chapter 3 business combinations 1 which of the following is not a business combinati 4309915

Chapter 3  Business Combinations

 

1) Which of the following is not a business combination?

A) Statutory amalgamation

B) Joint venture

C) A company's purchase of 100% of another company's net assets

D) A company's purchase of 80% of another company's voting shares

2) Under IFRS 3, Business Combinations, which method must be used to account for business combinations?

A) Purchase method

B) Pooling-of-interests method

C) Acquisition method

D) New entity method

3) After an exchange of shares in a business combination, each group of shareholders held 50% of the voting rights. Which of the following factors should be considered in determining the acquirer?

A) Head office location

B) Composition of the board of directors

C) If there are material transactions between the combining companies

D) Which company initiated the combination

4) Ha Ltd. and Hee Ltd. exchanged shares in a business combination. After the share exchange, each company held the same number of voting shares. Which of the following statements is true?

A) The company with the highest net assets is considered the acquirer.

B) The companies must ask the courts to decide which company is the

acquirer.

C) A number of factors must be considered to determine which company

is the acquirer.

D) There is no acquirer as this is not a proper business combination.

5) How should the transaction costs of issuing shares in an acquisition be recognized?

A) Expensed

B) Capitalized as part of the cost of the shares

C) Deducted in total from shareholders' equity

D) Deducted from shareholders' equity, net of related income tax benefits

6) How should the cost of issuing debt in an acquisition be recognized?

A) Expensed

B) Amortized over the term of the debt

C) Deducted from the value of the debt

D) Deducted from shareholders' equity

7) How should accounting fees for an acquisition be treated?

A) Expensed in the period of acquisition

B) Capitalized as part of the acquisition cost

C) Deferred and amortized

D) Deferred until the company is disposed of or wound-up

8) Thad Ltd. acquired 100% of the common shares of Zoe Co. for $560,000. At the time of acquisition, Zoe had the following:

	Book Value	Fair value
Inventory	$1,400,000	$1,400,000
Land	84,000	119,000
Liabilities	980,000	980,000

 

In this acquisition, how much goodwill has been created?

A) $0

B) $21,000

C) $35,000

D) $56,000

9)

	Cheers Co.	Tapp Ltd.
Current assets	$ 240,000	$   40,000
Net capital assets	400,000	240,000
	$ 640,000	$ 280,000
Current liabilities	$ 168,000	$ 140,000
Long-term debt	80,000	48,000
Share capital	360,000	50,000
Retained earnings	32,000	42,000
	$ 640,000	$ 280,000

 

Cheers acquired 100% of Tapp's shares for $150,000. On the acquisition date, the fair value of the current assets and the net capital assets were $104,000 and $216,000 respectively. The fair value of the liabilities equalled their book value. What is the amount of goodwill created in this acquisition?

A) $(24,000)

B) $ 0

C) $18,000

D) $40,000

10) What is the most common valuation method used for intangible assets?

A) Market-based

B) Income-based

C) Cost-based

D) Amortized cost