Chapter 1 Test Bank BUSINESS COMBINATIONS Multiple Choice Questions LO1 1. Research and development is a driver of business combinations for all of the following reasons except? a. Lower operating costs b. Acquisition of intangible assets c. Operating loss carryforwards d. Reduced business risk of acquiring established product lines LO2 2. A business combination in which a new corporation is created and two or more existing corporations are combined into the newly created corporation is called a: a. merger. b. purchase transaction. c. pooling-of-interests. d. consolidation. 3. 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. 4. FASB favors consolidation of two entities when a. One acquires at least 20% equity ownership of the other. b. One acquires between 20% an