Writing Experts
Crosby Corporation acquired 60 percent of Huble Corporation’s voting common stock. Huble’s buildings and equipment had a book value of $200,000 and a fair value of $250,000 at the time of the acquisition. What will be the amount at which Huble’s buildings and equipment will be reported in consolidated statements on the acquisition date?
$150,000
$200,000
$230,000
$250,000
5 points
An economic advantage of a business combination includes
Horizontally combining levels within the marketing chain
Creating separate management teams
Coordinated marketing campaigns
Utilizing duplicative assets
A change from the cost method to the equity method of accounting for an investment in common stock resulting from an increase in the number of shares held by the investor requires:
only a footnote disclosure.
that the cumulative amount of the change be shown as a line item on the income statement, net of tax.
that the change be accounted for as an unrealized gain included in other comprehensive income.
retroactive restatement as if the investor always had used the equity method.
Which of the following stockholders equity accounts are eliminated during the consolidation process?
Common stock of the subsidiary
Preferred stock of the subsidiary
Additional Paid-in-Capital of the subsidiary
All of the above
ASC 805 requires that ongoing research and development projects be treated in all of the following ways except:
Recorded at acquisition-date fair values
Classified as intangible assets having indefinite lives
Expensed immediately
Tested for impairment periodically
Burrough Corporation paid $80,000 to acquire all of Helyar Company’s net assets. Helyar reported assets with a book value of $60,000 and fair value of $98,000 and liabilities with a book value and fair value of $23,000 on the date of combination. Burrough also paid $3,000 to a search firm for finder’s fees related to the acquisition. What amount will be recorded as goodwill by Burrough Corporation while recording its investment in Helyar?
$0
$5,000
$8,000
$13,000
All of the following statementsaccurately describe Special Purpose Entities (SPEs) except for:
SPEs are corporations, trust or partnerships created for a single specified purpose.
SPEs usually have no substantive operations and are used for financing operations.
SPEs are used for asset securitization, risk sharing and taking advantage of tax statues.
A variable interest entity (VIE) is a type of SPE with a limited number of equity investors.
Dividends received are reported as revenue under the investment account when using the equity method.
True
False
Pink Inc. sells half of its 70% interest in Brown Co. on January 1, 20X6. On that date, the fair value of Brown as a whole is $940,000 and the carrying amount of Pink’s 70% share of Brown is $320,000. What, if any, is the gain on the sale of half of Pink’s interest in Brown?
$9,000
$169,000
$338,000
The fair value of net identifiable assets of a reporting unit of Y Company is $270,000. The carrying value of the reporting unit’s net assets on Y Company’s books is $320,000, including $50,000 goodwill. If the reported goodwill impairment for the unit is $10,000, what would be the fair value of the reporting unit?
$320,000
$310,000
$270,000
$290,000
In which of the following situations do accounting standards not require that the financial statements of the parent and subsidiary be consolidated:
A corporation creates a new 100 percent owned subsidiary
A corporation purchases 90 percent of the voting stock of another company
A corporation has both control and majority ownership of an unincorporated company
A corporation owns less-than a controlling interest in an unincorporated company
Which of the following observations is (are) consistent with the acquisition method of accounting for business combinations?
I. Expenses related to the business combination are expensed.
II. Stock issue costs are treated as a reduction in the issue price.
III. All merger and stock issue costs are expensed.
IV. No goodwill is ever recorded.
III
IV
I and II
I, II and IV
All of the following are examples of how a parent company may lose control over a subsidiary and discontinue future consolidation, except:
The parent sells some of its interest in the subsidiary.
The subsidiary issues additional common stock.
The subsidiary comes under the control of the government or other regulator.
The subsidiary issues a stock dividend or a stock split.
Under ASC 805, consolidation follows largely which theory approach?
Proprietary
Parent company
Entity
Variable
Dish Corporation acquired 100 percent of the common stock of Toll Company by issuing 10,000 shares of $10 par common stock with a market value of $60 per share. Summarized balance sheet data for the two companies immediately preceding the acquisition are as follows:
Dish Corporation
Toll Company
Book Value
Fair Value
Total Assets
$1,200,000
$1,500,000
$900,000
$1,300,000
Total Liabilities
$800,000
$700,000
$600,000
$750,000
Total Stockholders Equity
$400,000
$300,000
Required: Determine the dollar amounts to be presented in the consolidated balance sheet for (1) total assets, (2) total liabilities, and (3) total stockholders’ equity
10 points
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.
(1) What amount of inventory will be included in the consolidated balance sheet immediately following the acquisition?
(2) What amount of goodwill will be included in the consolidated balance sheet immediately following the acquisition?
(3) What amount will be included as investment in Venus Corporation in the consolidated balance sheet immediately following the acquisition?
Ace Co. owns 30% of the voting common stock of Becker Services Inc. Ace uses the equity method to account for its investment. On January 1, year 1, the balance in the investment account was $624,000. During year 1, Becker Services reported net income of $120,000 and paid dividends of $30,000. What is the balance in the investment account as of December 31, year 1? Be sure to show all work to receive full credit.
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