1. Companies may combine in following ways
(i) absorption
(ii) amalgamation
(iii) external reconstruction
(iv) internal reconstruction
(v) merger
a) any of above
b) none of above
c) any except (iv)
d) any except (v)
2. If the ABC Limited and DEF Limited are taken over by a new company XYZ Limited
a) it is called absorption
b) it is called amalgamation
c) it is called external reconstruction
d) it is called internal reconstruction
3. If the ABC Limited and DEF Limited are taken over by a new company XYZ Limited
a) ABC Ltd. and DEF Ltd. are known as the “Vendor Companies
b) ABC Ltd. and XYZ Ltd. are known as the “Vendor Companies”
c) XYZ Ltd. and DEF Ltd. are known as the “Vendor Companies”
d) XYZ Ltd. is known as the “Vendor Company”
4. If the ABC Limited and DEF Limited are taken over by a new company XYZ Limited
a) ABC Ltd. and DEF Ltd. are known as the “Purchasing Companies”
b) ABC Ltd. and XYZ Ltd. are known as the “Purchasing Companies”
c) XYZ Ltd. and DEF Ltd. are known as the “Purchasing Companies”
d) XYZ Ltd. is known as the “Purchasing Company”
5. If the business of an existing company ABC Limited is taken over by an existing company PQR Limited, it is called
a) external reconstruction
b) internal reconstruction
c) absorption
d) amalgamation
6. If the business of an existing company ABC Limited is taken over by an existing company PQR Limited,
a) ABC Ltd. is known as the “Vendor Company”; and PQR Ltd. is known as the “Purchasing Company”
b) ABC Ltd. and PQR Ltd. are known as the “Purchasing Companies”
c) PQR Ltd. is known as the “Vendor Company”; and ABC Ltd. is known as the “Purchasing Company”
d) ABC Ltd. and PQR Ltd. are known as the “Vendor Companies”
7. If the business of ABC Limited, a loss-making company, is taken over by a new company ABC (New) Limited, it is called
a) internal reconstruction
b) absorption
c) amalgamation
d) external reconstruction
8. If the business of ABC Limited, a loss-making company, is taken over by a new company ABC (New) Limited,
a) ABC Ltd. is known as the “Vendor Company”; and ABC (New) Ltd. is known as the “Purchasing Company”
b) ABC Ltd. and ABC (New) Ltd. are known as the “Purchasing Companies”
c) ABC (New) Ltd. is known as the “Vendor Company”; and ABC Ltd. is known as the “Purchasing Company”
d) ABC Ltd. and ABC (New) Ltd. are known as the “Vendor Companies”
9. When the merger involves liquidation of two existing companies and formation of one new company, it is called
a) internal reconstruction
b) absorption
c) external reconstruction
d) amalgamation
10. When the merger involves liquidation of one or more existing companies and formation of no new company, it is called
a) internal reconstruction
b) absorption
c) external reconstruction
d) amalgamation
11. When the merger involves liquidation of one existing sick company and formation of one new company, it is called
a) internal reconstruction
b) absorption
c) external reconstruction
d) amalgamation
12. A feature which is common in all cases of merger viz. absorption, amalgamation and external reconstruction is
a) purchase of one company by another company
b) liquidation of at least two companies
c) formation of at least one new company
d) liquidation at least one existing company and formation of at least one new company
13. Under the Companies Act, 1956
a) ‘absorption’ includes ‘’amalgamation”
b) ‘amalgamation’ includes ‘absorption’
c) ‘amalgamation’ excludes ‘absorption’
d) ‘internal reconstruction’ includes ‘’external reconstruction”
14. Accounting for amalgamation is governed by
a) Accounting Standard 1
b) Accounting Standard 13
c) Accounting Standard 14
d) Accounting Standard 11
15. Accounting for absorption is governed by
a) Accounting Standard 1
b) Accounting Standard 13
c) Accounting Standard 11
d) Accounting Standard 14
16. Accounting for amalgamation by way of purchase is governed by
a) Accounting Standard 1
b) Accounting Standard 13
c) Accounting Standard 14
d) None of the above
17. Accounting for amalgamation by way of merger is governed by
a) Accounting Standard 1
b) Accounting Standard 14
c) Accounting Standard 13
d) None of the above
18. According to AS 14, Transferor Company means the Company
a) which is amalgamated into another Company
b) into which a Company is amalgamated
c) which is newly formed
d) none of the above
19. According to AS 14, Transferee Company means the Company
a) which is amalgamated into another Company
b) into which a Company is amalgamated
c) which is liquidated
d) none of the above
20. According to AS 14, Amalgamations fall into two categories
a) amalgamation and absorption
b) merger and purchase
c) amalgamation and reconstruction
d) external reconstruction and internal reconstruction
21. On amalgamation, Share issue Expenses A/c appearing on Assets side of the balance sheet of the vendor company
a) is closed by debit to Realisation A/c
b) is closed by debit to Equity Shareholders A/c
c) is closed by debit to Profit & Loss A/c
d) is closed by credit to Equity Shareholders A/c
22. On amalgamation, Profit & Loss A/c (Dr.) balance of the vendor company
a) is closed by debit to Equity Shareholders A/c
b) is closed by debit to Realisation A/c
c) is closed by credit to Equity Shareholders A/c
d) is closed by credit to Realisation A/c
23. On amalgamation, Debenture A/c appearing in the balance sheet of the vendor company
a) is closed by credit to Purchasing Company A/c, if debentures are taken over by the purchasing company
b) is closed by credit to Realisation A/c, whether debentures are taken over by the new company or not
c) is closed by credit to Debentureholders A/c, if debentures are not taken over by the new company
d) is closed by debit to Realisation A/c, whether debentures are taken over by the new company or not
24. On amalgamation, Provident Fund A/c appearing on the Liabilities side in the balance sheet of the vendor company
a) is closed by credit to Purchasing Company A/c
b) is closed by debit to Realisation A/c
c) is closed by credit to Equity Shareholders A/c
d) is closed by credit to Realisation A/c
25. On amalgamation, Sinking Fund A/c appearing on the Liabilities side in the balance sheet of the vendor company
a) is closed by credit to Purchasing Company A/c
b) is closed by credit to Realisation A/c
c) is closed by credit to Equity Shareholders A/c
d) is closed by debit to Realisation A/c
26. On amalgamation, if the dissolution expenses are paid as well as borne by the purchasing company
a) Entries are passed in the books of the purchasing as well as the vendor company
b) no entry is passed in the books of the vendor company
c) no entry is passed in the books of the purchasing company
d) no entry is passed in the books of the purchasing as well as the vendor company
27. On amalgamation, if pref. shares are settled at a premium
a) the premium is credited to Realisation A/c
b) the premium is debited to Realisation A/c
c) the premium is credited to Security Premium A/c
d) the premium is debited to Capital Reserve A/c
28. On amalgamation, accounting procedure used by the vendor company
a) is the same in all types of amalgamation
b) is different depending upon whether the amalgamation is in the nature of a merger or a purchase as defined by Accounting Standard 14
c) is different depending upon whether the companies are private or public
d) is different depending upon the amount of purchase consideration
29. On amalgamation, accounting procedure used by the purchasing company
a) is the same in all types of amalgamation
b) is different depending upon whether the amalgamation is in the nature of a merger or a purchase as defined by Accounting Standard 14
c) is different depending upon whether the companies are private or public
d) is different depending upon the amount of purchase consideration
30. All the assets and liabilities of the vendor company become the assets and liabilities of the purchasing company
a) if the amalgamation is in the nature of merger as defined under AS 14
b) if the amalgamation is in the nature of absorption as defined under the Companies Act
c) if the amalgamation is in the nature of external reconstruction as defined under the Companies Act
d) if the amalgamation is in the nature of purchase as defined under AS 14
31. Shareholders holding not less than 90% of the face value of the equity share capital in the vendor company become equity shareholders in the purchasing company
a) if the amalgamation is in the nature of merger as defined under AS 14
b) if the purchase consideration is calculated under payment method
c) if the amalgamation is in the nature of external reconstruction as defined under the Companies Act
d) if the amalgamation is in the nature of purchase as defined under AS 14
32. The assets and liabilities of the vendor company are incorporated in the accounts of the purchasing company at book values
a) if the amalgamation is in the nature of merger as defined under AS 14
b) if the amalgamation is in the nature of purchase as defined under AS 14
c) if the purchase consideration is calculated under Net Assets method
d) if the amalgamation is in the nature of external reconstruction as defined under the Companies Act
33. In the books of the purchasing company, the assets and liabilities of the vendor company are incorporated on the basis of their agreed values (i.e. either the book values or the fair values)
a) if the amalgamation is in the nature of merger as defined under AS 14
b) if the amalgamation is in the nature of purchase as defined under AS 14
c) if the purchase consideration is calculated under Net Assets method
d) if the amalgamation is in the nature of external reconstruction as defined under the Companies Act
34. The difference between the purchase consideration and the net assets of the vendor company, if any, is either debited to the Goodwill Account or credited to the Capital Reserve Account
a) if the amalgamation is in the nature of merger as defined under AS 14
b) if the amalgamation is in the nature of purchase as defined under AS 14
c) if the purchase consideration is calculated under Net Assets method
d) if the amalgamation is in the nature of external reconstruction as defined under the Companies Act
35. Under purchase method of amalgamation, the reserves of the vendor Company
a) are not brought in the books of the purchasing company
b) are brought in the books of the purchasing company
c) (except a statutory reserve) are not brought in the books of the purchasing company
d) (except a statutory reserve) are brought in the books of the purchasing company
36. Amalgamation Adjustment Reserve
a) should be shown as a Fixed Asset in the balance sheet of the purchasing company
b) should be shown as a Fictitious Asset in the balance sheet of the vendor company
c) should be shown under Reserves and Surplus in the balance sheet of the purchasing company
d) should be shown as a Fictitious Asset in the balance sheet of the purchasing company
37. The amounts paid by the purchasing company to discharge the debentures are
a) ignored while calculating purchase consideration by net payment method
b) ignored while calculating purchase consideration by net asset method
c) considered while calculating purchase consideration by net payment method
d) none of the above
38. The amounts paid by the purchasing company to discharge the contingent liabilities are
a) ignored while calculating purchase consideration by net payment method
b) ignored while calculating purchase consideration by net asset method
c) considered while calculating purchase consideration by net payment method
d) none of the above
39. The amounts paid by the purchasing company to meet the expenses of winding up are
a) ignored while calculating purchase consideration by net payment method
b) ignored while calculating purchase consideration by net asset method
c) considered while calculating purchase consideration by net payment method
d) none of the above
40. The agreed values at which the assets or liabilities are taken over by the purchasing company are
a) ignored while calculating purchase consideration by net payment method
b) ignored while calculating purchase consideration by net asset method
c) considered while calculating purchase consideration by net payment method
d) none of the above
41. The value of assets or liabilities not taken over by the purchasing company is
a) ignored while calculating purchase consideration by net payment method
b) ignored while calculating purchase consideration by net asset method
c) considered while calculating purchase consideration by net asset method
d) none of the above
42. The Unamortized Expenditure not written off is
a) ignored while calculating purchase consideration by net payment method
b) ignored while calculating purchase consideration by net asset method
c) considered while calculating purchase consideration by net asset method
d) none of the above
43. Liquidation expenses of Vendor Co. agreed to be paid / re-imbursed by the Purchasing Co., should be
a) considered while calculating purchase consideration by net payment method
b) considered while calculating purchase consideration by net asset method
c) ignored while calculating the purchase consideration (whether under net payments method or net assets method).
d) none of the above
44. As per AS-14 purchase consideration is what is payable to
a) Shareholders
b) Shareholders and debenture holders
c) Shareholders and creditors
d) None of the above
45. When amalgamation is in the nature of merger, the accounting method to be followed is :
a) Equity method
b) Purchase method
c) Pooling of interests method
d) None of the above
46. Amalgamation adjustment reserve is opened in the books of transferee company to incorporate
a) The assets of the transferor company
b) The liabilities of the transferor company
c) The statutory reserves of the transferor company
d) None of the above
47. Under the 'Purchase method of accounting', the transferee company incorporates in its books:
a) Only the assets and liabilities of the transferor company
b) Only the assets, liabilities and statutory reserves of the transferor company
c) Only the assets, liabilities and reserves of the transferor company
d) None of the above
48. Goodwill arising on amalgamation is to be
a) Retained in the books of the transferee company
b) Amortised to income on a systematic basis
c) Adjusted against reserves and profit and loss account of the transferee company immediately
d) None of the above
49. Under the pooling of interests method the difference between the purchase consideration and share capital of transferee company should be adjusted to :
a) General reserve
b) Amalgamation adjustment reserve
c) Goodwill or capital reserve
d) None of the above
50. At the time of amalgamation, purchase consideration does not include
a) The sum which the transferee company will directly pay to the creditors of the transferor company
b) Payments made in the form of assets by the transferee company to the shareholders of the transferor company
c) Preference shares issued by the transferee company to the preference shareholders of the transferor company
d) preference shares issued by the transferee company to the equity shareholders of the transferor company