MCQ on Amalgamation and External Reconstruction : Multiple Choice Questions and Answers

Multiple Choice Questions and Answers

1.  Accounting Standard for amalgamation is:

  1. AS-3
  2. AS-9
  3. AS-12
  4. AS-14 (AS-14 deals with accounting for amalgamation)

Answer :- AS-14 (AS-14 deals with accounting for amalgamation)

2. according to AS – 14, purchase consideration is the sum of payments made to the:

  1. Debenture holders and Shareholders
  2. Shareholders
  3. Debenture holders
  4. Creditors, Debenture holders and Shareholders

Answer :- Shareholders

3. Future retail Ltd and Reliance Ltd go into liquidation and a new company Reliance Retail Ltd is formed. It is a case of:

  1. Absorption
  2. External reconstruction
  3. Amalgamation.
  4. Take over

Answer :- Amalgamation.

4. Reliance Ltd takes over the business of Future retails. It is a case of:

  1. Absorption
  2. External reconstruction
  3. Amalgamation.
  4. Take over

Answer :- Absorption

5. Future retail Ltd is liquidated and a new company Future Enterprises is formed to take over its business. It is a case of:

  1. Absorption
  2. External reconstruction
  3. Amalgamation.
  4. Take over.

Answer :- External reconstruction

6. Why Amalgamation is known to be in the nature of merger:

  1. There is transfer of all assets & liabilities at book values.
  2. Issue of equity shares discharged the Purchase consideration wholly (except cash for fractional shares)
  3. Equity shareholders holding 90% equity shares in Transferor Company become shareholders of  Transferee Company.
  4. All of the above

Answer :- All of the above

7. The method to be followed in case of amalgamation in the nature of merger is:

  1. Purchase method
  2. Pooling of Interest method
  3. Absorption method
  4. Consolidated method

Answer :- Pooling of Interest method

8. The method to be followed in case of amalgamation in the nature of merger is:

  1. Purchase method
  2. Pooling of Interest method
  3. Absorption method
  4. Consolidated method

Answer :- Purchase method

9. Amalgamation is called to be in the nature of purchase – why?:

  1. the transferee company  cannot take over all the assets and liabilities of the Transferor Company.
  2. There is change in the business of Transferor Company.
  3. Purchase consideration can be discharged by shares or debentures or cash.
  4. All of the above

Answer :- All of the above

10. In case of Amalgamation in the nature of purchase, Amalgamation Adjustment accounts is opened to record:

  1. General and revenue reserve of the transferor company.
  2. The statutory reserves of the transferor company
  3. Assets of the transferor company
  4. Liabilities of the transferor company.

Answer :- The statutory reserves of the transferor company

11. under the pooling of interest method where it will be adjusted if, the share capital of the transferor company and the difference between the considerations paid.

  1. Goodwill or Capital reserve.
  2. The general reserve or other reserves of the transferee company.
  3. Amalgamation Adjustment Account.
  4. All of the above.

Answer :- The general reserve or other reserves of the transferee company.

12. Only the __________ of Transferor Company is transferred to the transferee company’s balance sheet.

  1. General Reserve
  2. Statutory Reserve
  3. Capital Reserve
  4. Revenue reserve

Answer :- Statutory Reserve

13. under the purchase method – it will be adjusted in, the net assets of the transferor company and the difference between the purchase considerations paid in:

  1. Goodwill or Capital reserve.
  2. The general reserve or other reserves of the transferee company.
  3. Amalgamation Adjustment Account.
  4. All of the above.

Answer :- Goodwill or Capital reserve.

14. Goodwill arising on amalgamation is to be amortised:

  1. Within 5 years.
  2. Within 5 years unless a longer period is justified.
  3. Within 10 years.
  4. Within 3 years.

Answer :- Within 5 years unless a longer period is justified.

15. Accounting Standard-14 (AS-14) is not applicable if the separate entity of the transferor company after acquisition:

  1. Ceases to exist
  2. Continues to exist
  3. AS-14 is applicable in all situations.
  4. AS-14 is not applicable in acquisition.

Answer :- Continues to exist

16. Which of the following is included in accumulated profits?

  1. Provision for doubtful debts
  2. Superannuation fund
  3. Workmen’s compensation fund.
  4. Pension fund.

Answer :- Workmen’s compensation fund.

17. Which one of the following is an outsider’s liability?

  1. Dividend equalization fund.
  2. Workmen Compensation funds.
  3. Investment Allowance reserve.
  4. Provident fund.

Answer :- Provident fund.

18. Liquidation expenses borne by the transferee company are debited to:

  1. Goodwill account
  2. Capital reserve account
  3. General reserve account
  4. All of the above

Answer :- All of the above

(Note: In case of merger, debited to general reserve account and in case of purchase debited to goodwill or capital reserve depending on the balance arises)

19. If the transferee company paid the liquidation expenses is debited to:

  1. Goodwill account
  2. Capital reserve account
  3. General reserve account
  4. Realisation account

Answer :- Realisation account

20. While calculation purchases consideration, the following value of the assets is to be considered.

  1. Book value
  2. Market value
  3. Fair value
  4. Average price

Answer :- Fair value

21. Net assets minus capital reserve is:

  1. Goodwill
  2. General reserves
  3. Purchase consideration
  4. None of the above

Answer :- Purchase consideration

22. If purchase consideration is more than net assets of the transferor company, then difference will be shown as:

  1. Goodwill account
  2. Capital reserve account
  3. General reserve account
  4. None of the above

Answer :- Goodwill account

23. If purchase consideration is less than net assets of the transferor company, then difference will be shown as:

  1. Goodwill account
  2. Capital reserve account
  3. General reserve account
  4. None of the above

Answer :- Capital reserve account

24. The difference between the purchase consideration and net asset is adjusted in case of merger is adjusted with:

  1. Goodwill account
  2. Capital reserve account
  3. General reserve account
  4. None of the above

Answer :- General reserve account

25. in the books of Transferor Company, shares received from the new company are recorded at:

  1. Face value
  2. Market Price
  3. Intrinsic value of shares
  4. None of the above 

Answer :- Market Price

Leave a Comment

error: Content is protected !!