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Test bank For Advanced Accounting Exam #1 - Chapters 1,2,3 (15th Edition by Joe Ben Hoyle)
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Test bank For Advanced Accounting Exam #1 - Chapters 1,2,3 (15th Edition by Joe Ben Hoyle)
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Test bank For Advanced AccountingExam #1 - Chapters 1,2,3 (15th Edition
by Joe Ben Hoyle)
Which one of the following accounts would not appear in the consolidated financial statements
at the end of the first fiscal period of the combination? - ANSInvestment in Subsidiary
Which one of the following varies between the equity, initial value, and partial equity methods of
accounting for an investment? - ANSThe Balance in the investment account on the parent's
books
Which is the following internal record-keeping methods can a parent choose to account for a
subsidiary acquired in a business combination? - ANSInitial value, equity, or partial equity
Which of the following is false regarding contingent consideration in business combinations? -
ANSContingent consideration is recorded because of it's substantial probability of eventual
payment
When is goodwill impairment loss recognized? - ANSIf both the fair value of a reporting unit and
its associated implied goodwill fall below their respective carrying values
Using the acquisition method for a business combination, goodwill is generally defined as: -
ANSCost of the investment less the subsidiary's fair value at acquisition date
At the date of an acquisition which is not a bargain purchase, the acquisition method -
ANSConsolidates all subsidiary assets and liabilities at fair value
Which of the following is not a reason for a business combination to take place? - ANSIncrease
in stock price of the acquired company
In a transaction accounted for using the acquisition method where consideration transferred
exceeds book value of the acquired company, which statement is true of the acquiring company
with regard to its investment? - ANSNet assets of the acquired company are revalued to their
fair values and any excess of consideration transferred over fair value of net assets acquired is
allocated to goodwill
In a transaction accounted for using the acquisition method where consideration transferred is
less than fair value of net assets acquired, which statement is true? - ANSNegative goodwill is
recorded
, In an acquisition where control is achieved, how would the land accounts of the parent and the
land accounts of the subsidiary be combined? - ANSParent: Book Value
Subsidiary: Fair Value
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 - ANSa worksheet
According to GAAP, the pooling of interest method for business combinations - ANSIs no longer
allowed for business combinations after June 30, 2001
An example of a difference in types of business combinations is - ANSA statutory merger
requires dissolution of the acquired company while a statutory merger does not require
dissolution
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? -
ANSDirect combination costs are expensed and stock issuance costs are a reduction to
additional paid-in capital
Example of Stock Issuance Costs - ANSProfessional Fees
Example of Direct Combination Costs - ANSLegal Fees
A company should always use the equity method to account for an investment if: - ANSIt has
the ability to exercise significance over the operating polices of the investee
An upstream sale of inventory is a sale: - ANSMade by investee to investor
A downstream sale of inventory is a sale: - ANSMade by investor to investee
On January 1, 2011, Dermot Company purchased 15% of the voting common stock of Horne
Corp. One January 1, 2013, Dermot purchased 28% of Horne's voting common stock. If Dermot
achieves significant influence with this new investment, how must Dermot account for the
change to the equity method? - ANSIt must restate the financial statements for the 2012 and
2011 as if the equity method had been used for those two years
An investee company incurs an extraordinary loss during the period. The investor appropriately
applies the equity method. Which of the following statement's is true? - ANSThe extraordinary
loss would reduce the value of the investment
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