Question 1

The excess of the amount offered in an acquisition over the prior stock price of the acquired firm is the:

Accepted Answer

A) bonus. 
B) goodwill. 
C) implied offering price. 
D) takeover premium. 
A) bonus. 
B) goodwill. 
C) implied offering price. 
D) takeover premium.

Question 2

The view that consolidated financial statements represent those of a single economic entity with several classes of stockholder interest is consistent with the:

Accepted Answer

A) parent company concept. 
B) current practice concept. 
C) historical cost company concept. 
D) economic unit concept. 
A) parent company concept. 
B) current practice concept. 
C) historical cost company concept. 
D) economic unit concept.

Question 3

The following balances were taken from the records of S Company:
   P Company purchased 75% of S Company's common stock on January 1,2014 for $900,000.The difference between implied value and book value is attributable to assets with a remaining useful life on January 1,2016 of ten years.
Required:
A.Compute the difference between cost/(implied)and book value applying:
1.Parent company theory.
2.Economic unit theory.
B.Assuming the economic unit theory:
1.Compute noncontrolling interest in consolidated income for 2016.
2.Compute noncontrolling interest in net assets on December 31,2016.

Accepted Answer

The answer of The following balances were taken from the...

Question 4

The view that only the parent company's share of the unrealized intercompany profit recognized by the selling affiliate that remains in assets should be eliminated in the preparation of consolidated financial statements is consistent with the:

Accepted Answer

A) economic unit concept. 
B) current practice concept. 
C) parent company concept. 
D) historical cost company concept. 
A) economic unit concept. 
B) current practice concept. 
C) parent company concept. 
D) historical cost company concept.

Question 5

The defense tactic that involves purchasing shares held by the would-be acquiring company at a price substantially in excess of their fair value is called:

Accepted Answer

A) poison pill. 
B) pac-man defense. 
C) greenmail. 
D) white knight. 
A) poison pill. 
B) pac-man defense. 
C) greenmail. 
D) white knight.

Question 6

Under the parent company concept,consolidated net income __________ the consolidated net income under the economic unit concept.

Accepted Answer

A) is the same as 
B) is higher than 
C) is lower than 
D) can be higher or lower than 
A) is the same as 
B) is higher than 
C) is lower than 
D) can be higher or lower than

Question 7

The two alternative views of consolidated financial statements are the parent company concept and the economic entity concept.Briefly explain the differences between the concepts.

Accepted Answer

Under the parent company concept,the con

Question 8

Estimating the value of goodwill to be included in an offering price can be done under several alternative methods.The excess earnings approach is frequently used.Identify the steps used in this approach to estimate goodwill.

Accepted Answer

The excess earnings approach to estimati

Question 9

The impairment standard as it relates to goodwill is an example of a:

Accepted Answer

A) consumption of benefit approach. 
B) loss or lack of benefit approach. 
C) component of other comprehensive income. 
D) direct matching of expenses to revenues. 
A) consumption of benefit approach. 
B) loss or lack of benefit approach. 
C) component of other comprehensive income. 
D) direct matching of expenses to revenues.

Question 10

The third period of business combinations started after World War II and is called:

Accepted Answer

A) horizontal integration. 
B) merger mania. 
C) operating integration. 
D) vertical integration. 
A) horizontal integration. 
B) merger mania. 
C) operating integration. 
D) vertical integration.

Question 11

Which of the following situations best describes a business combination to be accounted for as a statutory merger?

Accepted Answer

A) Both companies in a combination continue to operate as separate,but related,legal entities. 
B) Only one of the combining companies survives and the other loses its separate identity. 
C) Two companies combine to form a new third company,and the original two companies are dissolved. 
D) One company transfers assets to another company it has created. 
A) Both companies in a combination continue to operate as separate,but related,legal entities. 
B) Only one of the combining companies survives and the other loses its separate identity. 
C) Two companies combine to form a new third company,and the original two companies are dissolved. 
D) One company transfers assets to another company it has created.

Question 12

Which of the following is not a component of other comprehensive income under GAAP?

Accepted Answer

A) earnings. 
B) gains and losses that bypass earnings. 
C) impairment losses. 
D) accumulated other comprehensive income. 
A) earnings. 
B) gains and losses that bypass earnings. 
C) impairment losses. 
D) accumulated other comprehensive income.

Question 13

Eden Company is trying to decide whether to acquire Bloomington Inc.The following balance sheet for Bloomington Inc.provides information about book values.Estimated market values are also listed,based upon Eden Company's appraisals.
   Eden Company expects that Bloomington will earn approximately $290,000 per year in net income over the next five years.This income is higher than the 14% annual return on tangible assets considered to be the industry "norm."
Required:
A.Compute an estimation of goodwill based on the information above that Eden might be willing to pay (include in its purchase price),under each of the following additional assumptions:
(1)Eden is willing to pay for excess earnings for an expected life of 4 years (undiscounted).
(2)Eden is willing to pay for excess earnings for an expected life of 4 years,which should be
capitalized at the industry normal rate of return.
(3)Excess earnings are expected to last indefinitely,but Eden demands a higher rate of return of
20% because of the risk involved.
B.Determine the amount of goodwill to be recorded on the books if Eden pays $1,300,000 cash and assumes Bloomington's liabilities.

Accepted Answer

A.Normal earnings for similar firms (bas

Question 14

When following the parent company concept in the preparation of consolidated financial statements,noncontrolling interest in combined income is considered a(n):

Accepted Answer

A) prorated share of the combined income. 
B) addition to combined income to arrive at consolidated net income. 
C) expense deducted from combined income to arrive at consolidated net income. 
D) deduction from current assets in the balance sheet. 
A) prorated share of the combined income. 
B) addition to combined income to arrive at consolidated net income. 
C) expense deducted from combined income to arrive at consolidated net income. 
D) deduction from current assets in the balance sheet.

Question 15

Stock given as consideration for a business combination is valued at:

Accepted Answer

A) fair market value 
B) par value 
C) historical cost 
D) None of these 
A) fair market value 
B) par value 
C) historical cost 
D) None of these

The excess of the amount offered in an acquisition over the prior stock price of the acquired firm is the:

The view that consolidated financial statements represent those of a single economic entity with several classes of stockholder interest is consistent with the:

The view that only the parent company's share of the unrealized intercompany profit recognized by the selling affiliate that remains in assets should be eliminated in the preparation of consolidated financial statements is consistent with the:

The defense tactic that involves purchasing shares held by the would-be acquiring company at a price substantially in excess of their fair value is called:

Under the parent company concept,consolidated net income __________ the consolidated net income under the economic unit concept.

The two alternative views of consolidated financial statements are the parent company concept and the economic entity concept.Briefly explain the differences between the concepts.

Estimating the value of goodwill to be included in an offering price can be done under several alternative methods.The excess earnings approach is frequently used.Identify the steps used in this approach to estimate goodwill.

The impairment standard as it relates to goodwill is an example of a:

The third period of business combinations started after World War II and is called:

Which of the following situations best describes a business combination to be accounted for as a statutory merger?

Which of the following is not a component of other comprehensive income under GAAP?

When following the parent company concept in the preparation of consolidated financial statements,noncontrolling interest in combined income is considered a(n):

Stock given as consideration for a business combination is valued at:

Accounting for Business Combinations

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 1: Introduction to Business Combinations and the Conceptual Framework

The excess of the amount offered in an acquisition over the prior stock price of the acquired firm is the:

The view that consolidated financial statements represent those of a single economic entity with several classes of stockholder interest is consistent with the:

The view that only the parent company's share of the unrealized intercompany profit recognized by the selling affiliate that remains in assets should be eliminated in the preparation of consolidated financial statements is consistent with the:

The defense tactic that involves purchasing shares held by the would-be acquiring company at a price substantially in excess of their fair value is called:

Under the parent company concept,consolidated net income __________ the consolidated net income under the economic unit concept.

The two alternative views of consolidated financial statements are the parent company concept and the economic entity concept.Briefly explain the differences between the concepts.

Estimating the value of goodwill to be included in an offering price can be done under several alternative methods.The excess earnings approach is frequently used.Identify the steps used in this approach to estimate goodwill.

The impairment standard as it relates to goodwill is an example of a:

The third period of business combinations started after World War II and is called:

Which of the following situations best describes a business combination to be accounted for as a statutory merger?

Which of the following is not a component of other comprehensive income under GAAP?

When following the parent company concept in the preparation of consolidated financial statements,noncontrolling interest in combined income is considered a(n):

Stock given as consideration for a business combination is valued at:

Accounting for Business Combinations

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