Question 1 2 out of 2 points Goodwill represents the excess of the implied value of an acquired company over the Answer

Selected Answer: aggregate fair values of identifiable assets less liabilities assumed. Correct Answer: aggregate fair values of identifiable assets less liabilities assumed. Question 2 2 out of 2 points On January 1, 2010, Pandora Company purchased 75% of the common stock of Saturn Company. Separate balance sheet data for the companies at the combination date are given below: Pandora Co. Saturn Co. Book Values $155,000 20,000 26,000 24,000 225,000 (45,000) _______ $405,000 $105,000 225,000 _______ $565,000 $105,000 Saturn Co. Fair Values $155,000 20,000 45,000 45,000 300,000

Cash Accounts receivable Inventory Land Plant assets Acc. depreciation Investment in Saturn Co. Total assets Accounts payable Capital stock

$ 18,000 108,000 99,000 60,000 525,000 (180,000) 330,000 $960,000 $156,000 600,000

Retained earnings Total liabilities & equities

204,000 $960,000

75,000 $405,000

Determine what the consolidated balance would be for inventory on January 2, 2010. Answer Selected Answer: $144,000 Correct Answer: $144,000 Question 3 2 out of 2 points On January 1, 2010, Poole Company purchased 75% of the common stock of Swimmer Company. Separate balance sheet data for the companies at the combination date are given below: Poole Co. Swimmer Co. Book Values $206,000 26,000 38,000 32,000 300,000 (60,000) Swimmer Co. Fair Values $206,000 26,000 60,000 60,000 350,000

Cash Accounts receivable Inventory Land Plant assets Acc. depreciation Investment in Swimmer Co. Total assets Accounts payable

$ 24,000 144,000 132,000 78,000 700,000 (240,000) 440,000 $1,278,000 $206,000

$542,000 $142,000

$702,000 $142,000

Capital stock Retained earnings Total liabilities & equities

800,000 272,000 $1,278,000

300,000 100,000 $542,000

Determine what the consolidated balance would be for total assets on January 2, 2010. Answer Selected Answer: $1,566,667 Correct Answer: $1,566,667 Question 4 2 out of 2 points Porter Company acquired an 80% interest in Strumble Company on January 1, 2010, for $270,000 cash when Strumble Company had common stock of $150,000 and retained earnings of $150,000. All excess was attributable to plant assets with a 10-year life. Strumble Company made $30,000 in 2010 and paid no dividends. Porter Company s separate income in 2010 was $375,000. Controlling interest in consolidated net income for 2010 is: Answer Selected Answer: $396,000. Correct Answer: $396,000. Question 5 2 out of 2 points Long-term debt and other obligations of an acquired company should be valued for

consolidation purposes at their Answer Selected Answer: fair value. Correct Answer: fair value. Question 6 2 out of 2 points On January 1, 2010, Lester Company purchased 70% of Stork Corporation's $5 par common stock for $600,000. The book value of Stork net assets was $640,000 at that time. The fair value of Stork's identifiable net assets were the same as their book value except for equipment that was $40,000 in excess of the book value. In the January 1, 2010, consolidated balance sheet, goodwill would be reported at Answer Selected Answer: $177,143. Correct Answer: $177,143. Question 7 2 out of 2 points Primer Company acquired an 80% interest in SealCoat Company on January 1, 2010, for $450,000 cash when SealCoat Company had common stock of $250,000 and retained earnings of $250,000. All excess was attributable to plant assets with a 10-year life. SealCoat Company made $50,000 in 2010 and paid no dividends. Primer Company s separate income in 2010 was $625,000. The controlling interest in consolidated net income for 2010 is: Answer

Selected Answer: $660,000. Correct Answer: $660,000. Question 8 2 out of 2 points On January 1, 2010, Pandora Company purchased 75% of the common stock of Saturn Company. Separate balance sheet data for the companies at the combination date are given below: Pandora Co. Saturn Co. Book Values $155,000 20,000 26,000 24,000 225,000 (45,000) _______ $405,000 $105,000 225,000 75,000 $405,000 _______ $565,000 $105,000 Saturn Co. Fair Values $155,000 20,000 45,000 45,000 300,000

Cash Accounts receivable Inventory Land Plant assets Acc. depreciation Investment in Saturn Co. Total assets Accounts payable Capital stock Retained earnings Total liabilities & equities

$ 18,000 108,000 99,000 60,000 525,000 (180,000) 330,000 $960,000 $156,000 600,000 204,000 $960,000

Determine what the consolidated balance would be for total assets on January 2, 2010.

Answer Selected Answer: $1,195,000 Correct Answer: $1,195,000 Question 9 0 out of 2 points Dividends declared by a subsidiary are eliminated against dividend income recorded by the parent under the Answer Selected Answer: partial equity method. Correct Answer: cost method. Question 10 2 out of 2 points In preparing consolidated working papers, beginning retained earnings of the parent company will be adjusted in years subsequent to acquisition with an elimination entry whenever: Answer Selected Answer: it does not reflect the equity method. Correct Answer: it does not reflect the equity method.

Question 11 2 out of 2 points If the fair value of the subsidiary's identifiable net assets exceeds both the book value and the value implied by the purchase price, the workpaper entry to eliminate the investment account Answer Selected Answer: debits Difference Between Implied and Book Value. Correct Answer: debits Difference Between Implied and Book Value. Question 12 2 out of 2 points Scooter Company, a 70%-owned subsidiary of Pusher Corporation, reported net income of $240,000 and paid dividends totaling $90,000 during Year 3. Year 3 amortization of differences between current fair values and carrying amounts of Scooter's identifiable net assets at the date of the business combination was $45,000. The noncontrolling interest in net income of Scooter for Year 3 was Answer Selected Answer: $58,500. Correct Answer: $58,500. Question 13 2 out of 2 points When the implied value exceeds the aggregate fair values of identifiable net assets, the residual difference is accounted for as

Answer Selected Answer: goodwill. Correct Answer: goodwill. Question 14 2 out of 2 points On January 1, 2010, Pandora Company purchased 75% of the common stock of Saturn Company. Separate balance sheet data for the companies at the combination date are given below: Pandora Co. Saturn Co. Book Values $155,000 20,000 26,000 24,000 225,000 (45,000) _______ $405,000 $105,000 225,000 75,000 $405,000 _______ $565,000 $105,000 Saturn Co. Fair Values $155,000 20,000 45,000 45,000 300,000

Cash Accounts receivable Inventory Land Plant assets Acc. depreciation Investment in Saturn Co. Total assets Accounts payable Capital stock Retained earnings Total liabilities & equities

$ 18,000 108,000 99,000 60,000 525,000 (180,000) 330,000 $960,000 $156,000 600,000 204,000 $960,000

Determine what the consolidated balance would be for goodwill on January 2, 2010. Answer Selected Answer: $0 Correct Answer: $0 Question 15 2 out of 2 points In a business combination accounted for as an acquisition, how should the excess of fair value of identifiable net assets acquired over implied value be treated? Answer Selected Answer: Recognized as an ordinary gain in the year of acquisition. Correct Answer: Recognized as an ordinary gain in the year of acquisition. Saturday, February 11, 2012 8:41:55 AM EST