Question 1

What is the primary difference between recording an acquisition when the subsidiary is dissolved and when separate incorporation is maintained?

Accepted Answer

When the subsidiary is dissolved, the ac

Question 2

With respect to recognizing and measuring the fair value of a business combination in accordance with the acquisition method of accounting, which of the following should the acquirer consider when determining fair value?

Accepted Answer

A) Only assets received by the acquirer. 
B) Only consideration transferred by the acquirer. 
C) The consideration transferred by the acquirer and the fair value of assets received less liabilities assumed. 
D) The par value of stock transferred by the acquirer, and the book value of identifiable assets transferred by the entity acquired. 
E) The book value of identifiable assets transferred to the acquirer as part of the business combination less any liabilities assumed. 
A) Only assets received by the acquirer. 
B) Only consideration transferred by the acquirer. 
C) The consideration transferred by the acquirer and the fair value of assets received less liabilities assumed. 
D) The par value of stock transferred by the acquirer, and the book value of identifiable assets transferred by the entity acquired. 
E) The book value of identifiable assets transferred to the acquirer as part of the business combination less any liabilities assumed.

Question 3

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

Accepted Answer

A bargain purchase results when the coll

Question 4

For acquisition accounting, why are assets and liabilities of the subsidiary consolidated at fair value?

Accepted Answer

The acquisition transaction is assumed t

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.What total amount of additional paid-in capital will Campbell recognize from this acquisition?

Accepted Answer

A) $1,020. 
B) $1,050. 
C) $1,080. 
D) $1,105. 
E) $1,400. 
A) $1,020. 
B) $1,050. 
C) $1,080. 
D) $1,105. 
E) $1,400.

Question 6

How should direct combination costs and amounts incurred to register and issue stock in connection with a business combination be accounted for in a pre-2009 business combination?

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 7

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 goodwill immediately following the acquisition.

Accepted Answer

A) $440. 
B) $442. 
C) $450. 
D) $455. 
E) $452. 
A) $440. 
B) $442. 
C) $450. 
D) $455. 
E) $452.

Question 8

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

Accepted Answer

Consolidation Entry A is a worksheet ent

Question 9

How are direct combination costs, contingent consideration, and a bargain purchase reflected in recording an acquisition transaction?

Accepted Answer

The acquisition method embraces a fair v

Question 10

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 paid a total of $500,000 in cash for all of the shares of Granger. In addition, Wilkins paid $42,000 for secretarial and management time allocated to the acquisition transaction. What will be the balance in consolidated goodwill?

Accepted Answer

A) $0. 
B) $20,000. 
C) $40,000. 
D) $42,000. 
E) $82,000. 
A) $0. 
B) $20,000. 
C) $40,000. 
D) $42,000. 
E) $82,000.

Question 11

Which of the following statements is true regarding the acquisition method of accounting for a business combination?

Accepted Answer

A) Net assets of the acquired company are reported at their fair values. 
B) Net assets of the acquired company are reported at their book values. 
C) Any goodwill associated with the acquisition is reported as a development cost. 
D) The acquisition can only be effected by a mutual exchange of voting common stock. 
E) Indirect costs of the combination reduce additional paid-in capital. 
A) Net assets of the acquired company are reported at their fair values. 
B) Net assets of the acquired company are reported at their book values. 
C) Any goodwill associated with the acquisition is reported as a development cost. 
D) The acquisition can only be effected by a mutual exchange of voting common stock. 
E) Indirect costs of the combination reduce additional paid-in capital.

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 equipment at date of acquisition.

Accepted Answer

A) $480. 
B) $580. 
C) $559. 
D) $570. 
E) $560. 
A) $480. 
B) $580. 
C) $559. 
D) $570. 
E) $560.

Question 13

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 preferred stock with a par value of $260,000 and a fair value of $500,000 for all of the outstanding shares of Granger in an acquisition business combination. What will be the balance in the consolidated Inventory and Land accounts?

Accepted Answer

A) $440,000, $540,000. 
B) $440,000, $560,000. 
C) $410,000, $540,000. 
D) $410,000, $560,000. 
E) $390,000, $460,000. 
A) $440,000, $540,000. 
B) $440,000, $560,000. 
C) $410,000, $540,000. 
D) $410,000, $560,000. 
E) $390,000, $460,000.

Question 14

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 shares of Granger. What will be the consolidated Additional Paid-In Capital and Retained Earnings (January 1, 2021 balances)as a result of this acquisition transaction?

Accepted Answer

A) $60,000 and $490,000. 
B) $60,000 and $250,000. 
C) $380,000 and $250,000. 
D) $593,000 and $250,000. 
E) $593,000 and $490,000. 
A) $60,000 and $490,000. 
B) $60,000 and $250,000. 
C) $380,000 and $250,000. 
D) $593,000 and $250,000. 
E) $593,000 and $490,000.

Question 15

For each of the following situations, select the best letter answer to reflect the effect of the numbered item on the acquirer's accounting entry at the date of combination when separate incorporation will be maintained. Item (4)requires two selections.(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.Direct costs.Indirect costs.Stock issue costs.Contingent consideration.Bargain purchase.

Accepted Answer

(1)I; (2)I

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.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 17

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 18

Using the acquisition method for a business combination, goodwill is generally calculated as the:

Accepted Answer

A) Cost of the investment less the subsidiary's book value at the beginning of the year. 
B) Cost of the investment less the subsidiary's book value at the acquisition date. 
C) Cost of the investment less the subsidiary's fair value at the beginning of the year. 
D) Cost of the investment less the subsidiary's fair value at acquisition date. 
E) Zero, it is no longer allowed under federal law. 
A) Cost of the investment less the subsidiary's book value at the beginning of the year. 
B) Cost of the investment less the subsidiary's book value at the acquisition date. 
C) Cost of the investment less the subsidiary's fair value at the beginning of the year. 
D) Cost of the investment less the subsidiary's fair value at acquisition date. 
E) Zero, it is no longer allowed under federal law.

Question 19

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. Immediately afterwards, what is the reported amount of the consolidated Common Stock?

Accepted Answer

A) $240,000. 
B) $302,000. 
C) $304,000. 
D) $366,000. 
E) $410,500. 
A) $240,000. 
B) $302,000. 
C) $304,000. 
D) $366,000. 
E) $410,500.

Question 20

The following are preliminary financial statements for Black Co. and Blue Co. for the year ending December 31, 2021, prior to Black's acquisition of Blue Co.
   On December 31, 2021 (subsequent to the preceding statements), Black exchanged 10,000 shares of its $10 par value common stock for all of the outstanding shares of Blue. Black's stock on that date has a fair value of $50 per share. Black was willing to issue 10,000 shares of stock because Blue's land was appraised at $204,000. Black also paid $14,000 to attorneys and accountants who assisted in creating this combination.Required: Assuming that these two companies retained their separate legal identities, prepare a consolidation worksheet as of December 31, 2021.

Accepted Answer

Bargain Purchase Acquisition Consolidati

What is the primary difference between recording an acquisition when the subsidiary is dissolved and when separate incorporation is maintained?

With respect to recognizing and measuring the fair value of a business combination in accordance with the acquisition method of accounting, which of the following should the acquirer consider when determining fair value?

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

For acquisition accounting, why are assets and liabilities of the subsidiary consolidated at fair value?

How should direct combination costs and amounts incurred to register and issue stock in connection with a business combination be accounted for in a pre-2009 business combination?

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

How are direct combination costs, contingent consideration, and a bargain purchase reflected in recording an acquisition transaction?

Which of the following statements is true regarding the acquisition method of accounting for a business combination?

Using the acquisition method for a business combination, goodwill is generally calculated as the:

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 is the primary difference between recording an acquisition when the subsidiary is dissolved and when separate incorporation is maintained?

With respect to recognizing and measuring the fair value of a business combination in accordance with the acquisition method of accounting, which of the following should the acquirer consider when determining fair value?

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

For acquisition accounting, why are assets and liabilities of the subsidiary consolidated at fair value?

How should direct combination costs and amounts incurred to register and issue stock in connection with a business combination be accounted for in a pre-2009 business combination?

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

How are direct combination costs, contingent consideration, and a bargain purchase reflected in recording an acquisition transaction?

Which of the following statements is true regarding the acquisition method of accounting for a business combination?

Using the acquisition method for a business combination, goodwill is generally calculated as the:

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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