Question 1

Under SFAS 141R,what value of the assets and liabilities is reflected in the financial statements on the acquisition date of a business combination?

Accepted Answer

A) Carrying value 
B) Fair value 
C) Book value 
D) Average value 
A) Carrying value 
B) Fair value 
C) Book value 
D) Average value B

Question 2

In a business combination,which of the following costs are assigned to the valuation of the security?

Accepted Answer

A) Professional or Security,yes; Consulting fees issued cost,yes 
B) Professional or Security,yes; Consulting fees issued cost,no 
C) Professional or Security,no; Consulting fees issued cost,yes 
D) Professional or Security,no; Consulting fees issued cost,no 
A) Professional or Security,yes; Consulting fees issued cost,yes 
B) Professional or Security,yes; Consulting fees issued cost,no 
C) Professional or Security,no; Consulting fees issued cost,yes 
D) Professional or Security,no; Consulting fees issued cost,no C

Question 3

When the acquisition price of an acquired firm is less than the fair value of the identifiable net assets,all of the following are recorded at fair value EXCEPT:

Accepted Answer

A) Assumed liabilities. 
B) Current assets. 
C) Long-lived assets. 
D) Each of these is recorded at fair value. 
A) Assumed liabilities. 
B) Current assets. 
C) Long-lived assets. 
D) Each of these is recorded at fair value. D

Question 4

On January 1,2013,Brighton Company acquired the net assets of Dakota Company for $1,580,000 cash.The fair value of Dakota's identifiable net assets was $1,310,000 on his date.Brighton Company decided to measure goodwill impairment using the present value of future cash flows to estimate the fair value of the reporting unit (Dakota).The information for these subsequent years is as follows:
   * Identifiable net assets do not include goodwill.
Required:
A: For each year determine the amount of goodwill impairment,if any.
B: Prepare the journal entries needed each year to record the goodwill impairment (if any)on Brighton's books.

Accepted Answer

The answer of On January 1,2013,Brighton Company acquired the net...

Question 5

Under the acquisition method,if the fair values of identifiable net assets exceed the value implied by the purchase price of the acquired company,the excess should be:

Accepted Answer

A) accounted for as goodwill. 
B) allocated to reduce current and long-lived assets. 
C) allocated to reduce current assets and classify any remainder as an extraordinary gain. 
D) allocated to reduce any previously recorded goodwill on the seller's books and classify any remainder as an ordinary gain. 
A) accounted for as goodwill. 
B) allocated to reduce current and long-lived assets. 
C) allocated to reduce current assets and classify any remainder as an extraordinary gain. 
D) allocated to reduce any previously recorded goodwill on the seller's books and classify any remainder as an ordinary gain.

Question 6

P Company purchased the net assets of S Company for $225,000.On the date of P's purchase,S Company had no investments in marketable securities and $30,000 (book and fair value)of liabilities.The fair values of S Company's assets,when acquired,were:   How should the $45,000 difference between the fair value of the net assets acquired ($270,000)and the consideration paid ($225,000)be accounted for by P Company?

Accepted Answer

A) The noncurrent assets should be recorded at $ 135,000. 
B) The $45,000 difference should be credited to retained earnings. 
C) The current assets should be recorded at $102,000,and the noncurrent assets should be recorded at $153,000. 
D) An ordinary gain of $45,000 should be recorded. 
A) The noncurrent assets should be recorded at $ 135,000. 
B) The $45,000 difference should be credited to retained earnings. 
C) The current assets should be recorded at $102,000,and the noncurrent assets should be recorded at $153,000. 
D) An ordinary gain of $45,000 should be recorded.

Question 7

Under SFAS 141R:

Accepted Answer

A) both direct and indirect costs are to be capitalized. 
B) both direct and indirect costs are to be expensed. 
C) direct costs are to be capitalized and indirect costs are to be expensed. 
D) indirect costs are to be capitalized and direct costs are to be expensed. 
A) both direct and indirect costs are to be capitalized. 
B) both direct and indirect costs are to be expensed. 
C) direct costs are to be capitalized and indirect costs are to be expensed. 
D) indirect costs are to be capitalized and direct costs are to be expensed.

Question 8

Once a reporting unit is determined to have a fair value below its carrying value,the goodwill impairment loss is computed by comparing the:

Accepted Answer

A) fair value of the reporting unit and the fair value of the identifiable net assets. 
B) carrying value of the goodwill to its implied fair value. 
C) fair value of the reporting unit to its carrying amount (goodwill included). 
D) carrying value of the reporting unit to the fair value of the identifiable net assets. 
A) fair value of the reporting unit and the fair value of the identifiable net assets. 
B) carrying value of the goodwill to its implied fair value. 
C) fair value of the reporting unit to its carrying amount (goodwill included). 
D) carrying value of the reporting unit to the fair value of the identifiable net assets.

Question 9

P Corporation issued 10,000 shares of common stock with a fair value of $25 per share for all the outstanding common stock of S Company in a business combination properly accounted for as an acquisition.The fair value of S Company's net assets on that date was $220,000.P Company also agreed to issue an additional 2,000 shares of common stock with a fair value of $50,000 to the former stockholders of S Company as an earnings contingency.Assuming that the contingency is expected to be met,the $50,000 fair value of the additional shares to be issued should be treated as a(n):

Accepted Answer

A) decrease in noncurrent liabilities of S Company that were assumed by P Company. 
B) decrease in consolidated retained earnings. 
C) increase in consolidated goodwill. 
D) decrease in consolidated other contributed capital. 
A) decrease in noncurrent liabilities of S Company that were assumed by P Company. 
B) decrease in consolidated retained earnings. 
C) increase in consolidated goodwill. 
D) decrease in consolidated other contributed capital.

Question 10

Following its acquisition of the net assets of Burnt Company,Primrose Company assigned goodwill of $60,000 to one of the reporting divisions.Information for this division follows:   Based on the preceding information,what amount of goodwill will be reported for this division if its fair value is determined to be $200,000?

Accepted Answer

A) $0 
B) $60,000 
C) $30,000 
D) $10,000 
A) $0 
B) $60,000 
C) $30,000 
D) $10,000

Question 11

North Company issued 24,000 shares of its $20 par value common stock for the net assets of Prairie Company in business combination under which Prairie Company will be merged into North Company.On the date of the combination,North Company common stock had a fair value of $30 per share.Balance sheets for North Company and Prairie Company immediately prior to the combination were as follows:   If the business combination is treated as an acquisition and Prairie Company's net assets have a fair value of $686,400,North Company's balance sheet immediately after the combination will include goodwill of:

Accepted Answer

A) $30,600. 
B) $38,400. 
C) $33,600. 
D) $56,400. 
A) $30,600. 
B) $38,400. 
C) $33,600. 
D) $56,400.

Question 12

SFAS No.142 requires that goodwill impairment be tested annually for each reporting unit.Discuss the necessary steps of the goodwill impairment test.

Accepted Answer

In the first step of the goodwill impair

Question 13

SFAS 141R requires that the acquirer disclose each of the following for each material business combination EXCEPT the:

Accepted Answer

A) name and a description of the acquiree acquired. 
B) percentage of voting equity instruments acquired. 
C) fair value of the consideration transferred. 
D) each of the above is a required disclosure 
A) name and a description of the acquiree acquired. 
B) percentage of voting equity instruments acquired. 
C) fair value of the consideration transferred. 
D) each of the above is a required disclosure

Question 14

A business combination is accounted for properly as an acquisition.Which of the following expenses related to effecting the business combination should enter into the determination of net income of the combined corporation for the period in which the expenses are incurred?

Accepted Answer

A) Security issue cost,yes; overhead allocated merger,yes 
B) Security issue cost,yes; overhead allocated merger,no 
C) Security issue cost,no; overhead allocated merger,yes 
D) Security issue cost,no; overhead allocated merger,no 
A) Security issue cost,yes; overhead allocated merger,yes 
B) Security issue cost,yes; overhead allocated merger,no 
C) Security issue cost,no; overhead allocated merger,yes 
D) Security issue cost,no; overhead allocated merger,no

Question 15

Maplewood Corporation purchased the net assets of West Corporation on January 2,2016 for $560,000 and also paid $20,000 in direct acquisition costs.West's balance sheet on January
1,2016 was as follows:
   Fair values agree with book values except for inventory,land,and equipment,which have fair values of $400,000,$50,000 and $70,000,respectively.West has patent rights valued at $20,000.
Required:
A.Prepare Maplewood's general journal entry for the cash purchase of West's net assets.
B.Assume Maplewood Corporation purchased the net assets of West Corporation for $500,000 rather than $560,000,prepare the general journal entry.

Accepted Answer

The answer of Maplewood Corporation purchased the net assets of...

Question 16

The fair value of net identifiable assets of a reporting unit exclusive of goodwill of Y Company is $270,000.The carrying value of the reporting unit's net assets on Y Company's books is $320,000,including $50,000 goodwill.If the reported goodwill impairment for the unit is $10,000,what would be the fair value of the reporting unit?

Accepted Answer

A) $320,000 
B) $310,000 
C) $270,000 
D) $290,000 
A) $320,000 
B) $310,000 
C) $270,000 
D) $290,000

Question 17

Balance sheet information for Hope Corporation at January 1,2016,is summarized as follows:
   Hope's assets and liabilities are fairly valued except for plant assets that are undervalued by $200,000.On January 2,2016,Robin Corporation issues 80,000 shares of its $10 par value common stock for all of Hope's net assets and Hope is dissolved.Market quotations for the two stocks on this date are:
   Robin pays the following fees and costs in connection with the combination:
   Required:
A.Calculate Robin's investment cost of Hope Corporation.
B.Calculate any goodwill from the business combination.

Accepted Answer

The answer of Balance sheet information for Hope Corporation at...

Question 18

The fair value of net identifiable assets exclusive of goodwill of a reporting unit of X Company is $300,000.On X Company's books,the carrying value of this reporting unit's net assets is $350,000,including $60,000 goodwill.If the fair value of the reporting unit is $335,000,what amount of goodwill impairment will be recognized for this unit?

Accepted Answer

A) $0 
B) $10,000 
C) $25,000 
D) $35,000 
A) $0 
B) $10,000 
C) $25,000 
D) $35,000

Question 19

In a leveraged buyout,the portion of the net assets of the new corporation provided by the management group is recorded at:

Accepted Answer

A) appraisal value. 
B) book value. 
C) fair value. 
D) lower of cost or market. 
A) appraisal value. 
B) book value. 
C) fair value. 
D) lower of cost or market.

Question 20

North Company issued 24,000 shares of its $20 par value common stock for the net assets of Prairie Company in business combination under which Prairie Company will be merged into North Company.On the date of the combination,North Company common stock had a fair value of $30 per share.Balance sheets for North Company and Prairie Company immediately prior to the combination were as follows:   If the business combination is treated as an acquisition and the fair value of Prairie Company's current assets is $270,000,its plant and equipment is $726,000,and its liabilities are $168,000,North Company's financial statements immediately after the combination will include:

Accepted Answer

A) Negative goodwill of $108,000. 
B) Plant and equipment of $2,133,000. 
C) Plant and equipment of $2,343,000. 
D) An ordinary gain of $108,000. 
A) Negative goodwill of $108,000. 
B) Plant and equipment of $2,133,000. 
C) Plant and equipment of $2,343,000. 
D) An ordinary gain of $108,000.

Under SFAS 141R,what value of the assets and liabilities is reflected in the financial statements on the acquisition date of a business combination?

In a business combination,which of the following costs are assigned to the valuation of the security?

When the acquisition price of an acquired firm is less than the fair value of the identifiable net assets,all of the following are recorded at fair value EXCEPT:

Under the acquisition method,if the fair values of identifiable net assets exceed the value implied by the purchase price of the acquired company,the excess should be:

Under SFAS 141R:

Once a reporting unit is determined to have a fair value below its carrying value,the goodwill impairment loss is computed by comparing the:

SFAS No.142 requires that goodwill impairment be tested annually for each reporting unit.Discuss the necessary steps of the goodwill impairment test.

SFAS 141R requires that the acquirer disclose each of the following for each material business combination EXCEPT the:

A business combination is accounted for properly as an acquisition.Which of the following expenses related to effecting the business combination should enter into the determination of net income of the combined corporation for the period in which the expenses are incurred?

In a leveraged buyout,the portion of the net assets of the new corporation provided by the management group is recorded at:

Introduction to Business Combinations and the Conceptual Framework

Consolidated Financial Statements Date of Acquisition

Consolidated Financial Statements After Acquisition

Allocation and Depreciation of Differences Between Implied and Book Values

Elimination of Unrealized Profit on Intercompany Sales of Inventory

Elimination of Unrealized Gains or Losses on Intercompany Sales of Property and Equipment

Changes in Ownership Interest

Intercompany Bond Holdings and Miscellaneous Topics Consolidated Financial Statements

Insolvency Liquidation and Reorganization

International Financial Reporting Standards

Accounting for Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Financial Statements of Foreign Affiliates

Reporting for Segments and for Interim Financial Periods

Partnerships: Formation, operation and Ownership Changes

Partnership Liquidation

Introduction to Fund Accounting

Introduction to Accounting for State and Local Governmental Units

Accounting for Nongovernment Nonbusiness Organizations: Colleges and Universities, hospitals, and Other Health Care Organizations

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Exam 2: Accounting for Business Combinations

Under SFAS 141R,what value of the assets and liabilities is reflected in the financial statements on the acquisition date of a business combination?

In a business combination,which of the following costs are assigned to the valuation of the security?

When the acquisition price of an acquired firm is less than the fair value of the identifiable net assets,all of the following are recorded at fair value EXCEPT:

Under the acquisition method,if the fair values of identifiable net assets exceed the value implied by the purchase price of the acquired company,the excess should be:

Under SFAS 141R:

Once a reporting unit is determined to have a fair value below its carrying value,the goodwill impairment loss is computed by comparing the:

SFAS No.142 requires that goodwill impairment be tested annually for each reporting unit.Discuss the necessary steps of the goodwill impairment test.

SFAS 141R requires that the acquirer disclose each of the following for each material business combination EXCEPT the:

A business combination is accounted for properly as an acquisition.Which of the following expenses related to effecting the business combination should enter into the determination of net income of the combined corporation for the period in which the expenses are incurred?

In a leveraged buyout,the portion of the net assets of the new corporation provided by the management group is recorded at:

Introduction to Business Combinations and the Conceptual Framework

Consolidated Financial Statements Date of Acquisition

Consolidated Financial Statements After Acquisition

Allocation and Depreciation of Differences Between Implied and Book Values

Elimination of Unrealized Profit on Intercompany Sales of Inventory

Elimination of Unrealized Gains or Losses on Intercompany Sales of Property and Equipment

Changes in Ownership Interest

Intercompany Bond Holdings and Miscellaneous Topics Consolidated Financial Statements

Insolvency Liquidation and Reorganization

International Financial Reporting Standards

Accounting for Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Financial Statements of Foreign Affiliates

Reporting for Segments and for Interim Financial Periods

Partnerships: Formation, operation and Ownership Changes

Partnership Liquidation

Introduction to Fund Accounting

Introduction to Accounting for State and Local Governmental Units

Accounting for Nongovernment Nonbusiness Organizations: Colleges and Universities, hospitals, and Other Health Care Organizations

Filters