Farm Inc. combines its assets and liabilities with those of Grain Company to form Harvest Corporation. Farm and Grain cease to exist. With respect to the liabilities of Farm and Grain, Harvest acquires
A)none.
B)only those acquired after the combination was proposed.
C)an amount equal to the ratio of the firms' pre-merger market values.
D)all.

Question

Quizplus · Accepted Answer

When two companies combine their assets and liabilities to form a new corporation, the new entity, in this case, Harvest Corporation, acquires all the liabilities of the predecessor companies (Farm and Grain). This is a standard procedure in mergers and acquisitions, ensuring that all obligations are accounted for and managed by the newly formed corporation.

Farm Inc Combines Its Assets and Liabilities with Those of Grain