Question 1

An example of a difference in types of business combination is:

Accepted Answer

A)  A statutory merger can only be effected by an asset acquisition while a statutory consolidation can only be effected by a capital stock acquisition. 
B)  A statutory merger can only be effected by a capital stock acquisition while a statutory consolidation can only be effected by an asset acquisition. 
C)  A statutory merger requires dissolution of the acquired company while a statutory consolidation does not require dissolution. 
D)  A statutory consolidation requires dissolution of the acquired company while a statutory merger does not require dissolution. 
E)  Both a statutory merger and a statutory consolidation can only be effected by an asset acquisition but only a statutory consolidation requires dissolution of the acquired company. 
A)  A statutory merger can only be effected by an asset acquisition while a statutory consolidation can only be effected by a capital stock acquisition. 
B)  A statutory merger can only be effected by a capital stock acquisition while a statutory consolidation can only be effected by an asset acquisition. 
C)  A statutory merger requires dissolution of the acquired company while a statutory consolidation does not require dissolution. 
D)  A statutory consolidation requires dissolution of the acquired company while a statutory merger does not require dissolution. 
E)  Both a statutory merger and a statutory consolidation can only be effected by an asset acquisition but only a statutory consolidation requires dissolution of the acquired company.

Question 2

Prior to being united in a business combination, Botkins Inc. and Volkerson Corp. had the following stockholders' equity figures:   Botkins issued 56,000 new shares of its common stock valued at $3.25 per share for all of the outstanding stock of Volkerson.
Assume that Botkins acquired Volkerson on January 1, 2012. Immediately afterwards, what is consolidated Common Stock?

Accepted Answer

A)  $456,000. 
B)  $402,000. 
C)  $274,000. 
D)  $276,000. 
E)  $330,000. 
A)  $456,000. 
B)  $402,000. 
C)  $274,000. 
D)  $276,000. 
E)  $330,000.

Question 3

Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January 1, 2013. 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?

Accepted Answer

A)  $0. 
B)  $20,000. 
C)  $35,000. 
D)  $55,000. 
E)  $65,000. 
A)  $0. 
B)  $20,000. 
C)  $35,000. 
D)  $55,000. 
E)  $65,000.

Question 4

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 retained earnings as a result of this acquisition.

Accepted Answer

A)  $1,160. 
B)  $1,170. 
C)  $1,265. 
D)  $1,280. 
E)  $1,650. 
A)  $1,160. 
B)  $1,170. 
C)  $1,265. 
D)  $1,280. 
E)  $1,650.

Question 5

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 receivables and inventory for 2013.

Accepted Answer

A)  $1,200. 
B)  $1,515. 
C)  $1,540. 
D)  $1,800. 
E)  $2,140. 
A)  $1,200. 
B)  $1,515. 
C)  $1,540. 
D)  $1,800. 
E)  $2,140.

Question 6

Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January 1, 2013. 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 issued 12,000 shares of common stock with a $5 par value and a $42 fair value for all of the outstanding stock of Vicker. What is the consolidated balance for Land as a result of this acquisition transaction?

Accepted Answer

A)  $460,000. 
B)  $510,000. 
C)  $500,000. 
D)  $520,000. 
E)  $490,000. 
A)  $460,000. 
B)  $510,000. 
C)  $500,000. 
D)  $520,000. 
E)  $490,000.

Question 7

Elon Corp. obtained all of the common stock of Finley Co., paying slightly less than the fair value of Finley's net assets acquired. How should the difference between the consideration transferred and the fair value of the net assets be treated if the transaction is accounted for as an acquisition?

Accepted Answer

The difference between the con

Question 8

Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January 1, 2013. 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 issued 12,000 shares of common stock with a $5 par value and a $47 fair value to obtain all of Vicker's outstanding stock. In this acquisition transaction, how much goodwill should be recognized?

Accepted Answer

A)  $144,000. 
B)  $104,000. 
C)  $64,000. 
D)  $60,000. 
E)  $0. 
A)  $144,000. 
B)  $104,000. 
C)  $64,000. 
D)  $60,000. 
E)  $0.

Question 9

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.
Determine the balance for Goodwill that would be included in a December 1, 2012, consolidation.

Accepted Answer

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

Question 10

Which of the following statements is true regarding the acquisition method of accounting for a business combination?

Accepted Answer

A)  Net assets of the acquired company are reported at their fair values. 
B)  Net assets of the acquired company are reported at their book values. 
C)  Any goodwill associated with the acquisition is reported as a development cost. 
D)  The acquisition can only be effected by a mutual exchange of voting common stock. 
E)  Indirect costs of the combination reduce additional paid-in capital. 
A)  Net assets of the acquired company are reported at their fair values. 
B)  Net assets of the acquired company are reported at their book values. 
C)  Any goodwill associated with the acquisition is reported as a development cost. 
D)  The acquisition can only be effected by a mutual exchange of voting common stock. 
E)  Indirect costs of the combination reduce additional paid-in capital.

Question 11

Which one of the following is a characteristic of a business combination accounted for as an acquisition?

Accepted Answer

A)  The combination must involve the exchange of equity securities only. 
B)  The transaction establishes an acquisition fair value basis for the company being acquired. 
C)  The two companies may be about the same size, and it is difficult to determine the acquired company and the acquiring company. 
D)  The transaction may be considered to be the uniting of the ownership interests of the companies involved. 
E)  The acquired subsidiary must be smaller in size than the acquiring parent. 
A)  The combination must involve the exchange of equity securities only. 
B)  The transaction establishes an acquisition fair value basis for the company being acquired. 
C)  The two companies may be about the same size, and it is difficult to determine the acquired company and the acquiring company. 
D)  The transaction may be considered to be the uniting of the ownership interests of the companies involved. 
E)  The acquired subsidiary must be smaller in size than the acquiring parent.

Question 12

In an acquisition where control is achieved, how would the land accounts of the parent and the land accounts of the subsidiary be combined?

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 13

On January 1, 2013, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long-term liabilities and 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows:   Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
Compute the amount of consolidated inventories at date of acquisition.

Accepted Answer

A)  $1,080. 
B)  $1,350. 
C)  $1,360. 
D)  $1,370. 
E)  $290. 
A)  $1,080. 
B)  $1,350. 
C)  $1,360. 
D)  $1,370. 
E)  $290.

Question 14

Direct combination costs and stock issuance costs are often incurred in the process of making a controlling investment in another company. How should those costs be accounted for in a pre-2009 purchase transaction?

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 15

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 consolidated expenses at the date of the acquisition.

Accepted Answer

A)  $2,760. 
B)  $2,770. 
C)  $2,785. 
D)  $3,380. 
E)  $3,390. 
A)  $2,760. 
B)  $2,770. 
C)  $2,785. 
D)  $3,380. 
E)  $3,390.

Question 16

Goodwill is often acquired as part of a business combination. Why, when separate incorporation is maintained, does Goodwill not appear on the Parent company's trial balance as a separate account?

Accepted Answer

While the Goodwill does not appear on th

Question 17

Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January 1, 2013. 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 issued 12,000 shares of common stock with a $5 par value and a $42 fair value for all of the outstanding shares of Vicker. What will be the consolidated Additional Paid-In Capital and Retained Earnings (January 1, 2013 balances) as a result of this acquisition transaction?

Accepted Answer

A)  $60,000 and $490,000. 
B)  $60,000 and $250,000. 
C)  $380,000 and $250,000. 
D)  $464,000 and $250,000. 
E)  $464,000 and $420,000. 
A)  $60,000 and $490,000. 
B)  $60,000 and $250,000. 
C)  $380,000 and $250,000. 
D)  $464,000 and $250,000. 
E)  $464,000 and $420,000.

Question 18

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.
On May 1, 2012, what value is assigned to Riley's investment account?

Accepted Answer

A)  $150,000. 
B)  $300,000. 
C)  $750,000. 
D)  $760,000. 
E)  $1,350,000. 
A)  $150,000. 
B)  $300,000. 
C)  $750,000. 
D)  $760,000. 
E)  $1,350,000.

Question 19

What term is used to refer to a business combination in which only one of the original companies continues to exist?

Accepted Answer

The approp

Question 20

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.
What will be the consolidated additional paid-in capital as a result of this acquisition?

Accepted Answer

A)  $440,000. 
B)  $740,000. 
C)  $750,000. 
D)  $940,000. 
E)  $950,000. 
A)  $440,000. 
B)  $740,000. 
C)  $750,000. 
D)  $940,000. 
E)  $950,000.

An example of a difference in types of business combination is:

Elon Corp. obtained all of the common stock of Finley Co., paying slightly less than the fair value of Finley's net assets acquired. How should the difference between the consideration transferred and the fair value of the net assets be treated if the transaction is accounted for as an acquisition?

Which of the following statements is true regarding the acquisition method of accounting for a business combination?

Which one of the following is a characteristic of a business combination accounted for as an acquisition?

In an acquisition where control is achieved, how would the land accounts of the parent and the land accounts of the subsidiary be combined?

Direct combination costs and stock issuance costs are often incurred in the process of making a controlling investment in another company. How should those costs be accounted for in a pre-2009 purchase transaction?

Goodwill is often acquired as part of a business combination. Why, when separate incorporation is maintained, does Goodwill not appear on the Parent company's trial balance as a separate account?

What term is used to refer to a business combination in which only one of the original companies continues to exist?

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

An example of a difference in types of business combination is:

Elon Corp. obtained all of the common stock of Finley Co., paying slightly less than the fair value of Finley's net assets acquired. How should the difference between the consideration transferred and the fair value of the net assets be treated if the transaction is accounted for as an acquisition?

Which of the following statements is true regarding the acquisition method of accounting for a business combination?

Which one of the following is a characteristic of a business combination accounted for as an acquisition?

In an acquisition where control is achieved, how would the land accounts of the parent and the land accounts of the subsidiary be combined?

Direct combination costs and stock issuance costs are often incurred in the process of making a controlling investment in another company. How should those costs be accounted for in a pre-2009 purchase transaction?

Goodwill is often acquired as part of a business combination. Why, when separate incorporation is maintained, does Goodwill not appear on the Parent company's trial balance as a separate account?

What term is used to refer to a business combination in which only one of the original companies continues to exist?

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