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JAMB Principles of Accounts 2001 Question 37

Question 37

Purchase of Business

Bala Ltd acquired the business of Bello Ltd and caused the separate existence of the latter company to terminate. This situation is best described as

  1. A.absorption
  2. B.merger
  3. C.conversion
  4. D.dissolution.
Show the answer and explanation

Answer: A (absorption)

Explanation

When one company takes over another and the taken-over company ceases to exist, it is an absorption.