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T F 16. If a remittance of cash by a branch has not been recorded by the home office, the balance
of the branchs Home Office ledger account exceeds the balance of the home offices Investment in
Branch account. (F)
T F 17. Freight costs on merchandise shipments from Cody Branch to Dana Branch in excess of
normal freight costs from the home office to Dana Branch should be recognized as operating
expenses of Dana Branch. (F)
T F 18. If a new branch is expected to be profitable starting with the second year of operations, a
loss incurred by the new branch in the first year should be deferred and recognized as expense over a
period of three to five years. (F)
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QUESTIONS
True or False Chapter 5
For each of the following statements, circle the T or the F to indicate whether the statement is true or false.
T F
1. Business combinations provide a method for achieving rapid growth in assets and sales. (T)
T F
2. In a statutory merger, a new corporation is formed to issue its common stock for the common
stock of two or more existing corporations, which then are liquidated. (F)
T F
3. A combinee is a corporation that acquires all or part of the common stock of another corporation.
(F)
T F
4. The exchange ratio expresses the relationship of the number of shares of the combinors
common stock exchanged for outstanding common stock of the combinee. (T)
T F
T F
T F
7. Legal fees incurred for the SEC registration statement covering shares of common stock issued in
a business combination are included in cost of the combinee. (F)
T F
T F