Question 1

When is a goodwill impairment loss recognized?

Accepted Answer

A) Only after both a quantitative and qualitative assessment of the fair value of goodwill of a reporting unit. 
B) After only definitive quantitative assessments of the fair value of goodwill is completed. 
C) After only definitive qualitative assessments of the fair value of goodwill is completed. 
D) If the fair value of a reporting unit falls to zero or below its original acquisition price. 
E) Never. 
A) Only after both a quantitative and qualitative assessment of the fair value of goodwill of a reporting unit. 
B) After only definitive quantitative assessments of the fair value of goodwill is completed. 
C) After only definitive qualitative assessments of the fair value of goodwill is completed. 
D) If the fair value of a reporting unit falls to zero or below its original acquisition price. 
E) Never.

Question 2

Which of the following is false regarding contingent consideration in business combinations?

Accepted Answer

A) Contingent consideration payable in cash is reported under liabilities. 
B) Contingent consideration payable in stock shares is reported under stockholders' equity. 
C) Contingent consideration is recorded because of its substantial probability of eventual payment. 
D) The contingent consideration fair value is recognized as part of the acquisition regardless of whether eventual payment is based on future performance of the target firm or future stock price of the acquirer. 
E) Contingent consideration is reflected in the acquirer's balance sheet at the present value of the potential expected future payment. 
A) Contingent consideration payable in cash is reported under liabilities. 
B) Contingent consideration payable in stock shares is reported under stockholders' equity. 
C) Contingent consideration is recorded because of its substantial probability of eventual payment. 
D) The contingent consideration fair value is recognized as part of the acquisition regardless of whether eventual payment is based on future performance of the target firm or future stock price of the acquirer. 
E) Contingent consideration is reflected in the acquirer's balance sheet at the present value of the potential expected future payment.

Question 3

Black Co. acquired 100% of Blue, Inc. on January 1, 2020. On that date, Blue had land with a book value of $38,000 and a fair value of $49,000. Also, on the date of acquisition, Blue had a building with a book value of $250,000 and a fair value of $460,000. Blue had equipment with a book value of $340,000 and a fair value of $280,000. The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life. How much total expense will be in the consolidated financial statements for the year ended December 31, 2020 related to the acquisition allocations of Blue?

Accepted Answer

A) $0. 
B) $9,000. 
C) $12,000. 
D) $21,000. 
E) $30,000. 
A) $0. 
B) $9,000. 
C) $12,000. 
D) $21,000. 
E) $30,000.

Question 4

Kaye Company acquired 100% of Fiore Company on January 1, 2021. Kaye paid $1,000 excess consideration over book value, which is being amortized at $20 per year. There was no goodwill in the combination. Fiore reported net income of $400 in 2021 and paid dividends of $100.Assume the initial value method is applied. How much equity income will Kaye report on its internal accounting records as a result of Fiore's operations?

Accepted Answer

A) $400 
B) $300 
C) $380 
D) $100 
E) $210 
A) $400 
B) $300 
C) $380 
D) $100 
E) $210

Question 5

Beatty, Inc. acquires 100% of the voting stock of Gataux Company on January 1, 2020 for $80,000, consisting of $20,000 in cash and 6,000 shares of stock. A contingent payment of $12,000 in cash will be paid on April 1, 2021 if Gataux generates cash flows from operations of $26,500 or more in the next year. Beatty estimates that there is a 30% probability that Gataux will generate at least $26,500 next year, and uses an interest rate of 4% to incorporate the time value of money. The fair value of $12,000 at 4%, using a probability-weighted approach, is $3,461. A contingent payment of $20,000, payable in stock, will be paid to the former owners of Gataux on April 1, 2021 if the market value of Beatty stock drops below $10 per share. Beatty estimates there is a 15% probability that its share price will not exceed that threshold. Using the same interest rate and probability-weighted approach, Beatty calculates the market value of the stock contingency to be $2,884.What will Beatty record as its Investment in Gataux on January 1, 2020?

Accepted Answer

A) $12,000. 
B) $80,000. 
C) $83,461. 
D) $86,345. 
E) $26,500. 
A) $12,000. 
B) $80,000. 
C) $83,461. 
D) $86,345. 
E) $26,500.

Question 6

Kaye Company acquired 100% of Fiore Company on January 1, 2021. Kaye paid $1,000 excess consideration over book value, which is being amortized at $20 per year. There was no goodwill in the combination. Fiore reported net income of $400 in 2021 and paid dividends of $100.Assume the partial equity method is used. In the year subsequent to acquisition, what additional worksheet entry must be made for consolidation purposes, but is not required for the equity method?

Accepted Answer

A) Entry A. 
B) Entry B. 
C) Entry C. 
D) Entry D. 
E) Entry E. 
A) Entry A. 
B) Entry B. 
C) Entry C. 
D) Entry D. 
E) Entry E.

Question 7

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 trademark.

Accepted Answer

A) $50,000. 
B) $46,875. 
C) $0. 
D) $34,375. 
E) $37,500. 
A) $50,000. 
B) $46,875. 
C) $0. 
D) $34,375. 
E) $37,500.

Question 8

What should an entity evaluate when making an initial impairment assessment of an intangible asset (other than goodwill)?

Accepted Answer

An entity may perform qualitative assess

Question 9

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 land that would be reported in a December 31, 2021, consolidated balance sheet.

Accepted Answer

A) $400. 
B) $900. 
C) $1,300. 
D) $1,500. 
E) $2,200. 
A) $400. 
B) $900. 
C) $1,300. 
D) $1,500. 
E) $2,200.

Question 10

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 long-term liabilities that would be reported in a December 31, 2020, consolidated balance sheet.

Accepted Answer

A) $1,700. 
B) $1,750. 
C) $1,800. 
D) $1,850. 
E) $1,900. 
A) $1,700. 
B) $1,750. 
C) $1,800. 
D) $1,850. 
E) $1,900.

Question 11

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 $300,000 in cash for Glen, at what amount would the subsidiary's Building be represented in a January 2, 2020 consolidation?

Accepted Answer

A) $200,000. 
B) $225,000. 
C) $273,000. 
D) $279,000. 
E) $300,000. 
A) $200,000. 
B) $225,000. 
C) $273,000. 
D) $279,000. 
E) $300,000.

Question 12

What is the basic objective of all consolidations?

Accepted Answer

The basic objective of all consolidation

Question 13

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 common stock.

Accepted Answer

A) $450,000. 
B) $530,000. 
C) $555,000. 
D) $635,000. 
E) $525,000. 
A) $450,000. 
B) $530,000. 
C) $555,000. 
D) $635,000. 
E) $525,000.

Question 14

How does the partial equity method differ from the equity method?

Accepted Answer

A) In the total assets reported on the consolidated balance sheet. 
B) In the treatment of dividends. 
C) In the total liabilities reported on the consolidated balance sheet. 
D) Under the partial equity method, subsidiary income does not increase the balance in the parent's investment account. 
E) Under the partial equity method, the balance in the investment account is not decreased by amortization on allocations made in the acquisition of the subsidiary. 
A) In the total assets reported on the consolidated balance sheet. 
B) In the treatment of dividends. 
C) In the total liabilities reported on the consolidated balance sheet. 
D) Under the partial equity method, subsidiary income does not increase the balance in the parent's investment account. 
E) Under the partial equity method, the balance in the investment account is not decreased by amortization on allocations made in the acquisition of the subsidiary.

Question 15

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 $400,000 in cash for Glen, what amount would be represented as the subsidiary's Building in a consolidation at December 31, 2022, assuming the book value of the building at that date is still $200,000?

Accepted Answer

A) $200,000. 
B) $285,000. 
C) $260,000. 
D) $268,000. 
E) $300,000. 
A) $200,000. 
B) $285,000. 
C) $260,000. 
D) $268,000. 
E) $300,000.

Question 16

Which of the following is not an example of an intangible asset?

Accepted Answer

A) Customer list 
B) Database 
C) Lease agreement 
D) Broken equipment 
E) Trademark 
A) Customer list 
B) Database 
C) Lease agreement 
D) Broken equipment 
E) Trademark

Question 17

Scott Co. paid $2,800,000 to acquire all of the common stock of Dawn Corp. on January 1, 2020. Dawn's reported earnings for 2020 totaled $512,000, and it paid $160,000 in dividends during the year. The amortization of allocations related to the investment was $28,000. Scott's net income, not including the investment, was $3,310,000, and it paid dividends of $950,000.On the consolidated financial statements for 2020, what amount should have been shown for consolidated dividends?

Accepted Answer

A) $-0- 
B) $160,000. 
C) $922,000. 
D) $950,000. 
E) $1,110,000. 
A) $-0- 
B) $160,000. 
C) $922,000. 
D) $950,000. 
E) $1,110,000.

Question 18

On 1/1/19, Sey Mold Corporation acquired 100% of DotDot.Com for $2,000,000 cash. On the date of acquisition, DotDot's net book value was $900,000. DotDot's assets included land that was undervalued by $300,000, a building that was undervalued by $400,000, and equipment that was overvalued by $50,000. The building had a remaining useful life of 8 years and the equipment had a remaining useful life of 4 years. Any excess fair value over consideration transferred is allocated to an undervalued patent and is amortized over 5 years.Determine the amortization expense related to the consolidation at the year-end date of 12/31/27.

Accepted Answer

By 2027, all of the fair value

Question 19

Harrison, Inc. acquires 100% of the voting stock of Rhine Company on January 1, 2020 for $400,000 cash. A contingent payment of $16,500 will be paid on April 15, 2021 if Rhine generates cash flows from operations of $27,000 or more in the next year. Harrison estimates that there is a 20% probability that Rhine will generate at least $27,000 next year, and uses an interest rate of 5% to incorporate the time value of money. The fair value of $16,500 at 5%, using a probability-weighted approach, is $3,142.When recording consideration transferred for the acquisition of Rhine on January 1, 2020, Harrison will record a contingent performance obligation in the amount of:

Accepted Answer

A) $628.40 
B) $2,671.60 
C) $3,142.00 
D) $13,358.00 
E) $16,500.00 
A) $628.40 
B) $2,671.60 
C) $3,142.00 
D) $13,358.00 
E) $16,500.00

Question 20

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, what amount would be represented as the subsidiary's Equipment in a consolidation at December 31, 2022, assuming the book value of the equipment at that date is still $80,000?

Accepted Answer

A) $70,000. 
B) $73,500. 
C) $75,000. 
D) $76,500. 
E) $80,000. 
A) $70,000. 
B) $73,500. 
C) $75,000. 
D) $76,500. 
E) $80,000.

When is a goodwill impairment loss recognized?

Which of the following is false regarding contingent consideration in business combinations?

What should an entity evaluate when making an initial impairment assessment of an intangible asset (other than goodwill)?

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 $300,000 in cash for Glen, at what amount would the subsidiary's Building be represented in a January 2, 2020 consolidation?

What is the basic objective of all consolidations?

How does the partial equity method differ from the equity method?

Which of the following is not an example of an intangible asset?

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

When is a goodwill impairment loss recognized?

Which of the following is false regarding contingent consideration in business combinations?

What should an entity evaluate when making an initial impairment assessment of an intangible asset (other than goodwill)?

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 $300,000 in cash for Glen, at what amount would the subsidiary's Building be represented in a January 2, 2020 consolidation?

What is the basic objective of all consolidations?

How does the partial equity method differ from the equity method?

Which of the following is not an example of an intangible asset?

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

Filters