Mergers and Acquisitions Paper 4

1

A corporation issued a property dividend to its shareholders. The dividend was distributed in the form of 100% of the common stock of a subsidiary. This is known as a






2

BigCo, a large conglomerate, has a division that has developed a new and highly promising technology. BigCo would like to retain control of this division but also raise additional capital to support the further development of this technology. BigCo also realizes this promising technology is different than its usual business lines and will require a new management style and incentive program to attract and maintain talent. Which one of the following would best allow BigCo to achieve these objectives?






3

When a company decides to divest a segment, the underlying reason for this decision could be any one of the following except






4

Which of the following expenses related to the business acquisition should be included, in total, in the determination of net income of the combined corporation for the period in which the expenses are incurred?
Fees of finders and consultants
Registration fees for equity securities issued






5

On August 31, year 1, Wood Corp. issued 100,000 shares of its $20 par value common stock for the net assets of Pine, Inc., in a business combination accounted for by the acquisition method. The market value of Wood’s common stock on August 31 was $36 per share. Wood paid a fee of $160,000 to the consultant who arranged this acquisition. Costs of registering and issuing the equity securities amounted to $80,000. No goodwill was involved in the acquisition. What amount should Wood capitalize as the cost of acquiring Pine’s net assets?






6

Consolidated financial statements are typically prepared when one company has a controlling financial interest in another unless






7

On January 1, year 1, Lake Corporation acquired 100% of the outstanding common stock of Shore Corporation for $800,000. On the date of acquisition, the fair value of Shore’s net identifiable assets is $820,000. The book value of Shore Corporation’s net assets is $760,000. In Lake’s year 1 financial statements, Lake should recognize






8

A business combination is accounted for appropriately as an acquisition. Which of the following should be deducted in determining the combined corporation’s net income for the current period?
Direct costs of acquisition
General expenses related to acquisition






9

Which of the following situations would require the use of the acquisition method in a business combination?






10

ASC Topic 805 (SFAS 141[R]) sets forth certain steps in accounting for an acquisition. Which of the following is not one of those steps?






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