Accounting for Amalgamation, Absorption and External

Bachelor of Business Administration (BBA),

Bachelor of Commerce (B Com)

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This set of Corporate Accounting Multiple Choice Questions & Answers (MCQs) focuses on Accounting for Amalgamation, Absorption and External

Q1 | A Ltd. and B Ltd. go into liquidation and a new company X Ltd. is formed. It is a case of:
  • Absorption
  • External reconstruction
  • Amalgamation.
  • none
Answer: Amalgamation.
Q2 | For amalgamation in the nature of merger, the shareholders holding at least ______ or more of the equity shares of the transferor company becomes the equity shareholders of the transferee company.
  • 51%
  • 90%
  • 99%
  • 100%
Answer: 90%
Q3 | As per AS–14 purchase consideration is what is payable to
  • Shareholders
  • Creditors
  • Debenture holders
  • Shareholders and Debenture holders.
Answer: Shareholders
Q4 | In the case of ………………………. only one of the combining companies survivesand the other losses its separate identity.
  • Acquisition
  • Merger
  • Amalgamation
  • Formation
Answer: Acquisition
Q5 | ……………….is the amount payable by the purchasing companies to the vendorcompany for taking over the business of vendor company.
  • Goodwill
  • Total assets
  • Purchase consideration
  • None of these
Answer: Purchase consideration
Q6 | In absorption there is one ……………………and no formation.
  • Merger
  • Liquidation.
  • Demerger
  • Formation
Answer: Liquidation.
Q7 | In external liquidations, there is one liquidation and one ………………
  • Formation
  • Merger
  • Demerger
  • Purchase consideration
Answer: Formation
Q8 | When two or more companies carrying on similar business decide to combine, anew company is formed, it is known as ..................
  • Amalgamation
  • Absorption
  • Internal reconstruction
  • External reconstruction
Answer: Amalgamation
Q9 | When one of the existing companies take over business of another company or companies, it is known as ...........
  • Amalgamation
  • Absorption
  • Internal reconstruction
  • External reconstruction
Answer: Absorption
Q10 | Which of the following statement is correct?
  • The amount of Goodwill or Capital Reserve is found out in the books of purchasing company only
  • The amount of Goodwill or Capital Reserve is found out in the books of vendor company only.
  • Goodwill = Net Assets – Purchase price (
  • The face value of shares of purchasing company will be taken in to account while calculating purchase consideration.
Answer: The amount of Goodwill or Capital Reserve is found out in the books of purchasing company only
Q11 | Internal reconstruction is a slow and tedious process since it required the approval of :
  • Court
  • Shareholders
  • Creditors
  • All of the Above.
Answer: All of the Above.
Q12 | If the preference shareholder agree to sacrifice the arrear off preference dividend, it iscredited to:
  • Capital Reduction A/C
  • Preference Shareholders A/C
  • Goodwill A/c
  • Profit& Loss A/C
Answer: Capital Reduction A/C
Q13 | After the implementation of the scheme of internal reconstruction , any surplus incapital reduction A/C is transferred to :
  • Capital A/C
  • Profit & Loss A/C
  • Shareholders A/C
  • Capital reserve A/C
Answer: Capital reserve A/C
Q14 | ……………………reconstruction refers to the reduction of capital to cancel any paid upcapital.
  • External
  • Internal
  • Amalagamation
  • Absorption
Answer: Internal
Q15 | Reduction of share capital is possible by the company, if it is authorized by its:
  • Articles.
  • Special resolution.
  • Confirmation of the court.
  • All of the Above.
Answer: All of the Above.
Q16 | Converting share of smaller denomination into larger denominations is called:
  • Sub-division
  • Combination
  • Consolidation
  • Merger
Answer: Consolidation
Q17 | Converting share of larger denomination into smaller denominations is called:
  • Sub-division
  • Combination
  • Consolidation
  • Merger
Answer: Sub-division
Q18 | After the implementation of scheme of internal reconstruction, any amount left in thecapital reduction A/C will be transfer to:
  • Capital Reserve A/C
  • Capital A/c
  • Profit & Loss A/C
  • Shareholders A/C
Answer: Capital Reserve A/C
Q19 | The main purpose of internal reconstruction is to:
  • Eliminate the accumulated losses from the books.
  • Bring down the assets to their true values
  • Both A&B above
  • Only A
Answer: Both A&B above
Q20 | A fair and equitable distribution of loss is the essence of a successful scheme of:
  • External reconstruction.
  • Merger
  • Amalgamation
  • Internal reconstruction
Answer: Internal reconstruction
Q21 | At the time of …………………, inter company debts and acceptances are to becancelled out.
  • Merger
  • Absorption.
  • Internal reconstruction.
  • Consolidation.
Answer: Consolidation.
Q22 | Inter- company dividends are ……………………..to the cost of investment in thesubsidiary company for calculating goodwill or capital reserve.
  • Added
  • Deducted
  • Remove
  • None of the above.
Answer: Deducted
Q23 | Holdings of minority will …………………by the number of bonus shares received bythem.
  • Increase
  • Decrease
  • Remain same
  • None of the above
Answer: Increase
Q24 | Out of the unrealized profits, a holding company’s share is reduced from the stock and
  • Profit & Loss A/C
  • Goodwill.
  • Minority Interest
  • Capital A/C
Answer: Profit & Loss A/C
Q25 | Investments made by a holding company in a subsidiary company are always to beshown in ……………….
  • Profit & Loss A/C
  • Consolidated Balance Sheet.
  • Minority Interest.
  • Dividend A/C
Answer: Consolidated Balance Sheet.
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