Chapter 41 Corporate Merger, Consolidation, and Termination. All Answers

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N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows. N A question new to this edition of the Test Bank. + A question modified from the previous edition of the Test Ban... k. = A question included in the previous edition of the Test Bank. TRUE/FALSE QUESTIONS A1. Federal law establishes the specific procedures for mergers. F PAGE: 796 TYPE: N NAT: AACSB Analytic AICPA Legal A2. The power to consolidate is conferred by statute. T PAGE: 796 TYPE: N NAT: AACSB Analytic AICPA Legal A3. When a merger takes place, the surviving corporation issues shares or pays fair consideration to the shareholders of the corporation that ceases to exist. T PAGE: 797 TYPE: N NAT: AACSB Analytic AICPA Legal A4. In a consolidation, two or more corporations combine so that each corpo-ration continues to exist. F PAGE: 797 TYPE: N NAT: AACSB Analytic AICPA Legal A5. In a share exchange, some or all of the shares of one corporation are ex-changed for some or all of the shares of another corporation. T PAGE: 797 TYPE: N NAT: AACSB Analytic AICPA Legal A6. The board of directors of each corporation involved must approve a merger. T PAGE: 797 TYPE: N NAT: AACSB Analytic AICPA Legal A7. How the value of the shares of each merging corporation will be deter¬mined is stated after the plan of merger has been approved. F PAGE: 797 TYPE: N NAT: AACSB Analytic AICPA Legal A8. A short-form merger is the legal combination of two or more corporations online. F PAGE: 798 TYPE: N NAT: AACSB Analytic AICPA Legal A9. Once a dissenting shareholder elects appraisal rights, the shareholder loses his or her shareholder status. T PAGE: 798 TYPE: N NAT: AACSB Analytic AICPA Legal A10. A corporation that is selling all of its assets must obtain approval only from its board of directors. F PAGE: 799 TYPE: N NAT: AACSB Analytic AICPA Legal A11. Generally, a corporation that purchases the assets of another corpora¬tion is automatically responsible for the liabilities of the selling corporation. F PAGE: 799 TYPE: N NAT: AACSB Analytic AICPA Legal A12. A corporate takeover is the process of acquiring control over a corpora¬tion by the purchase of a substantial number of the voting shares of its stock. T PAGE: 801 TYPE: N NAT: AACSB Analytic AICPA Legal A13. Federal securities laws strictly control the terms, duration, and circum-stances under which most tender offers are made. T PAGE: 801 TYPE: N NAT: AACSB Analytic AICPA Legal A14. Courts do not apply the business judgment rule to analyze whether the directors acted reasonably in resisting a takeover attempt. F PAGE: 801 TYPE: N NAT: AACSB Analytic AICPA Legal A15. A takeover cannot be challenged on the ground that it would result in a substantial increase in the acquiring corporation’s marker power. F PAGE: 802 TYPE: N NAT: AACSB Analytic AICPA Legal A16. Dissolution is the legal death of the artificial “person” of a corporation. T PAGE: 802 TYPE: N NAT: AACSB Analytic AICPA Legal A17. When a corporation is dissolved voluntarily, the corporation must file articles of dissolution with the state. T PAGE: 802 TYPE: N NAT: AACSB Analytic AICPA Legal A18. If a corporation is dissolved, its asset can be liquidated without further notice to a party who has a claim against the firm. F PAGE: 802 TYPE: N NAT: AACSB Analytic AICPA Legal A19. The state can bring an action to dissolve a corporation that has failed to pay its annual taxes. T PAGE: 805 TYPE: N NAT: AACSB Analytic AICPA Legal A20. On dissolution, corporate assets are distributed to shareholders accord¬ing to their stock rights and any remaining assets are used to pay creditors. F PAGE: 806 TYPE: N NAT: AACSB Analytic AICPA Legal MULTIPLE CHOICE QUESTIONS A1. Like other corporations, Biopesticide Corporation can extend its opera¬tions through a. a share exchange. b. a dissolution. c. a termination. d. a winding up. A PAGE: 796 TYPE: + NAT: AACSB Reflective AICPA Legal A2. Ridgeway Sand & Gravel Corporation and Quick-Set Paving Company combine so that all that remains after the papers have been signed is Ridgeway. This is a. a consolidation. b. a merger. c. a purchase of assets. d. a share exchange. B PAGE: 796 TYPE: + NAT: AACSB Reflective AICPA Legal Fact Pattern 41-1A (Questions A3-A5 apply) Cherry Grove Apartments, Inc., merges with Dutch Elm Realty, Inc. Only Dutch Elm remains. A3. Refer to Fact Pattern 41-1A. Cherry Grove owed money to Eager Beaver Repair Service and other creditors. Af¬ter the merger, Dutch Elm must pay a. all of Cherry Grove’s debts. b. half of Cherry Grove’s debts. c. none of Cherry Grove’s debts. d. only debts that Cherry Grove incurred after a merger was proposed. A PAGE: 796 TYPE: = NAT: AACSB Reflective AICPA Legal A4. Refer to Fact Pattern 41-1A. Cherry Grove held rights in certain real property. After the merger, Dutch Elm acquires the rights a. automatically. b. only after completing certain additional statutory procedures. c. only Cherry Grove’s former shareholders expressly approve. d. only if the acquisition is a specified result of the merger. A PAGE: 796 TYPE: = NAT: AACSB Reflective AICPA Legal A5. Refer to Fact Pattern 41-1A. The articles of the merger agreement differ from Dutch Elm’s articles of incor¬poration. The articles a. are deemed amended to include the differences. b. are replaced by the merger agreement. c. effectively prevent the merger. d. prevail. A PAGE: 796 TYPE: = NAT: AACSB Reflective AICPA Legal Fact Patter 41-2A (Questions A6–A8 apply) Petro Drilling Corporation combines its assets and debts with those of Oil Refining Company to form New Energy, Inc. A6. Refer to Fact Pattern 41-2A. The formation of New Energy is a. a consolidation. b. a share exchange. c. a liquidation. d. a merger. A PAGE: 797 TYPE: + NAT: AACSB Reflective AICPA Legal A7. Refer to Fact Pattern 41-2A. New Energy acquires a. all of Petro’s and Oil’s assets. b. half of Petro’s and Oil’s assets. c. none of Petro’s and Oil’s assets. d. only assets that Petro and Oil acquired after a combina¬tion was proposed. A PAGE: 797 TYPE: = NAT: AACSB Reflective AICPA Legal A8. Refer to Fact Pattern 41-2A. New Energy assumes a. all of Petro’s and Oil’s assets. b. half of Petro’s and Oil’s assets. c. none of Petro’s and Oil’s assets. d. only debts that Petro and Oil incurred after a combina¬tion was proposed. A PAGE: 797 TYPE: = NAT: AACSB Reflective AICPA Legal A9. Penn files a suit against Roadway Sign Company While the suit is pend¬ing, Roadway consolidates with Synchronized Signal Corporation to form Traffic Management, Inc. Now, liability in the suit, if any, rests with a. Traffic. b. Roadway and Synchronized. c. Penn. d. no one. C PAGE: 797 TYPE N NAT: AACSB Reflective AICPA Legal A10. Through a certain transaction, Corporate Properties, Inc., acquires all of the shares of Downtown Realty Corporation for some of Corporate Properties’s shares. Both Corporate Properties and Downtown Realty continue to exist. This is a. a consolidation. b. a share exchange. c. a short-form merger. d. a hold-up. B PAGE: 797 TYPE: + NAT: AACSB Reflective AICPA Legal A11. Precise Device Corporation and Quality Instruments, Inc., decide to merge. This corporate combination does not require the approval of a. Precise and Quality’s directors. b. Precise and Quality’s officers. c. Precise’s shareholders. d. Quality’s shareholders. B PAGE: 797 TYPE: = NAT: AACSB Reflective AICPA Legal A12. Vacation Adventures, Inc., and Wild River Tour Company plan to merge. Most likely, the ar¬ticles of merger will be filed with a. the county recording office. b. the local chamber of commerce. c. the state’s secretary of state. d. the national travel agents’ association. C PAGE: 798 TYPE: + NAT: AACSB Reflective AICPA Legal A13. Vision Optical Company and Wide Eyes Open, Inc. decide to combine. Xavier, a Wide Eyes shareholder, is dissatisfied with the price that he will receive for his stock. In the absence of fraud or other illegal conduct, Xavier’s exclusive remedy is to a. exercise an appraisal right. b. file a suit to delay the process. c. refuse to agree to the deal, which cannot then proceed. d. urge other shareholders to insist on a higher price. A PAGE: 798 TYPE: = NAT: AACSB Reflective AICPA Legal A14. Ewa is a shareholder of Farm Fresh Foods, Inc., whose management is con-sider¬ing a tender offer by Growers Market Corporation. Ewa elects appraisal rights. This affects a. Farm Fresh’s consideration of the offer. b. Ewa’s shareholder status. c. Growers Market’s offer. d. nothing. B PAGE: 798 TYPE: N NAT: AACSB Reflective AICPA Legal A15. Firelite Corporation wants to purchase all of the assets of Glo Power Products, Inc. Helen is a Glo Power shareholder. The approval of Helen and other Glo Power shareholders is necessary a. in all circumstances. b. in no circumstances. c. only if Firelite plans to pay with unauthorized, unissued stock. d. only if the purchase extends Firelite’s control over more assets. A PAGE: 799 TYPE: + NAT: AACSB Reflective AICPA Legal A16. Stratified Industries, Inc., increases its holdings, making ten¬der of¬fers in many states. These offers are subject to a. federal securities laws only. b. state antitakeover statutes only. c. neither state statutes nor federal laws. d. state antitakeover statutes and federal securities laws. D PAGE: 801 TYPE: + NAT: AACSB Reflective AICPA Legal A17. The term for the legal death of the artificial “person” of Skytop Services, Inc., or any other corporation, is a. surviving corporation. b. dissolution. c. takeover. d. winding up. B PAGE: 802 TYPE: + NAT: AACSB Reflective AICPA Legal A18. Titan Business Corporation can be compelled to dissolve by a. its creditors only. b. itself, through its shareholders and directors, only. c. itself, through its shareholders and directors, or the state. d. the state only. C PAGE: 802 TYPE: = NAT: AACSB Reflective AICPA Legal Fact Pattern 41-3A (Questions A19-A20 apply) Atlantic Corporation’s articles of incorporation prohibit a sale of its assets with¬out a vote of the board of directors. Atlantic’s officers sell some assets to Pacific Company without notice to the board. The officers also fail to pay Atlantic’s taxes on time, and some Atlantic funds are not accounted for. A19. Refer to Fact Pattern 41-3A. The appropriate remedy is most likely a. a sale of the rest of Atlantic’s assets to its directors and shareholders. b. Atlantic’s consolidation or merger with Pacific. c. Atlantic’s dissolution. d. payment of damages to Atlantic’s officers. C PAGE: 805 TYPE: = NAT: AACSB Reflective AICPA Legal A20. Refer to Fact Pattern 41-3A. With respect to Atlantic’s share¬holders, this conduct is most likely a. not oppressive because it is undertaken by Atlantic’s officers. b. oppressive because Atlantic’s directors may be personally liable. c. oppressive because Atlantic’s shareholders may be personally liable. d. oppressive because it departs from the standards of fair dealing. D PAGE: 805 TYPE: = NAT: AACSB Reflective AICPA Legal ESSAY QUESTIONS A1. Spice Corp. wants to acquire all the assets of Sugar Corp. Spice plans to pay for the assets by issuing its own corporate stock. Spice’s board of di¬rectors has already approved the merger. In what circumstances would the approval of Spice’s shareholders be required for this merger? Is the approval of Sugar’s shareholders necessary? Explain. A2. Florence and Grady pool their money and talents to form Happy Home Builders, Inc. They are the firm’s only shareholders, directors, and offi¬cers. After five years of declining home prices, they de¬cide to cease busi¬ness. Can they simply dis¬solve their corporation at will? If so, what are the steps in the process? [Show More]

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