AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate
that fair value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain
purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business
combination if dissolution does not take place.
56.
Carnes has the following account balances as of May 1, 2012 before an acquisition
transaction takes place.
The fair value of Carnes’ Land and Buildings are $650,000 and $550,000, respectively. On
May 1, 2012, Riley Company issues 30,000 shares of its $10 par value ($25 fair value)
common stock in exchange for all of the shares of Carnes’ common stock. Riley paid
$10,000 for costs to issue the new shares of stock. Before the acquisition, Riley has
$700,000 in its common stock account and $300,000 in its additional paid-in capital
account.
What will be the consolidated additional paid-in capital as a result of this acquisition?
A.
$440,000.
B.
$740,000.
C.
$750,000.
D.
$940,000.
E.
$950,000.
$300,000 APIC + $440,000 Added APIC = $740,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate
that fair value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain
purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business
combination if dissolution does not take place.
57.
The financial balances for the Atwood Company and the Franz Company as of December
31, 2013, are presented below. Also included are the fair values for Franz Company’s net
assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 2013. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and
direct costs of $10 (in thousands) were paid.
Compute the investment to be recorded at date of acquisition.
A.
$1,750.
B.
$1,760.
C.
$1,775.
D.
$1,300.
E.
$1,120.
$35 FV × 50 shares = $1,750
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business
combination if dissolution does not take place.
58.
The financial balances for the Atwood Company and the Franz Company as of December
31, 2013, are presented below. Also included are the fair values for Franz Company’s net
assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 2013. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and
direct costs of $10 (in thousands) were paid.
Compute the consolidated common stock at date of acquisition.
A.
$1,000.
B.
$2,980.
C.
$2,400.
D.
$3,400.
E.
$3,730.
$1,980 + ($20 Par × 50 shares) = $2,980
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate
that fair value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain
purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business
combination if dissolution does not take place.
59.
The financial balances for the Atwood Company and the Franz Company as of December
31, 2013, are presented below. Also included are the fair values for Franz Company’s net
assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 2013. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and
direct costs of $10 (in thousands) were paid.
Compute consolidated inventory at the date of the acquisition.
A.
$1,650.
B.
$1,810.
C.
$1,230.
D.
$580.
E.
$1,830.
$1,230 BV + $580 FV = $1,810
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate
that fair value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain
purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business
combination if dissolution does not take place.
60.
The financial balances for the Atwood Company and the Franz Company as of December
31, 2013, are presented below. Also included are the fair values for Franz Company’s net
assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 2013. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and
direct costs of $10 (in thousands) were paid.
Compute consolidated land at the date of the acquisition.
A.
$2,060.
B.
$1,800.
C.
$260.
D.
$2,050.
E.
$2,070.
$1,800 BV + $250 FV = $2,050
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate
that fair value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain
purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business
combination if dissolution does not take place.
61.
The financial balances for the Atwood Company and the Franz Company as of December
31, 2013, are presented below. Also included are the fair values for Franz Company’s net
assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 2013. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and
direct costs of $10 (in thousands) were paid.
Compute consolidated buildings (net) at the date of the acquisition.
A.
$2,450.
B.
$2,340.
C.
$1,800.
D.
$650.
E.
$1,690.
$1,800 BV + $650 FV = $2,450
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate
that fair value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain
purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business
combination if dissolution does not take place.
62.
The financial balances for the Atwood Company and the Franz Company as of December
31, 2013, are presented below. Also included are the fair values for Franz Company’s net
assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 2013. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and
direct costs of $10 (in thousands) were paid.
Compute consolidated long-term liabilities at the date of the acquisition.
A.
$2,600.
B.
$2,700.
C.
$2,800.
D.
$3,720.
E.
$3,820.
$2,700 BV + $1,120 FV = $3,820
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate
that fair value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain
purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business
combination if dissolution does not take place.
63.
The financial balances for the Atwood Company and the Franz Company as of December
31, 2013, are presented below. Also included are the fair values for Franz Company’s net
assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 2013. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and
direct costs of $10 (in thousands) were paid.
Compute consolidated goodwill at the date of the acquisition.
A.
$360.
B.
$450.
C.
$460.
D.
$440.
E.
$475.
($35 FV × 50 shares = $1,750) – ($1,300 Net Assets at FV) = $450 Goodwill
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate
that fair value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain
purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business
combination if dissolution does not take place.
64.
The financial balances for the Atwood Company and the Franz Company as of December
31, 2013, are presented below. Also included are the fair values for Franz Company’s net
assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 2013. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and
direct costs of $10 (in thousands) were paid.
Compute consolidated equipment (net) at the date of the acquisition.
A.
$400.
B.
$660.
C.
$1,060.
D.
$1,040.
E.
$1,050.
$660 BV + $400 FV = $1,060
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate
that fair value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain
purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business
combination if dissolution does not take place.
65.
The financial balances for the Atwood Company and the Franz Company as of December
31, 2013, are presented below. Also included are the fair values for Franz Company’s net
assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 2013. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and
direct costs of $10 (in thousands) were paid.
Compute fair value of the net assets acquired at the date of the acquisition.
A.
$1,300.
B.
$1,340.
C.
$1,500.
D.
$1,750.
E.
$2,480.
($240 + $600 + $580 + $250 + $650 + $400) – ($240 + $60 + $1,120) = $1300