Question 1

When an acquisition of another company occurs, FASB requires disclosing all of the following except:​

Accepted Answer

A) ​amounts recorded for each major class of assets and liabilities. 
B) ​information concerning contingent consideration including a description of the arrangements and the range of outcomes. 
C) ​results of operations for the current period if both companies had remained separate. 
D) ​a qualitative description of factors that make up the goodwill recognized. 
A) ​amounts recorded for each major class of assets and liabilities. 
B) ​information concerning contingent consideration including a description of the arrangements and the range of outcomes. 
C) ​results of operations for the current period if both companies had remained separate. 
D) ​a qualitative description of factors that make up the goodwill recognized.

Question 2

Vibe Company purchased the net assets of Atlantic Company in a business combination accounted for as a purchase.As a result, goodwill was recorded.For tax purposes, this combination was considered to be a tax-free merger.Included in the assets is a building with an appraised value of $210,000 on the date of the business combination.This asset had a net book value of $70,000.The building had an adjusted tax basis to Atlantic (and to Vibe as a result of the merger) of $120,000.Assuming a 40% income tax rate, at what amount should Vibe record this building on its books after the purchase?
$ \begin{array}{lc} & \text { Deferred Tax } \ \text { Building } & \text { Liability }\end{array} $

Accepted Answer

A) ?$174,000$\quad $$\quad $$\quad $$\quad $ $ 0 
B) ?$140,000 $\quad $$\quad $$\quad $$\quad $$36,000 
C) ?$210,000 $\quad $$\quad $$\quad $$\quad $$90,000 
D) ?$210,000 $\quad $$\quad $$\quad $$\quad $$36,000 
A) ?$174,000$\quad $$\quad $$\quad $$\quad $ $ 0 
B) ?$140,000 $\quad $$\quad $$\quad $$\quad $$36,000 
C) ?$210,000 $\quad $$\quad $$\quad $$\quad $$90,000 
D) ?$210,000 $\quad $$\quad $$\quad $$\quad $$36,000

Question 3

In performing the impairment test for goodwill, the company had the following 2016 and 2017 information available. 
$\begin{array}{lll}
&2016&2017\
\text { Fair value of the reporting unit } & \$ 350,000 & \$ 400,000 \
\text { Net book value (including } \$ 50,000 \text { goodwill) } & \$ 360,000 & \$ 380,000
\end{array}$
 Assume that the carrying value of the identifiable assets are a reasonable approximation of their fair values.Based upon this information what are the 2016 and 2017 adjustment to goodwill, if any
$\quad $$\quad $2016$\quad $$\quad $ $\quad $$\quad $2017

Accepted Answer

A) no adjustment $\quad $$20,000 decrease 
B) $10,000 increase $\quad $$20,000 decrease 
C) $10,000 decrease $\quad $$20,000 decrease 
D) $10,000 decrease $\quad $no adjustment 
A) no adjustment $\quad $$20,000 decrease 
B) $10,000 increase $\quad $$20,000 decrease 
C) $10,000 decrease $\quad $$20,000 decrease 
D) $10,000 decrease $\quad $no adjustment

Question 4

A large nation-wide bank's acquisition of a major investment advisory firm would be an example of a:​

Accepted Answer

A) ​market extension merger. 
B) ​conglomerate merger. 
C) ​product extension merger. 
D) ​horizontal merger. 
A) ​market extension merger. 
B) ​conglomerate merger. 
C) ​product extension merger. 
D) ​horizontal merger.

Question 5

A building materials company's acquisition of a television station would be an example of a:​

Accepted Answer

A) ​market extension merger. 
B) ​conglomerate merger. 
C) ​product extension merger. 
D) ​horizontal merger. 
A) ​market extension merger. 
B) ​conglomerate merger. 
C) ​product extension merger. 
D) ​horizontal merger.

Question 6

An economic advantage of a business combination includes:​

Accepted Answer

A) ​Utilizing duplicative assets. 
B) ​Creating separate management teams. 
C) ​Shared fixed costs. 
D) ​Horizontally combining levels within the marketing chain. 
A) ​Utilizing duplicative assets. 
B) ​Creating separate management teams. 
C) ​Shared fixed costs. 
D) ​Horizontally combining levels within the marketing chain.

Question 7

On January 1, July 1, and December 31, 2016, a condensed trial balance for Nelson Company showed the following debits and (credits):
?
?
 $\begin{array}{lrrr}
& 01 / 01 / 16 & 07 / 01 / 16 & 12 / 31 / 16 \
\text { Current Assets } & \$ 200,000 & \$ 260,000 & \$ 340,000 \
\text { Plant and Equipment (net) } & 500,000 & 510,000 & 510,000 \
\text { Current Liabilities } & (50,000) & (70,000) & (60,000) \
\text { Long-Term Debt } & (100,000) & (100,000) & (100,000) \
\text { Common Stock } & (150,000) & (150,000) & (150,000) \
\text { Other Paid-in Capital } & (100,000) & (100,000) & (100,000) \
\text { Retained Earnings, January 1 } & (300,000) & (300,000) & (300,000) \
\text { Dividends Declared } & & & 10,000 \
\text { Revenues } & & (400,000) & (900,000) \
\text { Expenses } & & 350,000 & 750,000
\end{array}$
 Assume that, on July 1, 2016, Systems Corporation purchased the net assets of Nelson Company for $750,000 in cash.On this date, the fair values for certain net assets were:
?
?
 $$\begin{array} { l r } 
\text { Current Assets } & \$ 280,000 \
\text { Plant and Equipment (remaining life of } 10 \text { years) } & 600,000
\end{array}$$ Nelson Company's books were NOT closed on June 30, 2016.
?
For all of 2016, Systems' revenues and expenses were $1,500,000 and $1,200,000, respectively.
?
Required:
?
 $$\text { (1) Record the entry on Systems' books for the July 1, } 2016 \text { purchase of Nelson. }$$

Accepted Answer

?
 \[\begin{array}{l}
1 .\
\begin{array

Question 8

Which of the following would not be considered an identifiable intangible asset?

Accepted Answer

A) ​Assembled workforce 
B) ​Customer lists 
C) ​Production backlog 
D) ​Internet domain name 
A) ​Assembled workforce 
B) ​Customer lists 
C) ​Production backlog 
D) ​Internet domain name

Question 9

Jones Company acquired Jackson Company for $2,000,000 cash.At that time, the fair value of recorded assets and liabilities was $1,500,000 and $250,000, respectively.Jackson also had unrecorded copyrights valued at $150,000 and its direct costs related to the acquisition were $50,000.What was the amount of the goodwill related to the acquisition?​

Accepted Answer

A) ​$600,000 
B) ​$650,000 
C) ​$550,000 
D) ​$700,000 
A) ​$600,000 
B) ​$650,000 
C) ​$550,000 
D) ​$700,000

Question 10

Orbit Inc.purchased Planet Co.on January 1, 2015.At that time an existing patent having a 5-year estimated life was assigned a provisional value of $10,000 and goodwill was assigned a value of $100,000.By the end of fiscal year 2015, better information was available that indicated the fair value of the patent was $20,000.How should intangible assets be reported at the beginning of fiscal year 2016??

Accepted Answer

A) ?Goodwill $100,000 $\quad $Patent $10,000 
B) ?Goodwill $90,000 $\quad $$\quad $Patent $16,000 
C) ?Goodwill $84,000 $\quad $$\quad $Patent $16,000 
D) ?Goodwill $90,000 $\quad $$\quad $Patent $20,000 
A) ?Goodwill $100,000 $\quad $Patent $10,000 
B) ?Goodwill $90,000 $\quad $$\quad $Patent $16,000 
C) ?Goodwill $84,000 $\quad $$\quad $Patent $16,000 
D) ?Goodwill $90,000 $\quad $$\quad $Patent $20,000

Question 11

Crystal Co.purchased all of the common stock of Sill Corp.on January 1 of the current year.Five years prior to the acquisition, Sill Corp.had issued 30-year bonds bearing an interest rate of 8%.At the time of the acquisition, the prevailing interest rate for similar bonds was 5%.These bonds should be included in the consolidated balance sheet at​

Accepted Answer

A) ​face value. 
B) ​at a value higher than Sill's recorded value due to the change in interest rates. 
C) ​at a value lower than Sill's recorded value due to the change in interest rates. 
D) ​at Sill's recorded value. 
A) ​face value. 
B) ​at a value higher than Sill's recorded value due to the change in interest rates. 
C) ​at a value lower than Sill's recorded value due to the change in interest rates. 
D) ​at Sill's recorded value.

Question 12

Publics Company acquired the net assets of Citizen Company during 2016.The purchase price was $800,000.On the date of the transaction, Citizen had no long-term investments in marketable equity securities and $400,000 in liabilities, of which the fair value approximated book value.The fair value of Citizen's assets on the acquisition date was as follows:
$$\begin{array} { l r } 
\text { Current assets } & \$ 800,000 \
\text { Noncurrent assets } & \underline { 600,000 } \
& \$ 1,400,000
\end{array}$$ How should Publics account for the difference between the fair value of the net assets acquired and the acquisition price of $800,000?

Accepted Answer

A) Retained earnings should be reduced by $200,000. 
B) A $600,000 gain on acquisition of business should be recognized. 
C) A $200,000 gain on acquisition of business should be recognized. 
D) A deferred credit of $200,000 should be set up and subsequently amortized to future net income over a period not to exceed 40 years. 
A) Retained earnings should be reduced by $200,000. 
B) A $600,000 gain on acquisition of business should be recognized. 
C) A $200,000 gain on acquisition of business should be recognized. 
D) A deferred credit of $200,000 should be set up and subsequently amortized to future net income over a period not to exceed 40 years.

Question 13

Rugby, Inc.issues 20,000 shares of $10 par value common stock with a market value of $15 each for Soccer Company.Rugby, Inc.pays related acquisition costs of $50,000.The total fair value of net assets acquired from Soccer Company is $450,000.Which of the following is true related to recording the purchase and related costs:​

Accepted Answer

A) ​Debit a loss for $150,000 on the acquisition of the business 
B) ​Debit goodwill for $250,000 above par value on the acquisition of the business 
C) ​Credit a gain for $150,000 on the acquisition of the business and capitalize the $55,000 of acquisition costs 
D) ​Credit a gain for $150,000 on the acquisition of the business and expense the acquisition costs. 
A) ​Debit a loss for $150,000 on the acquisition of the business 
B) ​Debit goodwill for $250,000 above par value on the acquisition of the business 
C) ​Credit a gain for $150,000 on the acquisition of the business and capitalize the $55,000 of acquisition costs 
D) ​Credit a gain for $150,000 on the acquisition of the business and expense the acquisition costs.

Question 14

Some advantages of obtaining control by acquiring a controlling interest in stock include all but:​

Accepted Answer

A) ​Negotiations are made directly with the acquiree's management. 
B) ​The legal liability of each corporation is limited to its own assets. 
C) ​The cost may be lower since only a controlling interest in the assets, not the total assets, is acquired. 
D) ​Tax advantages may result from preservation of the legal entities. 
A) ​Negotiations are made directly with the acquiree's management. 
B) ​The legal liability of each corporation is limited to its own assets. 
C) ​The cost may be lower since only a controlling interest in the assets, not the total assets, is acquired. 
D) ​Tax advantages may result from preservation of the legal entities.

Question 15

Cozzi Company is being purchased and has the following balance sheet as of the purchase date:
$$\begin{array} { c c c c } 
\text { Current assets } & \$ 200,000 & \text { Liabilities } & \$ 90,000 \
\text { Fixed assets } & \underline { 180,000 } & \text { Equity } & \underline { 290,000 }\
\text { Total } &  \underline { \$ 380,000} & \text { Total } &  \underline { \$ 380,000 }\

\end{array}$$ The price paid for Cozzi's net assets is $500,000.The fixed assets have a fair value of $220,000, and the liabilities have a fair value of $110,000.The amount of goodwill to be recorded in the purchase is:

Accepted Answer

A) $0 
B) $150,000 
C) $170,000 
D) $190,000 
A) $0 
B) $150,000 
C) $170,000 
D) $190,000

Question 16

ACME Co.paid $110,000 for the net assets of Comb Corp.At the time of the acquisition the following information was available related to Comb's balance sheet:
$$\begin{array} { l r r } 
& \text { Book Value } & \text { Fair Value } \
\text { Current Assets } & \$ 50,000 & \$ 50,000 \
\text { Building } & 80,000 & 100,000 \
\text { Equipment } & 40,000 & 50,000 \
\text { Liabilities } & 30,000 & 30,000
\end{array}$$ What is the amount of gain or loss on disposal of business should Comb Corp.recognize?

Accepted Answer

A) Gain of $60,000 
B) Gain of $60,000. 
C) Loss of $30,000 
D) Loss of $60,000 
A) Gain of $60,000 
B) Gain of $60,000. 
C) Loss of $30,000 
D) Loss of $60,000

Question 17

Goodwill is an intangible asset.There are a variety of recommendations about how intangible assets should be included in the financial statements.Discuss the recommendations for proper disclosure of goodwill.Include a comparison with disclosure of other intangible assets.

Accepted Answer

Goodwill arises when a company is purcha

Question 18

Internet Corporation is considering the acquisition of Homepage Corporation and has obtained the following audited condensed balance sheet:
?
 Homepage Corporation
Balance Sheet
December 31, 2016 ?
 $$\begin{array} { l r l r } 
& \text { Assets } & &  { \text { Liabilities and Equity } } \
\text { Current assets } & \$ 40,000 & \text { Current Liabilities } & \$ 60,000 \
\text { Land } & 20,000 & \text { Capital Stock } ( 50,000 & \
\text { Buildings (net) } & 80,000 & \text { shares, } \$ 1 \text { par value) } & 50,000 \
\text { Equipment (net) } & \underline { 60,000 } & \text { Other Paid-in Capital } & 20,000 \
& & \text { Retained Earnings } & 70,000 \
& \$ 200,000 & & \$ 200,000 
\end{array}$$ Internet also acquired the following fair values for Homepage's assets and liabilities:
?
?
 $$\begin{array} { l r } 
\text { Current assets } & \$ 55,000 \
\text { Land } & 60,000 \
\text { Buildings (net) } & 90,000 \
\text { Equipment (net) } & 75,000 \
\text { Current Liabilities } & ( 60,000 ) \
& \$ 220,000
\end{array}$$ Internet and Homepage agree on a price of $280,000 for Homepage's net assets.Prepare the necessary journal entry to record the purchase given the following scenarios:
? 
a.Internet pays cash for Homepage Corporation and incurs $5,000 of acquisition costs.?
?
b.Internet issues its $5 par value stock as consideration.The fair value of the stock at the acquisition date is $50 per share.Additionally, Internet incurs $5,000 of security issuance costs.?

Accepted Answer

?
 a.\[\begin{array} { l r r } 
& \text

Question 19

While performing a goodwill impairment test, the company had the following information:
$\begin{array}{llr}
  \text {Estimated implied fair value of reporting unit  } &\$420,000\
 \text {Fair value of net assets on date of measurement (without goodwill)  } &\$ 400,000 \
 \text {  Existing net book value of reporting unit (without goodwill)} & \$ 380,000\
 \text {  Book value of goodwill} & \$ 60,000\
\end{array}$

Based upon this information the proper conclusion is:

Accepted Answer

A) The company should recognize a goodwill impairment loss of $20,000. 
B) Goodwill is not impaired. 
C) The company should recognize a goodwill impairment loss of $40,000. 
D) The company should recognize a goodwill impairment loss of $60,000. 
A) The company should recognize a goodwill impairment loss of $20,000. 
B) Goodwill is not impaired. 
C) The company should recognize a goodwill impairment loss of $40,000. 
D) The company should recognize a goodwill impairment loss of $60,000.

Question 20

When determining the fair values of assets acquired in an acquisition, the highest level of measurement per GAAP is

Accepted Answer

A) ​adjusted market value based on prices of similar assets. 
B) ​unadjusted market values in an actively traded market. 
C) ​based on discounted cash flows. 
D) ​the entity's best estimate of an exit or sale value. 
A) ​adjusted market value based on prices of similar assets. 
B) ​unadjusted market values in an actively traded market. 
C) ​based on discounted cash flows. 
D) ​the entity's best estimate of an exit or sale value.

When an acquisition of another company occurs, FASB requires disclosing all of the following except:

A large nation-wide bank's acquisition of a major investment advisory firm would be an example of a:

A building materials company's acquisition of a television station would be an example of a:

An economic advantage of a business combination includes:

Which of the following would not be considered an identifiable intangible asset?

Some advantages of obtaining control by acquiring a controlling interest in stock include all but:

Goodwill is an intangible asset.There are a variety of recommendations about how intangible assets should be included in the financial statements.Discuss the recommendations for proper disclosure of goodwill.Include a comparison with disclosure of other intangible assets.

When determining the fair values of assets acquired in an acquisition, the highest level of measurement per GAAP is

Consolidated Statements: Date of Acquisition

Consolidated Statements: Subsequent to Acquisition

Intercompany Transactions: Merchandise, Plant Assets, and Notes

Intercompany Transactions: Bonds and Leases

Cash Flow, Eps, and Taxation

Special Issues in Accounting for an Investment in a Subsidiary

Subsidiary Equity Transactions, Indirect Subsidiary Ownership, and Subsidiary Ownership of Parent Shares

The International Accounting Environment

Foreign Currency Transactions

Translation of Foreign Financial Statements

Interim Reporting and Disclosures About Segments of an Enterprise

Partnerships: Characteristics, Formation, and Accounting for Activities

Partnerships: Ownership Changes and Liquidations

Government and Not for Profit Accounting

Governmental Accounting: Other Governmental Funds, Proprietary Funds, and Fiduciary Funds

Financial Reporting Issues

Accounting for Private Not-For-Profit Organizations

Accounting for Not-For-Profit Colleges and Universities and Health Care Organizations

Estates and Trusts: Their Nature and the Accountants Role

Debt Restructuring, Corporate Reorganizations, and Liquidations

Derivatives and Related Accounting Issues

Equity Method for Unconsolidated Investments

Variable Interest Entities

Filters

Exam 1: Business Combinations: New Rules for a Long-Standing Business Practice

When an acquisition of another company occurs, FASB requires disclosing all of the following except:​

A large nation-wide bank's acquisition of a major investment advisory firm would be an example of a:​

A building materials company's acquisition of a television station would be an example of a:​

An economic advantage of a business combination includes:​

Which of the following would not be considered an identifiable intangible asset?

Some advantages of obtaining control by acquiring a controlling interest in stock include all but:​

Goodwill is an intangible asset.There are a variety of recommendations about how intangible assets should be included in the financial statements.Discuss the recommendations for proper disclosure of goodwill.Include a comparison with disclosure of other intangible assets.

When determining the fair values of assets acquired in an acquisition, the highest level of measurement per GAAP is

Consolidated Statements: Date of Acquisition

Consolidated Statements: Subsequent to Acquisition

Intercompany Transactions: Merchandise, Plant Assets, and Notes

Intercompany Transactions: Bonds and Leases

Cash Flow, Eps, and Taxation

Special Issues in Accounting for an Investment in a Subsidiary

Subsidiary Equity Transactions, Indirect Subsidiary Ownership, and Subsidiary Ownership of Parent Shares

The International Accounting Environment

Foreign Currency Transactions

Translation of Foreign Financial Statements

Interim Reporting and Disclosures About Segments of an Enterprise

Partnerships: Characteristics, Formation, and Accounting for Activities

Partnerships: Ownership Changes and Liquidations

Government and Not for Profit Accounting

Governmental Accounting: Other Governmental Funds, Proprietary Funds, and Fiduciary Funds

Financial Reporting Issues

Accounting for Private Not-For-Profit Organizations

Accounting for Not-For-Profit Colleges and Universities and Health Care Organizations

Estates and Trusts: Their Nature and the Accountants Role

Debt Restructuring, Corporate Reorganizations, and Liquidations

Derivatives and Related Accounting Issues

Equity Method for Unconsolidated Investments

Variable Interest Entities

Filters

When an acquisition of another company occurs, FASB requires disclosing all of the following except:

A large nation-wide bank's acquisition of a major investment advisory firm would be an example of a:

A building materials company's acquisition of a television station would be an example of a:

An economic advantage of a business combination includes:

Some advantages of obtaining control by acquiring a controlling interest in stock include all but: