,Package Title: Test Bank Questions
Course Title: Advanced Accounting, 8e
Chapter: Introduction to Business Combinations
Chapter Number: 1
Question Type: Multiple Choice
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
Answer: d
Question Title: Test Bank (Multiple Choice) Question 01
Difficulty: Easy
Learning Objective: 1 Describe historical trends in types of business combinations.
Section Reference: 1.1
2. 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.
Answer: d
Question Title: Test Bank (Multiple Choice) Question 02
Difficulty: Medium
Learning Objective: 9 Discuss the Statements of Financial Accounting Concepts (SFAC).
Section Reference: 1.1
3. 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.
Answer: b
,Question Title: Test Bank (Multiple Choice) Question 03
Difficulty: Easy
Learning Objective: 4 Identify defensive tactics used to attempt to block business combinations.
Section Reference: 1.2
4. 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.
Answer: c
Question Title: Test Bank (Multiple Choice) Question 04
Difficulty: Medium
Learning Objective: 4 Identify defensive tactics used to attempt to block business combinations.
Section Reference: 1.2
5. Which of the following is NOT the benefit of horizontal integration?
a) expansion in size.
b) reduction in competition.
c) creating a monopoly in the market space.
d) regulatory issues.
Answer: d
Question Title: Test Bank (Multiple Choice) Question 05
Difficulty: Easy
Learning Objective: 2 Identify the major reasons firms combine.
Section Reference: 1.3
6. The third period of business combinations started after World War II and is called:
a) horizontal integration.
b) merger mania.
c) operating integration.
d) vertical integration.
Answer: b
Question Title: Test Bank (Multiple Choice) Question 06
Difficulty: Easy
Learning Objective: 1 Describe historical trends in types of business combinations.
Section Reference: 1.4
7. During the period between 1880-1904, huge trusts were created. This period of time is referred to as
, a) horizontal integration
b) vertical integration
c) merger mania
d) the conglomerate era
Answer: a
Question Title: Test Bank (Multiple Choice) Question 7
Difficulty: Medium
Learning Objective: 1 Describe historical trends in types of business combinations.
Section Reference: 1.4
8. 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.
Answer: b
Question Title: Test Bank (Multiple Choice) Question 8
Difficulty: Easy
Learning Objective: 5 Distinguish between an asset and a stock acquisition.
Section Reference: 1.5
9. 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
Answer: d
Question Title: Test Bank (Multiple Choice) Question 9
Difficulty: Easy
Learning Objective: 5 Distinguish between an asset and a stock acquisition.
Section Reference: 1.5
10. When the stock acquisition occurs, the acquiring company:
a) closes its book.
b) transfers the underlying assets and liabilities onto its own books.
c) debits an account “Investment in Subsidiary”.
d) acquires the total assets.
Course Title: Advanced Accounting, 8e
Chapter: Introduction to Business Combinations
Chapter Number: 1
Question Type: Multiple Choice
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
Answer: d
Question Title: Test Bank (Multiple Choice) Question 01
Difficulty: Easy
Learning Objective: 1 Describe historical trends in types of business combinations.
Section Reference: 1.1
2. 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.
Answer: d
Question Title: Test Bank (Multiple Choice) Question 02
Difficulty: Medium
Learning Objective: 9 Discuss the Statements of Financial Accounting Concepts (SFAC).
Section Reference: 1.1
3. 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.
Answer: b
,Question Title: Test Bank (Multiple Choice) Question 03
Difficulty: Easy
Learning Objective: 4 Identify defensive tactics used to attempt to block business combinations.
Section Reference: 1.2
4. 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.
Answer: c
Question Title: Test Bank (Multiple Choice) Question 04
Difficulty: Medium
Learning Objective: 4 Identify defensive tactics used to attempt to block business combinations.
Section Reference: 1.2
5. Which of the following is NOT the benefit of horizontal integration?
a) expansion in size.
b) reduction in competition.
c) creating a monopoly in the market space.
d) regulatory issues.
Answer: d
Question Title: Test Bank (Multiple Choice) Question 05
Difficulty: Easy
Learning Objective: 2 Identify the major reasons firms combine.
Section Reference: 1.3
6. The third period of business combinations started after World War II and is called:
a) horizontal integration.
b) merger mania.
c) operating integration.
d) vertical integration.
Answer: b
Question Title: Test Bank (Multiple Choice) Question 06
Difficulty: Easy
Learning Objective: 1 Describe historical trends in types of business combinations.
Section Reference: 1.4
7. During the period between 1880-1904, huge trusts were created. This period of time is referred to as
, a) horizontal integration
b) vertical integration
c) merger mania
d) the conglomerate era
Answer: a
Question Title: Test Bank (Multiple Choice) Question 7
Difficulty: Medium
Learning Objective: 1 Describe historical trends in types of business combinations.
Section Reference: 1.4
8. 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.
Answer: b
Question Title: Test Bank (Multiple Choice) Question 8
Difficulty: Easy
Learning Objective: 5 Distinguish between an asset and a stock acquisition.
Section Reference: 1.5
9. 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
Answer: d
Question Title: Test Bank (Multiple Choice) Question 9
Difficulty: Easy
Learning Objective: 5 Distinguish between an asset and a stock acquisition.
Section Reference: 1.5
10. When the stock acquisition occurs, the acquiring company:
a) closes its book.
b) transfers the underlying assets and liabilities onto its own books.
c) debits an account “Investment in Subsidiary”.
d) acquires the total assets.
