Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2010, for $3,800 cash. As of that date Hurley has the following trial balance; $\begin{array}{lr} &\text { Debit }&\text {Credit }\\ \text { Cash } & \$ 500 \\ \text { Accounts receivable } & 600 \\ \text { Inventory } & 800 \\ \text { Buildings (net) (5 year life) } & 1,500 \\ \text { Equipment (net) (2 year life) } & 1,000 \\ \text { Land } & 900\\ \text { Accounts Payable } & & \$ 400 \\ \text { Long-term liabilities (due 12/31/13) } & & 1,800 \\ \text { Common stock } & & 1,000 \\ \text { Additional paid-in capital } & & 600 \\ \text { Retained earnings } & & 1,500 \\ \text { Total } & \$ 5,300 & \$ 5.300 \\ \end{array}$ $\text { Net income and dividends reported by Hurley for } 2010 \text { and } 2011 \text { follow: }$ $\begin{array}{lrr} &2010&2011\\ \text { Net income } & \$ 100 & \$ 120 \\ \text { Dividends } & 30 & 40 \end{array}$ The fair value of Hurley's net assets that differ from their book values are listed below $\begin{array}{ll} &\text { Fair Value }\\ \text { Inventory } & \$ 900 \\ \text { Buildings } & 1,200 \\ \text { Equipment } & 1,250 \\ \text { Land } & 1,300 \\ \text { Long-term liabilities } & 1,700 \end{array}$Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life. FIFO inventory valuation method is used. -Compute the amount of Hurley's long-term liabilities that would be reported in a December 31,2010,consolidated balance sheet.

A) $1,800. B) $1,700. C) $1,725. D) $1,675. E) $3,500. A) $1,800. B) $1,700. C) $1,725. D) $1,675. E) $3,500.

Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2010. At that date, Glen owns only three assets and has no liabilities:$\begin{array} { | l | r | r | } \hline & \text { Book } & \text { Fair } \\ \hline & \text { Value } & \text { Value } \\ \hline \text { Inventory (FIFO method) } & \$ 40,000 & \$ 50,000 \\ \hline \text { Equipment (10-year life) } & 80,000 & 75,000 \\ \hline \text { Building (20-year life) } & 200,000 & 300,000 \\ \hline \end{array}$ -If Watkins pays $400,000 in cash for Glen,what amount would be represented as the subsidiary's Building in a consolidation at December 31,2012,assuming the book value of the building at that date is still $200,000?

A) $200,000. B) $285,000. C) $260,000. D) $268,000. E) $300,000. A) $200,000. B) $285,000. C) $260,000. D) $268,000. E) $300,000.

Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2010, for $3,800 cash. As of that date Hurley has the following trial balance; $\begin{array}{lr} &\text { Debit }&\text {Credit }\\ \text { Cash } & \$ 500 \\ \text { Accounts receivable } & 600 \\ \text { Inventory } & 800 \\ \text { Buildings (net) (5 year life) } & 1,500 \\ \text { Equipment (net) (2 year life) } & 1,000 \\ \text { Land } & 900\\ \text { Accounts Payable } & & \$ 400 \\ \text { Long-term liabilities (due 12/31/13) } & & 1,800 \\ \text { Common stock } & & 1,000 \\ \text { Additional paid-in capital } & & 600 \\ \text { Retained earnings } & & 1,500 \\ \text { Total } & \$ 5,300 & \$ 5.300 \\ \end{array}$ $\text { Net income and dividends reported by Hurley for } 2010 \text { and } 2011 \text { follow: }$ $\begin{array}{lrr} &2010&2011\\ \text { Net income } & \$ 100 & \$ 120 \\ \text { Dividends } & 30 & 40 \end{array}$ The fair value of Hurley's net assets that differ from their book values are listed below $\begin{array}{ll} &\text { Fair Value }\\ \text { Inventory } & \$ 900 \\ \text { Buildings } & 1,200 \\ \text { Equipment } & 1,250 \\ \text { Land } & 1,300 \\ \text { Long-term liabilities } & 1,700 \end{array}$Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life. FIFO inventory valuation method is used. -Compute the amount of total expenses reported in an income statement for the year ended December 31,2010,in order to recognize acquisition-date allocations of fair value and book value differences,

A) $140. B) $190. C) $260. D) $285. E) $310. A) $140. B) $190. C) $260. D) $285. E) $310.

Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2010. At that date, Glen owns only three assets and has no liabilities:$\begin{array} { | l | r | r | } \hline & \text { Book } & \text { Fair } \\ \hline & \text { Value } & \text { Value } \\ \hline \text { Inventory (FIFO method) } & \$ 40,000 & \$ 50,000 \\ \hline \text { Equipment (10-year life) } & 80,000 & 75,000 \\ \hline \text { Building (20-year life) } & 200,000 & 300,000 \\ \hline \end{array}$ -If Watkins pays $450,000 in cash for Glen,what amount would be represented as the subsidiary's Equipment in a consolidation at December 31,2012,assuming the book value of the equipment at that date is still $80,000?

A) $70,000. B) $73,500. C) $75,000. D) $76,500. E) $80,000. A) $70,000. B) $73,500. C) $75,000. D) $76,500. E) $80,000.

Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2010, for $3,800 cash. As of that date Hurley has the following trial balance; $\begin{array}{lr} &\text { Debit }&\text {Credit }\\ \text { Cash } & \$ 500 \\ \text { Accounts receivable } & 600 \\ \text { Inventory } & 800 \\ \text { Buildings (net) (5 year life) } & 1,500 \\ \text { Equipment (net) (2 year life) } & 1,000 \\ \text { Land } & 900\\ \text { Accounts Payable } & & \$ 400 \\ \text { Long-term liabilities (due 12/31/13) } & & 1,800 \\ \text { Common stock } & & 1,000 \\ \text { Additional paid-in capital } & & 600 \\ \text { Retained earnings } & & 1,500 \\ \text { Total } & \$ 5,300 & \$ 5.300 \\ \end{array}$ $\text { Net income and dividends reported by Hurley for } 2010 \text { and } 2011 \text { follow: }$ $\begin{array}{lrr} &2010&2011\\ \text { Net income } & \$ 100 & \$ 120 \\ \text { Dividends } & 30 & 40 \end{array}$ The fair value of Hurley's net assets that differ from their book values are listed below $\begin{array}{ll} &\text { Fair Value }\\ \text { Inventory } & \$ 900 \\ \text { Buildings } & 1,200 \\ \text { Equipment } & 1,250 \\ \text { Land } & 1,300 \\ \text { Long-term liabilities } & 1,700 \end{array}$Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life. FIFO inventory valuation method is used. -Compute the amount of Hurley's buildings that would be reported in a December 31,2010,consolidated balance sheet.

A) $1,560. B) $1,260. C) $1,440. D) $1,160. E) $1,140. A) $1,560. B) $1,260. C) $1,440. D) $1,160. E) $1,140.

Following are selected accounts for Green Corporation and Vega Company as of December 31, 2013. Several of Green's accounts have been omitted.$\begin{array} { l r r } \text { Revenues } & \text { Green } & \text { Vega } \\ \text { Cost of goods sold } & \$ 900,000 & \$ 500,000 \\ \text { Depreciation expense } & 360,000 & 200,000 \\ \text { Other expenses } & 140,000 & 40,000 \\ \text { Equity in Vega's income } & 100,000 & 60,000 \\ \text { Retained earnings, 1/1/13 } & ? & \\ \text { Dividends } & 1,350,000 & 1,200,000 \\ \text { Current assets } & 195,000 & 80,000 \\ \text { Land } & 300,000 & 1,380,000 \\ \text { Building (net) } & 450,000 & 180,000 \\ \text { Equipment (net) } & 750,000 & 280,000 \\ \text { Liabilities } & 300,000 & 500,000 \\ \text { Common stock } & 600,000 & 620,000 \\ \text { Additional paid-in capital } & 450,000 & 80,000 \\ & 75,000 & 320,000 \end{array}$Green acquired 100% of Vega on January 1, 2009, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2009, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment. -Compute the equity in Vega's income to be included in Green's consolidated income statement for 2013.

A) $500,000. B) $300,000. C) $190,375. D) $200,000. E) $290,375. A) $500,000. B) $300,000. C) $190,375. D) $200,000. E) $290,375.

Following are selected accounts for Green Corporation and Vega Company as of December 31, 2013. Several of Green's accounts have been omitted.$\begin{array} { l r r } \text { Revenues } & \text { Green } & \text { Vega } \\ \text { Cost of goods sold } & \$ 900,000 & \$ 500,000 \\ \text { Depreciation expense } & 360,000 & 200,000 \\ \text { Other expenses } & 140,000 & 40,000 \\ \text { Equity in Vega's income } & 100,000 & 60,000 \\ \text { Retained earnings, 1/1/13 } & ? & \\ \text { Dividends } & 1,350,000 & 1,200,000 \\ \text { Current assets } & 195,000 & 80,000 \\ \text { Land } & 300,000 & 1,380,000 \\ \text { Building (net) } & 450,000 & 180,000 \\ \text { Equipment (net) } & 750,000 & 280,000 \\ \text { Liabilities } & 300,000 & 500,000 \\ \text { Common stock } & 600,000 & 620,000 \\ \text { Additional paid-in capital } & 450,000 & 80,000 \\ & 75,000 & 320,000 \end{array}$Green acquired 100% of Vega on January 1, 2009, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2009, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment. -Compute the December 31,2013,consolidated trademark.

A) $50,000. B) $46,875. C) $0. D) $34,375. E) $37,500. A) $50,000. B) $46,875. C) $0. D) $34,375. E) $37,500.

Exam 3: Consolidations-Subsequent to the Date of Acquisition

On 4/1/09, Sey Mold Corporation acquired 100% of DotDot.Com for $2,000,000 cash. On the date of acquisition, DotDot's net book value was $900,000. DotDot's assets included land that was undervalued by $300,000, a building that was undervalued by $400,000, and equipment that was overvalued by $50,000. The building had a remaining useful life of 8 years and the equipment had a remaining useful life of 4 years. Any excess fair value over consideration transferred is allocated to an undervalued patent and is amortized over 5 years. -Determine the amortization expense related to the consolidation at the year-end date of 12/31/19.

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Question 1

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By 2019,all of the fair value adjustments and the patent will have been fully amortized.The amortization expense for 2019 related to the combination will be $0.

Harrison, Inc. acquires 100% of the voting stock of Rhine Company on January 1, 2010 for $400,000 cash. A contingent payment of $16,500 will be paid on April 15, 2011 if Rhine generates cash flows from operations of $27,000 or more in the next year. Harrison estimates that there is a 20% probability that Rhine will generate at least $27,000 next year, and uses an interest rate of 5% to incorporate the time value of money. The fair value of $16,500 at 5%, using a probability weighted approach, is $3,142. -When recording consideration transferred for the acquisition of Rhine on January 1,2010,Harrison will record a contingent performance obligation in the amount of:

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Question 2

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C

On January 1, 2010, Franel Co. acquired all of the common stock of Hurlem Corp. For 2010, Hurlem earned net income of $360,000 and paid dividends of $190,000. Amortization of the patent allocation that was included in the acquisition was $6,000. -How much difference would there have been in Franel's income with regard to the effect of the investment,between using the equity method or using the partial equity method of internal recordkeeping?

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Question 3

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D

Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2010, for $3,800 cash. As of that date Hurley has the following trial balance; Debit Credit Cash \ 500 Accounts receivable 600 Inventory 800 Buildings (net) (5 year life) 1,500 Equipment (net) (2 year life) 1,000 Land 900 Accounts Payable \ 400 Long-term liabilities (due 12/31/13) 1,800 Common stock 1,000 Additional paid-in capital 600 Retained earnings 1,500 Total \ 5,300 \ 5.300 $\text { Net income and dividends reported by Hurley for } 2010 \text { and } 2011 \text { follow: }$ 2010 2011 Net income \ 100 \ 120 Dividends 30 40 The fair value of Hurley's net assets that differ from their book values are listed below Fair Value Inventory \ 900 Buildings 1,200 Equipment 1,250 Land 1,300 Long-term liabilities 1,700 Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life. FIFO inventory valuation method is used. -Compute the amount of Hurley's long-term liabilities that would be reported in a December 31,2010,consolidated balance sheet.

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Question 4

Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2010. At that date, Glen owns only three assets and has no liabilities: Book Fair Value Value Inventory (FIFO method) \ 40,000 \ 50,000 Equipment (10-year life) 80,000 75,000 Building (20-year life) 200,000 300,000 -If Watkins pays $400,000 in cash for Glen,what amount would be represented as the subsidiary's Building in a consolidation at December 31,2012,assuming the book value of the building at that date is still $200,000?

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Question 5

Which of the following internal record-keeping methods can a parent choose to account for a subsidiary acquired in a business combination?

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Question 6

Which of the following statements is false regarding push-down accounting?

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Question 7

Push-down accounting is concerned with the

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Question 8

Beatty, Inc. acquires 100% of the voting stock of Gataux Company on January 1, 2010 for $500,000 cash. A contingent payment of $12,000 will be paid on April 1, 2011 if Gataux generates cash flows from operations of $26,500 or more in the next year. Beatty estimates that there is a 30% probability that Gataux will generate at least $26,500 next year, and uses an interest rate of 4% to incorporate the time value of money. The fair value of $12,000 at 4%, using a probability weighted approach, is $3,461. -When recording consideration transferred for the acquisition of Gataux on January 1,2010,Beatty will record a contingent performance obligation in the amount of:

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Question 9

Hanson Co.acquired all of the common stock of Roberts Inc.on January 1,2010,transferring consideration in an amount slightly more than the fair value of Roberts' net assets.At that time,Roberts had buildings with a twenty-year useful life,a book value of $600,000,and a fair value of $696,000.On December 31,2011,Roberts had buildings with a book value of $570,000 and a fair value of $648,000.On that date,Hanson had buildings with a book value of $1,878,000 and a fair value of $2,160,000. Required: What amount should be shown for buildings on the consolidated balance sheet dated December 31,2011?

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Question 10

What is the basic objective of all consolidations?

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Question 11

Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2010, for $3,800 cash. As of that date Hurley has the following trial balance; Debit Credit Cash \ 500 Accounts receivable 600 Inventory 800 Buildings (net) (5 year life) 1,500 Equipment (net) (2 year life) 1,000 Land 900 Accounts Payable \ 400 Long-term liabilities (due 12/31/13) 1,800 Common stock 1,000 Additional paid-in capital 600 Retained earnings 1,500 Total \ 5,300 \ 5.300 $\text { Net income and dividends reported by Hurley for } 2010 \text { and } 2011 \text { follow: }$ 2010 2011 Net income \ 100 \ 120 Dividends 30 40 The fair value of Hurley's net assets that differ from their book values are listed below Fair Value Inventory \ 900 Buildings 1,200 Equipment 1,250 Land 1,300 Long-term liabilities 1,700 Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life. FIFO inventory valuation method is used. -Compute the amount of total expenses reported in an income statement for the year ended December 31,2010,in order to recognize acquisition-date allocations of fair value and book value differences,

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Question 12

Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2010. At that date, Glen owns only three assets and has no liabilities: Book Fair Value Value Inventory (FIFO method) \ 40,000 \ 50,000 Equipment (10-year life) 80,000 75,000 Building (20-year life) 200,000 300,000 -If Watkins pays $450,000 in cash for Glen,what amount would be represented as the subsidiary's Equipment in a consolidation at December 31,2012,assuming the book value of the equipment at that date is still $80,000?

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Question 13

Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2010, for $3,800 cash. As of that date Hurley has the following trial balance; Debit Credit Cash \ 500 Accounts receivable 600 Inventory 800 Buildings (net) (5 year life) 1,500 Equipment (net) (2 year life) 1,000 Land 900 Accounts Payable \ 400 Long-term liabilities (due 12/31/13) 1,800 Common stock 1,000 Additional paid-in capital 600 Retained earnings 1,500 Total \ 5,300 \ 5.300 $\text { Net income and dividends reported by Hurley for } 2010 \text { and } 2011 \text { follow: }$ 2010 2011 Net income \ 100 \ 120 Dividends 30 40 The fair value of Hurley's net assets that differ from their book values are listed below Fair Value Inventory \ 900 Buildings 1,200 Equipment 1,250 Land 1,300 Long-term liabilities 1,700 Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life. FIFO inventory valuation method is used. -Compute the amount of Hurley's buildings that would be reported in a December 31,2010,consolidated balance sheet.

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Question 14

Kaye Company acquired 100% of Fiore Company on January 1, 2011. Kaye paid $1,000 excess consideration over book value which is being amortized at $20 per year. Fiore reported net income of $400 in 2011 and paid dividends of $100. -Assume the partial equity method is applied.How much will Kaye's income increase or decrease as a result of Fiore's operations?

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Question 15

Following are selected accounts for Green Corporation and Vega Company as of December 31, 2013. Several of Green's accounts have been omitted. Revenues Green Vega Cost of goods sold \ 900,000 \ 500,000 Depreciation expense 360,000 200,000 Other expenses 140,000 40,000 Equity in Vega's income 100,000 60,000 Retained earnings, 1/1/13 ? Dividends 1,350,000 1,200,000 Current assets 195,000 80,000 Land 300,000 1,380,000 Building (net) 450,000 180,000 Equipment (net) 750,000 280,000 Liabilities 300,000 500,000 Common stock 600,000 620,000 Additional paid-in capital 450,000 80,000 75,000 320,000 Green acquired 100% of Vega on January 1, 2009, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2009, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment. -Compute the equity in Vega's income to be included in Green's consolidated income statement for 2013.

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Question 16

Avery Company acquires Billings Company in a combination accounted for as an acquisition and adopts the equity method to account for Investment in Billings.At the end of four years,the Investment in Billings account on Avery's books is $198,984.What items constitute this balance?

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Question 17

Following are selected accounts for Green Corporation and Vega Company as of December 31, 2013. Several of Green's accounts have been omitted. Revenues Green Vega Cost of goods sold \ 900,000 \ 500,000 Depreciation expense 360,000 200,000 Other expenses 140,000 40,000 Equity in Vega's income 100,000 60,000 Retained earnings, 1/1/13 ? Dividends 1,350,000 1,200,000 Current assets 195,000 80,000 Land 300,000 1,380,000 Building (net) 450,000 180,000 Equipment (net) 750,000 280,000 Liabilities 300,000 500,000 Common stock 600,000 620,000 Additional paid-in capital 450,000 80,000 75,000 320,000 Green acquired 100% of Vega on January 1, 2009, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2009, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment. -Compute the December 31,2013,consolidated trademark.

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Question 18

Kaye Company acquired 100% of Fiore Company on January 1, 2011. Kaye paid $1,000 excess consideration over book value which is being amortized at $20 per year. Fiore reported net income of $400 in 2011 and paid dividends of $100. -Assume the equity method is applied.How much will Kaye's income increase or decrease as a result of Fiore's operations?

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Question 19

One company acquires another company in a combination accounted for as an acquisition.The acquiring company decides to apply the initial value method in accounting for the combination.What is one reason the acquiring company might have made this decision?

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Question 20

Which of the following internal record-keeping methods can a parent choose to account for a subsidiary acquired in a business combination?

Which of the following statements is false regarding push-down accounting?

Push-down accounting is concerned with the

What is the basic objective of all consolidations?

Avery Company acquires Billings Company in a combination accounted for as an acquisition and adopts the equity method to account for Investment in Billings.At the end of four years,the Investment in Billings account on Avery's books is $198,984.What items constitute this balance?

One company acquires another company in a combination accounted for as an acquisition.The acquiring company decides to apply the initial value method in accounting for the combination.What is one reason the acquiring company might have made this decision?

The Equity Method of Accounting for Investments

Consolidation of Financial Information

Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements - Intra-Entity Asset Transactions

Variable Interest Entities,intra-Entity Debt,consolidated Cash Flo

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Partnerships: Formation and Operations

Partnerships: Termination and Liquidation

Accounting for State and Local Governments Part 1

Accounting for State and Local Governments Part 2

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