Advanced Accounting, 12e (Beams et al.) Chapter 1 Business Combinations 1.1 Multiple Choice Questions 1) Which of the following is not a reason for a company to expand through a combination, rather than by building new facilities? A) A combination might provide cost advantages. B) A combination might provide fewer operating delays. C) A combination might provide easier access to intangible assets. D) A combination might provide an opportunity to invest in a company without having to take responsibility for its financial results. Answer: D Objective: LO1 Difficulty: Easy 2) A business merger differs from a business consolidation because A) a merger dissolves all but one of the prior entities, but a consolidation dissolves all of the prior entities and forms a new corporation. B) a consolidation dissolves all but one of the prior entities, but a merger dissolves all of the prior entities. C) a merger is created when two entities join, but a consolidation is created when more than two entities join. D) a consolidation is created when two entities join, but a merger is created when more than two entities join. Answer: A Objective: LO2 Difficulty: Easy 3) Following the accounting concept of a business combination, a business combination occurs when a company acquires an equity interest in another entity and has A) at least 20% ownership in the entity. B) more than 50% ownership in the entity. C) 100% ownership in the entity. D) control over the entity, irrespective of the percentage owned. Answer: D Objective: LO2 Difficulty: Easy 4) Historically, much of the controversy concerning accounting requirements for business combinations involved the ________ method.