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Unformatted text preview: GENERAL CONCEPTS Business Combination *. The result of acquiring control of one or more enterprises by another enterprise or the uniting of interest of two or more enterprises. a . Business combinations. c. Merger. b. Business consolidation. d. Pooling of interests. RPCPA 0593) 1. When should a business combination be undertaken? A. When a positive net present value is generated to the shareholders of an acquiring firm. B. When the two firms are in the same line of business, but economies of scale cannot be attained by the acquiror. C. When two firms are in different lines of business, creating diversification. D. When cash will be paid for the acquired firm's stock. Gleim Merger 2. Which of the following is a combination involving the absorption of one firm by another? A. Merger. C. Proxy fight. B. Consolidation. D. Acquisition. Gleim 3. When firm B merges with firm C to create firm BC, what has occurred? A. A tender offer. C. An acquisition of stock. B. An acquisition of assets. D. A consolidation. Gleim *. A business combination whereby the company taking over the properties of other companies retains its identity and continues operations as a larger unit and the other companies are dissolved is known as a a. Consolidation. c. Pooling of interests. b . Merger. d. Quasi-reorganization. RPCPA 1086 4. A business combination may be legally structured as a merger, consolidation, an investment in stock, or a direct acquisition of assets. Which of the following describes a business combination that is legally structured as a merger? A. The surviving company is one of the two combining companies. B. The surviving company is neither of the two combining companies. C. An investor-investee relationship is established. D. A parent-subsidiary relationship is established Gleim 5. A business combination legally structured as a merger has one set of books and accounting records (the surviving company's) to account for the combined (consolidated) operations. On the other hand, if the combination is accomplished by a stock investment, each of the combining companies continues to maintain its individual books and accounting records. For a stock investment, the books and accounting records of the consolidated organization are usually A. Maintained by the parent separately from the surviving company's books. B. Prepared in worksheet form each time consolidated statements are prepared. C. Maintained by each organization in the same manner that branch-home office accounting is accomplished. D. Maintained by the subsidiary corporation. Gleim 6. All of the following are true of mergers except A. Mergers are legally straightforward. B. Approval by shareholder vote of each firm involved in the merger is required....
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- Spring '10