Question 1

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 2

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

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 consolidation 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 consolidation is no longer a legal option.

Question 3

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 continues 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 continues 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.

Question 4

Figure:
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: $\begin{array}{lrr}&\text { Moody }&\text { Osorio }\
\text { Cash } & \$ 180 & \$ 40 \
\text { Receivables } & 810 & 180 \
\text { Inventories } & 1,080 & 280 \
\text { Land } & 600 & 360 \
\text { Buildings (net) } & 1,260 & 440 \
\text { Equipment (net) } & 480 & 100\
\text { Accounts payable } & (450) &(80)\
\text { Long-term liabilities } & (1,290)&(400) \
\text { Common stock }(\$ 1 \text { par })&(330)\\text { Common stock }(\$ 20 \text { par }) & & (240) \
\text { Additional paid-in capital } & (1,080)& (340) \
\text { Retained earnings } & (1,260) & (340)
\end{array}$ 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 5

Figure:
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 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 6

Figure:
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 retained earnings at the date of the acquisition.

Accepted Answer

A)  $1,160. 
B)  $1,170. 
C)  $1,280. 
D)  $1,290. 
E)  $1,640. 
A)  $1,160. 
B)  $1,170. 
C)  $1,280. 
D)  $1,290. 
E)  $1,640.

Question 7

Figure:
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 cash at the completion of the acquisition.

Accepted Answer

A)  $1,350. 
B)  $1,085. 
C)  $1,110. 
D)  $870. 
E)  $845. 
A)  $1,350. 
B)  $1,085. 
C)  $1,110. 
D)  $870. 
E)  $845.

Question 8

Figure:
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 equipment (net)?

Accepted Answer

A)  $385. 
B)  $335. 
C)  $435. 
D)  $460. 
E)  $360. 
A)  $385. 
B)  $335. 
C)  $435. 
D)  $460. 
E)  $360.

Question 9

Figure:
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.  
-Assuming the combination is accounted for as a purchase, what amount will be reported for consolidated retained earnings?

Accepted Answer

A)  $1,830. 
B)  $1,350. 
C)  $1,080. 
D)  $1,560. 
E)  $1,535. 
A)  $1,830. 
B)  $1,350. 
C)  $1,080. 
D)  $1,560. 
E)  $1,535.

Question 10

Figure:
Prior to being united in a business combination, Botkins Inc. and Volkerson Corp. had the following stockholders' equity figures: $\begin{array}{lrrrr} 
& {\text { Botkins }} & & \text { Volkerson } \
\text { Common stock (\$1 par value) } & \$ 220,000 & & \$ 54,000 \
\text { Additional paid-in capital } & 110,000 & & 25,000 \
\text { Retained earnings } & 360,000 & & 130,000
\end{array}$ Botkins issued 56,000 new shares of its common stock valued at $3.25 per share for all of the outstanding stock of Volkerson.
-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, 2011, 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 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 11

Figure:
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 12

For acquisition accounting, why are assets and liabilities of the subsidiary consolidated at fair value?

Accepted Answer

The acquisition transaction is assumed t

Question 13

Figure:
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 14

Figure:
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 revenues at the date of the acquisition.

Accepted Answer

A)  $3,540. 
B)  $2,880. 
C)  $1,170. 
D)  $1,650. 
E)  $4,050. 
A)  $3,540. 
B)  $2,880. 
C)  $1,170. 
D)  $1,650. 
E)  $4,050.

Question 15

Figure:
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: $\begin{array}{lrrr}&\text { Bullen } & \text { Vicker } & \text { Vicker } \
&\text { Book } & \text { Book } & \text { Fair } \
&\text { Value } & \text { Value } & \text { Value }\
\text { Retained earnings, 1/1/X1 } & \$ 250,000 & \$ 240,000 & \
\text { Cash and receivables } & 170,000 & 70,000 & \$ 70,000 \
\text { Inventory } & 230,000 & 170,000 & 210,000 \
\text { Land } & 280,000 & 220,000 & 240,000\\text { Buildings (net) } & 480,000 & 240,000 & 270,000 \
\text { Equipment (net) } & 120,000 & 90,000 & 90,000 \
\text { Liabilities } & 650,000 & 430,000 & 420,000 \
\text { Common stock } & 360,000 & 80,000 & \
\text { Additional paid-in capital } & 20,000 & 40,000 &
\end{array}$
-Assume that Bullen paid a total of $480,000 in cash for all of the shares of Vicker. In addition, Bullen paid $35,000 for secretarial and management time allocated to the acquisition transaction. What will be the balance in consolidated goodwill?

Accepted Answer

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

Question 16

Figure:
Prior to being united in a business combination, Botkins Inc. and Volkerson Corp. had the following stockholders' equity figures: $\begin{array}{lrrrr} 
& {\text { Botkins }} & & \text { Volkerson } \
\text { Common stock (\$1 par value) } & \$ 220,000 & & \$ 54,000 \
\text { Additional paid-in capital } & 110,000 & & 25,000 \
\text { Retained earnings } & 360,000 & & 130,000
\end{array}$ 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, 2010. 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 17

Figure:
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.

Question 18

Figure:
Prior to being united in a business combination, Botkins Inc. and Volkerson Corp. had the following stockholders' equity figures: $\begin{array}{lrrrr} 
& {\text { Botkins }} & & \text { Volkerson } \
\text { Common stock (\$1 par value) } & \$ 220,000 & & \$ 54,000 \
\text { Additional paid-in capital } & 110,000 & & 25,000 \
\text { Retained earnings } & 360,000 & & 130,000
\end{array}$ 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, 2010. At what amount did Botkins record the investment in Volkerson?

Accepted Answer

A)  $56,000. 
B)  $182,000. 
C)  $209,000. 
D)  $261,000. 
E)  $312,000. 
A)  $56,000. 
B)  $182,000. 
C)  $209,000. 
D)  $261,000. 
E)  $312,000.

Question 19

Figure:
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 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 20

Figure:
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 goodwill arising from this acquisition at December 31, 20X1.

Accepted Answer

A)  $0. 
B)  $100. 
C)  $125. 
D)  $160. 
E)  $45. 
A)  $0. 
B)  $100. 
C)  $125. 
D)  $160. 
E)  $45.

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

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

A statutory merger is a(n)

For acquisition accounting, why are assets and liabilities of the subsidiary consolidated at fair value?

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 Flo

Consolidated Financial Statements - Ownership Patterns and Income

Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Worldwide Accounting Diversity and International Standards

Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

Partnerships: Formation and Operations

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

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Exam 2: Consolidation of Financial Information

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

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

A statutory merger is a(n)

For acquisition accounting, why are assets and liabilities of the subsidiary consolidated at fair value?

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 Flo

Consolidated Financial Statements - Ownership Patterns and Income

Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Worldwide Accounting Diversity and International Standards

Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

Partnerships: Formation and Operations

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