Question 1

A Inc.purchases 100% of the voting shares of B Inc on July 1,2008.On that date,A Inc would be required to prepare which of the following statements?

Accepted Answer

A) No statement preparation is required) 
B) A Consolidated Income Statement. 
C) A Consolidated Balance Sheet. 
D) A Consolidated Income Statement and a Consolidated Balance Sheet. 
A) No statement preparation is required) 
B) A Consolidated Income Statement. 
C) A Consolidated Balance Sheet. 
D) A Consolidated Income Statement and a Consolidated Balance Sheet.

Question 2

Which of the following pertaining to Consolidated Financial Statements is correct?

Accepted Answer

A) The preparation of consolidated Financial Statements means that the companies involved cease to operate as separate legal entities. 
B) The preparation of Consolidated Financial Statements is at the Parent Company's discretion. 
C) When one company has control over another,Consolidated Financial Statements must be prepared for the combined entity. 
D) Before preparing Consolidated Financial Statements,a subsidiary's Financial Statements prior to the date of acquisition must be restated) 
A) The preparation of consolidated Financial Statements means that the companies involved cease to operate as separate legal entities. 
B) The preparation of Consolidated Financial Statements is at the Parent Company's discretion. 
C) When one company has control over another,Consolidated Financial Statements must be prepared for the combined entity. 
D) Before preparing Consolidated Financial Statements,a subsidiary's Financial Statements prior to the date of acquisition must be restated)

Question 3

During an acquisition,when should intangible assets NOT be recognized apart from Goodwill?

Accepted Answer

A) The assets have been identified but not accounted for by the subsidiary. 
B) The assets have been identified and accounted for by the subsidiary. 
C) The assets can be sold,licensed or exchanged) 
D) The assets have been accounted for by the subsidiary but have no Fair Value on the date of acquisition. 
A) The assets have been identified but not accounted for by the subsidiary. 
B) The assets have been identified and accounted for by the subsidiary. 
C) The assets can be sold,licensed or exchanged) 
D) The assets have been accounted for by the subsidiary but have no Fair Value on the date of acquisition.

Question 4

The following data pertains to questions 
Parent and Sub Inc had the following balance sheets on December 31,2008:   On January 1,2009 Parent purchased all of Sub Inc's Common Shares for $40,000 in cash.On that date,Sub's Current Assets and Fixed Assets were worth $26,000 and $54,000,respectively.Assuming that Consolidated Financial Statements were prepared on that date,answer the following:
-How much Goodwill was amortized during 2003?

Accepted Answer

A) $700 
B) ($1,700) 
C) $1,700 
D) None - Goodwill is never amortized. 
A) $700 
B) ($1,700) 
C) $1,700 
D) None - Goodwill is never amortized.

Question 5

Which of the following must be possible in order for a business combination to exist?

Accepted Answer

A) Control of a subsidiary's net assets. 
B) Ownership of 100 % of a subsidiary's voting shares. 
C) Ownership of all of a subsidiary's assets. 
D) Ownership of all of a subsidiary's operating assets. 
A) Control of a subsidiary's net assets. 
B) Ownership of 100 % of a subsidiary's voting shares. 
C) Ownership of all of a subsidiary's assets. 
D) Ownership of all of a subsidiary's operating assets.

Question 6

The following data pertains to questions 
Parent and Sub Inc had the following balance sheets on December 31,2008:   On January 1,2009 Parent purchased all of Sub Inc's Common Shares for $40,000 in cash.On that date,Sub's Current Assets and Fixed Assets were worth $26,000 and $54,000,respectively.Assuming that Consolidated Financial Statements were prepared on that date,answer the following:
-IAS 27 outlines the requirements for identifying the company that is the acquirer in a business combination when it's not clear who that is.Which is not a consideration in determining which company is the acquirer??

Accepted Answer

A) If the means of payment is cash,which party is paying the cash. 
B) Relative holdings of voting shares in the combined entity. 
C) Voting rights of the respective parties after the combination of their businesses. 
D) Any by-laws or provisions of the incorporation acts of each company that details the manner in which a business combination will occur at law . 
A) If the means of payment is cash,which party is paying the cash. 
B) Relative holdings of voting shares in the combined entity. 
C) Voting rights of the respective parties after the combination of their businesses. 
D) Any by-laws or provisions of the incorporation acts of each company that details the manner in which a business combination will occur at law .

Question 7

A Inc purchased 100% of B Inc's voting shares for cash on January 1,20X1.The Assets and Liabilities reported Consolidated Balance Sheet of A Inc prepared on the date of acquisition will include

Accepted Answer

A) The book value of A's assets and liabilities plus the book value of B's assets and liabilities. 
B) The fair market value of A's assets and liabilities plus the book value of B's assets and liabilities. 
C) The book value of A's assets and liabilities plus the fair market value of B's assets and liabilities. 
D) The fair market value of A's assets and liabilities plus the fair market value of B's assets and liabilities. 
A) The book value of A's assets and liabilities plus the book value of B's assets and liabilities. 
B) The fair market value of A's assets and liabilities plus the book value of B's assets and liabilities. 
C) The book value of A's assets and liabilities plus the fair market value of B's assets and liabilities. 
D) The fair market value of A's assets and liabilities plus the fair market value of B's assets and liabilities.

Question 8

A Inc.has purchased all of the outstanding voting shares of B Inc on January 1,20X1.On the date of acquisition,the book value of B's identifiable assets was equal to their fair market values with the exception B's Plant and Equipment,which had a Fair Market Value of $1,200,000.On the date of acquisition,A and B had Plant and Equipment with book values of $2,000,000 and $1,000,000 respectively.Both companies' Plant and Equipment are fully depreciated)Assuming that any excess fair market value on Plant and Equipment is to be amortized over ten years,the Plant and Equipment would be shown on A's Consolidated Balance Sheet in what amount on December 31,20x3?

Accepted Answer

A) $3,200,000 
B) $3,140,000 
C) $3,000,000 
D) $2,940,000 
A) $3,200,000 
B) $3,140,000 
C) $3,000,000 
D) $2,940,000

Question 9

Which of the following statements is correct?

Accepted Answer

A) Under the purchase method,the company's net assets are recorded at the price paid for these assets on the date of acquisition. 
B) Under the acquisition method,the company's net assets are recorded at the price paid for these assets on the date of acquisition. 
C) As of January 1st,2008,the Purchase method must be used to account for business combinations where an acquirer can be identified) 
D) The acquisition method is consistent with the historical cost principle while the purchase method is not. 
A) Under the purchase method,the company's net assets are recorded at the price paid for these assets on the date of acquisition. 
B) Under the acquisition method,the company's net assets are recorded at the price paid for these assets on the date of acquisition. 
C) As of January 1st,2008,the Purchase method must be used to account for business combinations where an acquirer can be identified) 
D) The acquisition method is consistent with the historical cost principle while the purchase method is not.

Question 10

The following information pertains to Questions 
Telecom Inc has decided to purchase the shares of Intron Inc.for $300,000 in Cash on July 1,2009.On the date,the balance sheets of each of these companies were as follows:   On that date,the fair values of Intron's Assets and Liabilities were as follows:  
-Assume that Intron's Assets and Liabilities were purchased instead of its shares for $300,000.Prepare the journal entry to record this purchase.

Accepted Answer

The answer of The following information pertains to Questions 
Telecom...

Question 11

The following data pertains to questions 
Parent and Sub Inc had the following balance sheets on July 31,2006:   Yours Inc's Book Values were equal to their Fair Values on the date of acquisition,with the exception of Yours' Plant and Equipment,which was worth $100,000.
-Assume that Mine Inc issued 10,000 shares for all of Yours Inc's Common Shares.Mine Inc's shares had a fair market value of $15 per share on that date.What entry would be made on Mine Inc's book on that date?

Accepted Answer

The answer of The following data pertains to questions 
Parent...

Question 12

A company has decided to purchase 100% of the voting shares of B Company for $100,000 on January 1,20x2.Immediately before the acquisition,A and B reported cash balances of $300,000 and 150,000 respectively.If Consolidated Financial Statements were prepared immediately following the acquisition,how much Cash would be reported on A's consolidated balance sheet?

Accepted Answer

A) $250,000 
B) $350,000 
C) $550,000 
D) $450,000 
A) $250,000 
B) $350,000 
C) $550,000 
D) $450,000

Question 13

Which of the following statements is correct?

Accepted Answer

A) Since 2002,the only acceptable method of accounting for Business Combinations is the Pooling of Interests Method) 
B) Since 2002,the only acceptable method of accounting for Business Combinations is the Purchase Method) 
C) In the future,all Business Combinations shall be accounted for using the New Entity Method only. 
D) The Purchase Method can only be used when Cash is the sole consideration offered by the acquirer in a Business Combination. 
A) Since 2002,the only acceptable method of accounting for Business Combinations is the Pooling of Interests Method) 
B) Since 2002,the only acceptable method of accounting for Business Combinations is the Purchase Method) 
C) In the future,all Business Combinations shall be accounted for using the New Entity Method only. 
D) The Purchase Method can only be used when Cash is the sole consideration offered by the acquirer in a Business Combination.

Question 14

Great Western Manufacturing Inc.("GWM")was acquired by Great Eastern Holding Ltd)("GEH")in 2009.The Vice President,Finance of GWM has asked you,the manager in charge of this year's audit,whether or not GWM has to prepare consolidated financial statements for the year ended December 31,2009.GWM has about fifteen wholly owned subsidiaries and has in the past prepared consolidated financial statements.
Required:
Prepare a discussion around the need to prepare consolidated financial statements.

Accepted Answer

IAS 27 states that a parent is not requi

Question 15

Under the new entity method,

Accepted Answer

A) the net assets of the acquiring company remain at book value while those of the acquired company are recorded at fair value. 
B) the net assets of the acquiring company are recorded at fair value while those of the acquired company are recorded at book value. 
C) the net assets of both companies are recorded at fair market value. 
D) the net assets of both companies are recorded at book value. 
A) the net assets of the acquiring company remain at book value while those of the acquired company are recorded at fair value. 
B) the net assets of the acquiring company are recorded at fair value while those of the acquired company are recorded at book value. 
C) the net assets of both companies are recorded at fair market value. 
D) the net assets of both companies are recorded at book value.

Question 16

The following data pertains to questions 
Parent and Sub Inc had the following balance sheets on December 31,2008:   On January 1,2009 Parent purchased all of Sub Inc's Common Shares for $40,000 in cash.On that date,Sub's Current Assets and Fixed Assets were worth $26,000 and $54,000,respectively.Assuming that Consolidated Financial Statements were prepared on that date,answer the following:
-Assuming this Business Combination was to be accounted for under the Pooling of Interests Method,the Shareholder's Equity section of the Consolidated Balance Sheet would show what amount?

Accepted Answer

A) $121,000 
B) $90,000 
C) $19,000 
D) $98,000 
A) $121,000 
B) $90,000 
C) $19,000 
D) $98,000

Question 17

The shareholders of 123 Inc.and 456 Inc.wish to engage in a Business Combination whereby each of the companies would acquire all of the voting shares of the other.On that date,123 Inc had 120,000 shares outstanding with a book value of $2,000,000,while 456 Inc had 100,000 shares outstanding,also with a book value of $2,000,000.On that date the fair market values of 123 Inc.and 456 Inc.were $2,200,000 and $1,500,000 respectively.Assuming that each share entitles the shareholder to one vote,which company (if any)can be identified as the acquirer?

Accepted Answer

A) No acquirer can be identified,since the Book values of both companies are the same. 
B) 456 Inc.is deemed to be the acquirer since it will own a majority of the voting shares of the combined entity. 
C) 123 Inc is deemed to be the acquirer since it holds more voting shares on the date of acquisition. 
D) 456 Inc is deemed to be the acquirer since its shares will have a greater market value than those of 123 Inc after the acquisition. 
A) No acquirer can be identified,since the Book values of both companies are the same. 
B) 456 Inc.is deemed to be the acquirer since it will own a majority of the voting shares of the combined entity. 
C) 123 Inc is deemed to be the acquirer since it holds more voting shares on the date of acquisition. 
D) 456 Inc is deemed to be the acquirer since its shares will have a greater market value than those of 123 Inc after the acquisition.

Question 18

1234567 Inc is contemplating a Business Combination with 7654321 Inc.One company is incorporated under Federal law,the other under provincial law.Is a statutory amalgamation permissible under these circumstances?

Accepted Answer

A) Yes,provided the combination is accounted for using the Acquisition Method) 
B) Yes,provided the surviving corporation would have had control of the purchased company. 
C) No,a statutory amalgamation would not be possible,since one company is incorporated under federal law and the other under provincial law. 
D) Cannot be determined from the information given. 
A) Yes,provided the combination is accounted for using the Acquisition Method) 
B) Yes,provided the surviving corporation would have had control of the purchased company. 
C) No,a statutory amalgamation would not be possible,since one company is incorporated under federal law and the other under provincial law. 
D) Cannot be determined from the information given.

Question 19

Assume that X inc)wishes to enter into a Business Combination with Y Inc.on January 1,20X1.X is unsure whether it should purchase Y's assets or liabilities or whether it should purchase all of Y's outstanding voting shares.X and Y are incorporated in different jurisdictions.On January 1,Y Inc was estimated to have various intangibles estimated to be worth a total of $ 1,000,000.Of this amount,$250,000 can be attributable to a Trademark owned by Y.
Required:
In the absence of any other figures,prepare a brief report explaining anything that would be of interest the Board of Directors of X Inc.

Accepted Answer

Report to the Board of Directors of X In

Question 20

Company Inc.owns all of the outstanding voting shares of Firm Inc.On January 1st,20X1.Firm Inc.would like to purchase all of the voting shares of its main competitor,N-CORP Inc.Briefly discuss the purported accounting implications of this transaction.

Accepted Answer

Given that Firm Inc is a wholly owned su

A Inc.purchases 100% of the voting shares of B Inc on July 1,2008.On that date,A Inc would be required to prepare which of the following statements?

Which of the following pertaining to Consolidated Financial Statements is correct?

During an acquisition,when should intangible assets NOT be recognized apart from Goodwill?

Which of the following must be possible in order for a business combination to exist?

A Inc purchased 100% of B Inc's voting shares for cash on January 1,20X1.The Assets and Liabilities reported Consolidated Balance Sheet of A Inc prepared on the date of acquisition will include

Which of the following statements is correct?

Which of the following statements is correct?

Under the new entity method,

1234567 Inc is contemplating a Business Combination with 7654321 Inc.One company is incorporated under Federal law,the other under provincial law.Is a statutory amalgamation permissible under these circumstances?

Company Inc.owns all of the outstanding voting shares of Firm Inc.On January 1st,20X1.Firm Inc.would like to purchase all of the voting shares of its main competitor,N-CORP Inc.Briefly discuss the purported accounting implications of this transaction.

A Survey of International Accounting

Investments in Equity Securities

Consolidated Statements on Date of Acquisition

Consolidation Subsequent to Acquisition Date

Intercompany Inventory and Land Profits

Aintercompany Profits in Depreciable Assets

Consolidated Cash Flows and Ownership Issues

Other Consolidated Reporting Issues

Foreign Currency Transactions

Translation and Consolidation of the Financial Statements of Foreign Operations

Accounting for Not-For-Profit Organizations and Governments

Filters

Exam 3: Business Combinations

A Inc.purchases 100% of the voting shares of B Inc on July 1,2008.On that date,A Inc would be required to prepare which of the following statements?

Which of the following pertaining to Consolidated Financial Statements is correct?

During an acquisition,when should intangible assets NOT be recognized apart from Goodwill?

Which of the following must be possible in order for a business combination to exist?

A Inc purchased 100% of B Inc's voting shares for cash on January 1,20X1.The Assets and Liabilities reported Consolidated Balance Sheet of A Inc prepared on the date of acquisition will include

Which of the following statements is correct?

Which of the following statements is correct?

Under the new entity method,

1234567 Inc is contemplating a Business Combination with 7654321 Inc.One company is incorporated under Federal law,the other under provincial law.Is a statutory amalgamation permissible under these circumstances?

Company Inc.owns all of the outstanding voting shares of Firm Inc.On January 1st,20X1.Firm Inc.would like to purchase all of the voting shares of its main competitor,N-CORP Inc.Briefly discuss the purported accounting implications of this transaction.

A Survey of International Accounting

Investments in Equity Securities

Consolidated Statements on Date of Acquisition

Consolidation Subsequent to Acquisition Date

Intercompany Inventory and Land Profits

Aintercompany Profits in Depreciable Assets

Consolidated Cash Flows and Ownership Issues

Other Consolidated Reporting Issues

Foreign Currency Transactions

Translation and Consolidation of the Financial Statements of Foreign Operations

Accounting for Not-For-Profit Organizations and Governments

Filters