Amalgamation_Corporate_Accounting Mcqs.docx

Amalgamation corporate accounting mcqs

1. CORPORATE ACCOUNTING - AMALGAMATION
Multiple Choice Questions (MCQs)
1.1. Amalgamation means:
a) Purchase of a company
b) Division of a company
c) Merger of two or more companies
d) Closure of a company
✅ Correct Answer: c)
2.2. In amalgamation in the nature of merger, the identity of:
a) Transferor company is lost
b) Transferee company is lost
c) Both companies are lost
d) Both companies continue
✅ Correct Answer: a)
3.3. The standard applicable for amalgamation accounting in India is:
a) AS 10
b) AS 14
c) AS 21
d) AS 18
✅ Correct Answer: b)
4.4. Purchase consideration excludes:
a) Debentures issued
b) Cash paid
c) Liabilities taken over
d) Shares issued
✅ Correct Answer: c)
5.5. In the pooling of interest method, the assets and liabilities are recorded at:
a) Market value
b) Book value
c) Revalued amount

2. d) Fair value
✅ Correct Answer: b)
6.6. Which of the following is not a method of computing purchase consideration?
a) Net asset method
b) Net payment method
c) Intrinsic value method
d) Weighted average method
✅ Correct Answer: d)
7.7. Under amalgamation in the nature of purchase, goodwill is recorded if:
a) Purchase consideration < Net assets
b) Purchase consideration > Net assets
c) Purchase consideration = Net assets
d) None of the above
Correct Answer: b)
8.8. The company which is formed after amalgamation is called:
a) Vendor company
b) Transferor company
c) Transferee company
d) Purchasing company
Correct Answer: c)
9.9. The company which is absorbed in amalgamation is known as:
a) Transferee company
b) Transferor company
c) New company
d) Parent company
Correct Answer: b)
10.10. Amalgamation is covered under which section of Companies Act, 2013?
a) Section 230–234
b) Section 100–105
c) Section 250–260

3. d) Section 301–305
Correct Answer: a)
11.11. Amalgamation adjustment account appears in:
a) Balance Sheet – Asset side
b) Profit and Loss Account
c) Balance Sheet – Liability side
d) Not shown
Correct Answer: a)
12.12. Pooling of interest method is used in case of:
a) Amalgamation in the nature of purchase
b) Amalgamation in the nature of merger
c) Internal reconstruction
d) External reconstruction
Correct Answer: b)
13.13. In amalgamation in the nature of purchase, assets and liabilities are recorded at:
a) Book value
b) Revalued figure
c) Fair market value or agreed value
d) Zero value
Correct Answer: c)
14.14. Which is not a form of amalgamation?
a) Horizontal
b) Vertical
c) Diagonal
d) Conglomerate
Correct Answer: c)
15.15. AS 14 does not apply to:
a) Acquisition of shares
b) Amalgamation
c) Internal reconstruction

4. d) Purchase of business
Correct Answer: c)
16.16. Which account is opened for statutory reserves in amalgamation?
a) General Reserve
b) Amalgamation Adjustment Account
c) Capital Reserve
d) Profit & Loss Account
Correct Answer: b)
17.17. Which of the following is true in pooling of interest method?
a) Assets are recorded at agreed value
b) New goodwill is created
c) Reserves are preserved
d) Assets are recorded at market value
Correct Answer: c)
18.18. Surplus arising from amalgamation in the nature of purchase is credited to:
a) Goodwill
b) Capital Reserve
c) General Reserve
d) P&L A/c
Correct Answer: b)
19.19. Which account is not transferred to transferee company?
a) General Reserve
b) Capital Reserve
c) Preliminary Expenses
d) Revaluation Reserve
Correct Answer: d)
20.20. In amalgamation, the accounting treatment is guided by:
a) SEBI Guidelines
b) Income Tax Act
c) Accounting Standard

5. d) Banking Regulation Act
Correct Answer: c)
Fill in the Blanks
1. Amalgamation is a ______ of two or more companies. Answer: merger
2. AS ____ deals with amalgamation. Answer: 14
3. In pooling of interest method, assets and liabilities are taken at ________. Answer:
book value
4. In amalgamation, ________ consideration is paid to the transferor company.
Answer: purchase
5. The company which is absorbed is called ________ company. Answer: transferor
6. The company that takes over the business is called ________. Answer: transferee
company
7. Amalgamation in the nature of purchase is recorded using the ______ method.
Answer: purchase
8. Goodwill arises when purchase consideration is ______ than net assets. Answer:
more
9. Capital reserve arises when purchase consideration is ______ than net assets.
Answer: less
10. In amalgamation, assets taken over are recorded at ______ value in purchase
method. Answer: agreed
11. Statutory reserves are preserved using ________ adjustment account. Answer:
amalgamation
12. Amalgamation requires approval of the ______ Tribunal. Answer: National
Company Law
13. Revaluation reserves are ________ in case of pooling of interest method. Answer:
not transferred
14. The two methods of amalgamation accounting are purchase and ______. Answer:
pooling of interest
15. Amalgamation is generally for achieving ________. Answer: synergy

6. 16. Net asset method of purchase consideration = Assets – ________. Answer:
liabilities
17. Net payment method considers the _______ paid to shareholders. Answer:
amount
18. In merger, identity of the ______ company is lost. Answer: transferor
19. Purchase method may lead to creation of ______ or capital reserve. Answer:
goodwill
20. Amalgamation is a form of _______ restructuring. Answer: external
2-Mark Questions with Answers
1. Define Amalgamation. Answer: Amalgamation is the process where two or more
companies merge into a single entity, either by forming a new company or by absorption
into an existing one.
2. What is Purchase Consideration? Answer: It is the total amount paid by the
transferee company to the shareholders of the transferor company for taking over its
business.
3. What is the objective of amalgamation? Answer: To achieve operational efficiency,
market expansion, reduce competition, or increase profitability.
4. What is the difference between merger and absorption? Answer: In merger, a new
company is formed; in absorption, one company is dissolved into another.
5. Name the two methods of accounting for amalgamation. Answer: Pooling of
Interest Method and Purchase Method.
6. What is goodwill in amalgamation? Answer: Goodwill arises when purchase
consideration is more than the net assets acquired.
7. How is purchase consideration calculated under net asset method? Answer: By
subtracting liabilities taken over from the value of assets taken over.
8. What is Capital Reserve? Answer: It arises when net assets are more than the
purchase consideration.
9. State any two features of amalgamation in the nature of merger. Answer: All
assets and liabilities are taken at book value, and reserves of the transferor company are
preserved.

7. 10. Mention any two features of purchase method. Answer: Assets and liabilities are
recorded at fair value; reserves of the transferor company are not preserved.
11. What is the treatment of statutory reserves in amalgamation? Answer: They are
preserved using the amalgamation adjustment account.
12. What is the role of NCLT in amalgamation? Answer: It approves the scheme of
amalgamation under Companies Act Sections 230–234.
13. Give two examples of horizontal amalgamation. Answer: Merging of two textile
companies or two automobile companies.
14. Give any two reasons for amalgamation. Answer: To eliminate competition and
achieve economies of scale.
15. What is meant by pooling of interest method? Answer: A method where assets,
liabilities, and reserves are recorded at existing book values.
16. Why are revaluation reserves not transferred in merger? Answer: Because only
actual reserves are preserved; revaluation is not considered.
17. State any two components of purchase consideration. Answer: Cash paid and
shares or debentures issued to shareholders.
18. What is amalgamation in the nature of purchase? Answer: It is where one
company takes over another and does not preserve its reserves.
19. How is goodwill shown in the balance sheet? Answer: As an intangible asset under
non-current assets.
20. Differentiate between Net Assets Method and Net Payment Method. Answer: Net
Assets Method is based on assets–liabilities; Net Payment Method is based on actual
payments to shareholders.