Question 1

How are bargain purchases accounted for in an acquisition business transaction?

Accepted Answer

A bargain purchase results when the coll

Question 2

Presented below are the financial balances for the Boxwood Company and the Tranz Company as of December 31, 2020, immediately before Boxwood acquired Tranz. Also included are the fair values for Tranz Company's net assets at that date (all amounts in thousands).   Note: Parenthesis indicate a credit balanceAssume a business combination took place at December 31, 2020. Boxwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Tranz. Stock issuance costs of $15 (in thousands) and direct costs of $10 (in thousands) were paid to effect this acquisition transaction. To settle a difference of opinion regarding Tranz's fair value, Boxwood promises to pay an additional $5.2 (in thousands) to the former owners if Tranz's earnings exceed a certain sum during the next year. Given the probability of the required contingency payment and utilizing a 4% discount rate, the expected present value of the contingency is $5 (in thousands).Compute consolidated revenues immediately following the acquisition.

Accepted Answer

A)  $3,540. 
B)  $2,880. 
C)  $1,170. 
D)  $1,650. 
E)  $4,050. 
A)  $3,540. 
B)  $2,880. 
C)  $1,170. 
D)  $1,650. 
E)  $4,050.

Question 3

Presented below are the financial balances for the Boxwood Company and the Tranz Company as of December 31, 2020, immediately before Boxwood acquired Tranz. Also included are the fair values for Tranz Company's net assets at that date (all amounts in thousands).   Note: Parenthesis indicate a credit balanceAssume a business combination took place at December 31, 2020. Boxwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Tranz. Stock issuance costs of $15 (in thousands) and direct costs of $10 (in thousands) were paid to effect this acquisition transaction. To settle a difference of opinion regarding Tranz's fair value, Boxwood promises to pay an additional $5.2 (in thousands) to the former owners if Tranz's earnings exceed a certain sum during the next year. Given the probability of the required contingency payment and utilizing a 4% discount rate, the expected present value of the contingency is $5 (in thousands).Compute consolidated expenses immediately following the acquisition.

Accepted Answer

A)  $2,735. 
B)  $2,760. 
C)  $2,770. 
D)  $2,785. 
E)  $3,380. 
A)  $2,735. 
B)  $2,760. 
C)  $2,770. 
D)  $2,785. 
E)  $3,380.

Question 4

The financial statement amounts for the Atwood Company and the Franz Company as of December 31, 2021, are presented below. Also included are the fair values for Franz Company's net assets (all numbers are in thousands).   Note: Parenthesis indicate a credit balanceAssume an acquisition business combination took place at December 31, 2021. Atwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and direct costs of $10 (in thousands) were paid.Compute consolidated retained earnings at the date of the acquisition.

Accepted Answer

A)  $1,160. 
B)  $1,170. 
C)  $1,280. 
D)  $1,290. 
E)  $1,640. 
A)  $1,160. 
B)  $1,170. 
C)  $1,280. 
D)  $1,290. 
E)  $1,640.

Question 5

The financial statements for Campbell, Inc., and Newton Company for the year ended December 31, 2021, prior to the business combination whereby Campbell acquired Newton, are as follows (in thousands):   On December 31, 2021, Campbell obtained a loan for $650 and used the proceeds, along with the transfer of 35 shares of its $10 par value common stock, in exchange for all of Newton's common stock. At the time of the transaction, Campbell's common stock had a fair value of $40 per share.In connection with the business combination, Campbell paid $25 to a broker for arranging the transaction and $30 in stock issuance costs. At the time of the transaction, Newton's equipment was actually worth $1,450 but its buildings were only valued at $590.Assuming that Newton retains a separate corporate existence after this acquisition, at what amount is the investment recorded on Campbell's books?

Accepted Answer

A)  $1,000. 
B)  $1,055. 
C)  $1,995. 
D)  $2,050. 
E)  $2,105. 
A)  $1,000. 
B)  $1,055. 
C)  $1,995. 
D)  $2,050. 
E)  $2,105.

Question 6

On January 1, 2021, Chester Inc. acquired 100% of Festus Corp.'s outstanding common stock by exchanging 37,500 shares of Chester's $2 par value common voting stock. On January 1, 2021, Chester's voting common stock had a fair value of $40 per share. Festus' voting common shares were selling for $6.50 per share. Festus' balances on the acquisition date, just prior to acquisition are listed below.   Required: Compute the value of Goodwill resulting from the acquisition.

Accepted Answer

The answer of On January 1, 2021, Chester Inc. acquired...

Question 7

According to GAAP, which of the following is true with respect to the pooling of interest method of accounting for business combinations?

Accepted Answer

A)  It was the only method used prior to 2002. 
B)  It must be used for all new acquisitions. 
C)  GAAP allowed its use prior to 2002. 
D)  It, or the acquisition method, may be used at the acquirer's discretion. 
E)  GAAP requires it to be used instead of the acquisition method for business combinations for which $50 billion or more in consideration is transferred. 
A)  It was the only method used prior to 2002. 
B)  It must be used for all new acquisitions. 
C)  GAAP allowed its use prior to 2002. 
D)  It, or the acquisition method, may be used at the acquirer's discretion. 
E)  GAAP requires it to be used instead of the acquisition method for business combinations for which $50 billion or more in consideration is transferred.

Question 8

Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1, 2021. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000 shares of $20 par value common stock on this date. Flynn's stock had a fair value of $36 per share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance costs.The book values for both Flynn and Macek immediately preceding the acquisition follow. The fair value of each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any related question also is in thousands.   Which of the following is true regarding the FASB Accounting Standards Update No. 2014-17, Business Combinations: Pushdown Accounting?

Accepted Answer

A)  It requires the use of pushdown accounting in all business combinations. 
B)  It prohibits the use of pushdown accounting in business combinations. 
C)  It provides an option to use pushdown accounting in a business combination. 
D)  It requires the use of pushdown accounting in a business combination only when the parent acquires 100% of a subsidiary's outstanding stock. 
E)  It prohibits the use of pushdown accounting in a business combination only when the parent acquires 100% of a subsidiary's outstanding stock. 
A)  It requires the use of pushdown accounting in all business combinations. 
B)  It prohibits the use of pushdown accounting in business combinations. 
C)  It provides an option to use pushdown accounting in a business combination. 
D)  It requires the use of pushdown accounting in a business combination only when the parent acquires 100% of a subsidiary's outstanding stock. 
E)  It prohibits the use of pushdown accounting in a business combination only when the parent acquires 100% of a subsidiary's outstanding stock.

Question 9

McCoy has the following account balances as of December 31, 2020 before an acquisition transaction takes place.   The fair value of McCoy's Land and Buildings are $650,000 and $600,000, respectively. On December 31, 2020, Ferguson Company issues 30,000 shares of its $10 par value ($30 fair value) common stock in exchange for all of the shares of McCoy's common stock. Ferguson paid $12,000 for costs to issue the new shares of stock. Before the acquisition, Ferguson has $800,000 in its common stock account and $350,000 in its additional paid-in capital account.On December 31, 2020, assuming that McCoy will retain its separate corporate existence, what value is assigned to Ferguson's investment account?

Accepted Answer

A)  $150,000. 
B)  $300,000. 
C)  $600,000. 
D)  $900,000. 
E)  $912,000. 
A)  $150,000. 
B)  $300,000. 
C)  $600,000. 
D)  $900,000. 
E)  $912,000.

Question 10

Presented below are the financial balances for the Boxwood Company and the Tranz Company as of December 31, 2020, immediately before Boxwood acquired Tranz. Also included are the fair values for Tranz Company's net assets at that date (all amounts in thousands).   Note: Parenthesis indicate a credit balanceAssume a business combination took place at December 31, 2020. Boxwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Tranz. Stock issuance costs of $15 (in thousands) and direct costs of $10 (in thousands) were paid to effect this acquisition transaction. To settle a difference of opinion regarding Tranz's fair value, Boxwood promises to pay an additional $5.2 (in thousands) to the former owners if Tranz's earnings exceed a certain sum during the next year. Given the probability of the required contingency payment and utilizing a 4% discount rate, the expected present value of the contingency is $5 (in thousands).Compute consolidated equipment immediately following the acquisition.

Accepted Answer

A)  $400. 
B)  $660. 
C)  $1,060. 
D)  $1,040. 
E)  $1,050. 
A)  $400. 
B)  $660. 
C)  $1,060. 
D)  $1,040. 
E)  $1,050.

Question 11

In a transaction accounted for using the acquisition method where consideration transferred is less than fair value of net assets acquired, which statement is true?

Accepted Answer

A)  Negative goodwill is recorded. 
B)  A deferred credit is recorded. 
C)  A gain on bargain purchase is recorded. 
D)  Long-term assets of the acquired company are reduced in proportion to their fair values. Any excess is recorded as a deferred credit. 
E)  Long-term assets and liabilities of the acquired company are reduced in proportion to their fair values. Any excess is recorded as gain. 
A)  Negative goodwill is recorded. 
B)  A deferred credit is recorded. 
C)  A gain on bargain purchase is recorded. 
D)  Long-term assets of the acquired company are reduced in proportion to their fair values. Any excess is recorded as a deferred credit. 
E)  Long-term assets and liabilities of the acquired company are reduced in proportion to their fair values. Any excess is recorded as gain.

Question 12

On January 1, 2021, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows:   Note: Parentheses indicate a credit balance.In Moody's appraisal of Osorio, three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.Compute the amount of consolidated cash after recording the acquisition transaction.

Accepted Answer

A)  $220. 
B)  $185. 
C)  $200. 
D)  $205. 
E)  $215. 
A)  $220. 
B)  $185. 
C)  $200. 
D)  $205. 
E)  $215.

Question 13

Lisa Co. paid cash for all of the voting common stock of Victoria Corp. Victoria will continue to exist as a separate corporation. Entries for the consolidation of Lisa and Victoria would be recorded in

Accepted Answer

A)  A worksheet. 
B)  Lisa's general journal. 
C)  Victoria's general journal. 
D)  Victoria's secret consolidation journal. 
E)  The general journals of both companies. 
A)  A worksheet. 
B)  Lisa's general journal. 
C)  Victoria's general journal. 
D)  Victoria's secret consolidation journal. 
E)  The general journals of both companies.

Question 14

In an acquisition where 100% control is acquired, how would the land accounts of the parent and the land accounts of the subsidiary be reported on consolidated financial statements?

Accepted Answer

A)  Option A. 
B)  Option B. 
C)  Option C. 
D)  Option D. 
E)  Option E. 
A)  Option A. 
B)  Option B. 
C)  Option C. 
D)  Option D. 
E)  Option E.

Question 15

What is the purpose of Consolidation Entry A in a consolidation worksheet?

Accepted Answer

Consolidation Entry A is a worksheet ent

Question 16

The financial statements for Campbell, Inc., and Newton Company for the year ended December 31, 2021, prior to the business combination whereby Campbell acquired Newton, are as follows (in thousands):   On December 31, 2021, Campbell obtained a loan for $650 and used the proceeds, along with the transfer of 35 shares of its $10 par value common stock, in exchange for all of Newton's common stock. At the time of the transaction, Campbell's common stock had a fair value of $40 per share.In connection with the business combination, Campbell paid $25 to a broker for arranging the transaction and $30 in stock issuance costs. At the time of the transaction, Newton's equipment was actually worth $1,450 but its buildings were only valued at $590.Compute the consolidated receivables and inventory for 2021.

Accepted Answer

A)  $470. 
B)  $1,200. 
C)  $1,440. 
D)  $1,560. 
E)  $2,030. 
A)  $470. 
B)  $1,200. 
C)  $1,440. 
D)  $1,560. 
E)  $2,030.

Question 17

The financial statement amounts for the Atwood Company and the Franz Company as of December 31, 2021, are presented below. Also included are the fair values for Franz Company's net assets (all numbers are in thousands).   Note: Parenthesis indicate a credit balanceAssume an acquisition business combination took place at December 31, 2021. Atwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and direct costs of $10 (in thousands) were paid.Compute consolidated land at the date of the acquisition.

Accepted Answer

A)  $2,060. 
B)  $1,800. 
C)  $260. 
D)  $2,050. 
E)  $2,070. 
A)  $2,060. 
B)  $1,800. 
C)  $260. 
D)  $2,050. 
E)  $2,070.

Question 18

Prior to being united in a business combination, Taunton Inc. and Eubanks Corp. had the following stockholders' equity figures:   Taunton issued 62,000 new shares of its common stock valued at $2.75 per share for all of the outstanding stock of Eubanks.Assume that Taunton acquired Eubanks on January 1, 2020 and that Eubanks maintains a separate corporate existence. At what amount did Taunton record the investment in Eubanks?

Accepted Answer

A)  $62,000. 
B)  $108,000. 
C)  $170,500. 
D)  $201,500. 
E)  $234,000. 
A)  $62,000. 
B)  $108,000. 
C)  $170,500. 
D)  $201,500. 
E)  $234,000.

Question 19

Which of the following statements is true regarding a statutory consolidation?

Accepted Answer

A)  The original companies dissolve while remaining as separate divisions of a newly created company. 
B)  Both companies remain in existence as legal corporations with one corporation now a subsidiary of the acquiring company. 
C)  The acquired company dissolves as a separate corporation and becomes a division of the acquiring company. 
D)  The acquiring company acquires the stock of the acquired company as an investment. 
E)  A statutory consolidation is no longer a legal option. 
A)  The original companies dissolve while remaining as separate divisions of a newly created company. 
B)  Both companies remain in existence as legal corporations with one corporation now a subsidiary of the acquiring company. 
C)  The acquired company dissolves as a separate corporation and becomes a division of the acquiring company. 
D)  The acquiring company acquires the stock of the acquired company as an investment. 
E)  A statutory consolidation is no longer a legal option.

Question 20

Contingent consideration.

Accepted Answer

A) Increase Investment account. 
B) Decrease Investment account. 
C) Increase Liabilities. 
D) Increase Common stock. 
E) Decrease common stock.
F)Increase Additional paid-in capital.
G)Decrease Additional paid-in capital.
H)Increase Retained earnings.
I)Decrease Retained earnings. 
A) Increase Investment account. 
B) Decrease Investment account. 
C) Increase Liabilities. 
D) Increase Common stock. 
E) Decrease common stock.
F)Increase Additional paid-in capital.
G)Decrease Additional paid-in capital.
H)Increase Retained earnings.
I)Decrease Retained earnings.

How are bargain purchases accounted for in an acquisition business transaction?

According to GAAP, which of the following is true with respect to the pooling of interest method of accounting for business combinations?

In a transaction accounted for using the acquisition method where consideration transferred is less than fair value of net assets acquired, which statement is true?

Lisa Co. paid cash for all of the voting common stock of Victoria Corp. Victoria will continue to exist as a separate corporation. Entries for the consolidation of Lisa and Victoria would be recorded in

In an acquisition where 100% control is acquired, how would the land accounts of the parent and the land accounts of the subsidiary be reported on consolidated financial statements?

What is the purpose of Consolidation Entry A in a consolidation worksheet?

Which of the following statements is true regarding a statutory consolidation?

Contingent consideration.

Accounting for Estates and Trusts

Accounting and Reporting for Private Not-For-Profit Organizations

Accounting for State and Local Governments, Part II

Accounting for State and Local Governments, Part I

Partnerships: Termination and Liquidation

Partnerships: Formation and Operation

Accounting for Legal Reorganizations and Liquidations

Financial Reporting and the Securities and Exchange Commission

Worldwide Accounting Diversity and International Accounting Standards

Translation of Foreign Currency Financial Statements

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Segment and Interim Reporting

Consolidated Financial Statements - Ownership Patterns and Income Taxes

Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues

Consolidated Financial Statements Intra-Entity Asset Transactions

Consolidated Financial Statements and Outside Ownership

Consolidations - Subsequent to the Date of Acquisition

The Equity Method of Accounting for Investments

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Exam 2: Consolidation of Financial Information

How are bargain purchases accounted for in an acquisition business transaction?

According to GAAP, which of the following is true with respect to the pooling of interest method of accounting for business combinations?

In a transaction accounted for using the acquisition method where consideration transferred is less than fair value of net assets acquired, which statement is true?

Lisa Co. paid cash for all of the voting common stock of Victoria Corp. Victoria will continue to exist as a separate corporation. Entries for the consolidation of Lisa and Victoria would be recorded in

In an acquisition where 100% control is acquired, how would the land accounts of the parent and the land accounts of the subsidiary be reported on consolidated financial statements?

What is the purpose of Consolidation Entry A in a consolidation worksheet?

Which of the following statements is true regarding a statutory consolidation?

Contingent consideration.

Accounting for Estates and Trusts

Accounting and Reporting for Private Not-For-Profit Organizations

Accounting for State and Local Governments, Part II

Accounting for State and Local Governments, Part I

Partnerships: Termination and Liquidation

Partnerships: Formation and Operation

Accounting for Legal Reorganizations and Liquidations

Financial Reporting and the Securities and Exchange Commission

Worldwide Accounting Diversity and International Accounting Standards

Translation of Foreign Currency Financial Statements

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Segment and Interim Reporting

Consolidated Financial Statements - Ownership Patterns and Income Taxes

Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues

Consolidated Financial Statements Intra-Entity Asset Transactions

Consolidated Financial Statements and Outside Ownership

Consolidations - Subsequent to the Date of Acquisition

The Equity Method of Accounting for Investments

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