It is a type of business combination wherein an investor, having an existing involvement in the investee, acquires additional investment in order to obtain control over the investee. a. Business combination achieved by contract alone b. Business combination achieved by mere exchanges of equity interests c. Business combination achieved in stages d. Baby step combination

It is a type of business combination wherein an investor, having an existing involvement in the investee, acquires additional investment in order to obtain control over the investee. a. Business combination achieved by contract alone b. Business combination achieved by mere exchanges of equity interests c. Business combination achieved in stages d. Baby step combination

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter18: Comparative Forms Of Doing Business

Section: Chapter Questions

Problem 12P

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How important is intercompany activity on decisions to form business combinations? We see intercompany transfers quite often between companies involved in a business combination. Why do you feel that this happens so frequently? Is this ever a concern to the investors, controlling and noncontrolling?
State whether the following statements are true or false and justify your answer in each case: a) The investor's relative exposure to the risks and rewards of the investee is known as the investor's 'extent of equity ownership' in the investee. b) The investor's 'extent of equity ownership' in the investee determines whether the investee is equity accounted. consolidated or simply measured as an investment in the investor's consolidated financial statements. c) The investor's degree of influence over an investee increases as the investment changes from a simple investment to a subsidiary. finally reaching the strongest degree of influence when the subsidiary becomes an associate. d) An investment over which the investor has significant influence is called an associate. e) An investee that is jointly controlled by the investor is called a subsidiary. f) The only instance where the investor may equity account for its investee is when such an investee is classified as an associate. g)…
Which partners in a business have limited risk only to their investment? a. General partners b. Limited partners c. Active partners d. International partners
In financial statements that are not separate financial statements, how should a joint venturer account for its interest in a joint arrangement? a. As an investment measured either at cost, fair value or using equity method b. As an investment measured using the equity method c. By using a T-account d. By recognizing its share in the assets, liabilities, income and expenses of the join venture and adding them line by line to similar accounts
The ability to combine skills and knowledge is anadvantage of aa. partnership.b. sole proprietorship.c. limited venture.d. an enterprise venture.e. a horizontal business.
n reference to intercompany transactions between an investor and an investee, when the investor can significantly influence the investee, which of the following statements is correct, assuming that the investor is using the equity method? Question 9Answer a. As long as the investor recognizes the effects of the transaction in its financial statements, it is notrequired to provide any additional disclosures. b. In reporting its share of earnings and losses of an investee, the investor must eliminate the effect of profits and losses on the intercompany transactions until they are realized. c. None of the others are correct. d. There is the presumption of arms-length bargaining between the related parties.
In a business combination, the acquiree is the business that: Select one: a. Finances the business combination. b. Pays the acquisition consideration. c. The acquirer obtains control of in a business combination. d. Obtains control of the acquiree.
A firm may choose to enter a new market through a joint venture. All of the following features of a joint venture reduce the risk associated with market entry EXCEPT: A. The partner firm will understand the local business environment. B. The local partner has an existing reputation in the country. C. Ability to easily integrate with the partner company culture. D. The cost of entry is shared by the joint venture partner firm.
Choose the correct.Which of the following does not indicate an investor company’s ability to significantly influence an investee?a. Material intra-entity transactions.b. The investor owns 30 percent of the investee but another owner holds the remaining 70 percent.c. Interchange of personnel.d. Technological dependency.
1. For the risk-return principle implies that the riskier a given course of action, the higherthe expected return must be. (T) (F)2. General partners have unrestricted transferability of ownership, while limited partnersmust have the consent of all partners to transfer their ownership. (T) (F)3. Owners must register and pay yearly fees to their State of residence when establishinga sole proprietorship. (T) (F)4. The purpose of financial markets is to bring borrowers and savers together. (T) (F)5. In Financial markets, borrowers and lenders most both be located in the same country. (T) (F)6. Beginning cash balance + cash flow from operations + cash flow from investingactivities + cash flow from financing activities = ending cash balance. (T) (F)7. On a common size balance sheet, total assets are equal to 100%. (T) (F)8. The income statement shows a company's earnings since it has been in business. (T) (F)9. The balance includes information about the company's assets and liabilities. (T)…
Q1. When the management of a business is conducted by individuals other than the owners, the business is more likely to be a: partnership. sole proprietorship. general partner. corporation.
This distinguishes a business combination from other types of investment transactions. Obtaining of control Acquisition of stocks Acquisition of assets All of these The entity that obtains control over another business in a business combination called the Controller Acquiree Acquirer Controllee Entity A obtained control of Entity B in a business combination. When computing for goodwill, Entity A would least likely account for which of the following? Entity B’s research and development projects that were already charged as expenses, but have a fair value as at the acquisition date. Entity B’s unrecorded identifiable intangible assets Operating lease between Entity A and Entity B, wherein Entity B is the lessee. Entity A’s expected costs of exiting or terminating some or all of Entity B’s activities after the combination. A contingent liability assumed in a business combination Is not accounted for by the acquirer if the contingent liability has an improbable outflow of economic…