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Exam 1: Intercorporate Acquisitions and Investments in Other Entities

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Question 31

Multiple Choice

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ASC 805 requires contingent consideration in a business combination to be classified as:

A) An asset
B) A liability or equity
C) An asset or equity
D) An asset or a liability

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

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Question 32

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Simmons Corporation paid $170,000 to acquire all of Bush Company's net assets.Bush reported assets with a book value of $189,000 and a fair value of $206,000 and liabilities with a book value and fair value of $48,000 on the date of the combination.Simmons also paid $8,000 to a search firm for finder's fees related to the acquisition.What amount will be recorded as goodwill by Simmons Corporation when recording its investment in Bush?

A) $29,000
B) $20,000
C) $12,000
D) $10,000

E) None of the above
F) All of the above

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Question 33

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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?

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 amount of goodwill impairment will be recognized for this division if its fair value is determined to be $245,000?

Nash Company acquired Seel Corporation through an exchange of common shares.All of Seel's assets and liabilities were immediately transferred to Nash.Nash's common stock was trading at $25 per share at the time of the exchange.The total par value of Nash's stock outstanding before and after the acquisition was $750,000 and $840,000,respectively.Nash's additional paid-in capital before and after the acquisition were $200,000 and $560,000,respectively. -Based on the preceding information,what is the fair value of Seel's net assets if goodwill of $20,000 is recorded in the acquisition?

On January 1,20X8,Alaska Corporation acquired Mercantile Corporation's net assets by paying $160,000 cash.Balance sheet data for the two companies and fair value information for Mercantile Corporation immediately before the business combination are given below: Required: Prepare the journal entry to record the acquisition of Mercantile Corporation.

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?

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

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

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?

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 impairment will be recognized for this division if its fair value is determined to be $195,000?

Assuming no impairment in value prior to transfer,assets transferred by a parent company to another entity it has created should be recorded by the newly created entity at the assets':

At its inception,Peacock Company purchased land for $50,000 and a building for $220,000.After exactly 4 years,it transferred these assets and cash of $75,000 to a newly created subsidiary,Selvick Company,in exchange for 25,000 shares of Selvick's $5 par value stock.Peacock uses straight-line depreciation.When purchased,the building had a useful life of 20 years with no expected salvage value.An appraisal at the time of the transfer revealed that the building has a fair value of $250,000. -Based on the preceding information,Selvick Company will report additional paid-in capital of

The length of the measurement period allowed to value the assets and liabilities in an acquired business combination starts on the date of acquisition and lasts until:

For all acquired contingencies,the acquirer should do all of the following except:

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 par value of Public's common stock?