Exam 2: Consolidation of Financial Information

REFERENCE: Ref.02_06 The financial balances for the Atwood Company and the Franz Company as of December 31,20X1,are presented below.Also included are the fair values for Franz Company's net assets. Note: Parenthesis indicate a credit balance Assume a business combination took place at December 31,20X1.Atwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Franz.Stock issuance costs of $15 (in thousands)and direct costs of $10 (in thousands)were paid. -Compute consolidated equipment (net)at the date of the combination.

REFERENCE: Ref.02_09 Salem Co.had the following account balances as of February 1,2008: SHAPE \* MERGEFORMAT Bellington Inc.paid $1.7 million in cash and issued 12,000 shares of its $30 par value common stock (valued at $90 per share)for all of Salem's outstanding common stock.This investment is accounted for using the purchase method. -Determine the balance for Goodwill that would be included in a February 1,2008,consolidation.

REFERENCE: Ref.02_03 The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,20X1,prior to Goodwin's business combination transaction regarding Corr,follow (in thousands): On December 31,20X1,Goodwin issued $600 in debt and 30 shares of its $10 par value common stock to the owners of Corr to purchase all of the outstanding shares of that company.Goodwin shares had a fair value of $40 per share. Goodwin paid $25 to a broker for arranging the transaction.Goodwin paid $35 in stock issuance costs.Corr's equipment was actually worth $1,400 but its buildings were only valued at $560. -Assuming the combination is accounted for as an acquisition,compute the consolidated retained earnings at December 31,20X1.

Peterman Co.owns 55% of Samson Co.Under what circumstances would Peterman not be required to prepare consolidated financial statements?

What is the primary accounting difference between accounting for when the subsidiary is dissolved and when the subsidiary retains its incorporation?

REFERENCE: Ref.02_08 Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1,20X1.To obtain these shares,Flynn pays $400 (in thousands)and issues 10,000 shares of $20 par value common stock on this date.Flynn's stock had a fair value of $36 per share on that date.Flynn also pays $15 (in thousands)to a local investment firm for arranging the transaction.An additional $10 (in thousands)was paid by Flynn in stock issuance costs. The book values for both Flynn and Macek as of January 1,20X1 follow.The fair value of each of Flynn and Macek accounts is also included.In addition,Macek holds a fully amortized trademark that still retains a $40 (in thousands)value.The figures below are in thousands.Any related question also is in thousands. SHAPE \* MERGEFORMAT -Assuming the combination is accounted for as a purchase,what amount will be reported for goodwill?

REFERENCE: Ref.02_03 The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,20X1,prior to Goodwin's business combination transaction regarding Corr,follow (in thousands): On December 31,20X1,Goodwin issued $600 in debt and 30 shares of its $10 par value common stock to the owners of Corr to purchase all of the outstanding shares of that company.Goodwin shares had a fair value of $40 per share. Goodwin paid $25 to a broker for arranging the transaction.Goodwin paid $35 in stock issuance costs.Corr's equipment was actually worth $1,400 but its buildings were only valued at $560. -Compute the consolidated common stock account at December 31,20X1.

REFERENCE: Ref.02_03 The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,20X1,prior to Goodwin's business combination transaction regarding Corr,follow (in thousands): On December 31,20X1,Goodwin issued $600 in debt and 30 shares of its $10 par value common stock to the owners of Corr to purchase all of the outstanding shares of that company.Goodwin shares had a fair value of $40 per share. Goodwin paid $25 to a broker for arranging the transaction.Goodwin paid $35 in stock issuance costs.Corr's equipment was actually worth $1,400 but its buildings were only valued at $560. -Compute the consolidated cash account at December 31,20X1.

REFERENCE: Ref.02_01 Bullen Inc.assumed 100% control over Vicker Inc.on January 1,20X1.The book value and fair value of Vicker's accounts on that date (prior to creating the combination)follow,along with the book value of Bullen's accounts: -Assume that Bullen paid a total of $480,000 in cash for all of the shares of Vicker.In addition,Bullen paid $35,000 to a group of attorneys for their work in arranging the combination to be accounted for as an acquisition.What will be the balance in consolidated goodwill?

How would you account for in-process research and development purchased in a business combination?

REFERENCE: Ref.02_03 The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,20X1,prior to Goodwin's business combination transaction regarding Corr,follow (in thousands): On December 31,20X1,Goodwin issued $600 in debt and 30 shares of its $10 par value common stock to the owners of Corr to purchase all of the outstanding shares of that company.Goodwin shares had a fair value of $40 per share. Goodwin paid $25 to a broker for arranging the transaction.Goodwin paid $35 in stock issuance costs.Corr's equipment was actually worth $1,400 but its buildings were only valued at $560. -Assuming the combination is accounted for as an acquisition,compute the consolidated goodwill account at December 31,20X1.

How are stock issuance costs accounted for in a business combination that is not a pooling of interests?

In a transaction accounted for using the purchase method where cost exceeds book value,which statement is true for the acquiring company with regard to its investment?

REFERENCE: Ref.02_06 The financial balances for the Atwood Company and the Franz Company as of December 31,20X1,are presented below.Also included are the fair values for Franz Company's net assets. Note: Parenthesis indicate a credit balance Assume a business combination took place at December 31,20X1.Atwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Franz.Stock issuance costs of $15 (in thousands)and direct costs of $10 (in thousands)were paid. -Assuming the combination is accounted for as a purchase,compute consolidated expenses at the date of the combination.

Which of the following is a not a reason for a business combination to take place?

REFERENCE: Ref.02_07 Presented below are the financial balances for the Atwood Company and the Franz Company as of December 31,2009,immediately before Atwood acquired Franz.Also included are the fair values for Franz Company's net assets at that date. Note: Parenthesis indicate a credit balance Assume a business combination took place at December 31,2009.Atwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Franz.Stock issuance costs of $15 (in thousands)and direct costs of $10 (in thousands)were paid.Atwood is applying the acquisition method in accounting for Franz.To settle a difference of opinion regarding Franz's fair value,Atwood promises to pay an additional $5.2 (in thousands)to the former owners if Franz's earnings exceed a certain sum during the next year.Given the probability of the required contingency payment and utilizing a 4% discount rate,the expected present value of the contingency is $5 (in thousands). -Compute consolidated retained earnings as a result of this acquisition.

Lorne Co.issued its common stock in exchange for the common stock of Fenn Corp.in a combination accounted for as a pooling of interests.At the date of the combination,Lorne had land with a book value of $700,000 and a fair value of $980,000.Fenn had land with a book value of $280,000 and a fair value of $250,000.The purchase was not a bargain purchase. Required: If a consolidated balance sheet was prepared at the date of the combination,what was the consolidated balance for Land?

REFERENCE: Ref.02_08 Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1,20X1.To obtain these shares,Flynn pays $400 (in thousands)and issues 10,000 shares of $20 par value common stock on this date.Flynn's stock had a fair value of $36 per share on that date.Flynn also pays $15 (in thousands)to a local investment firm for arranging the transaction.An additional $10 (in thousands)was paid by Flynn in stock issuance costs. The book values for both Flynn and Macek as of January 1,20X1 follow.The fair value of each of Flynn and Macek accounts is also included.In addition,Macek holds a fully amortized trademark that still retains a $40 (in thousands)value.The figures below are in thousands.Any related question also is in thousands. SHAPE \* MERGEFORMAT -What amount will be reported for consolidated common stock?

At the date of an acquisition which is not a bargain purchase,the acquisition method

REFERENCE: Ref.02_06 The financial balances for the Atwood Company and the Franz Company as of December 31,20X1,are presented below.Also included are the fair values for Franz Company's net assets. Note: Parenthesis indicate a credit balance Assume a business combination took place at December 31,20X1.Atwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Franz.Stock issuance costs of $15 (in thousands)and direct costs of $10 (in thousands)were paid. -Assuming the combination is accounted for as an acquisition,compute consolidated expenses at the date of the combination.