring firm's name.An entity shall determine whether a transaction or other event is a business combination by applying the definition in PFRS 3, which requires that: a. All of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination. b. All of the combining entities transfer their net assets, or the owners of those entities transfer their equity interests, to a newly formed entity. c. The assets acquired and the liabilities assumed constitute a business. d. All of the above.
- When one company buys the assets and liabilities of another company, this is known as which of the following?Choose one answer.a. Limited liability company b. Merger c. Conventional corporation d. AcquisitionA merger occurs when one corporation takes over all the operations of another business entity, and that entity is dissolved. Select one: True FalseTRUE OR FALSE 1. The merger of two completely unrelated enterprises is referred to as a congeneric merger, however, the merger of somewhat related companies is referred to as a conglomerate merger of somewhat related companies is referred to as conglomerate merger. 2. if there is sufficient proof that the acquisition has been made for a business purpose and the shareholders of the target firm will be compensated with voting shareholders of the target firm will be compensated with voting shares in the acquiring firm, the acquisition will be non-taxable. 3. with cash consideration, the stockholders of the target firm share the gains and losses of acquisition and vice-versa. 4. A merger is the total absorption of one firm by another, however with a consolidation an entirely new firm is created. 5. A white knight is a friendly suitor that a target firm turns to as an alternative to a hostile bidder.
- What amount of gain or loss does Ernesto recognize if the transaction is structured as a Type A merger?Entity A and Entity B combined their businesses. The acquirer in the businesscombination is not clearly identifiable. Which of the following is not an indicator that Entity A is the acquirer? A. Entity A is the initiator of the business combination. B. Entity A’s former owners receive the largest portion of the voting rights in the combined entity. C. Entity A’s former management team dominates the management of the combined entity. D. Entity C, a new entity, is formed and Entity C transfers cash to Entity A and Entity BChoose the correct. What is a basic premise of the acquisition method regarding accounting for noncontrolling interest?a. Consolidated financial statements should be primarily for the benefit of the parent company’s stockholders.b. Consolidated financial statements should be produced only if both the parent and the subsidiary are in the same basic industry.c. A subsidiary is an indivisible part of a business combination and should be included in its entirety regardless of the degree of ownership.d. Consolidated financial statements should not report a noncontrolling interest balance because these outside owners do not hold stock in the parent company.