pre finals- business combination
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1.P Company acquires 15% of S Company’s common stock for P600,000 cash and carries the
investment
using the cost model. A few months later, P Company purchases another 60% of S Company’s stock
for P2,592,000.
At that date, S Company reports identifiable assets with a book value of P4,680,000 and a fair value
of P6,120,000
and it has liabilities with a book value and fair value of P2,280,000. The fair value of the 25% non
controlling interest
in S Company is P1,080,000.
Compute the non controlling interest on acquisition , using (FULL) partial goodwill or proportionate
basis approach.
(5 Points)
960,000
1,080,000
480,000
360,000
2.WW Company obtains all of the outstanding stock of JJ, Inc, In a consolidation prepared
immediately after the
takeover, at what value will JJ’s inventory be consolidated?
(1 Point)
c. The inventory will be omitted in the consolidation.
d. At the acquisition- date fair value
b. A percentage of the acquisition cost paid by WW.
At JJ’s historical cost.
3.Dividends declared by a subsidiary are eliminated against dividend income recorded by the parent
under the:
(1 Point)
d) equity and partial equity methods.
c) cost method.
a) partial equity method.
b) equity method.
4.What is push-down accounting
(1 Point)
b. Inventory transfers made from a parent company to a subsidiary.
d. The adjustments required for consolidation When a parent has applied the equity method of
accounting for internal reporting purposes
A requirement that a subsidiary must use the same accounting principles as a parent company.
c. A subsidiary’s recording of the fair-value allocations as well as subsequent amortization.
5.At the date of an acquisition which is not a bargain purchase, the acquisition method
(1 Point)
c. Consolidates all subsidiary assets and liabilities at fair value d. Consolidates all subsidiary
assets and liabilities at fair valuee. Consolidates current assets and liabilities at book value,
long-term assets and liabilities at fair value ???
b. Consolidates all subsidiary assets and liabilities at book value
Consolidates the subsidiary's assets at fair value and the liabilities at book value
d. Consolidates all subsidiary assets and liabilities at fair value
6.Which of the following is the best theoretical justification for consolidated financial statements?
(1 Point)
d. In form and substance the companies are separate
b. In form the companies are separate: in substance they are one entity.
In form the companies are one entity: in substance they are separate.
c. In form and substance the companies arc one entity.
7.On January 1, 2016, 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, 2016, consolidated balance sheet, goodwill would be
reported at:
(5 Points)
b) $177,143.
d) $0.
a) $152,000.
c) $80,000.
8.P Company acquires 15% of S Company’s common stock for P600,000 cash and carries the
investment
using the cost model. A few months later, P Company purchases another 60% of S Company’s stock
for P2,592,000.
At that date, S Company reports identifiable assets with a book value of P4,680,000 and a fair value
of P6,120,000
and it has liabilities with a book value and fair value of P2,280,000. The fair value of the 25% non
controlling interest
in S Company is P1,080,000.
Compute the non controlling interest on acquisition , using partial goodwill or proportionate basis
approach.
(5 Points)
360,000
480,000
120,000
960,000
9.When the implied value exceeds the aggregate fair values of identifiable net assets, the residual
difference is accounted for as:
(1 Point)
d) goodwill.
c) difference between implied and fair value.
b) a deferred credit.
a) excess of implied over fair value.
10.Lisa Co. paid cash for all of the voting common stock of Victoria Corp. Victoria will continue to
exist a separate
corporation. Entries for the consolidation d of Victoria Lisa and is Victoria secret consolidation would
be
recorded journal in
(1 Point)
. A worksheet
c. Victoria’s general journal d. Victoria’s secret consolidation journale. The general journals of both
companies
b. Lisa's general journal
d. Victoria’s secret consolidation journal
11.Which of the following statements is correct?
(1 Point)
d. Consolidation is expected any time the investor holds significant influence over the investee.
b. Consolidated retained earnings do not include the non-controlling interest's claim on the
subsidiary's retained earnings.
c. The non-controlling shareholders' claim should be adjusted for changes in the fair value of the
subsidiary assets but should not include goodwill.
Foreign subsidiaries do not need to be consolidated if they are reported as a separate operating
group under segment reporting.
12.Goodwill represents the excess of the implied value of an acquired company over the:
(1 Point)
d) book value of an acquired company.
b) aggregate fair values of tangible assets less liabilities assumed.
c) aggregate fair values of intangible assets less liabilities assumed.
a) aggregate fair values of identifiable assets less liabilities assumed.
13.P Company acquires 15% of S Company’s common stock for P600,000 cash and carries the
investment
using the cost model. A few months later, P Company purchases another 60% of S Company’s stock
for P2,592,000.
At that date, S Company reports identifiable assets with a book value of P4,680,000 and a fair value
of P6,120,000
and it has liabilities with a book value and fair value of P2,280,000. The fair value of the 25% non
controlling interest
in S Company is P1,080,000.
1. Compute the amount of goodwill, using partial goodwill or proportionate basis approach.
(5 Points)
480,000
400,000
120,000
360,000
14.The entry to amortize the amount of difference between implied and book value allocated to an
unspecified intangible is recorded:
(1 Point)
b) on the parent's books.
d) on the parent's books and on the consolidated statements workpaper.
) on the subsidiary's books.
c) on the consolidated statements workpaper.
15.On November 30, 2016, Piani Incorporated purchased for cash of $25 per share all 400,000 shares
of the outstanding common stock of Surge Company. Surge 's balance sheet at November 30, 2016,
showed a book value of $8,000,000. Additionally, the fair value of Surge's property, plant, and
equipment on November 30, 2016, was $1,200,000 in excess of its book value. What amount, if any,
will be shown in the balance sheet caption "Goodwill" in the November 30, 2016, consolidated
balance sheet of Piani Incorporated, and its wholly owned subsidiary, Surge Company?
(5 Points)
b) $800,000.
d) $2,000,000.
c) $1,200,000.
a) $0.
16.P Company acquires 15% of S Company’s common stock for P600,000 cash and carries the
investment
using the cost model. A few months later, P Company purchases another 60% of S Company’s stock
for P2,592,000.
At that date, S Company reports identifiable assets with a book value of P4,680,000 and a fair value
of P6,120,000
and it has liabilities with a book value and fair value of P2,280,000. The fair value of the 25% non
controlling interest
in S Company is P1,080,000.
1. Compute the amount of goodwill, using full goodwill or fair value approach.
(5 Points)
480,000
350,000
120,000
360,000