Test Bank for Advanced Accounting 11th Edition Hoyle, Schaefer, Doupnik
Test Bank for Advanced Accounting 11th Edition Hoyle, Schaefer,
... [Show More] Doupnik
Multiple Choice Questions
1. At the date of an acquisition which is not a bargain purchase, the acquisition method
A. consolidates the subsidiary's assets at fair value and the liabilities at book value.
B. consolidates all subsidiary assets and liabilities at
book value.
C. consolidates all subsidiary assets and liabilities at fair value.
D. consolidates current assets and liabilities at book value, long-term
assets and liabilities at fair value.
E. consolidates the subsidiary's assets at book value and the liabilities at fair value.
2. In an acquisition where control is achieved, how would the land accounts of the parent and the land accounts of the subsidiary be combined?
A. Option A
B. Option
B
C. Option C
D. Option
D
E. Option E
3. Lisa Co. paid cash for all of the voting common stock of Victoria Corp. Victoria will continue to exist as a separate corporation. Entries for the consolidation of Lisa and Victoria would be recorded in
A. a
worksheet.
B. Lisa's general journal.
C. Victoria's general
journal.
D. Victoria's secret consolidation journal.
E. the general journals of both
companies.
4. Using the acquisition method for a business combination, goodwill is generally defined as:
A. Cost of the investment less the subsidiary's book value at the beginning of the year.
B. Cost of the investment less the subsidiary's book value at the
acquisition date.
C. Cost of the investment less the subsidiary's fair value at the beginning of the year.
D. Cost of the investment less the subsidiary's fair value at
acquisition date.
E. is no longer allowed under federal law.
5. 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 a pre-2009 purchase transaction?
A. Option A
B. Option
B
C. Option C
D. Option
D
E. Option E
6. How are direct and indirect costs accounted for when applying the acquisition method for a business combination?
A. Option A
B. Option
B
C. Option C
D. Option
D
E. Option E
7. What is the primary accounting difference between accounting for when the subsidiary is dissolved and when the subsidiary retains its incorporation?
A. If the subsidiary is dissolved, it will not be operated as a separate division.
B. If the subsidiary is dissolved, assets and liabilities are consolidated
at their book values.
C. If the subsidiary retains its incorporation, there will be no goodwill associated with the acquisition.
D. If the subsidiary retains its incorporation, assets and liabilities are
consolidated at their book values.
E. If the subsidiary retains its incorporation, the consolidation is not formally recorded in the accounting records of the acquiring company.
8. According to GAAP, the pooling of interest method for business combinations
A. Is preferred to the purchase method.
B. Is allowed for all new
acquisitions.
C. Is no longer allowed for business combinations after June 30, 2001.
D. Is no longer allowed for business combinations after December
31, 2001.
E. Is only allowed for large corporate mergers like Exxon and Mobil.
9. An example of a difference in types of business combination is:
A. A statutory merger can only be effected by an asset acquisition while a statutory consolidation can only be effected by a capital stock acquisition.
B. A statutory merger can only be effected by a capital stock
acquisition while a statutory consolidation can only be effected by an asset acquisition.
C. A statutory merger requires dissolution of the acquired company
while a statutory consolidation does not require dissolution.
D. A statutory consolidation requires dissolution of the acquired company while a statutory merger does not require dissolution.
E. Both a statutory merger and a statutory consolidation can only be
effected by an asset acquisition but only a statutory consolidation requires dissolution of the acquired company.
10 Acquired in-process research and development is considered as
.
A. a definite-lived asset subject to amortization.
B. a definite-lived asset subject to testing for
impairment.
C. an indefinite-lived asset subject to amortization.
D. an indefinite-lived asset subject to testing for
impairment.
E. a research and development expense at the date of acquisition.
11 Which one of the following is a characteristic of a business combination
. accounted for as an acquisition?
A. The combination must involve the exchange of equity securities only.
B. The transaction establishes an acquisition fair value basis for the
company being acquired.
C. The two companies may be about the same size, and it is difficult to determine the acquired company and the acquiring company.
D. The transaction may be considered to be the uniting of the
ownership interests of the companies involved.
E. The acquired subsidiary must be smaller in size than the acquiring parent.
12 Which one of the following is a characteristic of a business combination
. that is accounted for as an acquisition?
A. Fair value only for items received by the acquirer can enter into the determination of the acquirer's accounting valuation of the acquired company.
B. Fair value only for the consideration transferred by the acquirer can
enter into the determination of the acquirer's accounting valuation of the acquired company.
C. Fair value for the consideration transferred by the acquirer as well as
the fair value of items received by the acquirer can enter into the determination of the acquirer's accounting valuation of the acquired company.
D. Fair value for only consideration transferred and identifiable assets
received by the acquirer can enter into the determination of the acquirer's accounting valuation of the acquired company.
E. Only fair value of identifiable assets received enters into the
determination of the acquirer's accounting valuation of the acquired company.
13 A statutory merger is a(n)
.
A. business combination in which only one of the two companies continues to exist as a legal corporation.
B. business combination in which both companies continues
to exist.
C. acquisition of a competitor.
D. acquisition of a supplier or a
customer.
E. legal proposal to acquire outstanding shares of the target's stock.
14 How are stock issuance costs and direct combination costs treated in a
. business combination which is accounted for as an acquisition when the subsidiary will retain its incorporation?
A. Stock issuance costs are a part of the acquisition costs, and the direct combination costs are expensed.
B. Direct combination costs are a part of the acquisition costs, and the
stock issuance costs are a reduction to additional paid-in capital.
C. Direct combination costs are expensed and stock issuance costs are a reduction to additional paid-in capital.
D. Both are treated as part of the acquisition consideration
transferred.
E. Both are treated as a reduction to additional paid-in capital.
15 Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on
. January 1, 20X1. The book value and fair value of Vicker's accounts on that date (prior to creating the combination) follow, along with the book value of Bullen's accounts:
Assume that Bullen issued 12,000 shares of common stock with a $5 par value and a $47 fair value to obtain all of Vicker's outstanding stock. In this acquisition transaction, how much goodwill should be recognized?
A. $144,00 0.
B. $104,00
0.
C. $64,00 0.
D. $60,00
0.
E. $0
.
16 Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on
. January 1, 20X1. The book value and fair value of Vicker's accounts on that date (prior to creating the combination) follow, along with the book value of Bullen's accounts:
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 stock of Vicker. What is the consolidated balance for Land as a result of this acquisition transaction?
A. $460,00 0.
B. $510,00
0.
C. $500,00 0.
D. $520,00
0.
E. $490,00 0.
17 Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on
. January 1, 20X1. The book value and fair value of Vicker's accounts on that date (prior to creating the combination) follow, along with the book value of Bullen's accounts:
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 acquisition transaction?
A. $60,000 and
$490,000.
B. $60,000 and
$250,000.
C. $380,000 and
$250,000.
D. $464,000 and
$250,000.
E. $464,000 and
$420,000.
18 Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on
. January 1, 20X1. The book value and fair value of Vicker's accounts on that date (prior to creating the combination) follow, along with the book value ofBullen's accounts:
Assume that Bullen issued preferred stock with a par value of $240,000 and a fair value of $500,000 for all of the outstanding shares of Vicker in an acquisition business combination. What will be the balance in the consolidated Inventory and Land accounts?
A. $440,000,
$496,000. B. $440,000,
$520,000. C. $425,000,
$505,000. D. $400,000,
$500,000. E. $427,000,
$510,000.
19 Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on
. January 1, 20X1. The book value and fair value of Vicker's accounts on that date (prior to creating the combination) follow, along with the book value of Bullen's accounts:
Assume that Bullen paid a total of $480,000 in cash for all of the shares of Vicker. In addition, Bullen paid $35,000 for secretarial and management time allocated to the acquisition transaction. What will be the balance in consolidated goodwill?
A. $0
.
B. $20,00 0.
C. $35,00
0.
D. $55,00 0.
E. $65,00
0.
20 Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on
. January 1, 20X1. The book value and fair value of Vicker's accounts on that date (prior to creating the combination) follow, along with the book value of Bullen's accounts:
Assume that Bullen paid a total of $480,000 in cash for all of the shares of Vicker. In addition, Bullen paid $35,000 to a group of attorneys for their work in arranging the combination to be accounted for as an acquisition. What will be the balance in consolidated goodwill?
A. $0
.
B. $20,00 0.
C. $35,00
0.
D. $55,00 0.
E. $65,00
0
21 Prior to being united in a business combination, Botkins Inc. and
. Volkerson Corp. had the following stockholders' equity figures: [Show Less]