Question 1

West, Inc. holds 100 percent of the common stock of Coast Company, an investment acquired for $680,000. Immediately following the combination, West's net assets have a book value of $1,150,000 and a fair value of $1,390,000. The book value and the fair value of Coast's net assets on the date of combination are $400,000 and $550,000, respectively. Immediately following the combination, a consolidated balance sheet is prepared.
-Based on the information given above,what will be the amount of net assets reported in the consolidated balance sheet,prepared immediately following the combination?

Accepted Answer

A)  $1,150,000 
B)  $1,550,000 
C)  $1,700,000 
D)  $1,830,000

Question 2

Pace Corporation acquired 100 percent of Spin Company's common stock on January 1, 20X9. Balance sheet data for the two companies immediately following the acquisition follow:
At the date of the business combination, the book values of Spin's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, and land, which had a fair value of $50,000. The fair value of land for Pace Corporation was estimated at $80,000 immediately prior to the acquisition.
 
-Based on the preceding information,what amount of goodwill will be reported in the consolidated balance sheet prepared immediately after the business combination?

Accepted Answer

A)  $0 
B)  $21,000 
C)  $6,000 
D)  $15,000

Question 3

On December 31, 20X9, Add-On Company acquired 100 percent of Venus Corporation's common stock for $300,000. Balance sheet information Venus just prior to the acquisition is given here:
At the date of the business combination, Venus's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, land which had a fair value of $125,000, and buildings and equipment (net), which had a fair value of $250,000.
 
-Based on the information provided,what amount of inventory will be included in the consolidated balance sheet immediately following the acquisition?

Accepted Answer

A)  $60,000 
B)  $75,000 
C)  $15,000 
D)  $45,000

Question 4

Pace Corporation acquired 100 percent of Spin Company's common stock on January 1, 20X9. Balance sheet data for the two companies immediately following the acquisition follow:
At the date of the business combination, the book values of Spin's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, and land, which had a fair value of $50,000. The fair value of land for Pace Corporation was estimated at $80,000 immediately prior to the acquisition.
 
-Based on the preceding information,what is the differential associated with the acquisition?

Accepted Answer

A)  $15,000 
B)  $21,000 
C)  $6,000 
D)  $10,000

Question 5

On December 31, 20X9, Add-On Company acquired 100 percent of Venus Corporation's common stock for $300,000. Balance sheet information Venus just prior to the acquisition is given here:
At the date of the business combination, Venus's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, land which had a fair value of $125,000, and buildings and equipment (net), which had a fair value of $250,000.
 
-Based on the information provided,what amount will be included as investment in Venus Corporation in the consolidated balance sheet immediately following the acquisition?

Accepted Answer

A)  $0 
B)  $395,000 
C)  $255,000 
D)  $300,000

Question 6

Pace Corporation acquired 100 percent of Spin Company's common stock on January 1, 20X9. Balance sheet data for the two companies immediately following the acquisition follow:
At the date of the business combination, the book values of Spin's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, and land, which had a fair value of $50,000. The fair value of land for Pace Corporation was estimated at $80,000 immediately prior to the acquisition.
 
-Based on the preceding information,what amount of total stockholder's equity will be reported in the consolidated balance sheet prepared immediately after the business combination?

Accepted Answer

A)  $300,000 
B)  $479,000 
C)  $315,000 
D)  $350,000

Question 7

Based on the preceding information,the differential reflected in a consolidation worksheet to prepare a consolidated balance sheet immediately after the business combination is:

Accepted Answer

A)  $0. 
B)  $25,000. 
C)  $70,000. 
D)  $45,000.

Question 8

Paccu Corporation acquired 100 percent of Sallee Company's common stock on January 1, 20X7. Balance sheet data for the two companies immediately following the acquisition follow:
  At the date of the business combination, the book values of Sallee's assets and liabilities approximated fair value except for inventory, which had a fair value of $55,000, and land, which had a fair value of $65,000. The fair value of land for Paccu Corporation was estimated at $90,000 immediately prior to the acquisition.
-Based on the preceding information,what is the differential associated with the acquisition?

Accepted Answer

A)  $15,000 
B)  $20,000 
C)  $22,000 
D)  $37,000

Question 9

Based on the preceding information,what amount should be allocated to goodwill in the consolidated balance sheet,prepared after this business combination?

Accepted Answer

A)  $0 
B)  $25,000 
C)  $70,000 
D)  $45,000

Question 10

Paccu Corporation acquired 100 percent of Sallee Company's common stock on January 1, 20X7. Balance sheet data for the two companies immediately following the acquisition follow:
  At the date of the business combination, the book values of Sallee's assets and liabilities approximated fair value except for inventory, which had a fair value of $55,000, and land, which had a fair value of $65,000. The fair value of land for Paccu Corporation was estimated at $90,000 immediately prior to the acquisition.
-Based on the preceding information,what amount of retained earnings will be reported in the consolidated balance sheet prepared immediately after the business combination?

Accepted Answer

A)  $200,000 
B)  $212,000 
C)  $350,000 
D)  $488,000

Question 11

On December 31, 20X8, Mercury Corporation acquired 100 percent ownership of Saturn Corporation. On that date, Saturn reported assets and liabilities with book values of $300,000 and $100,000, respectively, common stock outstanding of $50,000, and retained earnings of $150,000. The book values and fair values of Saturn's assets and liabilities were identical except for land which had increased in value by $10,000 and inventories which had decreased by $5,000.
-Based on the preceding information,what amount of goodwill will be reported if the acquisition price was $240,000?

Accepted Answer

A)  $0 
B)  $40,000 
C)  $15,000 
D)  $35,000

Question 12

Which of the following is true? When companies employ push-down accounting:

Accepted Answer

A)  the subsidiary revalues assets and liabilities to their fair values as of the acquisition date. 
B)  a special account called Revaluation Capital will appear in the consolidated balance sheet. 
C)  all consolidation entries are made on the books of the subsidiary rather than in consolidated worksheets. 
D)  the subsidiary is not substantially wholly owned by the parent.

Question 13

On January 1, 20X8, Chariot Company acquired 100 percent of Stryder Company for $220,000 cash. The trial balances for the two companies on December 31, 20X8, included the following amounts:
On the acquisition date, Stryder reported net assets with a book value of $170,000. A total of $10,000 of the acquisition price is applied to goodwill, which was not impaired in 20X8. Stryder's depreciable assets had an estimated economic life of 10 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment. Chariot used the equity method in accounting for its investment in Stryder. Analysis of receivables and payables revealed that Stryder owed Chariot $10,000 on December 31, 20X8.
 
-Based on the information provided,what amount of total assets will be reported in the consolidated balance sheet for the year?

Accepted Answer

A)  $895,000 
B)  $801,000 
C)  $723,000 
D)  $1,111,000

Question 14

Consolidated financial statements are being prepared for Behemoth Corporation and its two wholly-owned subsidiaries that have intercompany loans of $50,000 and intercompany profits of $100,000.How much of these intercompany loans and profits should be eliminated?

Accepted Answer

A)  intercompany loans - $0; intercompany profits - $0 
B)  intercompany loans - $50,000; intercompany profits - $0 
C)  intercompany loans - $50,000; intercompany profits - $100,000 
D)  intercompany loans - $0; intercompany profits - $100,000

Question 15

On January 1, 20X9, Wilton Company acquired all of Sirius Company's common shares, for $365,000 cash. On that date, Sirius's balance sheet appeared as follows:
The fair values of all of Sirius's assets and liabilities were equal to their book values except for inventory that had a fair value of $85,000, land that had a fair value of $60,000, and buildings and equipment that had a fair value of $250,000. Buildings and equipment have a remaining useful life of 10 years with zero salvage value. Wilton Company decided to employ push-down accounting for the acquisition. Subsequent to the combination, Sirius continued to operate as a separate company.
 
-Based on the preceding information,what amount of differential will arise in the consolidation process?

Accepted Answer

A)  $0 
B)  $5,000 
C)  $15,000 
D)  $65,000

Question 16

Top Company obtained 100 percent of Bottom Company's common stock on January 1,20X6 by issuing 12,500 shares of its own common stock,which had a $5 par value and a $15 fair value on that date.Bottom reported a net book value of $150,000 and its shares had a $20 per share fair value on that date.However,some of its plant assets (with a 5-year remaining life)were undervalued by $20,000 in the company's accounting records.Bottom had also developed a customer list with an estimated fair value of $10,000 and a remaining life of 10 years.Top Company uses the equity-method to account for its investment in Bottom.During 20X6 Top and Bottom reported the following:
  
Required:
Prepare each of the journal entries listed below related to Top's investment in Bottom.
1.Top's acquisition of Bottom.
2.Top's share of Bottom's 20X6 income.
3.Top's share of Bottom's 20X6 dividend income.
4.Top's amortization of excess acquisition price.

Accepted Answer

The answer of Top Company obtained 100 percent of Bottom...

Question 17

Tanner Company,a subsidiary acquired for cash,owned equipment with a fair value higher than the book value as of the date of combination.A consolidated balance sheet prepared immediately after the acquisition would include this difference in:

Accepted Answer

A)  goodwill. 
B)  retained earnings. 
C)  deferred charges. 
D)  equipment.

Question 18

On October 1, 20X3, Green Corporation paid $450,000 for all of Yellow Company's outstanding common stock. On that date, the book values and fair values of Yellow's recorded assets and liabilities were as follows:
 
-Based on the preceding information,what amount should be allocated to goodwill in the consolidated balance sheet prepared immediately after the combination?

Accepted Answer

A)  $110,000 
B)  $65,000 
C)  $45,000 
D)  $0

Question 19

Grant,Inc.(Grant)acquired 30% of South Co.'s (South)voting stock for $200,000 on January 1,20X1.Grant's 30% interest in South gave Grant the ability to exercise significant influence over South's operating and financial policies.On that date,South reported assets of $500,000 and liabilities of $100,000.South had equipment with a book value of $60,000 that was actually worth $160,000.The equipment had a remaining useful life of five years.During 20X1,South reported net income of $80,000 and paid dividends of $50,000.What amount of income should Grant recognize in 20X1 as a result of this investment?

Accepted Answer

A)  $18,000 
B)  $4,000 
C)  $15,000 
D)  $16,750

Question 20

Enya Corporation acquired 100 percent of Celtic Corporation's common stock on January 1, 20X9. Summarized balance sheet information for the two companies immediately after the combination is provided:
 
-Based on the information provided,the consolidated balance sheet of Enya and Celtic will reflect goodwill in the amount of:

Accepted Answer

A)  $0. 
B)  $58,000. 
C)  $22,000. 
D)  $36,000.

Exam 4: Consolidation of Wholly Owned Subsidiaries Acquired at More Than Book Value

Based on the preceding information,the differential reflected in a consolidation worksheet to prepare a consolidated balance sheet immediately after the business combination is:

Based on the preceding information,what amount should be allocated to goodwill in the consolidated balance sheet,prepared after this business combination?

Which of the following is true? When companies employ push-down accounting:

Consolidated financial statements are being prepared for Behemoth Corporation and its two wholly-owned subsidiaries that have intercompany loans of $50,000 and intercompany profits of $100,000.How much of these intercompany loans and profits should be eliminated?

Tanner Company,a subsidiary acquired for cash,owned equipment with a fair value higher than the book value as of the date of combination.A consolidated balance sheet prepared immediately after the acquisition would include this difference in: