Chapter 5 Quiz 5 ACC 401

Question 1

0 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

Swimmer Co. Fair Values

Cash $ 24,000 $206,000 $206,000

Accounts receivable 144,000 26,000 26,000

Inventory 132,000 38,000 60,000

Land 78,000 32,000 60,000

Plant assets 700,000 300,000 350,000

Acc. depreciation (240,000) (60,000)

Investment in Swimmer Co. 440,000

Total assets $1,278,000 $542,000 $702,000

Accounts payable $206,000 $142,000 $142,000

Capital stock 800,000 300,000

Retained earnings 272,000 100,000

Total liabilities & equities $1,278,000 $542,000

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

Answer

Selected Answer:

$86,667.

Correct Answer:

$26,667.

Question 2

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.

Question 3

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 4

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

Swimmer Co. Fair Values

Cash $ 24,000 $206,000 $206,000

Accounts receivable 144,000 26,000 26,000

Inventory 132,000 38,000 60,000

Land 78,000 32,000 60,000

Plant assets 700,000 300,000 350,000

Acc. depreciation (240,000) (60,000)

Investment in Swimmer Co. 440,000

Total assets $1,278,000 $542,000 $702,000

Accounts payable $206,000 $142,000 $142,000

Capital stock 800,000 300,000

Retained earnings 272,000 100,000

Total liabilities & equities $1,278,000 $542,000

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

Answer

Selected Answer:

$192,000.

Correct Answer:

$192,000.

Question 5

2 out of 2 points

Dividends declared by a subsidiary are eliminated against dividend income recorded by the parent under the

Answer

Selected Answer:

cost method.

Correct Answer:

cost method.

Question 6

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 7

0 out of 2 points

On November 30, 2010, Pulse 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, 2010, showed a book value of $8,000,000. Additionally, the fair value of Surge's property, plant, and equipment on November 30, 2010, 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, 2010, consolidated balance sheet of Pulse Incorporated, and its wholly owned subsidiary, Surge Company?

Answer

Selected Answer:

$0.

Correct Answer:

$800,000.

Question 8

2 out of 2 points

The SEC requires the use of push down accounting when the ownership change is greater than

Answer

Selected Answer:

95%

Correct Answer:

95%

Question 9

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 10

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

Swimmer Co. Fair Values

Cash $ 24,000 $206,000 $206,000

Accounts receivable 144,000 26,000 26,000

Inventory 132,000 38,000 60,000

Land 78,000 32,000 60,000

Plant assets 700,000 300,000 350,000

Acc. depreciation (240,000) (60,000)

Investment in Swimmer Co. 440,000

Total assets $1,278,000 $542,000 $702,000

Accounts payable $206,000 $142,000 $142,000

Capital stock 800,000 300,000

Retained earnings 272,000 100,000

Total liabilities & equities $1,278,000 $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 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

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 14

2 out of 2 points

Under push down accounting, the workpaper entry to eliminate the investment account includes a

Answer

Selected Answer:

debit to Revaluation Capital.

Correct Answer:

debit to Revaluation Capital.

Question 15

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

Saturn Co. Fair Values

Cash $ 18,000 $155,000 $155,000

Accounts receivable 108,000 20,000 20,000

Inventory 99,000 26,000 45,000

Land 60,000 24,000 45,000

Plant assets 525,000 225,000 300,000

Acc. depreciation (180,000) (45,000)

Investment in Saturn Co. 330,000 _______ _______

Total assets $960,000 $405,000 $565,000

Accounts payable $156,000 $105,000 $105,000

Capital stock 600,000 225,000

Retained earnings 204,000 75,000

Total liabilities & equities $960,000 $405,000

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

Saturday, November 17, 2012 3:52:33 PM EST