Question 1

Compute the December 31, 2020, consolidated equipment.

Accepted Answer

A)  $800,000. 
B)  $808,000. 
C)  $840,000. 
D)  $760,000. 
E)  $848,000.

Question 2

How much goodwill impairment should Pritchett report for 2018?

Accepted Answer

The answer of How much goodwill impairment should Pritchett report...

Question 3

One company acquires another company in a combination accounted for under the acquisition method.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?

Accepted Answer

A)  It is the only method allowed by the SEC. 
B)  It is relatively easy to apply. 
C)  It is the only internal reporting method allowed by generally accepted accounting principles. 
D)  Operating results on the parent's financial records reflect consolidated totals. 
E)  When the initial method is used, no worksheet entries are required in the consolidation process.

Question 4

When a company applies the partial equity method in accounting for its investment in a subsidiary and the subsidiary's equipment has a fair value greater than its book value, what consolidation worksheet entry is made in a year subsequent to the initial acquisition of the subsidiary?

Accepted Answer

A)   
B)   
C)   
D)   
E)

Question 5

If the partial equity method had been applied, what was 2018 consolidated net income?

Accepted Answer

A)  $840,000. 
B)  $768,400. 
C)  $822,000. 
D)  $240,000. 
E)  $600,000.

Question 6

Under the initial value method, when accounting for an investment in a subsidiary,

Accepted Answer

A)  Dividends received by the subsidiary decrease the investment account. 
B)  The investment account is adjusted to fair value at year-end. 
C)  Income reported by the subsidiary increases the investment account. 
D)  The investment account does not change from year to year. 
E)  Dividends received are ignored.

Question 7

A business combination results in $90,000 of goodwill.Several years later a worksheet is being produced to consolidate the two companies.Describe in words at what amount goodwill will be reported at this date.

Accepted Answer

The answer of A business combination results in $90,000 of...

Question 8

When a company applies the initial value method in accounting for its investment in a subsidiary and the subsidiary reports income less than dividends paid, what entry would be made for a consolidation worksheet in the second year?

Accepted Answer

A)   
B)   
C)   
D)   
E)

Question 9

Compute the amount of Hurley's equipment that would be reported in a December 31, 2018, consolidated balance sheet.

Accepted Answer

A)  $ 0. 
B)  $1,000. 
C)  $1,250. 
D)  $1,125. 
E)  $1,200.

Question 10

Which of the following is false regarding contingent consideration in business combinations?

Accepted Answer

A)  Contingent consideration payable in cash is reported under liabilities. 
B)  Contingent consideration payable in stock shares is reported under stockholders' equity. 
C)  Contingent consideration is recorded because of its substantial probability of eventual payment. 
D)  The contingent consideration fair value is recognized as part of the acquisition regardless of whether eventual payment is based on future performance of the target firm or future stock price of the acquirer. 
E)  Contingent consideration is reflected in the acquirer's balance sheet at the present value of the potential expected future payment.

Question 11

What was the total for consolidated patents as of December 31, 2018?

Accepted Answer

The answer of What was the total for consolidated patents...

Question 12

Compute the book value of Vega at January 1, 2016.

Accepted Answer

A)  $ 997,500. 
B)  $ 857,500. 
C)  $1,200,000. 
D)  $1,600,000. 
E)  $ 827,500.

Question 13

Compute the December 31, 2020, consolidated revenues.

Accepted Answer

A)  $1,400,000. 
B)  $ 800,000. 
C)  $ 500,000. 
D)  $1,590,375. 
E)  $1,390,375.

Question 14

Compute the amount of Hurley's land that would be reported in a December 31, 2018, consolidated balance sheet.

Accepted Answer

A)  $ 900. 
B)  $1,300. 
C)  $ 400. 
D)  $1,450. 
E)  $2,200.

Question 15

Hoyt Corporation agreed to the following terms in order to acquire the net assets of Brown Company on January 1, 2018: (1.) To issue 400 shares of common stock ($10 par) with a fair value of $45 per share.
(2)) To assume Brown's liabilities which have a book value of $1,600 and a fair value of $1,500.
On the date of acquisition, the consideration transferred for Hoyt's acquisition of Brown would be

Accepted Answer

A)  $18,000. 
B)  $16,500. 
C)  $20,000. 
D)  $18,500. 
E)  $19,500.

Question 16

The 2017 total excess amortization of fair-value allocations is calculated to be

Accepted Answer

A)  $4,000. 
B)  $6,400. 
C)  ($2,400). 
D)  ($1,000). 
E)  $3,800.

Question 17

Private companies, with respect to goodwill:

Accepted Answer

A)  May elect to amortize it over a period of 15 years. 
B)  Must treat it as an intangible asset with an indefinite life. 
C)  Must amortize it over a 12-year period. 
D)  May amortize goodwill if the value of the company does not exceed $10 million. 
E)  May treat goodwill as a definite lived intangible asset with a 10-year useful life.

Question 18

Consolidated net income using the equity method for an acquisition combination is computed as follows:

Accepted Answer

A)  Parent company's revenues from its own operations plus subsidiary retained earnings. 
B)  Parent's reported net income plus subsidiary dividends. 
C)  Combined revenues less combined expenses less equity in subsidiary's earnings less amortization of fair-value allocations in excess of book value. 
D)  Parent's revenues less expenses for its own operations plus the equity from subsidiary's earnings less subsidiary dividends. 
E)  None of these answer choices are correct.

Question 19

Compute the December 31, 2020 consolidated retained earnings.

Accepted Answer

A)  $1,645,375. 
B)  $1,350,000. 
C)  $1,565,375. 
D)  $1,840,375. 
E)  $1,265,375.

Question 20

Parrett Corp.acquired one hundred percent of Jones Inc.on January 1, 2016, at a price in excess of the subsidiary's fair value.On that date, Parrett's equipment (ten-year life) had a book value of $360,000 but a fair value of $480,000.Jones had equipment (ten-year life) with a book value of $240,000 and a fair value of $350,000.Parrett used the partial equity method to record its investment in Jones.On December 31, 2018, Parrett had equipment with a book value of $250,000 and a fair value of $400,000.Jones had equipment with a book value of $170,000 and a fair value of $320,000.What is the consolidated balance for the Equipment account as of December 31, 2018?

Accepted Answer

A)  $387,000. 
B)  $497,000. 
C)  $508.000. 
D)  $537,000. 
E)  $570,000.

Exam 3: A: Consolidations - Subsequent to the Date of Acquisition