Question 1

A business combination could occur without any exchange of assets or equity between the entities involved in the exchange.

Accepted Answer

A) True 
 B)False  True

Question 2

How should legal fees for an acquisition be treated?

Accepted Answer

A) Capitalized as part of the acquisition cost. 
B) Expensed in the period of acquisition. 
C) Deferred and amortized. 
D) Deferred until the company is disposed of or wound-up. 
A) Capitalized as part of the acquisition cost. 
B) Expensed in the period of acquisition. 
C) Deferred and amortized. 
D) Deferred until the company is disposed of or wound-up. B

Question 3

Falter acquired 100% of Krystal's net assets for $300,000. On the acquisition date, the fair value of the current assets and the net capital assets were $208,000 and $432,000 respectively. The fair value of the liabilities equalled their book value. What is the amount of goodwill created in this acquisition? $\begin{array}{|l|r|r|}
\hline& \text { Falter Co. } & \text { Kustal Ltd. } \
\hline \text { Current assets } & \$ 480,000 & \$ 80,000 \
\hline \text { Net capital assets } & \underline{800,000} & \underline{480,000} \\hline & \$ 1,280,000 & \$ 560,000 \
\hline \text { Current liabilities } & \$ 336,000 & \$ 280,000 \
\hline \text { Long-term debt } & 160,000 & 96,000 \\hline \text { Share capital } & 720,000 & 1,000,000 \
\hline \text { Retained earnings } & \underline{64,000} & \underline{84,000} \
\hline & \$ \underline{1,280,000} & \$ \underline{560,000} \
\hline
\end{array}$

Accepted Answer

A) $(48,000) 
B) $ 0 
C) $36,000 
D) $80,000 
A) $(48,000) 
B) $ 0 
C) $36,000 
D) $80,000 C

Question 4

Having recognized goodwill arising in the business combination, which of the following statements regarding the subsequent accounting is FALSE?

Accepted Answer

A) Goodwill is subject to amortization. 
B) Goodwill is subject to an annual impairment test. 
C) Goodwill cannot be revalued. 
D) IAS38 does not allow the recognition of internally generated goodwill. 
A) Goodwill is subject to amortization. 
B) Goodwill is subject to an annual impairment test. 
C) Goodwill cannot be revalued. 
D) IAS38 does not allow the recognition of internally generated goodwill.

Question 5

In a business acquisition, an acquirer purchases the assets and liabilities of an entity. What is the "consideration transferred" and how is it measured and calculated?

Accepted Answer

The consideration transferred is the amo

Question 6

The acquirer is usually the combining entity whose owners have the ability to elect or appoint or to remove a majority of the members of the governing body of the combined entity.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is NOT a reason why a private enterprise may be acquired as a bargain purchase?

Accepted Answer

A) The business only has equity financing and has no debt financing. 
B) It is a family business and the next generation does not want to continue the business. 
C) The owner has health problems and does not have a successor. 
D) The owner is no longer interested in the business. 
A) The business only has equity financing and has no debt financing. 
B) It is a family business and the next generation does not want to continue the business. 
C) The owner has health problems and does not have a successor. 
D) The owner is no longer interested in the business.

Question 8

Where the acquirer purchases the acquiree's assets and liabilities, the acquiree may continue in existence or it may liquidate.

Accepted Answer

A) True 
 B)False

Question 9

Having recognized goodwill arising in the business combination, goodwill cannot be revalued.

Accepted Answer

A) True 
 B)False

Question 10

Where the contingent consideration is a financial liability, it will be accounted for under IFRS #9 and measured at ____________ value with movements being accounted for in accordance with that standard.

Accepted Answer

A) book 
B) fair 
C) carrying 
D) future 
A) book 
B) fair 
C) carrying 
D) future

Question 11

Having recognized any contingent liabilities of the acquiree as liabilities, the acquirer must then determine a subsequent measurement for the liability. The liability is initially recognized at fair value.
Subsequent to acquisition date, how is the liability measured?

Accepted Answer

Subsequent to acquisition date, the liab

Question 12

Xenon acquired 100% of Volt's net assets for $300,000. On the acquisition date, the fair value of the current assets and the net capital assets were $208,000 and $438,000 respectively. The fair value of the liabilities equalled their book value. On Xenon's statement of financial position, what is the total of its shareholders' equity? $\begin{array}{|l|r|r|} 
\hline& \text { Xenon Co. } & \text { Volt Ltd. } \
\hline \text { Current assets } & \$ 480,000 & \$ 80,000 \
\hline \text { Net capital assets } & \underline{800,000} & \underline{480,000} \\hline & \$ 1,280,000 & \$ 560,000 \
\hline \text { Current liabilities } & \$ 336,000 & \$ 280,000 \
\hline \text { Long-term debt } & 160,000 & 96,000 \
\hline \text { Share capital } & 720,000 & 100,000 \\hline \text { Retained earnings } & -64,000 & \$ \underline{64,000} \
\hline & \$ 1,280,000 & \$ \underline{560,000} \
\hline
\end{array}$

Accepted Answer

A) $968,000 
B) $184,000 
C) $784,000 
D) $1,084,000 
A) $968,000 
B) $184,000 
C) $784,000 
D) $1,084,000

Question 13

Quast Co. plans to acquire Fairweather Co. Fairweather has substantial depreciable assets that have fair values in excess of their book values. Considering only the income tax impact, which of the following statements is TRUE?

Accepted Answer

A) Quast would prefer to purchase Fairweather's shares and Fairweather would prefer to sell its assets to Quast. 
B) Both Quast and Fairweather would prefer Quast to purchase Fairweather's shares. 
C) Both Quast and Fairweather would prefer Quast to purchase Fairweather's assets. 
D) Quast would prefer to purchase Fairweather's assets and Fairweather would prefer to sell its shares to Quast. 
A) Quast would prefer to purchase Fairweather's shares and Fairweather would prefer to sell its assets to Quast. 
B) Both Quast and Fairweather would prefer Quast to purchase Fairweather's shares. 
C) Both Quast and Fairweather would prefer Quast to purchase Fairweather's assets. 
D) Quast would prefer to purchase Fairweather's assets and Fairweather would prefer to sell its shares to Quast.

Question 14

Identify and discuss some indicators provided by IFRS 3 to assist in assessing which entity is the acquirer in situtations of a share for share exchange.

Accepted Answer

IFRS 3 provides some indicators to assis

Question 15

Subsequent to the acquisition date, a contingent liability is measured as the amount initially recognized less, if appropriate, cumulative amortization recognized.

Accepted Answer

A) True 
 B)False

Question 16

How often should goodwill acquired in a business combination be tested for impairment?

Accepted Answer

A) At least once a year. 
B) At least once every two years. 
C) Whenever there is an indication of impairment. 
D) Whenever there is a change in circumstances in the business. 
A) At least once a year. 
B) At least once every two years. 
C) Whenever there is an indication of impairment. 
D) Whenever there is a change in circumstances in the business.

Question 17

A business combination involves the joining together of assets and liabilities under the control of a specific entity. Therefore, the business combination occurs at the date:

Accepted Answer

A) the net assets are under the control of the acquirer. 
B) the contract is signed. 
C) the consideration is paid. 
D) nominated in the contract. 
A) the net assets are under the control of the acquirer. 
B) the contract is signed. 
C) the consideration is paid. 
D) nominated in the contract.

Question 18

When the acquirer buys only shares in the acquiree from the shareholders of the acquiree, what is the impact on the acquiree's records?

Accepted Answer

When the acquirer buys only shares in th

Question 19

Which of the following statements about a bargain purchase is TRUE?

Accepted Answer

A) It is reported on the financial statements as an "excess of fair value over cost of assets acquired". 
B) Assets and liabilities of the acquired company are reported at their fair value. 
C) It is reported as a deferred credit on the financial statements called negative goodwill. 
D) Assets and liabilities of the acquired company are reported at net book value. 
A) It is reported on the financial statements as an "excess of fair value over cost of assets acquired". 
B) Assets and liabilities of the acquired company are reported at their fair value. 
C) It is reported as a deferred credit on the financial statements called negative goodwill. 
D) Assets and liabilities of the acquired company are reported at net book value.

Question 20

There are many forms of business combinations that can occur. However, for which of the following are the requirements for accounting for a business combination NOT used?

Accepted Answer

A) A acquires the assets only of B, and B pays off the liabilities and then liquidates. 
B) A acquires all the assets and only some of the liabilities of B, and B pays the remaining liabilities before liquidating. 
C) The business combination results in the formation of a joint venture. 
D) A acquires a group of net assets of B, the group of net assets constituting a business, such as a division, branch or segment, of B. 
A) A acquires the assets only of B, and B pays off the liabilities and then liquidates. 
B) A acquires all the assets and only some of the liabilities of B, and B pays the remaining liabilities before liquidating. 
C) The business combination results in the formation of a joint venture. 
D) A acquires a group of net assets of B, the group of net assets constituting a business, such as a division, branch or segment, of B.

A business combination could occur without any exchange of assets or equity between the entities involved in the exchange.

How should legal fees for an acquisition be treated?

Having recognized goodwill arising in the business combination, which of the following statements regarding the subsequent accounting is FALSE?

In a business acquisition, an acquirer purchases the assets and liabilities of an entity. What is the "consideration transferred" and how is it measured and calculated?

The acquirer is usually the combining entity whose owners have the ability to elect or appoint or to remove a majority of the members of the governing body of the combined entity.

Which of the following is NOT a reason why a private enterprise may be acquired as a bargain purchase?

Where the acquirer purchases the acquiree's assets and liabilities, the acquiree may continue in existence or it may liquidate.

Having recognized goodwill arising in the business combination, goodwill cannot be revalued.

Where the contingent consideration is a financial liability, it will be accounted for under IFRS #9 and measured at ____________ value with movements being accounted for in accordance with that standard.

Having recognized any contingent liabilities of the acquiree as liabilities, the acquirer must then determine a subsequent measurement for the liability. The liability is initially recognized at fair value. Subsequent to acquisition date, how is the liability measured?

Quast Co. plans to acquire Fairweather Co. Fairweather has substantial depreciable assets that have fair values in excess of their book values. Considering only the income tax impact, which of the following statements is TRUE?

Identify and discuss some indicators provided by IFRS 3 to assist in assessing which entity is the acquirer in situtations of a share for share exchange.

Subsequent to the acquisition date, a contingent liability is measured as the amount initially recognized less, if appropriate, cumulative amortization recognized.

How often should goodwill acquired in a business combination be tested for impairment?

A business combination involves the joining together of assets and liabilities under the control of a specific entity. Therefore, the business combination occurs at the date:

When the acquirer buys only shares in the acquiree from the shareholders of the acquiree, what is the impact on the acquiree's records?

Which of the following statements about a bargain purchase is TRUE?

There are many forms of business combinations that can occur. However, for which of the following are the requirements for accounting for a business combination NOT used?

Accounting for Investments

Consolidation: Wholly Owned Subsidiaries

Consolidations: Intragroup Transactions

Consolidation: Non-Controlling Interest

Accounting for Investments in Associates and Joint Ventures

Accounting for Foreign Currency

Accounting for Foreign Investments

Reporting for Not-For-Profit Organizations

Reporting for Public Sector Entities

Filters

Exam 2: Business Combinations

A business combination could occur without any exchange of assets or equity between the entities involved in the exchange.

How should legal fees for an acquisition be treated?

Having recognized goodwill arising in the business combination, which of the following statements regarding the subsequent accounting is FALSE?

In a business acquisition, an acquirer purchases the assets and liabilities of an entity. What is the "consideration transferred" and how is it measured and calculated?

The acquirer is usually the combining entity whose owners have the ability to elect or appoint or to remove a majority of the members of the governing body of the combined entity.

Which of the following is NOT a reason why a private enterprise may be acquired as a bargain purchase?

Where the acquirer purchases the acquiree's assets and liabilities, the acquiree may continue in existence or it may liquidate.

Having recognized goodwill arising in the business combination, goodwill cannot be revalued.

Where the contingent consideration is a financial liability, it will be accounted for under IFRS #9 and measured at ____________ value with movements being accounted for in accordance with that standard.

Having recognized any contingent liabilities of the acquiree as liabilities, the acquirer must then determine a subsequent measurement for the liability. The liability is initially recognized at fair value. Subsequent to acquisition date, how is the liability measured?

Quast Co. plans to acquire Fairweather Co. Fairweather has substantial depreciable assets that have fair values in excess of their book values. Considering only the income tax impact, which of the following statements is TRUE?

Identify and discuss some indicators provided by IFRS 3 to assist in assessing which entity is the acquirer in situtations of a share for share exchange.

Subsequent to the acquisition date, a contingent liability is measured as the amount initially recognized less, if appropriate, cumulative amortization recognized.

How often should goodwill acquired in a business combination be tested for impairment?

A business combination involves the joining together of assets and liabilities under the control of a specific entity. Therefore, the business combination occurs at the date:

When the acquirer buys only shares in the acquiree from the shareholders of the acquiree, what is the impact on the acquiree's records?

Which of the following statements about a bargain purchase is TRUE?

There are many forms of business combinations that can occur. However, for which of the following are the requirements for accounting for a business combination NOT used?

Accounting for Investments

Consolidation: Wholly Owned Subsidiaries

Consolidations: Intragroup Transactions

Consolidation: Non-Controlling Interest

Accounting for Investments in Associates and Joint Ventures

Accounting for Foreign Currency

Accounting for Foreign Investments

Reporting for Not-For-Profit Organizations

Reporting for Public Sector Entities

Filters