Test 1 Flashcards
What are the three forms of business combinations?
Merger, consolidation, acquisition
What is the acquisition method?
Any business combination that takes place.
What is a merger?
A company + B company = A company OR B company
The name of one stays the same
What is a hostile takeover?
The company being acquired does not approve of the buyout and fights against the acquisition.
If we do have the ability to influence a company, and the company then pays out a divided, what is the journal entry?
Debit: Cash
Credit: Investment in ____________ company
We credit the investment b/c the divided decreased the owners equity
How much stock must be owned to acquire control of a company?
50%
Do you make a mark to market entry when using the equity method?
No
If we do have the ability to influence that company, what journal entry is needed at 12/31? Where do we get the dollar amount?
Debit: Investment in _________________ company
Credit: Equity in investment earnings
The amount we use is our share of net income
What kind of account is equity in investment earnings?
It is a revenue account required by GAAP.
What is the difference between a merger and consolidation?
A new name.
*consolidation= the company creates a new name
*merger= the name stays the same
Which business combination has a parent company and a subsidiary company?
Acquisition
How many sets of accounting statements does a merger or consolidation require?
One
What is a tender offer?
The acquiring company appeals directly to the shareholders.
What is consolidation?
A company + B company = C company
*the company creates a new name
What is an acquisition?
A company + B company = A company AND B company
Ex. Exonmobile
