Which of the following types of business
combinations typically occurs when
management is attempting to monopolize a
particular industry Horizontal combination
Horizontal business combinations occur when
one entity purchases A competitor
Horizontal business combinations help sales
increase by all but Taking control of a
distribution system
Which of the following types of business
combinations typically occurs when
management is attempting to improve the
efficiency of operations Vertical combination
A vertical combination occurs when one entity
acquires another entity which has the
following characteristic(s)? The acquiree
purchases the acquirer's outputs. The
acquiree supplies raw materials to the
acquirer
Which of the following is a vertical
combination? A combination where the two
entities have a potential buyer/seller
relationship
Which of the following types of business
combinations typically occurs when.
management attempting to diversify its
investment Conglomerate combination
Management acquires a business in a
tangentially related industry to the current
business. What form of business combination
is accomplished? Conglomerate combination
One reason for conglomerate combinations
is that management has become more
aware that it helps accomplish It helps
increase income stability provided by
diversifying the asset base of an entity
Business combinations that result in one
dominant company in an industry are said to
have formed Monopoly
The business enterprises that enter into a
business combination are termed the:
Constituent companies
When an offer is made to acquire a
company and the acquiree management
supports the offer, the offer is called
Friendly takeover
The defensive maneuver where a company
buys stock from a potential acquirer at a
premium over the market price is called
Greenmail
The defensive maneuver where a company
seeks to be acquired by a company
perceived to be a better match than the
company making an offer to buy the
potential acquiree is called White knight
Company A makes a hostile take-over bid
for control of Company B. In response,
Company B makes a counter-offer to
purchase shares from Company A's
shareholders. Which of the following best
describes Company B's response? Pac-man
defence.
Company A has made an offer to purchase
all of the outstanding shares of Company B
for P10 per share (the current market
value of the shares). In response to
Company A's offer, the shareholders of
Company B were given rights to purchase
additional shares at P8 per share. Which
of the following tactics was employed by
Company B to prevent Company A from
acquiring control of Company B? Poison Pill
What is the term used for the defensive
maneuver where management of a potential
acquiree sells desirable assets to reduce
the company's value? Sale of the crown
jewels
Shark repellent is a term for
administrative measures that may make a
hostile takeover more difficult. Which of
the following is not a form of shark
repellent? Issuance of convertible
preferred stock that converts into common
stock of the acquirer if a takeover is
accomplished
Defensive maneuvers can be internal to the
potential acquiree (management or
stockholders) or may involve activities
external to the acquiree. Which of the
following is not an internal defensive
maneuver? Pacman defense
Able Ltd. Offers to buy shares from the
existing shareholders of Wei Co. at a premium
price the current management and board of
directors of Wei have let the Wei
shareholders know that they do not approve
of this. This is an example of a hostile
takeover.
Control over an acquiree can be attained
through which Either acquisition of the
acquiree assets or stock
In an acquisition of assets the acquirer must
give up Cash/Other assets/Liabilities
In an acquisition where there is an exchange
of assets for assets how does the ownership
structure of the acquiree change? net assets
change? There is no change in the acquiree
ownership structure
In an acquisition where there is an exchange
of assets for assets, how does the ownership
structure the acquirer change? There is no
change in the acquirer ownership structure
In an acquisition where there is an exchange
of stock (acquirer) for assets (acquiree), how
does the value of the acquiree net assets
change? The net assets may increase,
decrease or remain the same In an
acquisition where there is an exchange of
stock (acquirer) for assets (acquiree), how
does the ownership structure of the acquiree
change? There is no change in the acquiree
ownership structure.
In an acquisition where there is an exchange
of STOCK (acquirer) for assets (acquiree),
how does the ownership structure of the
acquirer change? The acquiree (company)
becomes a stockholder of the acquirer
Control over acquiree assets is attained in a
business combination. Indirect control is
attained in which type of exchange? Stock
for stock
Which of the following forms of business
combination is not subject to laws specific
to business combinations? Asset for asset
acquisition
Which of the following is not a true
statement with regard to a statutory
merger? The name of the new entity is not
the same as either of the entities
Which of the following is not true with
regard to the statutory consolidation form
of business combination The net assets of
the combining entities must be acquired
with assets of the new corporation
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? The acquirer Retained Earnings
account balance
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. Aparent-
subsidiary relationship is said to exist c.
Consolidated financial statements are
normally required All of the above statements
are true
Which of the following contingencies may
change the cost of an acquisition? Future
acquiree earnings
To qualify as a reorganization (for tax for long-term debt of the acquired
purposes), a business combination must meet Company S Both, Fair Value
which of the following criteria? a. Acquiree
Goodwill represents the excess cost of an
stockholders continue an indirect ownership
acquisition over the sum of the fair values
interest in the acquiree b. The acquirer must assigned to tangible and identifiable
continue the acquiree business or employ a intangible assets acquired less liabilities
significant portion of the acquiree net assets assumed.
in an ongoing business c. The combination
must be for a valid business purpose: All of When an acquisition of another company
the above criteria are required for a occurs, IASB recommends disclosing all of
combination to qualify as a reorganization the following EXCEPT: results of operations
for the current period if both companies
Which of the following is not a business had remained separate.
combination Joint venture
Separately identified intangible assets are
Under PFRS 3, Business Combinations,
accounted for by amortizing: based upon a
which method must be used to account for
pattern that reflects the benefits conveyed
business
by the asset
combinations Acquisition method
Acquisition costs such as the fees of
After an exchange of shares in a business accountants and lawyers that were
combination, each group of shareholders necessary to negotiate and consummate the
held 50% of the voting rights. Which of the purchase are expensed in the period of the
following factors should be considered in purchase.
determining the acquirer? Composition of the
Which of the following income factors
board of directors
should not be factored into an estimation
An acquired entity has a long-term of goodwill? Extraordinary items
operating lease for an office building used
for central management. The terms of the
lease are very favorable relative to current
market rates. However, the lease prohibits
subleasing or any other transfer of rights.
In the financial statements, the acquiring
firm should report the value assigned to
the lease as An intangible asset under the
contractual–legal criterion
Under PFRS 3, when is a gain recognized in
consolidating financial information? When any
bargain purchase is created
Company B acquired the net assets of
Company S in exchange for cash. The
acquisition price exceeds the fair value of
the net assets acquired. How should
Company B determine the amounts to be
reported for the plant and equipment, and