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Question;1.;An;economic advantage of a business combination includes;a.;Utilizing duplicative assets.;b.;Creating separate management teams.;c.;Coordinated marketing campaigns.;d. Horizontally combining;levels within the marketing chain.;2.;A tax advantage of business combination can occur;when the existing owner of a company sells out and receives;a.;cash to defer the taxable gain as a "tax-free;reorganization.;b.;stock to defer the taxable gain as a "tax-free;reorganization.;c.;cash to create a taxable gain.;d. stock to create a taxable;gain.]]';3.;A;controlling interest in a company implies that the parent company;a.;owns all of the subsidiary's stock.;b.;has influence over a majority of the subsidiary's;assets.;c.;has paid cash for a majority of the subsidiary's;stock.;d.;has transferred common stock for a majority of the;subsidiary's outstanding bonds and debentures.;4.;Which of the following is a potential abuse that may;arise when a business combination is accounted for as a pooling of interests?;a. Assets of;the buyer may be overvalued when the price paid by the investor is allocated;among specific assets.;b. Earnings of;the pooled entity may be increased because of the combination only and not as a;result of efficient operations.;c.;Liabilities may be undervalued when the price paid;by the investor is allocated to specific liabilities.;d. An undue;amount of cost may be assigned to goodwill, thus potentially allowing an;understatement of pooled earnings.;Chapter 1;5.;Company B acquired the assets (net of liabilities);of Company S in exchange for cash. The acquisition price exceeds the fair value;of the net assets acquired. How should Company B determine the amounts to be;reported for the plant and equipment, and for long-term debt of the acquired;Company S?;a.;Plant and Equipment;Long-Term Debt;Fair;value;S's;carrying amount;b.;Fair value;Fair;value;c.;S's carrying amount;Fair;value;d. S's carrying amount;S's;carrying amount;6.;Publics Company acquired the net assets of Citizen;Company during 20X5. The purchase price was $800,000. On the date of the;transaction, Citizen had no long-term investments in marketable equity;securities and $400,000 in liabilities. The fair value of Citizen assets on the;acquisition date was as follows;Current assets................................. $ 800,000;Noncurrent assets.............................. 600,000;$1,400,000;==========;How should;Publics account for the $200,000 difference between the fair value of the net;assets acquired, $1,000,000, and the cost, $800,000?;a.;Retained earnings should be reduced by $200,000.;b. Current;assets should be recorded at $685,000 and noncurrent assets recorded at;$515,000.;c.;The noncurrent assets should be recorded at;$400,000.;d.;A deferred credit of $200,000 should be set up and;subsequently amortized to future net income over a period not to exceed 40;years.;7.;ABC Co. is acquiring XYZ Inc. XYZ has the following Intangible assets: Patent;on a product that is deemed to have no useful life $10,000. Customer List with;an observable fair value of $50,000.;A 5-year operating lease with favorable terms with a discounted;present value of $8,000.;Identifiable R & D of $100,000.;ABC will;record how much for acquired Intangible Assets from the Purchase of XYZ Inc?;a.;$168,000;b.;$58,000;c.;$158,000;d. $150,000;1-2;Chapter 1;8.;Vibe Company purchased the net assets of Atlantic;Company in a business combination accounted for as a purchase. As a result;goodwill was recorded. For tax purposes, this combination was considered to be;a tax-free merger. Included in the assets is a building with an appraised value;of $210,000 on the date of the business combination. This asset had a net book;value of $70,000, based on the use of accelerated depreciation for accounting;purposes. The building had an adjusted tax basis to Atlantic (and to Vibe as a;result of the merger) of $120,000. Assuming a 36% income tax rate, at what;amount should Vibe record this building on its books after the purchase?;a.;$120,000;b.;$134,400;c.;$140,000;d. $210,000;9. Goodwill represents the;excess cost of an acquisition over the;a. sum of the;fair values assigned to intangible assets less liabilities assumed.;b. sum of the;fair values assigned to tangible and intangible assets acquired less;liabilities assumed.;c. sum of the;fair values assigned to intangibles acquired less liabilities assumed.;d. book value of an acquired;company.;10.;When purchasing a company occurs, FASB recommends;disclosing all of the following EXCEPT;a.;goodwill related to each reporting segment.;b.;contingent payment agreements, options, or commitments;included in the purchase agreement, including accounting methods to be;followed.;c. results of;operations for the current period if both companies had remained separate.;d. amount of;in-process R&D purchased and written-off during the period.;1-3;Chapter 1;11.;Cozzi Company is being purchased and has the;following balance sheet as of the purchase date;Current assets..........;$200,000;Liabilities....;$ 90,000;Fixed assets............;180,000;Equity.........;290,000;Total.................;$380,000;Total........;$380,000;========;========;The price;paid for Cozzi's net assets (the purchaser assumes the liabilities) is;$500,000. The fixed assets have a fair value of $220,000, and the liabilities;have a fair value of $110,000. The amount of goodwill to be recorded in the;purchase is __________.;a.;$0;b.;$50,000;c.;$70,000;d. $90,000;12. Separately;identified intangible assets are accounted for by amortizing;a.;exclusively by using impairment testing.;b. based upon a;pattern that reflects the benefits conveyed by the asset.;c. over the;useful economic life less residual value using only the straight-line method.;d. amortizing over a period not;to exceed a maximum of 40 years.;1.;Acme Co. is preparing a pro-forma set of financial;statements after an acquisition of Coyote Co. The purchase price is less than;the fair value of the assets acquired. However, the purchase price is greater;than net book value of the acquired company.;Acme's goodwill will decrease over time.;Acme's amortization of intangible assets will;increase over time.;Depreciation expense will be greater than Coyote;Company's expense.;Coyote's loss on the sale of the assets will create;a net loss carryforward.;1-4;Chapter 1;14. While;performing a goodwill impairment test, the company had the following;information;Estimated;implied fair value of reporting unit;$420,000;(without goodwill);Existing net book value of;reporting unit;$380,000;(without goodwill);Book value of goodwill;$60,000;Based upon this information the proper;conclusion is;a. The existing;net book value plus goodwill is in excess of the implied fair value, therefore;no adjustment is required.;b. The existing;net book value plus goodwill is less than the implied fair value plus goodwill;therefore, no adjustment is required.;c. The existing;net book value plus goodwill is in excess of the implied fair value, therefore;goodwill needs to be decreased.;d. The existing;net book value is less than the estimated implied fair value, therefore;goodwill needs to be decreased.


Paper#44343 | Written in 18-Jul-2015

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