CHAPTER 1

THEORIES | T or F

False

31.
In a statutory consolidation form of business combination, the Retained Earnings
account of the newly formed corporation has a balance of zero immediately after
the combination.

True

32.
After completing a business combination in the form of a statutory merger or
statutory consolidation, there is only one legal entity in existence.

True

33.
In a business combination accomplished as a stock acquisition normally two
companies exist after the combination.

False

34. A business combination accomplished as a stock acquisition must be

accomplished with a stock for stock exchange.

True

35. A stock acquisition is the only form of business combination that might require the
preparation of consolidated financial statements.

True

36. The substance of statutory mergers, statutory consolidations, and stock

acquisitions is the same if income tax considerations are ignored.

False

37. There are no uncertainties when two companies agree on a business combination.

True

38. When the acquisition price of an acquiree is contingent on acquiree future earnings, the
acquisition price may change?

False

39. When the acquisition price of an acquiree is contingent on the market value of the
acquirer stock, the acquisition price may change.

False

40. For business combinations to qualify as reorganizations (for tax purposes), the
acquiree stockholders must receive voting common stock of the acquirer.