Exam 5: The Purchase Method: at Date of Acquisition-100 Ownership

_____ In a step acquisition, Pardox went from 25% ownership of Sardox to 100% ownership. Immediately before achieving control, Pardox's analysis of its Investment account showed $20,000 assigned to undervalued land of Sardox. At the control date, Sardox's land had a current value of $500,000 and a book value of $400,000. At what amount should Sardox's land be reported in the consolidated financial statements under the parent company concept?

On 5/1/06, Patco acquired all of the assets and assumed all of the liabilities of Satco. Information about Satco as of the acquisition date follows: Additional information: (1) As consideration, Patco issued 20,000 shares of its $1 par value common stock, which had a market value of $19 per share. (2) Patco incurred $75,000 of direct out-of-pocket costs, $35,000 of which pertained to the registration with the Securities and Exchange Commission of the common stock issued. Required: a. Prepare the entry or entries to record the combination under a decentralized accounting system. b. Prepare the entries to prepare combined financial statements as of 5/1/06.

Acquired research and development costs in process are subsumed into goodwill at the business combination date.

_____ In a business combination, intangible assets other than goodwill must be capitalized as assets apart from goodwill only if they

_____ In a business combination, an intangible asset other than goodwill that is capitalized at the combination date

When assets are acquired, the acquired business may be referred to as either a __________________________ or a ___________________________.

Bargain purchase elements are allocated to the extent possible against certain noncurrent assets.

Plazco acquired all the assets of Slazco in a transaction that did not qualify for pooling of interests accounting treatment. Plazco gave $400,000 cash as consideration and assumed responsibility for all of Slazco's liabilities (totaling $200,000). For simplicity, assume that Slazco's only asset was a manufacturing plant that initially cost $1,400,000, was depreciated $500,000, and had a current value (based on an appraisal) of $650,000. Required: Record the entries that would be made on each company's books as a result of this transaction, assuming a centralized accounting system is to be used.

The step-by-step method is consistent with the parent company concept as to the extent to which the subsidiary's assets and liabilities are revalued to their current values for consolidated reporting purposes.

When control is achieved as a result of a step acquisition, goodwill is determined on a fresh basis using the subsidiary's current values as of the control date.

Goodwill that arises from a business combination cannot be subsequently _________________________ but is subject to _____________________________________.

The amount by which the total cost of an acquisition is below the current value of the acquired business's net assets is called _________________________________.

Bargain purchase elements are allocated to the extent possible against all noncurrent assets.

When control over a company is achieved in steps, a method of analyzing the total cost of all of the blocks using information only as of the date at which control was obtained is called the _____________________________________ method.

_____ In a business combination accounted for as a purchase in which common stock was the consideration given, how should the following items of the target company be reported in the consolidated balance sheet prepared immediately after the combination?

Intangible assets other than goodwill that are recognized as assets apart from goodwill in a business combination must be subsequently amortized to earnings only if they do not have indefinite useful economic lives.

In a business combination in which the consideration was cash, the target company's assets and liabilities are revalued to their current values for consolidated reporting purposes regardless of whether common stock or assets were acquired.

_____ Pemex acquired 100% of the outstanding common stock of Semex by paying cash. Of the $700,000 purchase price, $80,000 was determined to be goodwill. How should the following items on the books of Semex be reported in the consolidated balance sheet prepared immediately after the combination?

In a purchase business combination in which common stock was acquired, the target company's monetary and nonmonetary assets are revalued to their current values for consolidated reporting purposes.

Two manners of accounting for the acquired assets and assumed liabilities of a target company are __________________________ and ___________________________.