Fact Pattern 31-2 Dynamo Corporation combines its assets and liabilities with those of Energy Company to form Fuel Inc. Dynamo and Energy cease to exist.
Refer to Fact Pattern 31-2. The formation of Fuel Inc. is
A) a takeover.
B) a consolidation.
C) a liquidation.
D) a share exchange.

Question

Quizplus · Accepted Answer

The formation of Fuel Inc. is a consolidation because it involves the combination of two companies, Dynamo Corporation and Energy Company, into a new entity, Fuel Inc., with both original companies ceasing to exist.

Fact Pattern 31-2 Dynamo Corporation Combines Its Assets and Liabilities