Question 1

According to FASB Statement No.141,liabilities assumed in an acquisition will be valued at the ________.

Accepted Answer

A) reasonably estimated fair value 
B) historical book value 
C) current replacement cost 
D) present value using market interest rates 
A) reasonably estimated fair value 
B) historical book value 
C) current replacement cost 
D) present value using market interest rates

Question 2

Pony acquired Spur Corporation's assets and liabilities for $500,000 cash on December 31,2013.Spur dissolved on the date of the acquisition.Spur's balance sheet and related fair values are shown as of that date,below.   
Required: Prepare the journal entry recorded by Pony as a result of this transaction.

Accepted Answer

@#IMG-DLM& *Cash payment is sh

Question 3

On January 2,2013 Carolina Clothing issued 100,000 new shares of its $5 par value common stock valued at $19 a share for all of Dakota Dressing Company's outstanding common shares in an acquisition.Carolina paid $15,000 for registering and issuing securities and $10,000 for other direct costs of the business combination.The fair value and book value of Dakota's identifiable assets and liabilities were the same.Assume Dakota Company is dissolved on the date of the acquisition.Summarized balance sheet information for both companies just before the acquisition on January 2,2013 is as follows:   
Required:
Prepare a balance sheet for Carolina Clothing immediately after the business combination.

Accepted Answer

The answer of On January 2,2013 Carolina Clothing issued 100,000...

Question 4

Which of the following methods does the FASB consider the best indicator of fair values in the evaluation of goodwill impairment?

Accepted Answer

A) Senior executive's estimates 
B) Financial analyst forecasts 
C) Market value 
D) The present value of future cash flows discounted at the firm's cost of capital 
A) Senior executive's estimates 
B) Financial analyst forecasts 
C) Market value 
D) The present value of future cash flows discounted at the firm's cost of capital

Question 5

With respect to goodwill,an impairment

Accepted Answer

A) will be amortized over the remaining useful life. 
B) is a two-step process which first compares book value to fair value at the business reporting unit level. 
C) is a one-step process considering the entire firm. 
D) occurs when asset values are adjusted to fair value in a purchase. 
A) will be amortized over the remaining useful life. 
B) is a two-step process which first compares book value to fair value at the business reporting unit level. 
C) is a one-step process considering the entire firm. 
D) occurs when asset values are adjusted to fair value in a purchase.

Question 6

Samantha's Sporting Goods had net assets consisting of the following:   
Pedic Incorporated purchased Samantha's Sporting Goods,and immediately dissolved Samantha's as a separate legal entity.
Requirement 1: If Samantha's was purchased for $1,000,000 cash,prepare the entry recorded by Pedic.
Requirement 2: If Samantha's was purchased for $1,500,000 cash,prepare the entry recorded by Pedic.

Accepted Answer

Requirement 1: @#IMG-DLM& 
*Cash entries

Question 7

In reference to the FASB disclosure requirements about a business combination in the period in which the combination occurs,which of the following is correct?

Accepted Answer

A) Firms are not required to disclose the name of the acquired company. 
B) Firms are not required to disclose the business purpose for a combination. 
C) Firms are required to disclose the nature,terms and fair value of consideration transferred in a business combination. 
D) All of the above are correct. 
A) Firms are not required to disclose the name of the acquired company. 
B) Firms are not required to disclose the business purpose for a combination. 
C) Firms are required to disclose the nature,terms and fair value of consideration transferred in a business combination. 
D) All of the above are correct.

Question 8

In a business combination,which of the following will occur?

Accepted Answer

A) All identifiable assets and liabilities are recorded at fair value at the date of acquisition. 
B) All identifiable assets and liabilities are recorded at book value at the date of acquisition. 
C) Goodwill is recorded if the fair value of the net assets acquired exceeds the book value of the net assets acquired. 
D) None of the above is correct. 
A) All identifiable assets and liabilities are recorded at fair value at the date of acquisition. 
B) All identifiable assets and liabilities are recorded at book value at the date of acquisition. 
C) Goodwill is recorded if the fair value of the net assets acquired exceeds the book value of the net assets acquired. 
D) None of the above is correct.

Question 9

Pali Corporation exchanges 200,000 shares of newly issued $10 par value common stock with a fair market value of $40 per share for all the outstanding $5 par value common stock of Shingle Incorporated,which continues on as a legal entity.Fair value approximated book value for all assets and liabilities of Shingle.Pali paid the following costs and expenses related to the business combination:   
Required: Prepare the journal entries relating to the above acquisition and payments incurred by Pali,assuming all costs were paid in cash.

Accepted Answer

The answer of Pali Corporation exchanges 200,000 shares of newly...

Question 10

Parrot Incorporated purchased the assets and liabilities of Sparrow Company at the close of business on December 31,2013.Parrot borrowed $2,000,000 to complete this transaction,in addition to the $640,000 cash that they paid directly.The fair value and book value of Sparrow's recorded assets and liabilities as of the date of acquisition are listed below.In addition,Sparrow had a patent that had a fair value of $50,000.   
Required:
1.Prepare Parrot's general journal entry for the acquisition of Sparrow,assuming that Sparrow survives as a separate legal entity.
2.Prepare Parrot's general journal entry for the acquisition of Sparrow,assuming that Sparrow will dissolve as a separate legal entity.

Accepted Answer

1.General journal entry recorded by Parr

Question 11

On June 30,2013,Stampol Company ceased operations and all of their assets and liabilities were purchased by Postoli Incorporated.Postoli paid $40,000 in cash to the owner of Stampol,and signed a five-year note payable to the owners of Stampol in the amount of $200,000.Their closing balance sheets as of June 30,2013 are shown below.In the purchase agreement,both parties noted that Inventory was undervalued on the books by $10,000,and Pistoli would also take possession of a customer list with a fair value of $18,000.Pistoli paid all legal costs of the acquisition,which amounted to $7,000.   
Required:
1.Prepare the journal entry Postoli would record at the date of acquisition.
2.Prepare the journal entry Stampol would record at the date of acquisition.

Accepted Answer

Postoli's journal entry: @#IMG-DLM& 
*Cash payment

Question 12

Following the accounting concept of a business combination,a business combination occurs when a company acquires an equity interest in another entity and has

Accepted Answer

A) at least 20% ownership in the entity. 
B) more than 50% ownership in the entity. 
C) 100% ownership in the entity. 
D) control over the entity,irrespective of the percentage owned. 
A) at least 20% ownership in the entity. 
B) more than 50% ownership in the entity. 
C) 100% ownership in the entity. 
D) control over the entity,irrespective of the percentage owned.

Question 13

A business merger differs from a business consolidation because

Accepted Answer

A) a merger dissolves all but one of the prior entities,but a consolidation dissolves all of the prior entities and forms a new corporation. 
B) a consolidation dissolves all but one of the prior entities,but a merger dissolves all of the prior entities. 
C) a merger is created when two entities join,but a consolidation is created when more than two entities join. 
D) a consolidation is created when two entities join,but a merger is created when more than two entities join. 
A) a merger dissolves all but one of the prior entities,but a consolidation dissolves all of the prior entities and forms a new corporation. 
B) a consolidation dissolves all but one of the prior entities,but a merger dissolves all of the prior entities. 
C) a merger is created when two entities join,but a consolidation is created when more than two entities join. 
D) a consolidation is created when two entities join,but a merger is created when more than two entities join.

Question 14

The balance sheets of Palisade Company and Salisbury Corporation were as follows on December 31,2013:
   
On January 1,2014 Palisade issued 30,000 of its shares with a market value of $40 per share in exchange for all of Salisbury's shares,and Salisbury was dissolved.Palisade paid $20,000 to register and issue the new common shares.It cost Palisade $50,000 in direct combination costs.Book values equal market values except that Salisbury's land is worth $250,000.
Required:
Prepare a Palisade balance sheet after the business combination on January 1,2014.

Accepted Answer

The balance sheet for Palisade Corporati

Question 15

When considering an acquisition,which of the following is NOT a method by which one company may gain control of another company?

Accepted Answer

A) Purchase of the majority of outstanding voting stock of the acquired company. 
B) Purchase of all assets and liabilities of another company. 
C) Purchase the assets,but not necessarily the liabilities,of another company previously in bankruptcy. 
D) All of the above methods result in a company gaining control over another company. 
A) Purchase of the majority of outstanding voting stock of the acquired company. 
B) Purchase of all assets and liabilities of another company. 
C) Purchase the assets,but not necessarily the liabilities,of another company previously in bankruptcy. 
D) All of the above methods result in a company gaining control over another company.

Question 16

Under the current GAAP,Goodwill arising from a business combination is

Accepted Answer

A) charged to Retained Earnings after the acquisition is completed. 
B) amortized over 40 years or its useful life,whichever is longer. 
C) amortized over 40 years or its useful life,whichever is shorter. 
D) never amortized. 
A) charged to Retained Earnings after the acquisition is completed. 
B) amortized over 40 years or its useful life,whichever is longer. 
C) amortized over 40 years or its useful life,whichever is shorter. 
D) never amortized.

According to FASB Statement No.141,liabilities assumed in an acquisition will be valued at the ________.

Which of the following methods does the FASB consider the best indicator of fair values in the evaluation of goodwill impairment?

With respect to goodwill,an impairment

In reference to the FASB disclosure requirements about a business combination in the period in which the combination occurs,which of the following is correct?

In a business combination,which of the following will occur?

Following the accounting concept of a business combination,a business combination occurs when a company acquires an equity interest in another entity and has

A business merger differs from a business consolidation because

When considering an acquisition,which of the following is NOT a method by which one company may gain control of another company?

Under the current GAAP,Goodwill arising from a business combination is

Stock Investments Investor Accounting and Reporting

An Introduction to Consolidated Financial Statements

Consolidated Techniques and Procedures

Intercompany Profit Transactions - Inventories

Intercompany Profit Transactions - Plant Assets

Intercompany Profit Transactions - Bonds

Consolidations - Changes in Ownership Interests

Indirect and Mutual Holdings

Subsidiary Preferred Stock,consolidated Earnings Per Share,and Consolidated Income Taxation

Consolidation Theories,push-Down Accounting,and Corporate Joint Ventures

Derivatives and Foreign Currency: Concepts and Common Transactions

Accounting for Derivatives and Hedging Activities

Foreign Currency Financial Statements

Segment and Interim Financial Reporting

Partnerships - Formation,operations,and Changes in Ownership Interests

Partnership Liquidation

Corporate Liquidations and Reorganizations

An Introduction to Accounting for State and Local Governmental Units

Accounting for State and Local Governmental Units - Governmental Funds

Accounting for State and Local Governmental Units - Proprietary and Fiduciary Funds

Accounting for Not-For-Profit Organizations

Estates and Trusts

Filters

Exam 1: Business Combinations

According to FASB Statement No.141,liabilities assumed in an acquisition will be valued at the ________.

Which of the following methods does the FASB consider the best indicator of fair values in the evaluation of goodwill impairment?

With respect to goodwill,an impairment

In reference to the FASB disclosure requirements about a business combination in the period in which the combination occurs,which of the following is correct?

In a business combination,which of the following will occur?

Following the accounting concept of a business combination,a business combination occurs when a company acquires an equity interest in another entity and has

A business merger differs from a business consolidation because

When considering an acquisition,which of the following is NOT a method by which one company may gain control of another company?

Under the current GAAP,Goodwill arising from a business combination is

Stock Investments Investor Accounting and Reporting

An Introduction to Consolidated Financial Statements

Consolidated Techniques and Procedures

Intercompany Profit Transactions - Inventories

Intercompany Profit Transactions - Plant Assets

Intercompany Profit Transactions - Bonds

Consolidations - Changes in Ownership Interests

Indirect and Mutual Holdings

Subsidiary Preferred Stock,consolidated Earnings Per Share,and Consolidated Income Taxation

Consolidation Theories,push-Down Accounting,and Corporate Joint Ventures

Derivatives and Foreign Currency: Concepts and Common Transactions

Accounting for Derivatives and Hedging Activities

Foreign Currency Financial Statements

Segment and Interim Financial Reporting

Partnerships - Formation,operations,and Changes in Ownership Interests

Partnership Liquidation

Corporate Liquidations and Reorganizations

An Introduction to Accounting for State and Local Governmental Units

Accounting for State and Local Governmental Units - Governmental Funds

Accounting for State and Local Governmental Units - Proprietary and Fiduciary Funds

Accounting for Not-For-Profit Organizations

Estates and Trusts

Filters