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Exam 1: Intercorporate Acquisitions and Investments in Other Entities

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Question 1

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Public Equity Corporation acquired Lenore Company through an exchange of common shares.All of Lenore's assets and liabilities were immediately transferred to Public Equity.Public's common stock was trading at $20 per share at the time of exchange.Following selected information is also available. -Based on the preceding information,what is the fair value of Lenore's net assets,if goodwill of $56,000 is recorded?

A) $306,000
B) $244,000
C) $194,000
D) $300,000

E) All of the above
F) B) and C)

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Question 2

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FASB 141R (ASC 805) requires that ongoing research and development projects be treated in all of the following ways except:

A) Recorded at acquisition-date fair values
B) Classified as intangible assets having indefinite lives
C) Expensed immediately
D) Tested for impairment periodically

E) All of the above
F) A) and C)

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Question 3

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Pursuing an inorganic growth strategy,Wilson Company acquired Venus Company's net assets and assigned them to four separate reporting divisions.Wilson assigned total goodwill of $134,000 to the four reporting divisions as given below: -Based on the preceding information,for Gamma:

Paul Corp.acquired 100 percent of Sam Inc.'s voting stock on July 1,20X1.The following information was available as of December 31,20X1: How much net income should be reported in Paul Corp's income statement for 20X1?

Burrough Corporation paid $80,000 to acquire all of Helyar Company's net assets.Helyar reported assets with a book value of $60,000 and fair value of $98,000 and liabilities with a book value and fair value of $23,000 on the date of combination.Burrough also paid $3,000 to a search firm for finder's fees related to the acquisition.What amount will be recorded as goodwill by Burrough Corporation while recording its investment in Helyar?

Pursuing an inorganic growth strategy,Wilson Company acquired Venus Company's net assets and assigned them to four separate reporting divisions.Wilson assigned total goodwill of $134,000 to the four reporting divisions as given below: -Based on the preceding information,what amount of goodwill will be reported for Alpha at year-end?

Plummet Corporation reported the book value of its net assets at $400,000 when Zenith Corporation acquired 100 percent ownership.The fair value of Plummet's net assets was determined to be $510,000 on that date. -Based on the preceding information,what amount of goodwill will be reported in consolidated financial statements presented immediately following the combination if Zenith paid $550,000 for the acquisition?

In order to reduce the risk associated with a new line of business,Conservative Corporation established Spin Company as a wholly owned subsidiary.It transferred assets and accounts payable to Spin in exchange for its common stock.Spin recorded the following entry when the transaction occurred: -Based on the preceding information,what number of shares of $7 par value stock did Spin issue to Conservative?

Following its acquisition of the net assets of Dan Company,Empire Company assigned goodwill of $60,000 to one of the reporting divisions.Information for this division follows: -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?

Given the increased development of complex business structures,which of the following regulators is responsible for the continued usefulness of accounting reports?

During its inception,Devon Company purchased land for $100,000 and a building for $180,000.After exactly 3 years,it transferred these assets and cash of $50,000 to a newly created subsidiary,Regan Company,in exchange for 15,000 shares of Regan's $10 par value stock.Devon uses straight-line depreciation.Useful life for the building is 30 years,with zero residual value.An appraisal revealed that the building has a fair value of $200,000. -Based on the preceding information,Regan Company will report

Plummet Corporation reported the book value of its net assets at $400,000 when Zenith Corporation acquired 100 percent ownership.The fair value of Plummet's net assets was determined to be $510,000 on that date. -Based on the preceding information,what amount of goodwill will be reported in consolidated financial statements presented immediately following the combination if Zenith paid $500,000 for the acquisition?

Pursuing an inorganic growth strategy,Wilson Company acquired Venus Company's net assets and assigned them to four separate reporting divisions.Wilson assigned total goodwill of $134,000 to the four reporting divisions as given below: -Based on the preceding information,for Delta:

FASB 141R (ASC 805) requires contingent consideration in a business combination to be classified as:

On January 1,20X8,Line Corporation acquired all of the common stock of Staff Company for $300,000.On that date,Staff's identifiable net assets had a fair value of $250,000.The assets acquired in the purchase of Staff are considered to be a separate reporting unit of Line Corporation.The carrying value of Staff's investment at December 31,20X8,is $310,000.The fair value of the net assets (excluding goodwill)at that date is $220,000 and the fair value of the reporting unit is determined to be 260,000. Required: 1)Explain how goodwill is tested for impairment for a reporting unit. 2)Determine the amount,if any,of impairment loss to be recognized at December 31,20X8.

Pursuing an inorganic growth strategy,Wilson Company acquired Venus Company's net assets and assigned them to four separate reporting divisions.Wilson assigned total goodwill of $134,000 to the four reporting divisions as given below: -Based on the preceding information,what would be the total amount of goodwill that Wilson should report at year-end?

Which of the following observations is (are) consistent with the acquisition method of accounting for business combinations? I.Expenses related to the business combination are expensed. II.Stock issue costs are treated as a reduction in the issue price. III.All merger and stock issue costs are expensed. IV.No goodwill is ever recorded.

Plummet Corporation reported the book value of its net assets at $400,000 when Zenith Corporation acquired 100 percent ownership.The fair value of Plummet's net assets was determined to be $510,000 on that date. -Based on the preceding information,what amount will be recorded by Zenith as its investment in Plummet,if it paid $500,000 for the acquisition?

Big Company acquired the following assets and liabilities of Little Company (fair values listed below) for $470,000 cash. Assuming these items are all recorded at their acquisition date fair values,what additional item needs to be recorded and how will it be accounted for in the future?

Using the preceding information,what amount would have been expensed if the pooling-of-interests method of accounting was used?