Question 1

How are direct combination costs, contingent consideration, and a bargain purchase reflected in recording an acquisition transaction?

Accepted Answer

The acquisition method embraces a fair v

Question 2

The financial statements for Goodwin, Inc., and Corr Company for the year ended December 31, 20X1, prior to Goodwin's acquisition business combination transaction regarding Corr, follow (in thousands):   On December 31, 20X1, 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 liabilities at December 31, 20X1.

Accepted Answer

A)  $1,500. 
B)  $2,100. 
C)  $2,320. 
D)  $2,920. 
E)  $2,885. 
A)  $1,500. 
B)  $2,100. 
C)  $2,320. 
D)  $2,920. 
E)  $2,885.

Question 3

Salem Co. had the following account balances as of December 1, 2010:   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, 2010, consolidation.

Accepted Answer

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

Question 4

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 5

On January 1, 20X1, 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 common stock at date of acquisition.

Accepted Answer

A)  $370. 
B)  $570. 
C)  $610. 
D)  $330. 
E)  $530. 
A)  $370. 
B)  $570. 
C)  $610. 
D)  $330. 
E)  $530.

Question 6

The financial statements for Goodwin, Inc., and Corr Company for the year ended December 31, 20X1, prior to Goodwin's acquisition business combination transaction regarding Corr, follow (in thousands):   On December 31, 20X1, 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, 20X1.

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 7

On January 1, 20X1, 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 equipment at date of acquisition.

Accepted Answer

A)  $480. 
B)  $580. 
C)  $559. 
D)  $570. 
E)  $560. 
A)  $480. 
B)  $580. 
C)  $559. 
D)  $570. 
E)  $560.

Question 8

How would you account for in-process research and development acquired in a business combination accounted for as an acquisition?

Accepted Answer

In-Process Research and Develo

Question 9

Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1, 20X1. 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, 20X1 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. 
B)  $160. 
C)  $230. 
D)  $350. 
E)  $360. 
A)  $150. 
B)  $160. 
C)  $230. 
D)  $350. 
E)  $360.

Question 10

Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1, 20X1. 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, 20X1 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 cash after the acquisition is completed?

Accepted Answer

A)  $475. 
B)  $500. 
C)  $555. 
D)  $580. 
E)  $875. 
A)  $475. 
B)  $500. 
C)  $555. 
D)  $580. 
E)  $875.

Question 11

The financial statements for Goodwin, Inc., and Corr Company for the year ended December 31, 20X1, prior to Goodwin's acquisition business combination transaction regarding Corr, follow (in thousands):   On December 31, 20X1, 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 expenses for 20X1.

Accepted Answer

A)  $1,980. 
B)  $2,005. 
C)  $2,040. 
D)  $2,380. 
E)  $2,405. 
A)  $1,980. 
B)  $2,005. 
C)  $2,040. 
D)  $2,380. 
E)  $2,405.

Question 12

Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January 1, 20X1. 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, 20X1 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 13

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 14

The financial balances for the Atwood Company and the Franz Company as of December 31, 20X1, 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, 20X1. 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 15

Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1, 20X1. 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, 20X1 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 inventory?

Accepted Answer

A)  $1,000. 
B)  $960. 
C)  $920. 
D)  $660. 
E)  $620. 
A)  $1,000. 
B)  $960. 
C)  $920. 
D)  $660. 
E)  $620.

Question 16

Jernigan Corp. had the following account balances at 12/1/10:   Several of Jernigan's accounts have fair values that differ from book value. The fair values are: Land - $480,000; Building - $720,000; Inventory - $336,000; and Liabilities - $396,000.
Inglewood Inc. acquired all of the outstanding common shares of Jernigan by issuing 20,000 shares of common stock having a $6 par value, but a $66 fair value. Stock issuance costs amounted to $12,000.
Required:
Prepare a fair value allocation and goodwill schedule at the date of the acquisition.

Accepted Answer

The answer of Jernigan Corp. had the following account balances...

Question 17

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 18

The financial balances for the Atwood Company and the Franz Company as of December 31, 20X1, 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, 20X1. 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 land at the date of the acquisition.

Accepted Answer

A)  $2,060. 
B)  $1,800. 
C)  $260. 
D)  $2,050. 
E)  $2,070. 
A)  $2,060. 
B)  $1,800. 
C)  $260. 
D)  $2,050. 
E)  $2,070.

Question 19

Which of the following statements is true regarding a statutory merger?

Accepted Answer

A)  The original companies dissolve while remaining as separate divisions of a newly created company. 
B)  Both companies remain in existence as legal corporations with one corporation now a subsidiary of the acquiring company. 
C)  The acquired company dissolves as a separate corporation and becomes a division of the acquiring company. 
D)  The acquiring company acquires the stock of the acquired company as an investment. 
E)  A statutory merger is no longer a legal option. 
A)  The original companies dissolve while remaining as separate divisions of a newly created company. 
B)  Both companies remain in existence as legal corporations with one corporation now a subsidiary of the acquiring company. 
C)  The acquired company dissolves as a separate corporation and becomes a division of the acquiring company. 
D)  The acquiring company acquires the stock of the acquired company as an investment. 
E)  A statutory merger is no longer a legal option.

Question 20

Presented below are the financial balances for the Atwood Company and the Franz Company as of December 31, 2010, 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, 2010. 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 expenses at date of acquisition.

Accepted Answer

A)  $2,735. 
B)  $2,760. 
C)  $2,770. 
D)  $2,785. 
E)  $3,380. 
A)  $2,735. 
B)  $2,760. 
C)  $2,770. 
D)  $2,785. 
E)  $3,380.

How are direct combination costs, contingent consideration, and a bargain purchase reflected in recording an acquisition transaction?

Which of the following statements is true?

How would you account for in-process research and development acquired in a business combination accounted for as an acquisition?

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

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

Which of the following statements is true regarding a statutory merger?

The Equity Method of Accounting for Investments

Consolidations - Subsequent to the Date of Acquisition

Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements - Intercompany Asset Transactions

Intercompany Debt, Consolidated Statement of 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 for Not-For-Profit Organizations

Accounting for Estates and Trusts

Filters

Exam 2: Consolidation of Financial Information

How are direct combination costs, contingent consideration, and a bargain purchase reflected in recording an acquisition transaction?

Which of the following statements is true?

How would you account for in-process research and development acquired in a business combination accounted for as an acquisition?

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

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

Which of the following statements is true regarding a statutory merger?

The Equity Method of Accounting for Investments

Consolidations - Subsequent to the Date of Acquisition

Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements - Intercompany Asset Transactions

Intercompany Debt, Consolidated Statement of 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 for Not-For-Profit Organizations

Accounting for Estates and Trusts

Filters