Question 1 0 out of 2 points

The excess of the amount offered in an acquisition over the prior stock price of the acquired firm is the Answer Selected Answer: Correct Answer:

goodwill.

takeover premium.

Question 2 2 out of 2 points

According to the economic unit concept, the primary purpose of consolidated financial statements is to provide information that is relevant to Answer Selected Answer:

both majority and minority stockholders.

Correct Answer:

both majority and minority stockholders.

Question 3 2 out of 2 points

Estimated goodwill is determined by computing the present value of the Answer Selected Answer:

excess earnings.

Correct Answer:

excess earnings.

Question 4 2 out of 2 points

Which of the following situations best describes a business combination to be accounted for as a statutory merger? Answer Selected Answer:

Only one of the combining companies survives and the other loses its separate identity.

Correct Answer:

Only one of the combining companies survives and the other loses its separate identity.

Question 5 2 out of 2 points

When following the economic unit concept in the preparation of consolidated financial statements, the basis for valuing the noncontrolling interest in net assets is the Answer Selected Answer:

fair values of subsidiary assets and liabilities. Correct Answer:

fair values of subsidiary assets and liabilities.

Question 6 2 out of 2 points

Under the parent company concept, consolidated net income __________ the consolidated net income under the economic unit concept. Answer Selected Answer:

is the same as

Correct Answer:

is the same as

Question 7 2 out of 2 points

The difference between normal earnings and expected future earnings is Answer Selected Answer:

excess earnings.

Correct Answer:

excess earnings.

Question 8 2 out of 2 points

Under the economic unit concept, noncontrolling interest in net assets is treated as Answer Selected Answer:

stockholders' equity.

Correct Answer:

stockholders' equity.

Question 9 2 out of 2 points

A statutory ______________ results when one company acquires all the net assets of another company and the acquired company ceases to exist as a separate legal entity. Answer Selected Answer:

merg er.

Correct Answer:

merg er.

Question 10 2 out of 2 points

The view that the noncontrolling interest in income reflects the noncontrolling stockholders' allocated share of consolidated income is consistent with the Answer Selected Answer:

economic unit concept.

Correct Answer:

economic unit concept.

Question 11 2 out of 2 points

The first step in estimating goodwill in the excess earnings approach is to Answer Selected Answer:

identify a normal rate of return for similar firms.

Correct Answer:

identify a normal rate of return for similar firms.

Question 12 2 out of 2 points

Which of the following statements would not be a valid or logical reason for entering into a business combination? Answer Selected Answer:

the operating costs of the combined entity would be more than

the sum of the separate entities. Correct Answer:

the operating costs of the combined entity would be more than the sum of the separate entities.

Question 13 2 out of 2 points

The view that only the parent company's share of the unrealized intercompany profit recognized by the selling affiliate that remains in assets should be eliminated in the preparation of consolidated financial statements is consistent with the Answer Selected Answer:

parent company concept.

Correct Answer:

parent company concept.

Question 14 2 out of 2 points

The parent company concept adjusts subsidiary net asset values for the Answer Selected Answer:

differences between cost and book value.

Correct Answer:

differences between cost and

book value. Question 15 2 out of 2 points

When following the parent company concept in the preparation of consolidated financial statements, noncontrolling interest in combined income is considered a(n) Answer Selected Answer:

expense deducted from combined income to arrive at consolidated net income.

Correct Answer:

expense deducted from combined income to arrive at consolidated net income.

Question 16 2 out of 2 points

If an impairment loss is recorded on previously recognized goodwill due to the transitional goodwill impairment test, the loss should be treated as a(n): Answer Selected Answer:

loss from a change in accounting principles.

Correct Answer:

loss from a change in accounting principles.

Question 17 2 out of 2 points

The first step in determining goodwill impairment involves comparing the Answer Selected Answer:

fair value of a reporting unit to its carrying amount (goodwill included).

Correct Answer:

fair value of a reporting unit to its carrying amount (goodwill included).

Question 18 0 out of 2 points

In a business combination, which of the following costs are assigned to the valuation of the security? Professional or Security consulting fees issue costs a. b. c. d. Answer Selected Answer: Correct Answer: c Question 19 0 out of 2 points Yes Yes No No Yes No Yes No

In a business combination accounted for as an acquisition, how should the excess of fair value of net assets acquired over the consideration paid be treated? Answer Selected Answer:

Amortized as a credit to income over a period not to exceed forty years.

Correct Answer: Question 20 2 out of 2 points

Recorded as an ordinary gain.

Potter Corporation acquired Sims Company through an exchange of common shares. All of Sims assets and liabilities were immediately transferred to Potter. Potter Companys common stock was trading at $20 per share at the time of exchange. The following selected information is also available: Potter Company Before Acquisition After Acquisition Par value of shares outstanding Additional Paid in Capital $200,000 350,000 $250,000 550,000

What number of shares was issued at the time of the exchange? Answer Selected Answer:

12,5 00

Correct Answer:

12,5 00

Question 21 2 out of 2 points

In a business combination in which the total fair value of the identifiable assets acquired over liabilities assumed is greater than the consideration paid, the excess fair value is: Answer Selected Answer:

allocated first to eliminate any previously recorded goodwill, and any remaining excess over the consideration paid is classified as an ordinary gain.

Correct Answer:

allocated first to eliminate any previously recorded goodwill, and any remaining excess over the consideration paid is classified as an ordinary gain.

Question 22 2 out of 2 points

Following its acquisition of the net assets of Sandy Company, Potter Company assigned goodwill of $60,000 to one of the reporting divisions. Information for this division follows: Carrying Amount Cash Inventory Equipment Goodwill Accounts Payable $ 20,000 35,000 125,000 60,000 30,000 30,000 Fair Value $20,000 40,000 160,000

Based on the preceding information, what amount of goodwill will be reported for this division if its fair value is determined to be $200,000? Answer Selected Answer:

$10,0 00

Correct Answer:

$10,0 00

Question 23 2 out of 2 points

SFAS 141R requires that all business combinations be accounted for using Answer Selected Answer:

the acquisition method.

Correct Answer:

the acquisition method.

Question 24 2 out of 2 points

On February 5, Pryor Corporation paid $1,600,000 for all the issued and outstanding common stock of Shaw, Inc., in a transaction properly accounted for as an acquisition. The book values and fair values of Shaw's assets and liabilities on February 5 were as follows Book Value Fair Value Cash Receivables (net) Inventory Plant and equipment (net) Liabilities Net assets $ 160,000 180,000 315,000 820,000 (350,000) $ 160,000 180,000 300,000 920,000 (350,000)

$1.125.000 $1,210,000

What is the amount of goodwill resulting from the business combination? Answer Selected Answer:

$390,0 00.

Correct Answer:

$390,0 00.

Question 25 2 out of 2 points

The fair value of net identifiable assets of a reporting unit exclusive of goodwill of Y Company is $270,000. The carrying value of the reporting unit's net assets on Y Company's books is $320,000, including $50,000 goodwill. If the reported goodwill impairment for the unit is $10,000, what would be the fair value of the reporting unit? Answer

Selected Answer:

$310,0 00

Correct Answer:

$310,0 00

Question 26 2 out of 2 points

If the value implied by the purchase price of an acquired company exceeds the fair values of identifiable net assets, the excess should be Answer Selected Answer:

accounted for as goodwill.

Correct Answer:

accounted for as goodwill.

Question 27 2 out of 2 points

P Company acquires all of the voting stock of S Company for $930,000 cash. The book values of S Companys assets are $800,000, but the fair values are $840,000 because land has a fair value above its book value. Goodwill from the combination is computed as: Answer Selected Answer:

$90,00 0.

Correct Answer:

$90,00 0.

Question 28 0 out of 2 points

Under SFAS 141R, what value of the assets and liabilities are reflected in the financial statements on the acquisition date of a business combination? Answer Selected Answer:

Carrying value

Correct Answer: Question 29 2 out of 2 points

Fair value

The fair value of net identifiable assets exclusive of goodwill of a reporting unit of X Company is $300,000. On X Company's books, the carrying value of this reporting unit's net assets is $350,000, including $60,000 goodwill. If the fair value of the reporting unit is $335,000, what amount of goodwill impairment will be recognized for this unit? Answer Selected Answer:

$25,0 00

Correct Answer:

$25,0 00

Question 30 0 out of 2 points

In a period in which an impairment loss occurs, SFAS No. 142 requires each of the following note disclosures except Answer Selected Answer:

a description of the facts and circumstances leading to the impairment.

Correct Answer:

the amount of goodwill by reporting segment.

Friday, January 18, 2013 11:18:18 AM EST OK