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Question :
(TCO 1) Which of the following results in a decrease in the Equity in Investee Income account when applying the equity method?
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False
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2. Question : Student Answer:
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(TCO 1) Which of the following results in an increase in the investment account when applying the equity method?
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10
False
0
3. Question : Student Answer:
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10
(TCO 1) All of the following statements regarding the investment account using the equity method are true except
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15
True
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4. Question : Student Answer:
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15
(TCO 1) After allocating cost in excess of book value, which asset or liability would not be amortized over a useful life?
Patents
Goodwill
Bonds payable
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16
True
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5. Question : Student Answer:
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The statement permits all entities to choose to measure eligible items at fair value at specified dates (159 pg 2)
the fair value option may be applied instrument by instrument with a few exceptions (159 pg 2)
2 of 2 Good.
1.
Question :
(TCO 2) In a transaction accounted for using the purchase method where cost exceeds book value, which statement is true for the acquiring company with regard to its investment?
Student Answer: Net assets of the acquired company are revalued to their fair values and any excess of cost over fair value is allocated to goodwill
Net assets of the acquired company are maintained at book value and any excess of cost over book value is allocated to goodwill
Assets are revalued to their fair values. Liabilities are maintained at book values. Any excess is allocated to goodwill
Long-term assets are revalued to their fair values. Any excess is allocated to goodwill
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MultipleChoice
11
True
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2. Question :
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(TCO 2)
MultipleChoice
11
Bullen Inc. assumed 100% control over Vicker Inc. on January 1, 20x1. The book value and fair value of Vickers accounts on that date (prior to creating the combination) follow, along with the book value of Bullens accounts: Bullen Book Value Retained Earnings, 1/1/x1 Cash receivables Inventory Land Buildings (net) Equipment (net) Liabilities Common Stock Additional paid-in capital 160,000 170,000 230,000 280,000 480,000 120,000 650,000 360,000 20,000 Vicker Book Value 240,000 70,000 170,000 220,000 240,000 90,000 430,000 80,000 40,000 70,000 210,000 240,000 270,000 90,000 420,000 Vicker Fair Value
Assume that Bullen issued 12,000 shares of common stock with a $5 par value and a $42 fair value for all of the outstanding shares of Vicker. What will be the consolidated Additional Paid-In Capital and Retained Earnings (January 1, 20X1 balances) as a result of this transaction (which is not a pooling of interests)?
Student Answer: $20,000 and $160,000
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False
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3. Question :
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(TCO 2) Chapel Hill Company had common stock of $350,000 and retained earnings of $490,000. Blue Town Inc. had common stock of $700,000 and retained earnings of $980,000. On January 1, 2009, Blue Town issued 34,000 shares of common stock with a $12 par value and a $35 fair value for all of Chapel Hill Company's outstanding common stock. This combination was accounted for as an acquisition. Immediately after the combination, what was the consolidated net assets?
$1,190,000
$1,680,000
$2,870,000
$2,030,000
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10
True
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4. Question : Student Answer:
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The original companies dissolve while remaining as separate divisions of a newly created company
Both companies remain in existence as legal corporations with one corporation now a subsidiary of the acquiring company
The acquired company dissolves as a separate corporation and becomes a division of the acquiring company
The acquiring company acquires the stock of the acquired company as an investment
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12
True
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5. Question : Student Answer:
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12
(TCO 2) According to FAS 141R (FASB, 2008), the new statement requires
acquisition related costs to be recognized separately from the acquisition. Restructuring costs that the acquirer expected but was not obligated to incur are recognized as if they were a liability assumed at the acquisition date
the acquirer to recognize goodwill as the excess of the consideration transferred plus the fair value of any noncontrolling interest in the acquiree at the acquisition date over the fair values of the identifiable net assets acquired.
recognition of assets and liabilities arising from contractual contingencies as of the acquisition date.
recognition of the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date.
1.
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2. Question :
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(TCO 3) Red Co. acquired 100% of Green, Inc. on October 1, 2009. On January 1, Green had inventory with a book value of $42,000 and a fair value of $52,000. This inventory had not yet been sold at December 31, 2009. Green had a building with a book value of $200,000 and a fair value of $390,000. Green had equipment with a book value of $350,000 and a fair value of $280,000. The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life. How much amortization expense will be on the consolidated financial statements for the year ended on December 31, 2009 related to the acquisition of Green?
$33,000
$5,000
$15,000
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10
True
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3. Question :
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(TCO 3) One company acquires another company in a combination accounted for as an acquisition. The acquiring 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?
It is the only internal reporting method allowed by generally accepted accounting principles
When the initial method is used, no worksheet entries are required in the consolidation process
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4. Question : Student Answer:
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Push-down proponents argue that a change in ownership creates a new basis for subsidiary assets and liabilities
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5. Question :
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(TCO 3) Match the following method, entry type, and year designation with what needs to be accomplished according to the interactive lecture this week 1 : Beginning SH equity of sub is eliminated against book value portion of investment account 4 : Unamortized cost at beginning of year is allocated to specific accounts and goodwill
Student Answer:
1
: Equity, S entry, During current year
4
: Initial Value, A entry, During
subsequent year
3
: Partial Equity, *C entry, During current year
3 : No entry required
2
: Partial Equity, P entry, During current year Instructor Explanation: Try this interactive lecture
Points Received:
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1.
Question :
(TCO 3) With regard to the intercompany sale, which of the following choices would be a debit entry in the consolidated worksheet for 2009?
Inventory
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2. Question : Student Answer:
MultipleChoice
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(TCO 3) Which of the following statements is true regarding an intercompany sale of land?
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(TCO 3) What would differ between a statement of cash flows for a consolidated company and an unconsolidated company using the indirect method?
Proceeds from the sale of long-term investments would be added to investing activities
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26
True
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4. Question :
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(TCO 3) On January 1, 2009, Cocker issued 10,000 additional shares of common stock for $35 per share. Popper acquired 8,000 of these shares. How would this transaction affect the additional paid-in capital of the parent company?
Increase it by $16,800
$0
Increase it by $280,000
Increase it by $593,600
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5. Question : Student Answer:
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(TCO 3) How do intercompany sales of inventory affect the preparation of a consolidated statement of cash flows?
Because the consolidated balance sheet and income statement are used in preparing the consolidated statement of cash flows, no special elimination is required
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Student Answer: The investment account remains at initial value Dividends received are recorded as revenue Goodwill is amortized over 20 years Correct Asnwer: Income reported by the subsidiary increases the investment account Dividends received increase the investment account
2.Question :(TCO 3) Melvin Company applies the equity method to account for its investment in Lang Company. Lang reports income in excess of an extraordinary loss in 2009. Melvin acknowledges that it must separately disclose the extraordinary loss in consolidated financial statements. What entry would be made by Melvin Company to record Lang's results? Student Answer: A above B above C above D above E above
3.Question :(TCO 3) Which of the following statements is false regarding push-down accounting?
Student Answer: Push-down accounting simplifies the consolidation process Fewer worksheet entries are necessary when push-down accounting is applied Push-down accounting provides better information for internal evaluation Correct Answer: Push-down accounting must be applied for combinations under a pooling of interests Push-down proponents argue that a change in ownership creates a new basis for subsidiary assets and liabilities Points Received:0 of 2 Comments:
4.Question :(TCO 3) Hoyt Corporation agreed to the following terms in order to acquire the net assets of Brown Company on January 1, 2009: (1.) To issue 400 shares of common stock ($10 par) with a fair value of $45 per share. (2.) To assume Brown's liabilities which have a fair value of $1,500. On the date of acquisition, the consideration transferred for Hoyt's acquisition of Brown would be
5.Question :(TCO 3) Match the following method, entry type, and year designation with what needs to be accomplished according to the interactive lecture this week
Student Answer: : Equity, S entry, During current year 1 : Beginning SH equity of sub is eliminated against book value portion of investment account : Initial Value, A entry, During subsequent year 4 : Unamortized cost at beginning of year is allocated to specific accounts and goodwill : Partial Equity, *C entry, During current year 3 : No entry required : Partial Equity, P entry, During current year 2 : Intercompany payable/receivable balances are offset Instructor Explanation: Try this interactive lecture Points Received:2 of 2
Question :(TCO 3) With regard to the intercompany sale, which of the following choices would be a debit entry in the consolidated worksheet for 2009?
Student Answer: Retained earnings Correct Answer: Cost of goods sold Inventory Investment Strickland Company Additional paid-in capital
2.Question :(TCO 3) Which of the following statements is true regarding an intercompany sale of land? Student Answer: A loss is always recognized but a gain is eliminated on a consolidated income statement Correct Answer: A loss and a gain are always eliminated on a consolidated income statement A loss and a gain are always recognized on a consolidated income statement A gain is always recognized but a loss is eliminated on a consolidated income statement A gain or loss is eliminated by adjusting stockholders' equity through comprehensive income Points Received:0 of 2 Comments:
3.Question :(TCO 3) What would differ between a statement of cash flows for a consolidated company and an unconsolidated company using the indirect method? Student Answer: Parent's dividends would be subtracted as a financing activity Gain on sale of land would be deducted from net income Non-controlling interest in net income of subsidiary would be added to net income Proceeds from the sale of long-term investments would be added to investing activities Loss on sale of equipment would be added to net income Points Received:2 of 2 Comments:
4.Question :(TCO 3) On January 1, 2009, Cocker issued 10,000 additional shares of common stock for $35 per share. Popper acquired 8,000 of these shares. How would this transaction affect the additional paid-in capital of the parent company? Student Answer: Increase it by $28,700
5.Question :(TCO 3) How do intercompany sales of inventory affect the preparation of a consolidated statement of cash flows? Correct Answer - Student Answer: They must be added in calculating cash flows from investing activities They must be deducted in calculating cash flows from investing activities They must be added in calculating cash flows from operating activities Because the consolidated balance sheet and income statement are used in preparing the consolidated statement of cash flows, no special elimination is required They must be deducted in calculating cash flows from operating activities
Points Received:2 of 2