Exam 3: Business Combinations

Under IFRS 3,Business Combinations,which method must be used to account for business combinations?

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

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

On September 1,20X7,Spike Limited decided to buy 100% of the outstanding shares of Volley Inc.for $1,200,000 paid for with the issuance of shares.In addition Spike has agreed to pay an additional $250,000 if the revenues of Volley have a 5% growth over the next two years from the date of the acquisition.It has been determined that the fair value of this contingent consideration is $175,000. The balances showing on the statement of financial position for the two companies at August 31,20X7 are as follows: After a review of the financial assets and liabilities,Spike determines that some of the assets of Volley have fair values different from their carrying values.These items are listed below: Capital assets - fair value is $1,350,000 Patent - fair value is $255,000 Brand name - fair value is $135,000 Required: Determine the amount of goodwill that will be recorded on the business combination. Prepare the consolidated statement of financial position as at September 1,20X7.

On March 17,20X2,Cho Co.acquired 100% of the shares of Bisset Ltd.for $1,000,000.The net assets of Bisset included 10 acres of land,which was carried on Bisset's books at $100,000 even though its market value was approximately $350,000.Cho did not own any land prior to the acquisition of Bisset's net assets.If push down accounting was applied,what amount would be shown for land on the consolidated the separate-entity balance sheets for Bisset on March 18,20X2?

There are a number of possible approaches to reporting consolidated financial statements after one company acquires control over another.Which of the following methods reports the consolidated amounts by adding together the carrying values of the assets and liabilities of the parent and the subsidiary?

Perez Co.acquired Roo Co.in a business combination.Perez issued new shares to Roo's shareholders in exchange for their outstanding shares.What type of share exchange is this?

Sya Ltd.acquired all the assets and liabilities of Littman Ltd.by issuing common shares to Littman.After this transaction,Littman owned 30% of Sya's outstanding shares.How should Sya record Littman's assets and liabilities on its books?

Perez Co.acquired Roo Co.in a business combination.Roo issued new shares to Perez's shareholders in exchange for their outstanding shares.What type of share exchange is this?

How should accounting fees for an acquisition be treated?

Able Ltd.offers to buy shares from the existing shareholders of Wei Co.at a premium price.The current management and board of directors of Wei have let the Wei shareholders know that they do not approve of this.This is an example of a(n)________.

Dupuis Ltd.acquired Waul Ltd.through a business combination using the direct method.How should Waul record this on its books?

Slade Co.has 1,000,000 shares outstanding and is traded on the TSX.On October 1,20X6,Slade purchased all of the outstanding shares of Print Co.by issuing 1,200,000 shares at $50 per share. Required: Explain the legal form of this transaction.What is the transaction in substance? How will this transaction be accounted for? Why might the transaction have been accomplished in this manner?

Raj Co.acquired all of Event Ltd.'s common shares.At the date of acquisition,Event had $80,000 of goodwill resulting from its acquisition of Baker Ltd.a few years ago.At Raj's date of acquisition,what is the proper treatment of Event's $80,000 of goodwill?

Cheers acquired 100% of Tapp's shares for $150,000.On the acquisition date,the fair value of the current assets and the net capital assets were $104,000 and $216,000 respectively.The fair value of the liabilities equalled their book value.What is the amount of goodwill created in this acquisition?

On December 31,20X5,CI Co.purchased 100% of the outstanding common shares of SA Ltd.for $1,500,000 in cash;80% of the cash was obtained by issuing a five-year note payable.The statements of financial position of CI and SA immediately before the acquisition and issuance of the notes payable were as follows (in 000s): Required: Prepare the journal entry that CI will post to record the acquisition of CI.Prepare the consolidated statement of financial position for CI immediately following the acquisition of SA.

Sugar Corp and Syrup Limited have reached an agreement in principle to combine their operations as of October 1,20X9.However,the Board of directors cannot decide on the best way to accomplish the combination.Below are the alternatives being considered: 1.Sugar acquires the net assets of Syrup for $1,700,000 cash. 2.Sugar acquires only the assets for $2,650,000 cash. 3.Sugar acquires all of the outstanding shares of Syrup by issuing shares with a fair market value of $1,700,000. Syrup has the following assets and liabilities at October 1,20X9,(in thousands of dollars) The only item that has a fair value different from its carrying value is the property,plant and equipment,which has a fair value of $1,900. Required: Explain how each transaction is different from the acquirer's point of view.Prepare the journal entry that would be recorded by Sugar for each these alternatives.

At December 31,20X0,Crowe Company has 80,000 common shares outstanding while Dylan Inc.has 40,000 common shares outstanding.Crowe wishes to gain control over Dylan and will enter into a reverse takeover of Dylan to gain Dylan's listing on the stock exchange.In order to facilitate the reverse takeover,which of the following would have to occur?

Cheers acquired 100% of Tapp's shares for $150,000.On the acquisition date,the fair value of the current assets and the net capital assets were $104,000 and $216,000 respectively.The fair value of the liabilities equalled their book value.On Cheers' consolidated statement of financial position,what is the total of its shareholders' equity?

Nashman Ltd.is a private enterprise with five subsidiaries.Which of the Following statements is true?