Question 1

How are bargain purchases accounted for in an acquisition business transaction?

Accepted Answer

A bargain purchase results when the coll

Question 2

Carnes has the following account balances as of May 1, 2012 before an acquisition transaction takes place.   The fair value of Carnes' Land and Buildings are $650,000 and $550,000, respectively. On May 1, 2012, Riley Company issues 30,000 shares of its $10 par value ($25 fair value) common stock in exchange for all of the shares of Carnes' common stock. Riley paid $10,000 for costs to issue the new shares of stock. Before the acquisition, Riley has $700,000 in its common stock account and $300,000 in its additional paid-in capital account.
At the date of acquisition, by how much does Riley's additional paid-in capital increase or decrease?

Accepted Answer

A)  $0. 
B)  $440,000 increase. 
C)  $450,000 increase. 
D)  $640,000 increase. 
E)  $650,000 decrease. 
A)  $0. 
B)  $440,000 increase. 
C)  $450,000 increase. 
D)  $640,000 increase. 
E)  $650,000 decrease.

Question 3

Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1, 2013. To obtain these shares, Flynn pays $400 cash (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 acquisition. 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, 2013 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.  
By how much will Flynn's additional paid-in capital increase as a result of this acquisition?

Accepted Answer

A)  $150,000. 
B)  $160,000. 
C)  $230,000. 
D)  $350,000. 
E)  $360,000. 
A)  $150,000. 
B)  $160,000. 
C)  $230,000. 
D)  $350,000. 
E)  $360,000.

Question 4

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

Accepted Answer

Peterman would not be required to prepar

Question 5

Describe the accounting for direct costs, indirect costs, and issuance costs under the acquisition method of accounting for a business combination.

Accepted Answer

Direct and indirect combinatio

Question 6

Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1, 2013. To obtain these shares, Flynn pays $400 cash (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 acquisition. 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, 2013 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.  
What amount will be reported for consolidated retained earnings?

Accepted Answer

A)  $1,065,000. 
B)  $1,080,000. 
C)  $1,525,000. 
D)  $1,535,000. 
E)  $1,560,000. 
A)  $1,065,000. 
B)  $1,080,000. 
C)  $1,525,000. 
D)  $1,535,000. 
E)  $1,560,000.

Question 7

The financial statements for Goodwin, Inc. and Corr Company for the year ended December 31, 2013, prior to Goodwin's acquisition business combination transaction regarding Corr, follow (in thousands):   On December 31, 2013, Goodwin issued $600 in debt and 30 shares of its $10 par value common stock to the owners of Corr to acquire 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 additional paid-in capital at December 31, 2013.

Accepted Answer

A)  $810. 
B)  $1,350. 
C)  $1,675. 
D)  $1,910. 
E)  $1,875. 
A)  $810. 
B)  $1,350. 
C)  $1,675. 
D)  $1,910. 
E)  $1,875.

Question 8

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

Accepted Answer

A)  consolidates the subsidiary's assets at fair value and the liabilities at book value. 
B)  consolidates all subsidiary assets and liabilities at book value. 
C)  consolidates all subsidiary assets and liabilities at fair value. 
D)  consolidates current assets and liabilities at book value, long-term assets and liabilities at fair value. 
E)  consolidates the subsidiary's assets at book value and the liabilities at fair value. 
A)  consolidates the subsidiary's assets at fair value and the liabilities at book value. 
B)  consolidates all subsidiary assets and liabilities at book value. 
C)  consolidates all subsidiary assets and liabilities at fair value. 
D)  consolidates current assets and liabilities at book value, long-term assets and liabilities at fair value. 
E)  consolidates the subsidiary's assets at book value and the liabilities at fair value.

Question 9

Presented below are the financial balances for the Atwood Company and the Franz Company as of December 31, 2012, 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, 2012. 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 to effect this acquisition transaction. 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 equipment at date of acquisition.

Accepted Answer

A)  $400. 
B)  $660. 
C)  $1,060. 
D)  $1,040. 
E)  $1,050. 
A)  $400. 
B)  $660. 
C)  $1,060. 
D)  $1,040. 
E)  $1,050.

Question 10

The financial balances for the Atwood Company and the Franz Company as of December 31, 2013, are presented below. Also included are the fair values for Franz Company's net assets.   Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 2013. 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 fair value of the net assets acquired at the date of the acquisition.

Accepted Answer

A)  $1,300. 
B)  $1,340. 
C)  $1,500. 
D)  $1,750. 
E)  $2,480. 
A)  $1,300. 
B)  $1,340. 
C)  $1,500. 
D)  $1,750. 
E)  $2,480.

Question 11

How are direct and indirect costs accounted for when applying the acquisition method for a business combination?

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
E)  Option E 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
E)  Option E

Question 12

According to GAAP, the pooling of interest method for business combinations

Accepted Answer

A)  Is preferred to the purchase method. 
B)  Is allowed for all new acquisitions. 
C)  Is no longer allowed for business combinations after June 30, 2001. 
D)  Is no longer allowed for business combinations after December 31, 2001. 
E)  Is only allowed for large corporate mergers like Exxon and Mobil. 
A)  Is preferred to the purchase method. 
B)  Is allowed for all new acquisitions. 
C)  Is no longer allowed for business combinations after June 30, 2001. 
D)  Is no longer allowed for business combinations after December 31, 2001. 
E)  Is only allowed for large corporate mergers like Exxon and Mobil.

Question 13

How are direct combination costs accounted for in an acquisition transaction?

Accepted Answer

In an acquisition, d

Question 14

Salem Co. had the following account balances as of December 1, 2012:   
Bellington Inc. transferred $1.7 million in cash and 12,000 shares of its newly issued $30 par value common stock (valued at $90 per share) to acquire all of Salem's outstanding common stock.
Assume that Bellington paid cash of $2.8 million. No stock is issued. An additional $50,000 is paid in direct combination costs.
Required:
For Goodwill, determine what balance would be included in a December 1, 2012 consolidation.

Accepted Answer

The answer of Salem Co. had the following account balances...

Question 15

Chapel Hill Company had common stock of $350,000 and retained earnings of $490,000. Blue Town Inc. had common stock of $700,000 and retained earnings of $980,000. On January 1, 2013, Blue Town issued 34,000 shares of common stock with a $12 par value and a $35 fair value for all of Chapel Hill Company's outstanding common stock. This combination was accounted for as an acquisition. Immediately after the combination, what was the total consolidated net assets?

Accepted Answer

A)  $2,520,000. 
B)  $1,190,000. 
C)  $1,680,000. 
D)  $2,870,000. 
E)  $2,030,000. 
A)  $2,520,000. 
B)  $1,190,000. 
C)  $1,680,000. 
D)  $2,870,000. 
E)  $2,030,000.

Question 16

The financial statements for Goodwin, Inc. and Corr Company for the year ended December 31, 2013, prior to Goodwin's acquisition business combination transaction regarding Corr, follow (in thousands):   On December 31, 2013, Goodwin issued $600 in debt and 30 shares of its $10 par value common stock to the owners of Corr to acquire 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 retained earnings at December 31, 2013.

Accepted Answer

A)  $2,800. 
B)  $2,825. 
C)  $2,850. 
D)  $3,425. 
E)  $3,450. 
A)  $2,800. 
B)  $2,825. 
C)  $2,850. 
D)  $3,425. 
E)  $3,450.

Question 17

Which of the following statements is true?

Accepted Answer

A)  The pooling of interests for business combinations is an alternative to the acquisition method. 
B)  The purchase method for business combinations is an alternative to the acquisition method. 
C)  Neither the purchase method nor the pooling of interests method is allowed for new business combinations. 
D)  Any previous business combination originally accounted for under purchase or pooling of interests accounting method will now be accounted for under the acquisition method of accounting for business combinations. 
E)  Companies previously using the purchase or pooling of interests accounting method must report a change in accounting principle when consolidating those subsidiaries with new acquisition combinations. 
A)  The pooling of interests for business combinations is an alternative to the acquisition method. 
B)  The purchase method for business combinations is an alternative to the acquisition method. 
C)  Neither the purchase method nor the pooling of interests method is allowed for new business combinations. 
D)  Any previous business combination originally accounted for under purchase or pooling of interests accounting method will now be accounted for under the acquisition method of accounting for business combinations. 
E)  Companies previously using the purchase or pooling of interests accounting method must report a change in accounting principle when consolidating those subsidiaries with new acquisition combinations.

Question 18

Presented below are the financial balances for the Atwood Company and the Franz Company as of December 31, 2012, 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, 2012. 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 to effect this acquisition transaction. 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 the consolidated cash upon completion of the acquisition.

Accepted Answer

A)  $1,350. 
B)  $1,110. 
C)  $1,080. 
D)  $1,085. 
E)  $635. 
A)  $1,350. 
B)  $1,110. 
C)  $1,080. 
D)  $1,085. 
E)  $635.

Question 19

The financial balances for the Atwood Company and the Franz Company as of December 31, 2013, are presented below. Also included are the fair values for Franz Company's net assets.   Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 2013. 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 the investment to be recorded at date of acquisition.

Accepted Answer

A)  $1,750. 
B)  $1,760. 
C)  $1,775. 
D)  $1,300. 
E)  $1,120. 
A)  $1,750. 
B)  $1,760. 
C)  $1,775. 
D)  $1,300. 
E)  $1,120.

Question 20

A statutory merger is a(n)

Accepted Answer

A)  business combination in which only one of the two companies continues to exist as a legal corporation. 
B)  business combination in which both companies continue to exist. 
C)  acquisition of a competitor. 
D)  acquisition of a supplier or a customer. 
E)  legal proposal to acquire outstanding shares of the target's stock. 
A)  business combination in which only one of the two companies continues to exist as a legal corporation. 
B)  business combination in which both companies continue to exist. 
C)  acquisition of a competitor. 
D)  acquisition of a supplier or a customer. 
E)  legal proposal to acquire outstanding shares of the target's stock.

How are bargain purchases accounted for in an acquisition business transaction?

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

Describe the accounting for direct costs, indirect costs, and issuance costs under the acquisition method of accounting for a business combination.

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

How are direct and indirect costs accounted for when applying the acquisition method for a business combination?

According to GAAP, the pooling of interest method for business combinations

How are direct combination costs accounted for in an acquisition transaction?

Which of the following statements is true?

A statutory merger is a(n)

The Equity Method of Accounting for Investments

Consolidations - Subsequent to the Date of Acquisition

Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements Intra-Entity Asset Transactions

Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues

Consolidated Financial Statements - Ownership Patterns and Income Taxes

Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Worldwide Accounting Diversity and International Accounting Standards

Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

Partnerships: Formation and Operation

Partnerships: Termination and Liquidation

Accounting for State and Local Governments

Accounting for State and Local Governments

Accounting and Reporting for Private Not-For-Profit Organizations

Accounting for Estates and Trusts

Filters

Exam 2: Consolidation of Financial Information

How are bargain purchases accounted for in an acquisition business transaction?

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

Describe the accounting for direct costs, indirect costs, and issuance costs under the acquisition method of accounting for a business combination.

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

How are direct and indirect costs accounted for when applying the acquisition method for a business combination?

According to GAAP, the pooling of interest method for business combinations

How are direct combination costs accounted for in an acquisition transaction?

Which of the following statements is true?

A statutory merger is a(n)

The Equity Method of Accounting for Investments

Consolidations - Subsequent to the Date of Acquisition

Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements Intra-Entity Asset Transactions

Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues

Consolidated Financial Statements - Ownership Patterns and Income Taxes

Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Worldwide Accounting Diversity and International Accounting Standards

Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

Partnerships: Formation and Operation

Partnerships: Termination and Liquidation

Accounting for State and Local Governments

Accounting for State and Local Governments

Accounting and Reporting for Private Not-For-Profit Organizations

Accounting for Estates and Trusts

Filters