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Test bank For Advanced Accounting Exam 2 (15th Edition by Joe Ben Hoyle)
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Test bank For Advanced Accounting Exam 2 (15th Edition by Joe Ben Hoyle)
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Test bank For Advanced AccountingExam 2 (15th Edition by Joe Ben Hoyle)
For business combinations involving less than 100% ownership, the acquirer recognizes and
measures all of the following at the acquisition date except:
a. identifiable assets acquired, at fair value
b. liabilities assumed, at book value
c. non-controlling interest, at fair value
d. goodwill or a gain from bargain purchase
e. none of these choices is correct - ANSb. liabilities assumed, at book value
In measuring non-controlling interest at the date of acquisition, which of the following would not
be indicative of the value attributed to the non-controlling interest?
a. fair value based on stock trades of the acquired company
b. subsidiary cash flows discounted to present value
c. book value of subsidiary net assets
d. projections of residual income
e. consideration transferred by the parent company that implies a total subsidiary value - ANSc.
book value of subsidiary net assets
When a parent uses the equity method throughout the year to account for its investment in an
acquired subsidiary, which of the following statements is false before making adjustments on the
consolidated worksheet?
a. parent company net income = controlling int. in consolidated net income
b. parent company R/E = consolidated R/E
c. parent company total assets = consolidated total assets
d. parent company dividends equals consolidated dividends
e. goodwill will not be recorded on the parent's books - ANSc. parent company total assets =
consolidated total assets
When a parent uses the initial value method throughout the year to account for its investment in
an acquired subsidiary, which of the following statements is true before making adjustments on
the consolidated worksheet?
a. parent company net income = consolidated net income
b. parent company R/E = consolidated R/E
c. parent company total assets = consolidated total assets
d. parent company dividends = consolidated dividends
e. goodwill needs to be recognized on the parent's books - ANSd. parent company dividends =
consolidated dividends
, When a subsidiary is acquired sometime after the first day of the fiscal year, which of the
following statements is true?
a. income from sub is not recognized until there is an entire year of consolidated operations
b. income from sub is recognized from date of acquisition to year-end
c. excess cost cover acquisition value if recognized at the beg. of the fiscal year
d. no goodwill can be recognized
e. income from sub is recognized for the entire year - ANSb. income from sub is recognized
from date of acquisition to year-end
When a parent uses the acquisition method for business combinations and sells shares of its
subsidiary, which of the following statements is false?
a. if majority control is still maintained, consolidated financial statements are still required
b. if majority control is not maintained but significant influence exists, the equity method to
account for the inv. is still used but consolidated financial statements are not required
c. if majority control is not maintained but significant influence exists, the equity method is still
used to account for the investment & consolidated financial statements are still required
d. if majority control is not maintained & significant influence no longer exists, a prospective
change in acc. principle to the FV method is required
e. a gain or loss calc must be prepared if control is lost - ANSc. if majority control is not
maintained but significant influence exists, the equity method is still used to account for the
investment & consolidated financial statements are still required
Which of the following statements is true regarding the sale of subsidiary shares when using the
acquisitions method for accounting for business combinations?
a. If control continues, the diff. between selling price & acquisition value is recorded as a
realized gain or loss
b. If control continues, the difference between SP & acquisition value is an unrealized gain or
loss
c. If control continues, the diff. between SP & carrying value is recorded as an adjustment to
APIC
d. If control continues, the diff. between SP & CV is recorded as a realized gain or loss
e. If control continues, the diff. between SP & CV is recorded as an adjustment to R/E - ANSc. If
control continues, the diff. between SP & carrying value is recorded as an adjustment to APIC
Jax Company uses the acquisition method for accounting for its investment in Saxton Company.
Jax sells some of its shares of Saxton such that neither control nor significant influence exists.
Which of the following statements is true?
a. Diff. between SP & acquisition value is recorded as a realized gain or loss
b. Diff between SP & AV is recorded as an unrealized gain or loss
c. Diff between SP & CV is recorded as a realized gain or loss
d. Diff. between SP & CV is recorded as an unrealized gain or loss
e. Diff between SP & CV is recorded as an adjustment to R/E - ANSc. Diff between SP & CV is
recorded as a realized gain or loss
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