Question 1

When two or more companies carrying on similar business decide to combine, a new company is formed, it is known as ..................&#10;A)amalgamation&#10;B)absorption&#10;C)Absorption.&#10;D)absorption..

Accepted Answer

Amalgamation refers to the process where two or more companies merge to form a new entity, combining their businesses.

Question 2

When one of the existing companies take over business of another company or companies, it is known as ...........&#10;A)amalgamation&#10;B)absorption&#10;C)internal reconstruction&#10;D)internal reconstruction.

Accepted Answer

Absorption is when one company takes over the business of another company or companies, essentially absorbing the acquired company into its operations.

Question 3

While calculating purchase price, the following values of assets are considered&#10;A)book value&#10;B)new values fixed&#10;C)average values&#10;D)market values

Accepted Answer

new values fixed&#10;

Question 4

Shares received from the new company are recorded at -&#10;A)face value&#10;B)face value.&#10;C)market value&#10;D)face value..

Accepted Answer

Shares received from a new company are typically recorded at their market value. This is because market value reflects the current worth of the shares in the open market, providing a more accurate representation of their value at the time of receipt.

Question 5

Which of the following statement is correct?&#10;A)the amount of goodwill or capital reserve is found out in the books of purchasing company only&#10;B)the amount of goodwill or capital reserve is found out in the books of vendor company only.&#10;C)goodwill = net assets - purchase price&#10;D)the face value of shares of purchasing company will be taken in to account while calculating purchase consideration.

Accepted Answer

The amount of goodwill or capital reserve arises in the books of the purchasing company as a result of business combinations, where the purchase consideration paid for an acquisition is compared with the net assets acquired. This does not occur in the vendor company's books.

Question 6

If the two companies have different accounting policies in respect of the same item, then they make necessary changes to adopt .............. accounting policies.&#10;A)lifo method&#10;B)fifo method&#10;C)weighted method&#10;D)uniform

Accepted Answer

When two companies have different accounting policies for the same item and need to make changes, they adopt uniform accounting policies to ensure consistency and comparability in their financial statements.

Question 7

The Amalgamation Adjustment Account appears in the books, it is shown under the heading of ......... in the balance sheet.&#10;A)reserve and surplus&#10;B)fixed assets&#10;C)investments&#10;D)miscellaneous expenditure

Accepted Answer

The Amalgamation Adjustment Account, which often reflects adjustments related to the process of amalgamation, is shown under the heading of "miscellaneous expenditure" in the balance sheet. This is because it typically includes various preliminary expenses, discounts on issue of shares or debentures, and other items that do not fit into the conventional asset categories.

Question 8

If amalgamation is in the ..............., the General Reserve or Profit and Loss A/c balance will not be shown in the balance sheet&#10;A)form of merger&#10;B)form of purchase&#10;C)net assets method&#10;D)consideration method

Accepted Answer

In the form of purchase, the General Reserve or Profit and Loss Account balance of the acquired company is not shown in the balance sheet of the acquiring company. This is because, under purchase accounting, only identifiable assets and liabilities are recorded at their fair values, and any pre-existing reserves or profit and loss balances of the acquired company are not carried over.

Question 9

If the intrinsic values of shares exchanged are not equal, the difference is paid in ...........&#10;A)cash&#10;B)debenture&#10;C)pref. share&#10;D)assets

Accepted Answer

When the intrinsic values of shares exchanged are not equal, the difference is typically paid in cash to balance the transaction. This is a common practice in mergers and acquisitions to equalize the value exchanged between the entities involved.

Question 10

In case of .............., one existing company takes over the business of another company and no new company is formed&#10;A)amalgamation&#10;B)absorption&#10;C)reconstruction&#10;D)none of the above

Accepted Answer

Absorption is when one company takes over the business of another company without forming a new company. The acquiring company absorbs the business of the other.

Deck 1: Amalgamations and Takeovers in Business