11– Occurs when a new corporation is formed to take over the
assets and operations of two or more separate business entities and
dissolves the previously separate entities
A- Legal consolidation
B- Legal merger
C- Acquisition
D- Trading securities
12 – T Corporation acquired a 40% interest in K Corporation at
book value several years ago. K declared $50,000 dividends in 2011
and reported its income for $300,000. T’s Investment in K account
for 2011 should increase by:
a-
$ 75,000
c-
$ 90,000
b-
$ 80,000
d-
$100,000
13 – On March 31, 2010, P Corporation acquired for $1,000,000
cash all the outstanding common stocks of S company when S's
balance sheet showed net assets of $1,100,000 at the FMV.
Out-of-pocket cost of the business combination was $100,000
indirect costs and $200,000 direct costs. The goodwill is
---------------
a-
$300,000 negative goodwill
c-
$300,000 positive goodwill
b-
$100,000 positive goodwill
d-
$100,000 negative goodwill
14- The realized gains or losses that related to the stock
investment- long term [18%] securities will be treated:
a-
In the retained earnings
c-
In the balance sheet.
b-
In the stockholders equity.
d-
In the cash flows statement.
15 – On Jan 1, 2011, X Company acquired 15% of the voting
common stocks of Z Company for $200000. The intent of X is to hold
the shares for five years. Z Company achieved $100000 net income
and announced $80000 cash dividends. On December 31, 2011. The
account of "stock investment in Z" will be:
a-
$203,000
c-
$220,000
b-
$200,000
d-
$212,000
16 – B Co. acquires all of the voting stock of N Co. for
$900,000 cash. The book values of N’s assets are $850,000, but the
fair value of N’s net assets $820,000. Goodwill from the
combination is computed as?
a-
$800,000.
c-
$30,000
b-
$80,000.
d-
8000.
17 – X acquires 80% of Y net assets. The carrying value of
stock investment in Y voting common stocks is $1000,000 and the
fair market value of Y net assets is $1,100,000 . The goodwill
is
a-
$100,000
c-
$120,000
b-
$0
d-
$325,000.
18– S Corporation owns 92% of the outstanding common stock of
H company; the other 8% is owned by Z Corporation. In the
consolidated financial statements of S Corporation and subsidiary,
Z is considered:
A
An investor
C
An affiliate
B
An investee
D
A minority interest
19– In a statutory merger, a new corporation is formed to
issue its common stock for the common stock of two or more existing
corporations, which then are liquidated
A
True
B
False
20– Legal fees for bourse registration of business combination
are direct costs.
A
True
B
False