Question 1

Bus Corporation exchanges some of its shares for some of the shares of Car Company. The exchange is used to create Drive Inc., whose business activity is to hold the shares of the two companies. Once the formalities are satisfied, a certificate of the exchange is issued by
A)Drive Inc.
B)none of the choices.
C)the appropriate state.
D)the U.S. Department of Commerce.

Accepted Answer

The appropriate state issues the certificate for the exchange because business incorporations and related formalities, such as the creation of a holding company through share exchange, are governed at the state level in the United States.

Question 2

Revenue Inc. owns more than 90 percent of the shares of Sales Corporation. A copy of a plan for a merger of Revenue and Sales must be sent to each shareholder of
A)both corporations.
B)Revenue.
C)Sales.
D)neither corporation.

Accepted Answer

When one corporation owns more than 90% of another, typically only the minority shareholders of the subsidiary (Sales Corporation) need to be notified of a merger plan.

Question 3

Salmon Company decides to combine its operations with Tuna Corporation to form United Seafood Inc. Salmon and Tuna are domestic corporations. The plan for Salmon and Tuna's combination must be approved by the shareholders of
A)each corporation.
B)Salmon only.
C)Tuna only.
D)neither corporation.

Accepted Answer

The plan for combining operations, especially in a significant manner such as forming a new entity, typically requires approval from the shareholders of each corporation involved in the merger or consolidation. This ensures that the interests of the shareholders are considered and approved before such a significant corporate action is taken.

Question 4

All of the shares of GMO Company are owned by Hybrid Inc. GMO Inc. is
A)a holding company.
B)a parent corporation.
C)a subsidiary corporation.
D)none of the choices.

Accepted Answer

GMO Company is considered a subsidiary corporation because it is owned entirely by another company, Hybrid Inc., making Hybrid Inc. the parent corporation.

Question 5

Bank Company decides to combine its operations with Credit Corporation to form Debit Finance Inc. Bank and Credit are domestic corporations. The plan for Bank and Credit's combination must be approved by the board of directors of
A)each corporation.
B)Bank only.
C)Credit only.
D)neither corporation.

Accepted Answer

The plan for the combination of two corporations into a new entity must be approved by the board of directors of each corporation involved in the merger or consolidation. This ensures that the interests of both companies are considered and that the decision is made with the consent of their respective governing bodies.

Question 6

Lumber Company owns more than 90 percent of the shares of Mill Corporation. A plan for a merger of Lumber and Mill must be approved by the directors of
A)both corporations.
B)Lumber only.
C)Mill only.
D)neither corporation.

Accepted Answer

The answer of Lumber Company owns more than 90 percent...

Question 7

Mergers, consolidations, and share exchanges are authorized by
A)all states.
B)most states.
C)no states.
D)the federal government.

Accepted Answer

Mergers, consolidations, and share exchanges are authorized by most states.

Question 8

Lunch Truck Inc. owns more than 90 percent of the shares of Meal Prep Company. A plan for a merger of Lunch Truck and Meal Prep must be approved by the shareholders of
A)both corporations.
B)Lunch Truck only.
C)Meal Prep only.
D)neither corporation.

Accepted Answer

The answer of Lunch Truck Inc. owns more than 90...

Question 9

Code Company combines its assets and liabilities with those of Design Corporation to form Engineer Inc. Code and Design cease to exist. With respect to the assets of Code and Design, Engineer Inc. 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.

Accepted Answer

When two companies combine their assets and liabilities to form a new company, the new entity, in this case, Engineer Inc., acquires all the assets and liabilities of the merging companies (Code Company and Design Corporation). This is a characteristic of a merger or consolidation where the assets and liabilities of the combining entities are merged into the new entity.

Question 10

Quantum Company exchanges some of its shares for some of the shares of Rocket Corporation. The exchange is used to create Space Inc., whose business activity is to hold the shares of the two companies. Space Inc. is
A)a holding company.
B)a parent corporation.
C)a subsidiary corporation.
D)a foreign corporation.

Accepted Answer

A holding company is an entity created to own the shares of other companies, which is exactly what Space Inc. is doing by holding shares of Quantum Company and Rocket Corporation.

Question 11

Carrier Company exchanges some of its shares for some of the shares of Dispatch Corporation. The plan for this exchange must be approved by each corporation's
A)directors only.
B)shareholders only.
C)directors and shareholders.
D)none of the choices.

Accepted Answer

In most jurisdictions, both the directors and the shareholders of a corporation must approve significant corporate actions such as exchanging shares with another corporation. The directors typically approve the proposal first, and then the shareholders vote on the directors' recommendation.

Question 12

Market Company exchanges some of its shares for some of the shares of Niche Corporation. On the exchange of shares between Market and Niche
A)both companies continue to exist.
B)both companies cease to exist.
C)only Market survives.
D)only Niche survives.

Accepted Answer

When companies exchange shares, they both continue to exist as separate legal entities. This exchange does not dissolve either company.

Question 13

Lender Inc. owns all of the shares of Mortgage Company. Lender Inc. is
A)a holding company.
B)a parent corporation.
C)a subsidiary corporation.
D)all of the choices.

Accepted Answer

Lender Inc. is a parent corporation because it owns all of the shares of Mortgage Company, making Mortgage Company its subsidiary.

Question 14

Through a certain transaction, Café Inc. acquires all of the shares of Diner Corporation for some of Café's shares. Both Café and Diner continue to exist. This is
A)a consolidation.
B)a share exchange.
C)a short-form merger.
D)a purchase of assets.

Accepted Answer

A share exchange involves one company acquiring all the shares of another company in exchange for its own shares, without the dissolution of either company.

Question 15

Kudos Corporation combines its assets and liabilities with those of Livestream Company to form MedOnline Inc. Kudos and Livestream cease to exist. The agreement between Kudos and Livestream that sets out the capital structure and other features of MedOnline
A)amends the articles of Kudos and Livestream.
B)disappears once the combination is complete.
C)combines with the articles of Kudos and Livestream.
D)takes the place of the articles of Kudos and Livestream.

Accepted Answer

When two companies combine assets and liabilities to form a new entity, and the original companies cease to exist, the agreement that outlines the new entity's capital structure and other features essentially replaces the articles of incorporation of the original companies. This is because the original entities are dissolved, and their legal and operational frameworks are no longer relevant or applicable.

Question 16

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.

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.

Question 17

Cloud Inc. merges with Data Corporation. Cloud, the surviving corporation, issues shares or pays fair consideration to
A)Cloud's shareholders.
B)Data's shareholders.
C)the state.
D)no one.

Accepted Answer

In a merger where one corporation (Cloud Inc.) is the surviving entity, it typically issues shares or pays fair consideration to the shareholders of the non-surviving corporation (Data Corporation) as compensation for their shares being absorbed into the surviving entity.

Question 18

Beef Inc. merges with Chicken Corporation. Beef absorbs Chicken. After the merger, the surviving corporation is
A)a different, new entity-Diners Choice Inc.
B)Beef and Chicken.
C)Beef only.
D)Chicken only.

Accepted Answer

When one company absorbs another in a merger, the surviving company retains its identity, while the other ceases to exist as a separate entity. In this case, Beef Inc. absorbs Chicken Corporation, so the surviving corporation is Beef only.

Question 19

Garden Company and Home Corporation make a plan to consolidate. Once approved, the plan will be filed with
A)a holding company.
B)a parent corporation.
C)the appropriate state's secretary of state.
D)the U.S. Department of Commerce.

Accepted Answer

When companies plan to consolidate, the plan must be filed with the appropriate state's secretary of state, as this is the entity responsible for the registration and regulation of businesses within the state.

Question 20

Apps Inc. decides to combine its operations with Beta Company to form Computer Software Inc. Apps and Beta are domestic corporations. Before a vote is taken on the proposed combination, sufficient information to evaluate the deal must be given to each corporation's
A)shareholders.
B)creditors.
C)officers and other employees.
D)none of the choices.

Accepted Answer

When corporations like Apps Inc. and Beta Company decide to combine operations, they are required to provide sufficient information about the proposed combination to their shareholders before a vote is taken. This is to ensure that shareholders can make an informed decision regarding the merger or acquisition. Creditors, officers, and other employees are not legally entitled to this information in the context of voting on the deal, although they may be informed for other reasons related to the transaction's impact on their interests.

Quiz 38: Mergers and Takeovers

Bus Corporation exchanges some of its shares for some of the shares of Car Company. The exchange is used to create Drive Inc., whose business activity is to hold the shares of the two companies. Once the formalities are satisfied, a certificate of the exchange is issued by

Revenue Inc. owns more than 90 percent of the shares of Sales Corporation. A copy of a plan for a merger of Revenue and Sales must be sent to each shareholder of

Salmon Company decides to combine its operations with Tuna Corporation to form United Seafood Inc. Salmon and Tuna are domestic corporations. The plan for Salmon and Tuna's combination must be approved by the shareholders of

All of the shares of GMO Company are owned by Hybrid Inc. GMO Inc. is

Bank Company decides to combine its operations with Credit Corporation to form Debit Finance Inc. Bank and Credit are domestic corporations. The plan for Bank and Credit's combination must be approved by the board of directors of

Lumber Company owns more than 90 percent of the shares of Mill Corporation. A plan for a merger of Lumber and Mill must be approved by the directors of

Mergers, consolidations, and share exchanges are authorized by

Lunch Truck Inc. owns more than 90 percent of the shares of Meal Prep Company. A plan for a merger of Lunch Truck and Meal Prep must be approved by the shareholders of

Code Company combines its assets and liabilities with those of Design Corporation to form Engineer Inc. Code and Design cease to exist. With respect to the assets of Code and Design, Engineer Inc. acquires

Quantum Company exchanges some of its shares for some of the shares of Rocket Corporation. The exchange is used to create Space Inc., whose business activity is to hold the shares of the two companies. Space Inc. is

Carrier Company exchanges some of its shares for some of the shares of Dispatch Corporation. The plan for this exchange must be approved by each corporation's

Market Company exchanges some of its shares for some of the shares of Niche Corporation. On the exchange of shares between Market and Niche

Lender Inc. owns all of the shares of Mortgage Company. Lender Inc. is

Through a certain transaction, Café Inc. acquires all of the shares of Diner Corporation for some of Café's shares. Both Café and Diner continue to exist. This is

Kudos Corporation combines its assets and liabilities with those of Livestream Company to form MedOnline Inc. Kudos and Livestream cease to exist. The agreement between Kudos and Livestream that sets out the capital structure and other features of MedOnline

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

Cloud Inc. merges with Data Corporation. Cloud, the surviving corporation, issues shares or pays fair consideration to

Beef Inc. merges with Chicken Corporation. Beef absorbs Chicken. After the merger, the surviving corporation is

Garden Company and Home Corporation make a plan to consolidate. Once approved, the plan will be filed with

Apps Inc. decides to combine its operations with Beta Company to form Computer Software Inc. Apps and Beta are domestic corporations. Before a vote is taken on the proposed combination, sufficient information to evaluate the deal must be given to each corporation's