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Kaplan Mt482 week 6 quiz

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Question;Question 1.1.Which of the following isincorrect?An analyst should be aware of the following when analyzing a company that has significant investments recorded using the equity method:(Points: 2) Cash flow received from investee may be substantially different from investment income recorded.As investee's liabilities are not recorded on the company's balance sheet, there may be significant off-balance-sheet financing.They must mark investment in investee to market even though there may be no ready market in which they can sell their investment.Company must record pro rata share of investee's earnings, which may not be well correlated with changes in market value of investee.Question 2.2.Guido Inc. buys 2,000 shares of Weiner Company for $30 per share on January 1, 2006. At the end of 2006, Weiner shares are trading at $33 per share. Weiner has a total of 200,000 shares outstanding and reported net income of $3,000,000 and paid dividends of $1,000,000 for fiscal 2006.Determine the amount Guido Inc. will record as aninvestment on its balance sheetunder the three scenarios: Weiner is considered trading marketable equity security (MES), available for sale (AFS) MES or using cost method.(Points: 2) Choice AChoice BChoice CChoice DQuestion 3.3.Constant Corp. bought Steady Company on June 30, 2005 in a pooling-of-interests transaction. Both companies are in stagnant markets. Steady had total assets of $50,000 and total liabilities of $30,000 with fair market values of $60,000 and $30,000, respectively. Constant issued 1,000 shares, valued at $45 per share. Both companies operate in tax-free havens and take a half-year's depreciation in the year acquired using ten-year lives. Monthly operating results are as follows:Assume revenue and earnings remain same for the next year. Company is following SFAS 142.Feedback:It can be either $42,000 or $48,000. Under GAAP for purchase accounting, there are two alternatives. Although income is always reported from the acquisition date forward, it is permitted to report 12 months sales of the acquired company, as long as 12 months expenses are included and pre-acquisition earnings are backed out. The simpler (and easier for the reader) approach is to only report post-acquisition (i.e., six months in this example) sales and expenses.If accounted for as a purchase, 2005 consolidated earnings are reported as(Points: 2) $10,700$11,900$12,700$13,200Question 4.4.Parent Company Inc. successfully bids for Child Company Inc. in year X1. Parent Company Inc. has purchased all of Child's shares outstanding for $8,500. Following are excerpts from both companies' financial statements for year X1, prior to the acquisition.Also assume the following information: the acquisition was accounted for using the purchase method. $1,500 of the excess price relates to depreciable assets, and those assets have an additional useful life of 10 years at the time of the acquisition. Parent Company Inc. uses the straight line depreciation method and has a 34% tax rate. The combined net income for both companies for year X2 (excluding any expenses that need to be recorded as a result of the purchase method accounting for the merger) was $1,560.What would be total assets in the consolidated financial statements for the date on which the merger became effective, assuming any excess purchase price relates to goodwill?(Points: 2) $50,008$49,498$41,508$44,113Question 5.5.The following information is from L&H's 2004 income statement:Feedback: Pre-tax income in 2005 is $3,900 ($2,600 x 1.5), an increase of $1,300. Starting with 2004, add back amortization expense no longer permitted by SFAS 142 (income increases by $2,000) less the impact of the sales decline of $1,400 (at 50% gross margin = $700 real economic income decrease).Based upon your analysis, you reflect that L&H management(Points: 2) is more than holding its own in a tough economic environment.needs to strengthen its marketing.is achieving growth in its new product line.has adroitly managed its asset portfolio.Question 6.6.Constant Corp. bought Steady Company on June 30, 2005 in a pooling-of-interests transaction. Both companies are in stagnant markets. Steady had total assets of $50,000 and total liabilities of $30,000 with fair market values of $60,000 and $30,000, respectively. Constant issued 1,000 shares, valued at $45 per share. Both companies operate in tax-free havens and take a half-year's depreciation in the year acquired using ten-year lives. Monthly operating results are as follows:Assume revenue and earnings remain same for the next year. Company is following SFAS 142.Feedback:It can be either $42,000 or $48,000. Under GAAP for purchase accounting, there are two alternatives. Although income is always reported from the acquisition date forward, it is permitted to report 12 months sales of the acquired company, as long as 12 months expenses are included and pre-acquisition earnings are backed out. The simpler (and easier for the reader) approach is to only report post-acquisition (i.e., six months in this example) sales and expenses.If accounted for as a pooling-of-interests, 2005 consolidated earnings are reported as:(Points: 2) $12,000$13,200$14,400It cannot be determined without further informationQuestion 7.7.A U.S. company has a subsidiary located in Great Britain. If the British pound is the functional currency and is appreciating relative to the dollar, what will happen to the following ratios after translation?(Points: 2) Choice AChoice BChoice CChoice DQuestion 8.8.Constant Corp. bought Steady Company on June 30, 2005 in a pooling-of-interests transaction. Both companies are in stagnant markets. Steady had total assets of $50,000 and total liabilities of $30,000 with fair market values of $60,000 and $30,000, respectively. Constant issued 1,000 shares, valued at $45 per share. Both companies operate in tax-free havens and take a half-year's depreciation in the year acquired using ten-year lives. Monthly operating results are as follows:Assume revenue and earnings remain same for the next year. Company is following SFAS 142.Feedback:It can be either $42,000 or $48,000. Under GAAP for purchase accounting, there are two alternatives. Although income is always reported from the acquisition date forward, it is permitted to report 12 months sales of the acquired company, as long as 12 months expenses are included and pre-acquisition earnings are backed out. The simpler (and easier for the reader) approach is to only report post-acquisition (i.e., six months in this example) sales and expenses.If accounted for as a purchase, 2006 consolidated earnings are reported as(Points: 2) $10,700$13,400$11,950$14,400Question 9.9.Parent Company Inc. successfully bids for Child Company Inc. in year X1. Parent Company Inc. has purchased all of Child's shares outstanding for $8,500. Following are excerpts from both companies' financial statements for year X1, prior to the acquisition.Also assume the following information: the acquisition was accounted for using the purchase method. $1,500 of the excess price relates to depreciable assets, and those assets have an additional useful life of 10 years at the time of the acquisition. Parent Company Inc. uses the straight line depreciation method and has a 34% tax rate. The combined net income for both companies for year X2 (excluding any expenses that need to be recorded as a result of the purchase method accounting for the merger) was $1,560.What would be total liabilities in the consolidated financial statements for the date on which the merger became effective, assuming any excess purchase price relates to goodwill?(Points: 2) $28,221$27,231$27,741$25,462Question 10.10.Parent Company Inc. successfully bids for Child Company Inc. in year X1. Parent Company Inc. has purchased all of Child's shares outstanding for $8,500. Following are excerpts from both companies' financial statements for year X1, prior to the acquisition.Also assume the following information: the acquisition was accounted for using the purchase method. $1,500 of the excess price relates to depreciable assets, and those assets have an additional useful life of 10 years at the time of the acquisition. Parent Company Inc. uses the straight line depreciation method and has a 34% tax rate. The combined net income for both companies for year X2 (excluding any expenses that need to be recorded as a result of the purchase method accounting for the merger) was $1,560.What would be the net income in the consolidated income statement for year X2 assuming any excess purchase price relates to goodwill, and goodwill was found to be impaired by $830?(Points: 2) $1,461$1,560$1,012.2$730

 

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