Chapter: Accounting for Amalgamation, Absorption and External
1.

Shares received from the new company are recorded at –

A. Face value
B. Average price
C. Market value
D. None of the above
Answer» C. Market value
2.

When two or more companies carrying on similar business decide to combine, a new company is formed, it is known as ..................

A. Amalgamation
B. Absorption
C. Internal reconstruction
D. External reconstruction
Answer» A. Amalgamation
3.

When one of the existing companies take over business of another company or companies, it is known as ...........

A. Amalgamation
B. Absorption
C. Internal reconstruction
D. External reconstruction
Answer» B. Absorption
4.

While calculating purchase price, the following values of assets are considered

A. Book value
B. New values fixed
C. Average values
D. Market values
Answer» B. New values fixed
5.

While calculating purchase price, the following values of assets are considered

A. Book value
B. New values fixed
C. Average values
D. Market values
Answer» C. Average values
6.

Which of the following statement is correct?

A. The amount of Goodwill or Capital Reserve is found out in the books of purchasing company only
B. The amount of Goodwill or Capital Reserve is found out in the books of vendor company only.
C. Goodwill = Net Assets – Purchase price
D. The face value of shares of purchasing company will be taken in to account while calculating purchase consideration.
Answer» A. The amount of Goodwill or Capital Reserve is found out in the books of purchasing company only
7.

If the two companies have different accounting policies in respect of the same item, then they make necessary changes to adopt .............. accounting policies.

A. LIFO method
B. FIFO method
C. Weighted method
D. Uniform
Answer» D. Uniform
8.

The Amalgamation Adjustment Account appears in the books, it is shown under the heading of ......... in the balance sheet.

A. Reserve and Surplus
B. Fixed Assets
C. Investments
D. Miscellaneous expenditure
Answer» D. Miscellaneous expenditure
9.

If amalgamation is in the ..............., the General Reserve or Profit and Loss A/c balance will not be shown in the balance sheet.

A. Form of Merger
B. Form of purchase
C. Net assets method
D. Consideration method
Answer» B. Form of purchase
10.

If the intrinsic values of shares exchanged are not equal, the difference is paid in ...........

A. Cash
B. Debenture
C. Pref. share
D. Assets
Answer» A. Cash
11.

In case of .............., one existing company takes over the business of another company and no new company is formed.

A. Amalgamation
B. Absorption
C. Reconstruction
D. None of the Above
Answer» B. Absorption
12.

In amalgamation of two companies

A. Both companies lose their existence
B. Both companies continue
C. Any one company continues
D. none
Answer» A. Both companies lose their existence
13.

When purchasing company pays purchase consideration, it will be debited to

A. Business purchase account
B. Assets account
C. Liquidator of selling company’s account
D. none
Answer» C. Liquidator of selling company’s account
14.

When the purchasing company bears the liquidation expenses, it will debit the expenses to

A. Vendor Company’s Account
B. Bank Account
C. Goodwill Account
D. none
Answer» C. Goodwill Account
15.

When the Vendor (seller) company agrees to bear liquidation expenses, it will debit

A. Realisation Account
B. Bank Account
C. Goodwill Account
D. none
Answer» A. Realisation Account
16.

When the purchasing company does not take over a particular liability and the vendor company pays that liability, it will debit it to

A. Realisation Account
B. Bank Account
C. Liability Account
D. none
Answer» A. Realisation Account
17.

When the Net Assets are less than the Purchase Consideration, the difference will be

A. Debited to Goodwill A/c.
B. Debited to General Reserve
C. none of these
D. none
Answer» A. Debited to Goodwill A/c.
18.

While calculating purchase consideration ............... values of assets is to be considered.

A. Book value
B. Revalued price
C. Average price
D. Capital
Answer» B. Revalued price
19.

Net Assets minus Capital Reserve is _________

A. Goodwill
B. Total assets
C. Purchase consideration
D. None of these
Answer» C. Purchase consideration
20.

Hitesh Ltd.’s purchase consideration is Rs.12,345 and Net Assets Rs.3,568, then..........

A. Goodwill Rs. 8,777
B. Capital Reserve Rs. 8,777
C. Goodwill Rs. 15,913
D. Capital Reserve Rs. 15,913
Answer» A. Goodwill Rs. 8,777
21.

The original amount of preference share capital should be transferred to ............ account in the time of amalgamation in the books of vendor co.

A. Preference shareholders Account
B. Capital Reserve Account
C. Equity share capital Account
D. Equity share capital Account
Answer» A. Preference shareholders Account
22.

The share capital, to the extent already held by the purchasing company, is closed by the vendor company by crediting it to:

A. Share capital account
B. Purchasing company's account
C. Realisation account.
D. none
Answer» C. Realisation account.
23.

In case of inter-company holdings, the purchasing company, at the time of payment of the purchase consideration, surrenders the shares in the vendor company by crediting:

A. Vendor company's account
B. Shares in the vendor company account
C. Share capital account.
D. none
Answer» B. Shares in the vendor company account
24.

The vendor company transfers preliminary expenses (at the time of absorption) to:

A. Equity shareholders' account
B. Realisation account
C. Purchasing company's account.
D. none
Answer» B. Realisation account
25.

A Ltd. and B Ltd. go into liquidation and a new company X Ltd. is formed. It is a case of:

A. Absorption
B. External reconstruction
C. Amalgamation.
D. none
Answer» C. Amalgamation.
26.

For amalgamation in the nature of merger, the shareholders holding at least ______ or more of the equity shares of the transferor company becomes the equity shareholders of the transferee company.

A. 51%
B. 90%
C. 99%
D. 100%
Answer» B. 90%
27.

As per AS–14 purchase consideration is what is payable to

A. Shareholders
B. Creditors
C. Debenture holders
D. Shareholders and Debenture holders.
Answer» A. Shareholders
28.

In the case of ………………………. only one of the combining companies survives and the other losses its separate identity.

A. Acquisition
B. Merger
C. Amalgamation
D. Formation
Answer» A. Acquisition
29.

……………….is the amount payable by the purchasing companies to the vendor company for taking over the business of vendor company.

A. Goodwill
B. Total assets
C. Purchase consideration
D. None of these
Answer» C. Purchase consideration
30.

In absorption there is one ……………………and no formation.

A. Merger
B. Liquidation.
C. Demerger
D. Formation
Answer» B. Liquidation.
31.

In external liquidations, there is one liquidation and one ………………

A. Formation
B. Merger
C. Demerger
D. Purchase consideration
Answer» A. Formation
32.

When two or more companies carrying on similar business decide to combine, a new company is formed, it is known as ..................

A. Amalgamation
B. Absorption
C. Internal reconstruction
D. External reconstruction
Answer» A. Amalgamation
33.

When one of the existing companies take over business of another company or companies, it is known as ...........

A. Amalgamation
B. Absorption
C. Internal reconstruction
D. External reconstruction
Answer» B. Absorption
34.

Which of the following statement is correct?

A. The amount of Goodwill or Capital Reserve is found out in the books of purchasing company only
B. The amount of Goodwill or Capital Reserve is found out in the books of vendor company only.
C. Goodwill = Net Assets – Purchase price (
D. The face value of shares of purchasing company will be taken in to account while calculating purchase consideration.
Answer» A. The amount of Goodwill or Capital Reserve is found out in the books of purchasing company only
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