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Question;15. nBalter Inc. acquired Jersey;Company on January 1, 20X5. When the purchase occurred Jersey Company had the;following information related to fixed assets;Land;$ 80,000;Building;200,000;Accumulated;Depreciation;(100,000);Equipment;100,000;Accumulated Depreciation;(50,000);The building;has a 10-year remaining useful life and the equipment has a 5-year remaining;useful life. The fair value of the assets on that;date were: Land Building Equipment;What is the;20X5 depreciation expense Balter will record related to purchasing Jersey;Company?;a. $8,000;b. $15,000;c. $28,000;d. $30,000;ANS: C DIF: M OBJ: 6;1-5;Chapter 1;16. In;performing the 20X7 impairment test for goodwill, the company had the following;20X6 and 20X7 information is available.;20X6 20X7 Implied fair value of reporting unit $350,000 $400,000;Net book value of reporting unit (including goodwill) $380,000 $360,000;Based upon;this information what are the 20X6 and 20X7 adjustment to goodwill, if any?;a. 20X6 $0;20X7 $40,000 decrease;b. 20X6 $30,000;increase;20X7 $40,000 decrease;c. 20X6 $30,000;decrease;20X7 $40,000 decrease;d. 20X6 $30,000;decrease;20X7;$0;ANS: D DIF: D OBJ: 7;17.;Couples Corporation purchases Players Corporation.;The fair value of the net assets of Players is $750,000 and the fair value of;priority accounts (including a deduction for depreciation) is $600,000. Which;of the following purchase prices would require using allocation procedures?;a. $500,000;b. $600,000;c. $700,000;d. $800,000;ANS: B DIF: D OBJ: 7;18. ACME Co. paid $110,000 for;the net assets of Comb Corp. At the time of the acquisition the following;information was available related to Comb's balance sheet;Current Assets;Book Value;Fair Value;$50,000;$ 50,000;Building;80,000;100,000;Equipment;40,000;50,000;Liabilities;30,000;30,000;What is the amount recorded by ACME for the;Building?;a. $40,000;b. $60,000;c. $80,000;d. $100,000;ANS: B DIF: D OBJ: 7;19. Which of;the following business combination expenses would NOT qualify as a direct;acquisition expense for a purchase?;a. Fees for;purchase audit;b. Outside;legal fees;c. Stock;issuance fees;d. All are direct acquisition;expenses.;1-6;Chapter 1;ANS: C DIF: E OBJ: 8;20.;Polk issues common stock to acquire all the assets;of the Sam Company on January 1, 20X5. There is a contingent share agreement;which states that if the income of the Sam Division exceeds a certain level;during 20X5 and 20X6, additional shares will be issued on January 1, 20X7. The;impact of issuing the additional shares is to;a. increase the;price assigned to fixed assets.;b.;have no effect on asset values, but to reassign the;amounts assigned to equity accounts.;c. reduce;retained earnings.;d. record additional goodwill.;ANS: D DIF: D OBJ: 8;21.;In a purchase, the direct acquisition, indirect;acquisition and security issuance costs are accounted for as follows;Direct Acquisition;Indirect Acquisition;Security Issuance;a.;Added to price paid;Added to price paid;Added;to price paid;b.;Added to price paid;Expensed;Deducted;from value;c. Expensed;Expensed;of security issued;Deducted;from value;d. Expensed;Expensed;of security issued;Expensed;ANS: B;DIF;E;OBJ;9;22.;Orbit Inc. purchased Planet Co. in 20X3. At that;time an existing patent was not recorded as a separately identified intangible;asset. At the end of fiscal year 20X5, the patent is valued at $15,000, and;goodwill has a book value of $100,000. How should intangible assets be reported;at the beginning of fiscal year 20X6?;a. Goodwill;$100,000 Patent $0;b. Goodwill;$115,000 Patent $0;c. Goodwill;$100,000 Patent $15,000;d. Goodwill $85,000;Patent $15,000;ANS: D;DIF;M;OBJ: 9;23.;Which of the following income factors should not be;factored into a calculation of goodwill?;a. sales for;the period;b. income tax;expense;c. extraordinary;items;d. cost of goods sold;ANS: C DIF: M OBJ: 10, Appendix A;1-7;Chapter 1;PROBLEM;1.;Internet Corporation is considering the acquisition;of Homepage Corporation and has obtained the following audited condensed;balance sheet;Homepage Corporation;Balance Sheet;December 31, 20X5;Assets;$;40,000;Liabilities;and Equity;$;60,000;Current assets....;Current Liabilities..........;Land..............;20,000;Capital Stock (50,000 shares;50,000;Buildings;(net)...;80,000;$1 par;value)................;Equipment;(net)...;60,000;Other Paid-in Capital........;20,000;Retained Earnings.............;70,000;$200,000;$200,000;========;========;Internet also acquired the following fair values for;Homepage's assets and liabilities;Current;assets.........................................;$ 55,000;Land...................................................;60,000;Buildings;(net)........................................;90,000;Equipment;(net)........................................;75,000;Current;Liabilities....................................;(60,000);$220,000;========;Internet;and Homepage agree on a price of $280,000 for Homepage's net assets. Prepare;the necessary journal entry to record the purchase given the following;scenarios;a.;Internet pays cash for Homepage Corporation and;incurs $5,000 of direct acquisition costs.;b.;Internet issues its $5 par value stock as;consideration. The fair value of the stock at the acquisition date is $50 per;share. Additionally, Internet incurs $5,000 of security issuance costs.;1-8;Chapter 1;ANS;a. Current assets..........................;$55,000;Land....................................;60,000;Buildings...............................;90,000;Equipment...............................;75,000;Goodwill................................;65,000;Current Liabilities....................;$ 60,000;Cash...................................;285,000;b. Current assets..........................;$55,000;Land....................................;60,000;Buildings...............................;90,000;Equipment...............................;75,000;Goodwill................................;65,000;Current Liabilities...................;$ 60,000;Common Stock..........................;28,000;Other Paid-in Capital.................;252,000;Cash..................................;5,000

 

Paper#44344 | Written in 18-Jul-2015

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