Question 1

With respect to the recognition of goodwill in a business combination, which of the following statements is true?

Accepted Answer

A) Only US GAAP requires recognition of goodwill when the fair value of the consideration transferred exceeds the net fair value of assets and liabilities. 
B) US GAAP standards require goodwill to be allocated to reporting units expected to benefit from the goodwill. 
C) Only IFRS standards require annual assessments for goodwill impairment. 
D) IFRS requires a reporting unit's implied fair value for goodwill to be calculated as the excess of such unit's fair value over the fair value of its identifiable net assets. 
E) Neither US GAAP, nor IFRS, provide that goodwill impairments will not be recoverable once recognized. 
A) Only US GAAP requires recognition of goodwill when the fair value of the consideration transferred exceeds the net fair value of assets and liabilities. 
B) US GAAP standards require goodwill to be allocated to reporting units expected to benefit from the goodwill. 
C) Only IFRS standards require annual assessments for goodwill impairment. 
D) IFRS requires a reporting unit's implied fair value for goodwill to be calculated as the excess of such unit's fair value over the fair value of its identifiable net assets. 
E) Neither US GAAP, nor IFRS, provide that goodwill impairments will not be recoverable once recognized. B

Question 2

On January 1, 2020, Barber Corp. paid $1,160,000 to acquire Thompson Co. Thompson maintained separate incorporation. Barber used the equity method to account for the investment. The following information is available for Thompson's assets, liabilities, and stockholders' equity accounts on January 1, 2020:   Thompson earned net income for 2020 of $134,000 and paid dividends of $51,000 during the year.If Barber Corp. had net income of $468,000 in 2020, exclusive of the investment, what is the amount of consolidated net income?

Accepted Answer

A) $468,000. 
B) $519,000. 
C) $602,000. 
D) $602,900. 
E) $691,000. 
A) $468,000. 
B) $519,000. 
C) $602,000. 
D) $602,900. 
E) $691,000. D

Question 3

Jaynes Inc. acquired all of Aaron Co.'s common stock on January 1, 2020, by issuing 11,000 shares of $1 par value common stock. Jaynes' shares had a $17 per share fair value. On that date, Aaron reported a net book value of $120,000. However, its equipment (with a five-year remaining life)was undervalued by $6,000 in the company's accounting records. Any excess of consideration transferred over fair value of assets and liabilities acquired is assigned to an unrecorded patent to be amortized over ten years.The following figures came from the individual accounting records of these two companies as of December 31, 2020:
   The following figures came from the individual accounting records of these two companies as of December 31, 2021:
   What was consolidated equipment as of December 31, 2021?

Accepted Answer

The answer of Jaynes Inc. acquired all of Aaron Co.'s...

Question 4

Jackson Company acquires 100% of the stock of Clark Corporation on January 1, 2020, for $4,100 cash. As of that date Clark has the following trial balance:   Net income and dividends reported by Clark for 2020 and 2021 follow:
  The fair value of Clark's net assets that differ from their book values are listed below:
  Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life.Compute the amount of Clark's inventory that would be reported in a January 1, 2020, consolidated balance sheet.

Accepted Answer

A) $0. 
B) $100. 
C) $400. 
D) $550. 
E) $900. 
A) $0. 
B) $100. 
C) $400. 
D) $550. 
E) $900.

Question 5

Avery Company acquires Billings Company in a combination accounted for as an acquisition and adopts the equity method to account for Investment in Billings. At the end of four years, the Investment in Billings account on Avery's books is $198,984. What items constitute this balance?

Accepted Answer

Since the equity method has been applied

Question 6

For recognized intangible assets that are considered to possess indefinite lives, what is the accounting treatment for purposes of income recognition?

Accepted Answer

Assets that are recognized as

Question 7

On January 1, 2020, Barber Corp. paid $1,160,000 to acquire Thompson Co. Thompson maintained separate incorporation. Barber used the equity method to account for the investment. The following information is available for Thompson's assets, liabilities, and stockholders' equity accounts on January 1, 2020:   Thompson earned net income for 2020 of $134,000 and paid dividends of $51,000 during the year.What is the balance in Barber's investment in subsidiary account at the end of 2020?

Accepted Answer

A) $1,211,000. 
B) $1,242,100. 
C) $1,243,000. 
D) $1,243,900. 
E) $1,294,000. 
A) $1,211,000. 
B) $1,242,100. 
C) $1,243,000. 
D) $1,243,900. 
E) $1,294,000.

Question 8

When is a goodwill impairment loss recognized?

Accepted Answer

A) Annually on a systematic and rational basis. 
B) Never. 
C) When both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying values. 
D) If the fair value of a reporting unit falls below its original acquisition price. 
E) Whenever the fair value of the entity declines significantly. 
A) Annually on a systematic and rational basis. 
B) Never. 
C) When both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying values. 
D) If the fair value of a reporting unit falls below its original acquisition price. 
E) Whenever the fair value of the entity declines significantly.

Question 9

Anderson, Inc. acquires all of the voting stock of Kenneth, Inc. on January 4, 2020, at an amount in excess of Kenneth's fair value. On that date, Kenneth has equipment with a book value of $90,000 and a fair value of $120,000 (10-year remaining life). Anderson has equipment with a book value of $800,000 and a fair value of $1,200,000 (10-year remaining life). On December 31, 2021, Anderson has equipment with a book value of $975,000 but a fair value of $1,350,000 and Kenneth has equipment with a book value of $105,000 but a fair value of $125,000.If Anderson applies the initial value method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2021?

Accepted Answer

A) $1,080,000. 
B) $1,104,000. 
C) $1,100,000. 
D) $1,468,000. 
E) $1,475,000. 
A) $1,080,000. 
B) $1,104,000. 
C) $1,100,000. 
D) $1,468,000. 
E) $1,475,000.

Question 10

Following are selected accounts for Green Corporation and Vega Company as of December 31, 2023. Several of Green's accounts have been omitted.   Green acquired 100% of Vega on January 1, 2019, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2019, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment.Compute the December 31, 2023, consolidated total expenses.

Accepted Answer

A) $620,000. 
B) $280,000. 
C) $900,000. 
D) $909,625. 
E) $299,625. 
A) $620,000. 
B) $280,000. 
C) $900,000. 
D) $909,625. 
E) $299,625.

Question 11

When a company applies the initial value method in accounting for its investment in a subsidiary and the subsidiary reports income less than dividends paid, what entry would be made to convert to full-accrual totals in a consolidation worksheet for the second year?

Accepted Answer

A) A above. 
B) B above. 
C) C above. 
D) D above. 
E) E above. 
A) A above. 
B) B above. 
C) C above. 
D) D above. 
E) E above.

Question 12

Fesler Inc. acquired all of the outstanding common stock of Pickett Company on January 1, 2020. Annual amortization of $22,000 resulted from this transaction. On the date of the acquisition, Fesler reported retained earnings of $520,000 while Pickett reported a $240,000 balance for retained earnings. Fesler reported net income of $100,000 in 2020 and $68,000 in 2021, and paid dividends of $25,000 in dividends each year. Pickett reported net income of $24,000 in 2020 and $36,000 in 2021, and paid dividends of $10,000 in dividends each year.If the parent's net income reflected use of the equity method, what were the consolidated retained earnings on December 31, 2021?

Accepted Answer

The answer of Fesler Inc. acquired all of the outstanding...

Question 13

Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2020. As of that date, Jackson had the following trial balance:
   During 2020, Jackson reported net income of $96,000 while paying dividends of $12,000. During 2021, Jackson reported net income of $132,000 while paying dividends of $36,000. Assume that Matthews Co. acquired the common stock of Jackson Co. for $588,000 in cash. As of January 1, 2020, Jackson's land had a fair value of $102,000, its buildings were valued at $188,000, and its equipment was appraised at $216,000. Any excess of consideration transferred over fair value of assets and liabilities acquired is due to an unamortized patent to be amortized over 10 years.Matthews decided to use the equity method for this investment.Required:(A.)Prepare consolidation worksheet entries for December 31, 2020.(B.)Prepare consolidation worksheet entries for December 31, 2021.

Accepted Answer

@#IMG-DLM& A.Consolidated Work

Question 14

Pritchett Company recently acquired three businesses, recognizing goodwill in each acquisition. Destin has allocated its acquired goodwill to its three reporting units: Apple, Banana, and Carrot. Pritchett provides the following information in performing the 2021 annual review for impairment:
   Which of Pritchett's reporting units require both steps to test for goodwill impairment?

Accepted Answer

Goodwill Impairment Test-Step 1For the f

Question 15

Jackson Company acquires 100% of the stock of Clark Corporation on January 1, 2020, for $4,100 cash. As of that date Clark has the following trial balance:   Net income and dividends reported by Clark for 2020 and 2021 follow:
  The fair value of Clark's net assets that differ from their book values are listed below:
  Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life.Compute the amount of Clark's equipment that would be reported in a December 31, 2020, consolidated balance sheet.

Accepted Answer

A) $825. 
B) $1,000. 
C) $1,175. 
D) $1,350. 
E) $1,525. 
A) $825. 
B) $1,000. 
C) $1,175. 
D) $1,350. 
E) $1,525.

Question 16

For an acquisition when the subsidiary retains its incorporation, which method of internal recordkeeping gives the most accurate portrayal of the accounting results for the entire business combination?

Accepted Answer

The equity method gi

Question 17

Under the initial value method, when accounting for an investment in a subsidiary,

Accepted Answer

A) Dividends received by the subsidiary decrease the investment account. 
B) The investment account is adjusted to fair value at year-end. 
C) Income reported by the subsidiary increases the investment account. 
D) The investment account does not change from year to year. 
E) Dividends received are ignored. 
A) Dividends received by the subsidiary decrease the investment account. 
B) The investment account is adjusted to fair value at year-end. 
C) Income reported by the subsidiary increases the investment account. 
D) The investment account does not change from year to year. 
E) Dividends received are ignored.

Question 18

Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2020. At that date, Glen owns only three assets and has no liabilities:   If Watkins pays $450,000 in cash for Glen, and Glen earns $50,000 in net income and pays $20,000 in dividends during 2020, what amount representing Glen would be reflected in consolidated net income for the year ended December 31, 2020?

Accepted Answer

A) $20,000 under the initial value method. 
B) $30,000 under the partial equity method. 
C) $50,000 under the partial equity method. 
D) $44,500 under the equity method. 
E) $45,500 regardless of the internal accounting method used. 
A) $20,000 under the initial value method. 
B) $30,000 under the partial equity method. 
C) $50,000 under the partial equity method. 
D) $44,500 under the equity method. 
E) $45,500 regardless of the internal accounting method used.

Question 19

Which of the following internal record-keeping methods can a parent choose to account for a subsidiary acquired in a business combination?

Accepted Answer

A) Initial value or book value. 
B) Initial value, lower-of-cost-or-market-value, or equity. 
C) Initial value, equity, or partial equity. 
D) Initial value, equity, or book value. 
E) Initial value, lower-of-cost-or-market-value, or partial equity. 
A) Initial value or book value. 
B) Initial value, lower-of-cost-or-market-value, or equity. 
C) Initial value, equity, or partial equity. 
D) Initial value, equity, or book value. 
E) Initial value, lower-of-cost-or-market-value, or partial equity.

Question 20

Craft Corp. acquired all of the common stock of Pitts Co. in 2019. Pitts maintained its incorporation. Which of Craft's account balances would vary between the equity method and the initial value method?

Accepted Answer

A) Goodwill, Investment in Pitts Co., and Retained Earnings. 
B) Expenses, Investment in Pitts Co., and Equity in Subsidiary Earnings. 
C) Investment in Pitts Co., Equity in Subsidiary Earnings, and Retained Earnings. 
D) Common Stock, Goodwill, and Investment in Pitts Co. 
E) Expenses, Goodwill, and Investment in Pitts Co. 
A) Goodwill, Investment in Pitts Co., and Retained Earnings. 
B) Expenses, Investment in Pitts Co., and Equity in Subsidiary Earnings. 
C) Investment in Pitts Co., Equity in Subsidiary Earnings, and Retained Earnings. 
D) Common Stock, Goodwill, and Investment in Pitts Co. 
E) Expenses, Goodwill, and Investment in Pitts Co.

With respect to the recognition of goodwill in a business combination, which of the following statements is true?

Avery Company acquires Billings Company in a combination accounted for as an acquisition and adopts the equity method to account for Investment in Billings. At the end of four years, the Investment in Billings account on Avery's books is $198,984. What items constitute this balance?

For recognized intangible assets that are considered to possess indefinite lives, what is the accounting treatment for purposes of income recognition?

When is a goodwill impairment loss recognized?

When a company applies the initial value method in accounting for its investment in a subsidiary and the subsidiary reports income less than dividends paid, what entry would be made to convert to full-accrual totals in a consolidation worksheet for the second year?

For an acquisition when the subsidiary retains its incorporation, which method of internal recordkeeping gives the most accurate portrayal of the accounting results for the entire business combination?

Under the initial value method, when accounting for an investment in a subsidiary,

Which of the following internal record-keeping methods can a parent choose to account for a subsidiary acquired in a business combination?

Craft Corp. acquired all of the common stock of Pitts Co. in 2019. Pitts maintained its incorporation. Which of Craft's account balances would vary between the equity method and the initial value method?

The Equity Method of Accounting for Investments

Consolidation of Financial Information

Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements Intra-Entity Asset Transactions

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

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Partnerships: Formation and Operation

Partnerships: Termination and Liquidation

Accounting for State and Local Governments Part 1

Accounting for State and Local Governments Part 2

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Exam 3: Consolidationssubsequent to the Date of Acquisition

With respect to the recognition of goodwill in a business combination, which of the following statements is true?

Avery Company acquires Billings Company in a combination accounted for as an acquisition and adopts the equity method to account for Investment in Billings. At the end of four years, the Investment in Billings account on Avery's books is $198,984. What items constitute this balance?

For recognized intangible assets that are considered to possess indefinite lives, what is the accounting treatment for purposes of income recognition?

When is a goodwill impairment loss recognized?

When a company applies the initial value method in accounting for its investment in a subsidiary and the subsidiary reports income less than dividends paid, what entry would be made to convert to full-accrual totals in a consolidation worksheet for the second year?

For an acquisition when the subsidiary retains its incorporation, which method of internal recordkeeping gives the most accurate portrayal of the accounting results for the entire business combination?

Under the initial value method, when accounting for an investment in a subsidiary,

Which of the following internal record-keeping methods can a parent choose to account for a subsidiary acquired in a business combination?

Craft Corp. acquired all of the common stock of Pitts Co. in 2019. Pitts maintained its incorporation. Which of Craft's account balances would vary between the equity method and the initial value method?

The Equity Method of Accounting for Investments

Consolidation of Financial Information

Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements Intra-Entity Asset Transactions

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

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Partnerships: Formation and Operation

Partnerships: Termination and Liquidation

Accounting for State and Local Governments Part 1

Accounting for State and Local Governments Part 2

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