Question 1

Fact Pattern 31-5 Lender Inc. owns more than 90 percent of the stock of Mortgage Inc .
Refer to Fact Pattern 31-5. Lender Inc. is

Accepted Answer

A)   an insufficient company.
B)   a parent corporation.
C)   a subsidiary corporation.
D)   a consolidated company. B

Question 2

Fact Pattern 31-4 Carrier Company exchanges some of its shares for some of the shares of Distribution Corporation. The exchange is used to create Equity Inc., whose business activity is to hold the shares of the two companies.
Refer to Fact Pattern 31-4. Once the formalities are satisfied, a certificate of the exchange is issued by

Accepted Answer

A)   Equity Inc.
B)   none of the choices.
C)   the appropriate state.
D)   the U.S. Department of Commerce. C

Question 3

Fact Pattern 31-5 Lender Inc. owns more than 90 percent of the stock of Mortgage Inc .
Refer to Fact Pattern 31-5. A copy of a plan for a merger of Lender and Mortgage must be sent to each shareholder of

Accepted Answer

A)   both corporations.
B)   Lender.
C)   Mortgage.
D)   neither corporation. C

Question 4

Fact Pattern 31-7 Enchilada Inc. seeks to purchase a substantial number of the voting shares of Fajita Inc .
Refer to Fact Pattern 31-7. Enchilada deals directly with the shareholders of Fajita. Enchilada offers a price higher than the market price of Fajita's shares. This is

Accepted Answer

A)   a poison pill.
B)   a tender offer.
C)   a self-tender.
D)   a breach of the business judgment rule.

Question 5

Fact Pattern 31-3 Bank Company decides to combine its operations with Credit Corporation to form Debit Finance Inc. Bank and Credit are domestic corporations.
Refer to Fact Pattern 31-3. The plan for Bank and Credit's combination must be approved by the shareholders of

Accepted Answer

A)   both corporations.
B)   Bank only.
C)   Credit only.
D)   neither corporation.

Question 6

In a consolidation, two or more corporations combine in such a way that only one of the original corporations continues to exist.

Accepted Answer

A) True 
 B)False

Question 7

A share exchange can be used to create a holding company.

Accepted Answer

A) True 
 B)False

Question 8

Fact Pattern 31-3 Bank Company decides to combine its operations with Credit Corporation to form Debit Finance Inc. Bank and Credit are domestic corporations.
Refer to Fact Pattern 31-3. Mergers, consolidations, and share exchanges of domestic corporations are authorized

Accepted Answer

A)   in all states.
B)   in most states.
C)   in no states.
D)   by the federal government.

Question 9

Fact Pattern 31-5 Lender Inc. owns more than 90 percent of the stock of Mortgage Inc .
Refer to Fact Pattern 31-5. A plan for a merger of Lender and Mortgage must be approved by the shareholders of

Accepted Answer

A)   both corporations.
B)   Lender only.
C)   Mortgage only.
D)   neither corporation.

Question 10

Fact Pattern 31-2 Dynamo Corporation combines its assets and liabilities with those of Energy Company to form Fuel Inc. Dynamo and Energy cease to exist.
Refer to Fact Pattern 31-2. With respect to the assets of Dynamo and Energy, Fuel Inc. acquires

Accepted Answer

A)   none of the assets.
B)   only those assets acquired after the combination was proposed.
C)   an amount of assets equal to the ratio of the firms' pre-merger market values.
D)   all of the assets of both companies.

Question 11

Fact Pattern 31-2 Dynamo Corporation combines its assets and liabilities with those of Energy Company to form Fuel Inc. Dynamo and Energy cease to exist.
Refer to Fact Pattern 31-2. The agreement between Dynamo and Energy that sets out the capital structure and other features of Fuel Inc.

Accepted Answer

A)   amends the articles of Dynamo and Energy.
B)   disappears once the combination is complete.
C)   combines with the articles of Dynamo and Energy.
D)   takes the place of the articles of Dynamo and Energy.

Question 12

Repair Inc. issues a plan to combine operations with Service Company. Tom is a shareholder who disapproves of the deal. He may be entitled to an appraisal right if the combination is

Accepted Answer

A)   a merger or a short-from merger.
B)   none of the choices.
C)   a purchase of substantially all of the assets of either corporation.
D)   a dissolution or winding up of either corporation.

Question 13

Only the board of directors of the disappearing corporation involved in a merger must approve the merger.

Accepted Answer

A) True 
 B)False

Question 14

An appraisal right is available only when a federal statute specifically provides for it.

Accepted Answer

A) True 
 B)False

Question 15

Fact Pattern 31-5 Lender Inc. owns more than 90 percent of the stock of Mortgage Inc .
Refer to Fact Pattern 31-5. A plan for a merger of Lender and Mortgage must be approved by the directors of

Accepted Answer

A)   both corporations.
B)   Lender only.
C)   Mortgage only.
D)   neither corporation.

Question 16

A shareholder may not petition a court for corporate dissolution.

Accepted Answer

A) True 
 B)False

Question 17

A merger will not affect the rights and liabilities of the corporations involved.

Accepted Answer

A) True 
 B)False

Question 18

Fact Pattern 31-6 Sweet Inc. acquires all of the assets of Tart Inc . by direct purchase.
Refer to Fact Pattern 31-6. Approval of the deal between Sweet and Tart is subject to the approval of the shareholders of

Accepted Answer

A)   both corporations.
B)   Sweet.
C)   Tart.
D)   neither corporation.

Question 19

In a merger, the surviving corporation assumes all of the assets and liabilities of the disappearing corporation.

Accepted Answer

A) True 
 B)False

Question 20

Fact Pattern 31-3 Bank Company decides to combine its operations with Credit Corporation to form Debit Finance Inc. Bank and Credit are domestic corporations.
Refer to Fact Pattern 31-3. The plan for Bank and Credit's combination must be approved by the board of directors of

Accepted Answer

A)   both corporations.
B)   Bank only.
C)   Credit only.
D)   neither corporation.

Exam 31: Combining and Dissolving a Corporation

Fact Pattern 31-5 Lender Inc. owns more than 90 percent of the stock of Mortgage Inc . Refer to Fact Pattern 31-5. Lender Inc. is

Fact Pattern 31-5 Lender Inc. owns more than 90 percent of the stock of Mortgage Inc . Refer to Fact Pattern 31-5. A copy of a plan for a merger of Lender and Mortgage must be sent to each shareholder of

Fact Pattern 31-7 Enchilada Inc. seeks to purchase a substantial number of the voting shares of Fajita Inc . Refer to Fact Pattern 31-7. Enchilada deals directly with the shareholders of Fajita. Enchilada offers a price higher than the market price of Fajita's shares. This is

Fact Pattern 31-3 Bank Company decides to combine its operations with Credit Corporation to form Debit Finance Inc. Bank and Credit are domestic corporations. Refer to Fact Pattern 31-3. The plan for Bank and Credit's combination must be approved by the shareholders of

In a consolidation, two or more corporations combine in such a way that only one of the original corporations continues to exist.

A share exchange can be used to create a holding company.

Fact Pattern 31-3 Bank Company decides to combine its operations with Credit Corporation to form Debit Finance Inc. Bank and Credit are domestic corporations. Refer to Fact Pattern 31-3. Mergers, consolidations, and share exchanges of domestic corporations are authorized

Fact Pattern 31-5 Lender Inc. owns more than 90 percent of the stock of Mortgage Inc . Refer to Fact Pattern 31-5. A plan for a merger of Lender and Mortgage must be approved by the shareholders of

Fact Pattern 31-2 Dynamo Corporation combines its assets and liabilities with those of Energy Company to form Fuel Inc. Dynamo and Energy cease to exist. Refer to Fact Pattern 31-2. With respect to the assets of Dynamo and Energy, Fuel Inc. acquires

Fact Pattern 31-2 Dynamo Corporation combines its assets and liabilities with those of Energy Company to form Fuel Inc. Dynamo and Energy cease to exist. Refer to Fact Pattern 31-2. The agreement between Dynamo and Energy that sets out the capital structure and other features of Fuel Inc.

Repair Inc. issues a plan to combine operations with Service Company. Tom is a shareholder who disapproves of the deal. He may be entitled to an appraisal right if the combination is

Only the board of directors of the disappearing corporation involved in a merger must approve the merger.

An appraisal right is available only when a federal statute specifically provides for it.

Fact Pattern 31-5 Lender Inc. owns more than 90 percent of the stock of Mortgage Inc . Refer to Fact Pattern 31-5. A plan for a merger of Lender and Mortgage must be approved by the directors of

A shareholder may not petition a court for corporate dissolution.

A merger will not affect the rights and liabilities of the corporations involved.

Fact Pattern 31-6 Sweet Inc. acquires all of the assets of Tart Inc . by direct purchase. Refer to Fact Pattern 31-6. Approval of the deal between Sweet and Tart is subject to the approval of the shareholders of

In a merger, the surviving corporation assumes all of the assets and liabilities of the disappearing corporation.

Fact Pattern 31-3 Bank Company decides to combine its operations with Credit Corporation to form Debit Finance Inc. Bank and Credit are domestic corporations. Refer to Fact Pattern 31-3. The plan for Bank and Credit's combination must be approved by the board of directors of