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ACCT4110 Exam1

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Question;Question 1 3;/ 3 points;A business combination in which the acquired company's;assets and liabilities are combined with those of the acquiring company into a;single entity is defined as;a) Stock acquisition;b) Leveraged buyout;c) Statutory Merger;d) Reverse statutory rollup;Question 2 3;/ 3 points;In which of the following situations do accounting standards;not require that the financial statements of the parent and subsidiary be;consolidated;a) A corporation creates a new 100;percent owned subsidiary;b) A corporation purchases 90 percent of;the voting stock of another company;c) A corporation has both control and;majority ownership of an unincorporated company;d) A corporation owns less-than a;controlling interest in an unincorporated company;Question 3 3;/ 3 points;Which of the following situations best describes a business;combination to be accounted for as a statutory merger?;a) Both companies in a combination;continue to operate as separate, but related, legal entities.;b) Only one of the combining companies;survives and the other loses its separate identity.;c) Two companies combine to form a new;third company, and the original two companies are dissolved.;d) One company transfers assets to;another company it has created.;Question 4 3;/ 3 points;A statutory consolidation is a type of business combination;in which;a) one of the combining companies;survives and the other loses its separate identity.;b) one company acquires the voting;shares of the other company and the two companies continue to operate as;separate legal entities.;c) two publicly traded companies agree to;share a board of directors.;d) each of the combining companies is;dissolved and the net assets of both companies are transferred to a newly;created corporation.;Question 5 3;/ 3 points;Rivendell Corporation and Foster Company merged as of;January 1, 20X9. To effect the merger, Rivendell paid finder's fees of $40,000;legal fees of $13,000, audit fees related to the stock issuance of $10,000;stock registration fees of $5,000, and stock listing application fees of;$4,000.;Based on the preceding information, under the acquisition;method, what amount relating to the business combination would be expensed?;a) $72,000;b) $19,000;c) $53,000;d) $63,000;Question 6 3;/ 3 points;Rivendell Corporation and Foster Company merged as of;January 1, 20X9. To effect the merger, Rivendell paid finder's fees of $40,000;legal fees of $13,000, audit fees related to the stock issuance of $10,000;stock registration fees of $5,000, and stock listing application fees of;$4,000.;Based on the preceding information, under the acquisition;method;a) $72,000 of stock issue costs are;treated as goodwill.;b) $19,000 of stock issue costs are;treated as a reduction in the issue price.;c) $19,000 of stock issue costs are;expensed.;d) $72,000 of stock issue costs are;expensed.;Question 7 3;/ 3 points;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?;a) $0;b) $5,000;c) $8,000;d) $13,000;Question 8 3;/ 3 points;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.;a) III;b) IV;c) I and II;d) I, II, and IV;Question 9 3;/ 3 points;Which of the following observations refers to the term;differential?;a) Excess of consideration exchanged;over fair value of net identifiable assets.;b) Excess of fair value over book value;of net identifiable assets.;c) Excess of consideration exchanged over;book value of net identifiable assets.;d) Excess of fair value over historical;cost of net identifiable assets.;Question 10 3;/ 3 points;Which of the following observations concerning;goodwill" is NOT correct?;a) Once written down, it may be written;up for recoveries.;b) It must be tested for impairment at;least annually.;c) Goodwill impairment losses are;recognized in income from continuing operations or income before extraordinary;gains and losses.;d) It must be reported as a separate line;item in the balance sheet.;Question 11 3;/ 3 points;If Push Company owned 51 percent of the outstanding common;stock of Shove Company, which reporting method would be appropriate?;a) Cost method;b) Consolidation;c) Equity method;d) Merger method;Question 12 3;/ 3 points;Usually, an investment of 20 to 50 percent in another;company's voting stock is reported under the;a) cost method;b) equity method;c) full consolidation method;d) fair value method;Question 13 3;/ 3 points;From an investor's point of view, a liquidating dividend;from an investee is;a) a dividend declared by the investee;in excess of its earnings in the current year;b) a dividend declared by the investee;in excess of its earnings since acquisition by the investor;c) any dividend declared by the investee;since acquisition;d) a dividend declared by the investee in;excess of the investee's retained earnings;Question 14 3;/ 3 points;Under the equity method of accounting for a stock;investment, the investment initially should be recorded at;a) cost;b) cost minus any differential;c) proportionate share of the fair value;of the investee company's net assets;d) proportionate share of the book value;of the investee company's net assets;Question 15 3;/ 3 points;What portion of the subsidiary stockholders' equity account;balances should be eliminated in preparing the consolidated balance sheet?;a) Common stock;b) Additional paid-in capital;c) Retained Earnings;d) All of the balances are eliminated;Question 16 3;/ 3 points;The consolidation process consists of all the following;except;a) combining the financial statements of;two or more legally separate companies;b) eliminating intercompany transactions;and holdings;c) closing the individual subsidiary's;revenue and expense accounts into the parent's retained earnings;d) combining the accounts of separate;companies, creating a single set of financial statements;Question 17 3;/ 3 points;In which of the following cases would consolidation be;inappropriate?;a) The subsidiary is in bankruptcy.;b) Subsidiary's operations are;dissimilar from those of the parent.;c) The parent owns 90 percent of the;subsidiary's common stock, but all of the subsidiary's nonvoting preferred;stock is held by a single investor.;d) Subsidiary is foreign.;Question 18 3;/ 3 points;On January 1, 20X8, Zeta Company acquired 85 percent of;Theta Company's common stock for $100,000 cash. The fair value of the;noncontrolling interest was determined to be 15 percent of the book value of;Theta at that date. What portion of the retained earnings reported in the;consolidated balance sheet prepared immediately after the business combination;is assigned to the noncontrolling interest?;a) None;b) 15 percent;c) 100 percent;d) Cannot be determined;Question 19 3;/ 3 points;On January 3, 20X9, Redding Company acquired 80 percent of;Frazer Corporation's common stock for $344,000 in cash. At the acquisition;date, the book values and fair values of Frazer's assets and liabilities were;equal, and the fair value of the noncontrolling interest was equal to 20;percent of the total book value of Frazer. The stockholders' equity accounts of;the two companies at the acquisition date are;Noncontrolling interest was assigned income of $11,000 in;Redding's consolidated income statement for 20X9.;Based on the preceding information, what amount will be;assigned to the noncontrolling interest on January 3, 20X9, in the consolidated;balance sheet?;a) $86,000;b) $44,000;c) $68,800;d) $50,000;Question 20 0;/ 3 points;On January 3, 20X9, Redding Company acquired 80 percent of;Frazer Corporation's common stock for $344,000 in cash. At the acquisition;date, the book values and fair values of Frazer's assets and liabilities were;equal, and the fair value of the noncontrolling interest was equal to 20;percent of the total book value of Frazer. The stockholders' equity accounts of;the two companies at the acquisition date are;Noncontrolling interest was assigned income of $11,000 in;Redding's consolidated income statement for 20X9.;Based on the preceding information, what is the total;stockholders' equity in the consolidated balance sheet as of January 3, 20X9?;a) $1,580,000;b) $1,064,000;c) $1,150,000;d) $1,236,000;Question 21 3;/ 3 points;On January 3, 20X9, Redding Company acquired 80 percent of;Frazer Corporation's common stock for $344,000 in cash. At the acquisition;date, the book values and fair values of Frazer's assets and liabilities were;equal, and the fair value of the noncontrolling interest was equal to 20;percent of the total book value of Frazer. The stockholders' equity accounts of;the two companies at the acquisition date are;Noncontrolling interest was assigned income of $11,000 in;Redding's consolidated income statement for 20X9.;Based on the preceding information, what will be the amount;of net income reported by Frazer Corporation in 20X9?;a) $44,000;b) $55,000;c) $66,000;d) $36,000;Question 22 3;/ 3 points;On January 3, 20X9, Jane Company acquired 75 percent of;Miller Company's outstanding common stock for cash. The fair value of the;noncontrolling interest was equal to a proportionate share of the book value of;Miller Company's net assets at the date of acquisition. Selected balance sheet;data at December 31, 20X9, are as follows;Based on the preceding information, what amount should be;reported as noncontrolling interest in net assets in Jane Company's December;31, 20X9, consolidated balance sheet?;a) $90,000;b) $54,000;c) $36,000;d) $0;Question 23 3;/ 3 points;On January 3, 20X9, Jane Company acquired 75 percent of;Miller Company's outstanding common stock for cash. The fair value of the;noncontrolling interest was equal to a proportionate share of the book value of;Miller Company's net assets at the date of acquisition. Selected balance sheet;data at December 31, 20X9, are as follows;Based on the preceding information, what amount will Jane;Company report as common stock outstanding in its consolidated balance sheet at;December 31, 20X9?;a) $120,000;b) $180,000;c) $156,000;d) $264,000;Question 24 3;/ 3 points;Under ASC 805, consolidation follows largely which theory;approach?;a) Proprietary;b) Parent company;c) Entity;d) Variable;Question 25 3;/ 3 points;On January 1, 20X9, Heathcliff Corporation acquired 80;percent of Garfield Corporation's voting common stock. Garfield's buildings and;equipment had a book value of $300,000 and a fair value of $350,000 at the time;of acquisition.;Based on the preceding information, what will be the amount;at which Garfield's buildings and equipment will be reported in consolidated;statements using the current accounting practice?;a) $350,000;b) $340,000;c) $280,000;d) $300,000;Question 26 3;/ 3 points;On January 1, 20X9, Gold Rush Company acquires 80 percent;ownership in California Corporation for $200,000. The fair value of the;noncontrolling interest at that time is determined to be $50,000. It reports;net assets with a book value of $200,000 and fair value of $230,000. Gold Rush;Company reports net assets with a book value of $600,000 and a fair value of;$650,000 at that time, excluding its investment in California. What will be the;amount of goodwill that would be reported immediately after the combination;under current accounting practice?;a) $50,000;b) $30,000;c) $40,000;d) $20,000;Question 27 3;/ 3 points;On July 1, 20X9, Link Corporation paid $340,000 for all of;Tinsel Company's outstanding common stock. On that date, the costs and fair;values of Tinsel's recorded assets and liabilities were as follows;Based on the preceding information, the differential;reflected in a consolidation worksheet to prepare a consolidated balance sheet;immediately after the business combination is;a) $0.;b) $25,000.;c) $70,000.;d) $45,000.;Question 28 3;/ 3 points;On July 1, 20X9, Link Corporation paid $340,000 for all of;Tinsel Company's outstanding common stock. On that date, the costs and fair;values of Tinsel'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 after this;business combination?;a) $0;b) $25,000;c) $70,000;d) $45,000;Question 29 3;/ 3 points;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 preceding information, the amount of differential;associated with the acquisition is;a) $0.;b) $58,000.;c) $22,000.;d) $36,000.;Question 30 3;/ 3 points;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;a) $0.;b) $58,000.;c) $22,000.;d) $36,000.;Question 31 3;/ 3 points;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;a) goodwill.;b) retained earnings.;c) deferred charges.;d) equipment.;Question 32 0;/ 3 points;When a parent company uses the equity method to account for;investments, the controlling interest in consolidated net income includes all;of the following except;a) The parent's income from its own;operations.;b) The parent company's share of income;from consolidated subsidiaries.;c) The non-controlling interest's share;of income from consolidated subsidiaries.;d) Differential adjustments.;Question 33 3;/ 3 points;Company X acquires 100 percent of the voting shares of;Company Y for $275,000 on December 31, 20X8.The fair value of the net assets of;Company X at the date of acquisition was $300,000. This is an example of a(n);a) positive differential.;b) bargain purchase.;c) extraordinary loss.;d) revaluation adjustment.;Question 34 3;/ 3 points;Which of the following observations is NOT consistent with;the use of push-down accounting?;a) The revaluation capital account is;part of the subsidiary's stockholders' equity.;b) No differential arises in the;consolidation process.;c) Revaluation Capital account is;eliminated in preparing consolidated statements.;d) Eliminating entries related to the;differential are needed in the worksheets.;Question 35 3;/ 3 points;Which of the following is true? When companies employ;push-down accounting;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 elimination 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 36 15;/ 15 points;On January 1, 20X8, Alaska Corporation acquired Mercantile;Corporation's net assets by paying $160,000 cash. Balance sheet data for the;two companies and fair value information for Mercantile Corporation immediately;before the business combination are given below;Required;Prepare the journal entry to record the acquisition of;Mercantile Corporation.Question 37 10;/ 10 points;In reading a set of consolidated financial statements you;are surprised to see the term noncontrolling interest not reported under the;Liability section of the Balance Sheet.;Required;a. What is a non-controlling interest?;b. Why must it be reported in the financial statements as an;element of equity rather than a liability?Question 38 20;/ 20 points;Parent Company acquired 90% of Son Inc. on January 31, 20X2;in exchange for cash. The book value of Son's individual assets and liabilities;approximated their acquisition-date fair values. On the date of acquisition;Son reported the following;During the year Son Inc. reported $310,000 in net income and;declared $15,000 in dividends. Parent Company reported $520,000 in net income;and declared $25,000 in dividends. Parent accounts for their investment using;the equity method.;Required;1. What journal entry will Parent make on the date of;acquisition to record the investment in Son Inc.?;2. If Parent were to prepare a consolidated balance sheet on;the acquisition date (January 31, 20X2), what is the basic elimination entry;Parent would use in the consolidation worksheet?;3. What is Parent's balance in "Investment in Son;Inc." prior to consolidation on December 31, 20X2?;4. What is the basic elimination entry Parent would use in;the consolidation worksheet on December 31, 20X2?

 

Paper#45094 | Written in 18-Jul-2015

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