ACC 316 - Advanced Financial Accounting Review Sheet Chapter 1 1) A(n) occurs when the operations of two or more companies are brought under common control.
a) tender offer b) vertical combination c) operating synergy d) business combination
2) Which of the following situations best describes a business combination to be accounted for as a statutory merger?
a) Both companies in a combination continue to operate as separate, but related, legal entities. b) Only one of the combining companies survives and the other loses its separate identity. c) Two companies combine to form a new third company, and the original two companies are dissolved. d) One company transfers assets to another company it has created.
3) A firm can use which method of financing for an acquisition structured as either an asset or stock acquisition?
a) Cash b) Issuing Debt c) Issuing Stock d) All of these
4) The objectives of FASB 141R (Business Combinations) and FASB 160 (Noncontrolling Interests in Consolidated Financial Statements) are as follows:
a) to improve the relevance, comparability, and transparency of financial information related to business combinations. b) to eliminate the amortization of Goodwill c) to facilitate the convergence project of the FASB and the International Accounting Standards Board. d) to improve the relevance, comparability, and transparency of financial information related to business combinations and to eliminate the amortization of Goodwill.
5) A business combination in which the boards of directors of the potential combining companies negotiate mutually agreeable terms is a(n):
a) agreeable combination b) friendly combination. c) hostile combination. d) unfriendly combination.
6) A merger between a supplier and a customer is a(n):
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ACC 316 - Advanced Financial Accounting Review Sheet Chapter 1
a) friendly combination. b) horizontal combination. c) unfriendly combination. d) vertical combination.
7) The impairment standard as it relates to goodwill is an example of a:
a) consumption of benefit approach. b) loss or lack of benefit approach. c) component of other comprehensive income. d) direct matching of expenses to revenues.
8) The defense tactic that involves purchasing shares held by the would-be acquiring company at a price substantially in excess of their fair value is called:
a) poison pill. b) pac-man defense. c) greenmail d) white knight.
9) When a new corporation is formed to acquire two or more other corporations and the acquired corporations cease to exist as separate legal entities, the result is a statutory:
a) acquisition. b) combination. c) consolidation. d) merger.
10) The excess of the amount offered in an acquisition over the prior stock price of the acquired firm is the:
a) bonus. b) goodwill. c) implied offering price. d) takeover premium
11) The difference between normal earnings and expected future earnings is:
a) average earnings b) excess earnings. c) ordinary earnings. d) target earnings.
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ACC 316 -- Advanced Financial Accounting Review Sheet Chapter 1 12) The first step in estimating goodwill in the excess earnings approach is to:
a) determine normal earnings. b) identify