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Question;Pinehollow;acquired all of the outstanding stock of Stonebriar by issuing 100,000 shares;of its $1 par value stock. The shares have a fair value of $15 per share.;Pinehollow also paid $25,000 in direct acquisition costs. Prior to the;transaction, the have companies has the following balance sheets:................................;Assets;Pinehollow;Stonebriar;Cash;$;150,000;$;50,000;Accounts receivable.................;500,000;350,000;Inventory...........................;900,000;600,000;Property, plant, and equipment(net).;1,850,000;900,000........................Totalassets;$3,400,000;$1,900,000;==========;==========;Liabilities;and Stockholders' Equity;$;100,000;Current;liabilities.................;$;300,000;Bonds;payable.......................;1,000,000;600,000;Common stock ($1;par)...............;300,000;100,000;Paid-in capital in excess of;par....;800,000;900,000;Retained earnings...................;1,000,000;200,000........Totalliabilitiesandequity;$3,400,000;$1,900,000;==========;==========;The fair;values of Stonebriar's inventory and plant, property and equipment are $700,000;and $1,000,000, respectively.;15.;Refer to the Pinehollow-Stonebriar Scenario. The;journal entry to record the purchase of Stonebriar would include a;a.;credit to common stock for $1,500,000.;b.;credit to additional paid-in capital for $1,100,000.;c.;credit to cash for $1,525,000.;d. debit to investment for;$1,525,000.;2-5;Chapter 2;16. Goodwill associated with the;purchase of Stonebriar is __________.;a.;$100,000;b.;$125,000;c.;$300,000;d. $325,000;17.;On April 1, 20X1, Paape Company paid $950,000 for;all the issued and outstanding stock of Simon Corporation in a transaction;properly recorded as a purchase. The recorded assets and liabilities of the;Prime Corporation on April 1, 20X1, follow;Cash.............................................;$ 80,000;Inventory........................................;240,000;Property;and equipment;(net of accumulated;depreciation;480,000;of;$320,000)..................................;Liabilities......................................;(180,000);On April 1;20X1, it was determined that the inventory of Paape had a fair value of;$190,000, and the property and equipment (net) had a fair value of $560,000.;What is the amount of goodwill resulting from the business combination?;a.;$0;b.;$120,000;c.;$300,000;d. $230,000;18.;Paro Company purchased 80% of the voting common;stock of Sabon Company for $900,000. There are no liabilities. The following;book and fair values are available:......................;Current assets;Book Value;Fair;Value;$100,000;$200,000;Land and;building...................;200,000;200,000;Machinery...........................;300,000;600,000;Goodwill............................;100,000;?;Using the;parent company concept, the machinery will appear on the consolidated balance;sheet at __________.;a.;$600,000;b.;$540,000;c.;$480,000;d. $300,000;2-6;Chapter 2;19. When a company purchases;another company that has existing goodwill and the transaction is accounted for;as a stock acquisition, the goodwill should be treated in the following manner.;a. Goodwill on;the books of an acquired company should be disregarded.;b.;Goodwill is recorded prior to recording fixed;assets.;c. Goodwill is;not recorded until all assets are stated at full fair value.;d. Goodwill is treated;consistent with other tangible assets.;20. The SEC;requires the use of push-down accounting in some specific situations. Push-down;accounting results in;a.;goodwill be recorded in the parent company separate;accounts.;b.;eliminating subsidiary retained earnings and paid-in;capital in excess of par.;c.;reflecting fair values on the subsidiary's separate;accounts.;d.;changing the consolidation worksheet procedure;because no adjustment is necessary to eliminate the investment in subsidiary;account.

 

Paper#44351 | Written in 18-Jul-2015

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