Question 1

What are the benefits of using pushdown accounting?

Accepted Answer

Pushdown accounting provides a newly acq

Question 2

Salem Co. had the following account balances as of December 1, 2020:
   Assume that Bellington paid cash of $2.8 million and no stock is issued. Also assume that $50,000 is paid in direct combination costs.Required:For Goodwill, determine what balance would be included in a December 1, 2020 consolidation as a result of the acquisition.

Accepted Answer

The answer of Salem Co. had the following account balances...

Question 3

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 cash at the completion of the acquisition.

Accepted Answer

A) $1,350. 
B) $1,085. 
C) $1,110. 
D) $870. 
E) $845. 
A) $1,350. 
B) $1,085. 
C) $1,110. 
D) $870. 
E) $845.

Question 4

How are direct combination costs accounted for in an acquisition transaction?

Accepted Answer

In an acquisition, d

Question 5

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 the investment to be recorded at the date of acquisition.

Accepted Answer

A) $1,750. 
B) $1,755. 
C) $1,725. 
D) $1,760. 
E) $1,765. 
A) $1,750. 
B) $1,755. 
C) $1,725. 
D) $1,760. 
E) $1,765.

Question 6

How is contingent consideration accounted for in an acquisition business combination transaction?

Accepted Answer

The fair value approach of the acquisiti

Question 7

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 inventory at the date of the acquisition.

Accepted Answer

A) $1,650. 
B) $1,810. 
C) $1,230. 
D) $580. 
E) $1,830. 
A) $1,650. 
B) $1,810. 
C) $1,230. 
D) $580. 
E) $1,830.

Question 8

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 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 9

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.   Assuming the combination occurred prior to 2009 and was accounted for under the purchase method, what amount will be reported for consolidated retained earnings?

Accepted Answer

A) $1,830,000. 
B) $1,350,000. 
C) $1,080,000. 
D) $1,560,000. 
E) $1,535,000. 
A) $1,830,000. 
B) $1,350,000. 
C) $1,080,000. 
D) $1,560,000. 
E) $1,535,000.

Question 10

Peterman Co. owns 55% of Samson Co. Under what circumstances would Peterman not be required to prepare consolidated financial statements?

Accepted Answer

Peterman would not be required to prepar

Question 11

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 12

How would you account for in-process research and development acquired in a business combination accounted for as an acquisition?

Accepted Answer

In-Process Research and Develo

Question 13

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 14

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 15

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 common stock at date of acquisition.

Accepted Answer

A) $370. 
B) $570. 
C) $610. 
D) $330. 
E) $530. 
A) $370. 
B) $570. 
C) $610. 
D) $330. 
E) $530.

Question 16

Crown Company had common stock of $360,000 and retained earnings of $510,000. Baker Inc. had common stock of $750,000 and retained earnings of $970,000. On January 1, 2021, Baker issued 32,000 shares of common stock with a $13 par value and a $37 fair value for all of Crown Company's outstanding common stock. This combination was accounted for using the acquisition method. Immediately after the combination, what was the amount of total consolidated net assets?

Accepted Answer

A) $2,054,000. 
B) $2,136,000. 
C) $2,590,000. 
D) $2,904,000. 
E) $3,006,000. 
A) $2,054,000. 
B) $2,136,000. 
C) $2,590,000. 
D) $2,904,000. 
E) $3,006,000.

Question 17

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.   What amount will be reported for consolidated common stock?

Accepted Answer

A) $1,000,000. 
B) $1,080,000. 
C) $1,200,000. 
D) $1,280,000. 
E) $1,360,000. 
A) $1,000,000. 
B) $1,080,000. 
C) $1,200,000. 
D) $1,280,000. 
E) $1,360,000.

Question 18

Wilkins Inc. acquired 100% of the voting common stock of Granger Inc. on January 1, 2021. The book value and fair value of Granger's accounts on that date (prior to creating the combination)are as follows, along with the book value of Wilkins's accounts:   Assume that Wilkins issued 13,000 shares of common stock with a $5 par value and a $46 fair value for all of the outstanding stock of Granger. What is the consolidated balance for Land as a result of this acquisition transaction?

Accepted Answer

A) $500,000. 
B) $550,000. 
C) $540,000. 
D) $560,000. 
E) $530,000. 
A) $500,000. 
B) $550,000. 
C) $540,000. 
D) $560,000. 
E) $530,000.

Question 19

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 20

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 buildings (net)at date of acquisition.

Accepted Answer

A) $1,700. 
B) $1,760. 
C) $1,640. 
D) $1,320. 
E) $500. 
A) $1,700. 
B) $1,760. 
C) $1,640. 
D) $1,320. 
E) $500.

What are the benefits of using pushdown accounting?

How are direct combination costs accounted for in an acquisition transaction?

How is contingent consideration accounted for in an acquisition business combination transaction?

Peterman Co. owns 55% of Samson Co. Under what circumstances would Peterman not be required to prepare consolidated financial statements?

How would you account for in-process research and development acquired in a business combination accounted for as an acquisition?

The Equity Method of Accounting for Investments

Consolidationssubsequent to the Date of Acquisition

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 2: Consolidation of Financial Information

What are the benefits of using pushdown accounting?

How are direct combination costs accounted for in an acquisition transaction?

How is contingent consideration accounted for in an acquisition business combination transaction?

Peterman Co. owns 55% of Samson Co. Under what circumstances would Peterman not be required to prepare consolidated financial statements?

How would you account for in-process research and development acquired in a business combination accounted for as an acquisition?

The Equity Method of Accounting for Investments

Consolidationssubsequent to the Date of Acquisition

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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