Q1. Company A is about to merge with Company B. Relative to the pre-merger financial statements of Company A what would be

    the most likely impact on the following items if the pooling of interests method was used to record the merger of Company A and B?

Total Assets                      Revenues                               Profit Margin

A) Increases                       Increase                                    Increases

B) Unchanged                   Increase                                    Increases

C) Increases                      Increases                                  Indeterminate

Q2. Which of the following statements regarding the statement of cash flow impacts of an acquisition is least accurate?

A)   When the acquisition is accounted for using the purchase method, the cost of the acquisition is mostly an investing cash outflow offset by a financing inflow.

B)   When the acquisition is financed with debt, the only impact is a cash flow financing inflow.

C)   When using the pooling method, no cash flow arises as a result of the transaction itself.

Q3. Relative to the pre-acquisition financial statements, what would be the most likely impact on the following items of financing the

    acquisition with new debt?

Leverage                                  Total Assets                        Current ratio

A) Large increase                      Increase                                 Insufficient information

B) Small increase                     Increase                                 Increase

C) Large increase                     Unchanged                           Falls

Q4. Assume Company P acquires Company T for $100 million. The fair market value of Company T’s net tangible assets is $75

million. The only differences in fair market value of the assets and liabilities is in property, plant, and equipment (PP&E), which

has a book value of $20 million and a fair market value of $25 million. No other intangible assets are identified. The PP&E has a

remaining useful life of ten years. Company P has a company policy of amortizing all intangible assets over 20 years. The

acquisition takes place on October 1, 2006, and is accounted for using the purchase method according to U.S. GAAP.

Company P has a 31st December fiscal year end. The combined amount of incremental amortization of intangible assets and

depreciation of PP&E attributable to the write-up of assets under the purchase method that should be taken by Company P in 2006 is closest to:

A)   $125,000.

B)   $500,000.

C)   $375,000.

tx

thx

thanks