Question 1

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 2

What amount will be reported for goodwill as a result of this acquisition?

Accepted Answer

A)  $ 30,000. 
B)  $ 55,000. 
C)  $ 65,000. 
D)  $175,000. 
E)  $ 200,000. 
A)  $ 30,000. 
B)  $ 55,000. 
C)  $ 65,000. 
D)  $175,000. 
E)  $ 200,000.

Question 3

Chapel Hill Company had common stock of $350,000 and retained earnings of $490,000.Blue Town Inc.had common stock of $700,000 and retained earnings of $980,000.On January 1, 2018, Blue Town issued 34,000 shares of common stock with a $12 par value and a $35 fair value for all of Chapel Hill 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)  $2,520,000. 
B)  $1,190,000. 
C)  $1,680,000. 
D)  $2,870,000. 
E)  $2,030,000. 
A)  $2,520,000. 
B)  $1,190,000. 
C)  $1,680,000. 
D)  $2,870,000. 
E)  $2,030,000.

Question 4

According to GAAP, which of the following is true with respect to the pooling of interest method of accounting for business combinations?

Accepted Answer

A)  It was the only method used prior to 2002. 
B)  It must be used for all new acquisitions. 
C)  GAAP allowed its use prior to 2002. 
D)  It, or the acquisition method, may be used at the acquirer's discretion. 
E)  GAAP requires it to be used instead of the acquisition method for business combinations for which $50 billion or more in consideration is transferred. 
A)  It was the only method used prior to 2002. 
B)  It must be used for all new acquisitions. 
C)  GAAP allowed its use prior to 2002. 
D)  It, or the acquisition method, may be used at the acquirer's discretion. 
E)  GAAP requires it to be used instead of the acquisition method for business combinations for which $50 billion or more in consideration is transferred.

Question 5

The following are preliminary financial statements for Black Co.and Blue Co.for the year ending December 31, 2018, prior to Black's acquisition of Blue Co.
   On December 31, 2018 (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, 2018.

Accepted Answer

Bargain Purchase Acq

Question 6

Assume that Botkins acquired Volkerson on January 1, 2017.Immediately afterwards, what is the value of the consolidated Common Stock?

Accepted Answer

A)  $456,000. 
B)  $402,000. 
C)  $274,000. 
D)  $276,000. 
E)  $330,000. 
A)  $456,000. 
B)  $402,000. 
C)  $274,000. 
D)  $276,000. 
E)  $330,000.

Question 7

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

How are direct and indirect costs accounted for when applying the acquisition method for a business combination?

Accepted Answer

The answer of How are direct and indirect costs accounted...

Question 9

Compute the consolidated buildings (net) account at December 31, 2018.

Accepted Answer

A)  $2,700. 
B)  $3,370. 
C)  $3,300. 
D)  $3,260. 
E)  $3,340. 
A)  $2,700. 
B)  $3,370. 
C)  $3,300. 
D)  $3,260. 
E)  $3,340.

Question 10

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 11

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 12

Compute fair value of the net assets acquired at the date of the acquisition.

Accepted Answer

A)  $1,300. 
B)  $1,340. 
C)  $1,500. 
D)  $1,750. 
E)  $2,480. 
A)  $1,300. 
B)  $1,340. 
C)  $1,500. 
D)  $1,750. 
E)  $2,480.

Question 13

What will be the consolidated additional paid-in capital as a result of this acquisition?

Accepted Answer

A)  $440,000. 
B)  $740,000. 
C)  $750,000. 
D)  $940,000. 
E)  $950,000. 
A)  $440,000. 
B)  $740,000. 
C)  $750,000. 
D)  $940,000. 
E)  $950,000.

Question 14

Compute the consolidated receivables and inventory for 2018.

Accepted Answer

A)  $1,200. 
B)  $1,515. 
C)  $1,540. 
D)  $1,800. 
E)  $2,140. 
A)  $1,200. 
B)  $1,515. 
C)  $1,540. 
D)  $1,800. 
E)  $2,140.

Question 15

Compute consolidated retained earnings as a result of this acquisition.

Accepted Answer

A)  $1,160. 
B)  $1,170. 
C)  $1,265. 
D)  $1,280. 
E)  $1,650. 
A)  $1,160. 
B)  $1,170. 
C)  $1,265. 
D)  $1,280. 
E)  $1,650.

Question 16

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 17

Compute the consolidated retained earnings at December 31, 2018.

Accepted Answer

A)  $2,800. 
B)  $2,825. 
C)  $2,850. 
D)  $3,425. 
E)  $3,450. 
A)  $2,800. 
B)  $2,825. 
C)  $2,850. 
D)  $3,425. 
E)  $3,450.

Question 18

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 19

On January 1, 2018, 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, 2018, 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 on the date of acquisition, 1/1/18.

Accepted Answer

Fair value of consideration transferred:

Question 20

Acquired in-process research and development is considered as

Accepted Answer

A)  A definite-lived asset subject to amortization. 
B)  A definite-lived asset subject to testing for impairment. 
C)  An indefinite-lived asset subject to amortization. 
D)  An indefinite-lived asset subject to testing for impairment. 
E)  A research and development expense at the date of acquisition. 
A)  A definite-lived asset subject to amortization. 
B)  A definite-lived asset subject to testing for impairment. 
C)  An indefinite-lived asset subject to amortization. 
D)  An indefinite-lived asset subject to testing for impairment. 
E)  A research and development expense at the date of acquisition.

Exam 2: A: Consolidation of Financial Information

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

What amount will be reported for goodwill as a result of this acquisition?

According to GAAP, which of the following is true with respect to the pooling of interest method of accounting for business combinations?

Assume that Botkins acquired Volkerson on January 1, 2017.Immediately afterwards, what is the value of the consolidated Common Stock?

Compute consolidated goodwill immediately following the acquisition.

How are direct and indirect costs accounted for when applying the acquisition method for a business combination?

Compute the consolidated buildings (net) account at December 31, 2018.

Compute the investment to be recorded at the date of acquisition.

Compute consolidated cash at the completion of the acquisition.

Compute fair value of the net assets acquired at the date of the acquisition.

What will be the consolidated additional paid-in capital as a result of this acquisition?

Compute the consolidated receivables and inventory for 2018.

Compute consolidated retained earnings as a result of this acquisition.

Compute consolidated expenses immediately following the acquisition.

Compute the consolidated retained earnings at December 31, 2018.

Compute the amount of consolidated equipment at date of acquisition.

Acquired in-process research and development is considered as

The Equity Method of Accounting for Investments

A: the Equity Method of Accounting for Investments

Consolidation of Financial Information

Consolidations - Subsequent to the Date of Acquisition

A: Consolidations - Subsequent to the Date of Acquisition

Consolidated Financial Statements and Outside Ownership

A: Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements Intra-Entity Asset Transactions

A: Consolidated Financial Statements Intra-Entity Asset Transactions

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

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

Consolidated Financial Statements - Ownership Patterns and Income Taxes

A: Consolidated Financial Statements - Ownership Patterns and Income Taxes

Segment and Interim Reporting

A: Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

A: Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

A: Translation of Foreign Currency Financial Statements

Worldwide Accounting Diversity and International Accounting Standards

A: Worldwide Accounting Diversity and International Accounting Standards

Financial Reporting and the Securities and Exchange Commission

A: Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

A: Accounting for Legal Reorganizations and Liquidations

Partnerships: Formation and Operation

A: Partnerships: Formation and Operation

Partnerships: Termination and Liquidation

A: Partnerships: Termination and Liquidation

Accounting for State and Local Governments, Part I

A: Accounting for State and Local Governments, Part I

Accounting for State and Local Governments, Part II

A: Accounting for State and Local Governments, Part II

Accounting for Not-For-Profit Entities

A: Accounting for Not-For-Profit Entities

Accounting for Estates and Trusts

A: Accounting for Estates and Trusts

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