22. Red Co. acquired 100% of Green, Inc. on January 1, 2010. On that date,
Green had inventory with a book value of $42,000 and a fair value of $52,000. This
inventory had not yet been sold at December 31, 2010. Also, on the date of
acquisition, Green had a building with a book value of $200,000 and a fair value of
$390,000. Green had equipment with a book value of $350,000 and a fair value of
$280,000. The building had a 10-year remaining useful life and the equipment had
a 5-year remaining useful life. How much total expense will be in the consolidated
financial statements for the year ended December 31, 2010 related to the
acquisition allocations of Green?
23. All of the following are acceptable methods to account for a majority-
owned investment in subsidiary except
24. Under the equity method of accounting for an investment,
25. Under the partial equity method of accounting for an investment,
26. Under the initial value method, when accounting for an investment in a
subsidiary,
27. According to GAAP regarding amortization of goodwill and other intangible
assets, which of the following statements is true?
28. When a company applies the initial method in accounting for its investment
in a subsidiary and the subsidiary reports income in excess of dividends paid,
what entry would be made for a consolidation worksheet?
29. When a company applies the initial value method in accounting for its
investment in a subsidiary and the subsidiary reports income less than dividends
paid, what entry would be made for a consolidation worksheet?
30. When a company applies the partial equity method in accounting for its
investment in a subsidiary and the subsidiary’s equipment has a fair value greater
than its book value, what consolidation worksheet entry is made in a year
subsequent to the initial acquisition of the subsidiary?
31. When a company applies the partial equity method in accounting for its
investment in a subsidiary and initial value, book values, and fair values of net
assets acquired are all equal, what consolidation worksheet entry would be
made?
32. When consolidating a subsidiary under the equity method, which of the
following statements is true?
33. When consolidating a subsidiary under the equity method, which of the
following statements is true with regard to the subsidiary subsequent to the year
of acquisition?
34. Which of the following statements is
false
regarding push-down
accounting?
35. Which of the following is
false
regarding contingent consideration in
business combinations?
36. Factors that should be considered in determining the useful life of an
intangible asset include
37. Consolidated net income using the equity method for an acquisition
combination is computed as follows:
38. Perry Company acquires 100% of the stock of Hurley Corporation on
January 1, 2010, for $3,800 cash. As of that date Hurley has the following trial
balance;
Any excess of consideration transferred over fair value of net assets acquired is
considered goodwill with an indefinite life. FIFO inventory valuation method is
used.
Compute the consideration transferred in excess of book value acquired at
January 1, 2010.
39. Perry Company acquires 100% of the stock of Hurley Corporation on
January 1, 2010, for $3,800 cash. As of that date Hurley has the following trial
balance;
Any excess of consideration transferred over fair value of net assets acquired is
considered goodwill with an indefinite life. FIFO inventory valuation method is
used.
Compute goodwill, if any, at January 1, 2010.
40. Perry Company acquires 100% of the stock of Hurley Corporation on
January 1, 2010, for $3,800 cash. As of that date Hurley has the following trial
balance;
Any excess of consideration transferred over fair value of net assets acquired is
considered goodwill with an indefinite life. FIFO inventory valuation method is
used.
Compute the amount of Hurley’s inventory that would be reported in a January 1,
2010, consolidated balance sheet.
