Question 1

If Watkins pays $450,000 in cash for Glen, and Glen earns $50,000 in net income and pays $20,000 in dividends during 2017, what amount representing Glen would be reflected in consolidated net income for the year ended December 31, 2017?

Accepted Answer

A)  $20,000 under the initial value method. 
B)  $30,000 under the partial equity method. 
C)  $50,000 under the partial equity method. 
D)  $44,500 under the equity method. 
E)  $45,500 regardless of the internal accounting method used.

Question 2

If Watkins pays $450,000 in cash for Glen, what acquisition-date fair value allocation, net of amortization, should be attributed to the subsidiary's Equipment in consolidation at December 31, 2019?

Accepted Answer

A)  ($5,000). 
B)  $80,000. 
C)  $75,000. 
D)  $73,500. 
E)  ($3,500).

Question 3

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

Accepted Answer

A)  Initial value or book value. 
B)  Initial value, lower-of-cost-or-market-value, or equity. 
C)  Initial value, equity, or partial equity. 
D)  Initial value, equity, or book value. 
E)  Initial value, lower-of-cost-or-market-value, or partial equity.

Question 4

When is a goodwill impairment loss recognized?

Accepted Answer

A)  Only after both a quantitative and qualitative assessment of the fair value of goodwill of a reporting unit. 
B)  After only definitive quantitative assessments of the fair value of goodwill is completed. 
C)  After only definitive qualitative assessments of the fair value of goodwill is completed. 
D)  If the fair value of a reporting unit falls to zero or below its original acquisition price. 
E)  Never.

Question 5

Assume the partial equity method is used.In the years following acquisition, what additional worksheet entry must be made for consolidation purposes, but is not required for the equity method?

Accepted Answer

A)  Entry A. 
B)  Entry B. 
C)  Entry C. 
D)  Entry D. 
E)  Entry E.

Question 6

With respect to the recognition of goodwill in a business combination, which of the following statements is true?

Accepted Answer

A)  Only US GAAP requires recognition of goodwill when the fair value of the consideration transferred exceeds the net fair value of assets and liabilities. 
B)  US GAAP standards require goodwill to be allocated to reporting units expected to benefit from the goodwill. 
C)  Only IFRS standards require annual assessments for goodwill impairment. 
D)  IFRS requires a reporting unit's implied fair value for goodwill to be calculated as the excess of such unit's fair value over the fair value of its identifiable net assets. 
E)  Neither US GAAP, nor IFRS, provide that goodwill impairments will not be recoverable once recognized.

Question 7

Compute the amount of Hurley's inventory that would be reported in a January 1, 2017, consolidated balance sheet.

Accepted Answer

A)  $800. 
B)  $100. 
C)  $900. 
D)  $150. 
E)  $ 0.

Question 8

What is the basic objective of all consolidations?

Accepted Answer

The answer of What is the basic objective of all...

Question 9

Compute the December 31, 2020, consolidated land.

Accepted Answer

A)  $220,000. 
B)  $180,000. 
C)  $670,000. 
D)  $630,000. 
E)  $450,000.

Question 10

Under the partial equity method, the parent recognizes income when

Accepted Answer

A)  Dividends are received from the investee. 
B)  Dividends are declared by the investee. 
C)  The related expense has been incurred. 
D)  The related contract is signed by the subsidiary. 
E)  It is earned by the subsidiary.

Question 11

What should an entity evaluate when making an initial impairment assessment of an intangible asset (other than goodwill)?

Accepted Answer

The answer of What should an entity evaluate when making...

Question 12

What is the amount of consolidated net income for the year 2017?

Accepted Answer

A)  $3,180,000. 
B)  $3,612,000. 
C)  $3,300,000. 
D)  $3,588,000. 
E)  $3,420,000.

Question 13

On April 1, 2018, Beatty stock closes with a market value of $8.98 per share.How many shares of stock, rounded to the next whole number, must it issue to the former owners of Gateax?

Accepted Answer

A)  682 
B)  2,000 
C)  2,228 
D)  2,884 
E)  6,000

Question 14

If the equity method had been applied, what would be the Investment in Tysk Corp.account balance within the records of Jans at the end of 2018?

Accepted Answer

A)  $612,100. 
B)  $744,000. 
C)  $774,150. 
D)  $372,000. 
E)  $844,150.

Question 15

What is the partial equity method? How does it differ from the equity method? What are its advantages and disadvantages compared to the equity method?

Accepted Answer

The answer of What is the partial equity method? How...

Question 16

Compute the December 31, 2020, consolidated trademark.

Accepted Answer

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

Question 17

If Goehler applies the initial value method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2018?

Accepted Answer

A)  $1,080,000. 
B)  $1,104,000. 
C)  $1,100,000. 
D)  $1,468,000. 
E)  $1,475,000.

Question 18

Assume the partial equity method is applied.How much equity income will Kaye report on its internal accounting records as a result of Fiore's operations?

Accepted Answer

A)  $400 
B)  $300 
C)  $380 
D)  $280 
E)  $480

Question 19

Determine the amortization expense related to the combination at the year-end date of 12/31/16.

Accepted Answer

The answer of Determine the amortization expense related to the...

Question 20

Compute the amount of Hurley's buildings that would be reported in a December 31, 2017, consolidated balance sheet.

Accepted Answer

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

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