Quiz1

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 true

1 Which of the following is a characteristic of a business combination that should be accounted for as an acquisition?  Group of answer choices a. The combination must involve the exchange of equity securities only. b. The transaction may be considered to be uniting of the ownership interest of the companies involved. c. The transaction establishes an acquisition fair value basis for the company being acquired d. Two companies may be about the same size and it is difficult to determine the acquired company and acquiring company.

Statement I: A consolidation occurs when the entity that issues securities (the legal acquirer) is identified as the acquiree for accounting purposes.Statement II: In a consolidation, all of the combining entities transfers their net assets to form a new entity or sometimes referred as roll-up or put-together transaction. a. True, True b. False, False c. False, True d. True, False

TRUE OR FALSE. 1. Under the shareholders' equity section of a consolidated statement of Financial Position, common shares consist of only the parent company's shares. 2. The date of acquisition is the date on which the buyer obtains control of the target business. This date is very important as the value of all of the amounts included in the business combination are measured at this date, and the buyer starts consolidation of the target for accounting. 3. In business combination, even if the acquirer does not acquire 100% of the target business, the acquired assets and assumed liabilities are recorded at 100% of their fair value 4. When obtaining control of the business, the acquirer must take an ownership stake of more than 50% in the business.

Statement 1: In the financial settlement of a contingent consideration classified as financial liability, the amount shall be remeasured at fair value with any gain or loss included in profit or loss.   Statement 2: If a new entity is formed to issue equity interests to effect a business combination one of the combining entitites that existed before the combination shall be identified as the acquirer.    Which statement/s is TRUE?

TRUE 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.

1. Company S and Company T combine to form a new Company ST by pooling all their assets and liabilities and issuing new ST shares to all shareholders in proportion to their previous shareholdings. How this transaction should be categorised? a) Merger b) Acquisition c) Spin-off d) De-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 B

S1: The preparation of consolidated financial statements after acquisition is materially different concept from preparing them in the acquisition date in the sense that reciprocal accounts are eliminated and remaining balances are combined. S2: All revenues and expenses of individual consolidating companies arising from transactions and actions with affiliated companies are included in the consolidated financial statements.     A. Only S2 is correct   B. Both statements are incorrect   C. Only S1 is correct   D. Both statements are correct

Assuming the existence of two companies, A and B, which of the following is not a business combination? a. Company A acquires all assets and liabilities of Company B. Company B continues as a company, holding shares of Company A. b. Company C is formed to acquire all the assets and liabilities of Company A and Company B. Both Company A and Company B liquidate. c. Company A acquires all assets and liabilities of Company B, and Company B liquidates. d. Company A acquires a group of assets of Company B, the group of assets not constituting a business. Company B continues to operate as a company.

Following the completion of a business combination in the form of a statutory consolidation, what is the balance in the new corporation’s Retained earnings account? A. The sum of the acquirer and acquiree retained earnings account balances. B. The acquirer retained earnings account balance C. Zero D. The acquiree retained earnings account balance

Choose the correct. A company acquires a subsidiary and will prepare consolidated financial statements for external reporting purposes. For internal reporting purposes, the company has decided to apply the equity method. Why might the company have made this decision?a. It is a relatively easy method to apply.b. Operating results appearing on the parent’s financial records reflect consolidated totals.c. GAAP now requires the use of this particular method for internal reporting purposes.d. Consolidation is not required when the parent uses the equity method.

Why would a company implement this upon acquisitions: "All significant intercompany transactions and balances between Group enterprises are eliminated on combination." I would like to know the possible reasons for this statement in a companies annual report.

IFRS 10 Consolidated Financial Statements outlines the requirements for identifying thecompany that is the acquirer in a business combination when it's not clear who that is. Whichis NOT a consideration in determining which company is the acquirer?A. If the means of payment is cash, which party is paying the cash.B. Relative holdings of voting shares in the combined entity.C. Voting rights of the respective parties after the combination of their businesses.D. Any by-laws or provisions of the incorporation acts of each company that details themanner in which a business combination will occur at law.

Which 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.

PFRS 3 must be applied when accounting for business combinations, but does not apply to:i. Formation of a joint arrangementii. The acquisition of an asset or group of assets that is not a business although general guidance is provided on how such transactions should be accounted foriii. Combination of entities or businesses under common controliv. Acquisitions by an investment entity of a subsidiary that is required to be measured at fair value through profit or loss under PFRS 10 Consolidated Financial Statementsv. Mutual entitiesvi. Not-for-profit organizations     i, ii, iii, iv, v, and iv i, ii, iii, and iv i, ii, iii, iv, and vi i, ii, iii, iv, and v

PFRS 3 must be applied when accounting for business combinations, but does not apply to:i. Formation of a joint arrangementii. The acquisition of an asset or group of assets that is not a business although general guidance is provided on how such transactions should be accounted foriii. Combination of entities or businesses under common controliv. Acquisitions by an investment entity of a subsidiary that is required to be measured at fair value through profit or loss under PFRS 10 Consolidated Financial Statementsv. Mutual entitiesvi. Not-for-profit organizations a. i, ii, iii, iv, and v b. i, ii, iii, and iv c. i, ii, iii, iv, v, and iv d. i, ii, iii, iv, and vi

a.Which of the following statement/s regarding the method of consolidation is true:   (1) Subsidiaries are consolidated in full  (2) Associates are equity accounted Select one: a. Neither statement b. Statement (1) only c. Both statements d. Statement (2) Q2. Which of the following is a characteristic of the cost method of accounting for subsidiary operations? Select one: a. Parent company net income equals consolidated net income. b. More working paper eliminations are required than for the equity method of accounting. c. Consolidated amounts differ from the comparable amounts under the equity method of accounting. d. None of the above Q3.  How soon does goodwill acquired in a business combination need to be tested after an acquisition? Select one: a. The year after acquisition b. The year of acquisition c. Two years after acquisition d. None of the above

S1: The preparation of consolidated financial statements after acquisition is materially different concept from preparing them in the acquisition date in the sense that reciprocal accounts are eliminated and remaining balances are combined. S2: All revenues and expenses of individual consolidating companies arising from transactions and actions with affiliated companies are included in the consolidated financial statements. Only S2 is correct Both statements are correct Both statements are incorrect Only S1 is correct

Assuming the existence of two companies, A and B, which of the following is not a business combination?    Company C is formed to acquire all the assets and liabilities of Company A and Company B. Both Company A and Company B liquidate.  Company A acquires all assets and liabilities of Company B, and Company B liquidates.  Company A acquires all assets and liabilities of Company B. Company B continues as a company, holding shares of Company A.  Company A acquires a group of assets of Company B, the group of assets not constituting a business. Company B continues to operate as a company.

Question 27       In reference to the FASB disclosure requirements about a business combination in the period in which the combination occurs, which of the following is correct?       Answers: A.  Firms are not required to disclose the business purpose for a combination.   B.  Firms are not required to disclose the name of the acquired company.   C.  Firms are required to disclose the nature, terms and fair value of consideration transferred in a business combination.   D.  Firms are not required to disclose the details about step acquisitions.       Question 28       Which one of the following statements is correct for an investor company?       Answers: A.  Under the equity method, the balance in the Investment in Osprey Co. account can be negative if the investee corporation operates at a loss.   B.  Under the equity method, the balance in the Investment in Osprey Co. account will increase when cash dividends are received.…

Statement 1: Consolidated inventory on the statement of financial position is recorded at fair market value to the affiliated group. Statement 2: In a business combination resulting in a parent company-wholly owned subsidiary relationship, goodwill developed in the working paper elimination is attributed in its entirety to the parent. Statement 3: If a new entity is formed to issue equity interests to effect a business combination, one of the combining entities that existed before the combination shall be identified as the acquirer. Statement 4: If the intercompany seller is the subsidiary, it is the subsidiary's income that needs adjustment. Statement 5: On the date of the business combination and its partially owned subsidiary, the amount assigned to minority interest in net assets of subsidiary is based on the cost of the parent company's investment in the parents' common stock.Which statement/s is/are true?