At the date of an acquisition which is not a bargain purchase, the acquisition method:
d) Consolidates current assets and liabilities at book value, long-term assets and liabilities at fair value
Lunt Co. paid cash for all of the voting common stock of Verisilitude corp. V corp will continue to exist as a seperate copraration. Entries for the consolodation of Lunt and V. would be recorded in:
a) a worksheet
Which of the following is not a reason for a business combination to take place?
e) FTC regulations require similar companies to combine whenever possible.
According to SFAS 141R, a business combination is a transaction or other event in which,
d) an acquirer obtains control of one or more businesses
In the acquisition method, contingent consideration obligations are considered
b) a negotiated component of the fair value consideration transferred
When a bargain purchase occurs and the net amount of the fair values of the separately identified assets and liabilities acquired exceed the fair value of the consideration transferred:
b) a gain on bargain purchase is recognized at the acquisition date
Powell Company buys all of the outstanding common shares of South Bay Co. on Jan 1, 2009, for 1,500,000. If a contingent cash payment is a portion of the negotiated fair value of this acquisition, how will changes in the revaluation of the contingent performance payment affect the future finanacial statements
c) Change from the revaluation are reported as prior period adjustments and affect retained earnings
Some Subsidiaries already have goodwill oin their books when they are acquired by a parent company. This preexisting Goodwill
d)Should be capitalized in the case of a bargain purchase
Many Aquired companies have significant research and development (R&D) projects ongoing. This in-process R&D
d) Should be recognized as an asset
Which of the following is the best theoretical justification for consolidated financial statements?
b)In form the companies are separate; in substance they are one entity
The worksheet that is sed to consolidate the information for the parent and the subsidiary when both companies maintain thier individual incorporation and records
e) is prepared in order to develop the figures necessary for the consolidated financial statements
When a dissolution takes place,
b) all account balances are physically consolidated in the parent companies records
In chapters 2 and 3, the authors focus exclusivelt on combinations
e) that result in complete ownership by the acquirer
Which one of the following accounts would not appear on the consolidated financial statements at the end of the first fiscal period of the combination
c) Investment in Sub'y
Which of the following internal record-keeping methods can a parent choose to account for its investment in a sub'y
c) initial value, equity, or partial equity
For the consolidating worksheet for a parent company and a sub'y acquired at the beginning of the current year
e)no amortization of the excess of fair value over book value is ever necessary
How does the partial equity method differ from the equity method?
e) under the partial equity method, the balance in the investment account is not decreased by the amortization of the excess of acquisition fair value over book value of specific assets and liabilities
Under the initial value method, when accounting for an investment in a sub'y
a) dividends received from the sub'y decrease the investment account
According to SFAS 142, which of the following statements is true?
b) goodwill recognized in consolidation must be expensed in the period of aquisition
one company acquires another company in a combination accounted for as an acquisition. The parent company decides to apply the initial value method in accounting for the combination. What is one reason the acquiring company might have made this decision?
b) it is relatively easy to apply during the year
Which one of the following is not a category of intangible assets?
e) Customer-related intangible assets
Which one of the following varies depending on the internal record-keeping method the parent chooses to use for its investment in the sub'y
a) the amount of consolidated net income
Direct combination costs and stock issuance costs are often incurred in the process of making a controlling investment in another company. How should those costs be accounted for in an acquisition transaction?
Combination or prof costs - Increase the Investment
Stock issuance costs - Decrease paid- in capital
Under the equity method of accounting for an investment
d) income reported by the sub'y increases the investment account
The first worksheet entry, called c*, is needed to adjust the investment in sub'y account:
d) In the second and later years when the parent company uses either the initial value or partial equity method
If the book values and fair values of all sub' net assets are equal: (NOT SURE)
d) there is no difference between the initial value method and the equity methods in the second and subsequent years