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Question 1

2 out of 2 points

The fair value of net identifiable assets exclusive of goodwill of a reporting unit of X Company is $300,000. On X Company's books, the carrying value of this reporting unit's net assets is $350,000, including $60,000 goodwill. If the fair value of the reporting unit is $335,000, what amount of goodwill impairment will be recognized for this unit? Answer Selected Answer: $25,000 Correct Answer: $25,000

Question 2
0 out of 2 points

The first step in determining goodwill impairment involves comparing the Answer Selected Answer: Correct Answer: fair value of a reporting unit to its carrying amount (goodwill excluded). fair value of a reporting unit to its carrying amount (goodwill included).

Question 3
0 out of 2 points

If the value implied by the purchase price of an acquired company exceeds the fair values of identifiable net assets, the excess should be Answer Selected Answer: allocated to reduce current and long-lived assets. Correct Answer:

accounted for as goodwill.

Question 4
0 out of 2 points

In a business combination in which the total fair value of the identifiable assets acquired over liabilities assumed is greater than the consideration paid, the excess fair value is: Answer Selected Answer: allocated first to reduce proportionately non-current, depreciable assets to zero, and any remaining excess over cost is classified as a deferred credit. allocated first to eliminate any previously recorded goodwill, and any remaining excess over the consideration paid is classified as an ordinary gain.

Correct Answer:

Question 5
0 out of 2 points

Once a reporting unit is determined to have a fair value below its carrying value, the goodwill impairment loss is computed by comparing the Answer Selected Answer: Correct Answer: fair value of the reporting unit and the fair value of the identifiable net assets. carrying value of the goodwill to its implied fair value.

Question 6
2 out of 2 points

In a business combination, which of the following costs are assigned to the valuation of the security?

a. b. c. d. Answer Selected Answer:

Professional or Security issue consulting fees costs Yes Yes Yes No No Yes No No

c Correct Answer: c

Question 7
2 out of 2 points

Par Company and Sub Company were combined in an acquisition transaction. Par was able to acquire Sub at a bargain Pratt. The sum of the fair values of identifiable assets acquired less the fair value of liabilities assumed exceeded the cost to Par. After eliminating previously recorded goodwill, there was still some "negative goodwill." Proper accounting treatment by Par is to report the amount as Answer Selected Answer: an ordinary gain. Correct Answer: an ordinary gain.

Question 8
2 out of 2 points

P Company acquires all of the voting stock of S Company for $930,000 cash. The book values of S Companys assets are $800,000, but the fair values are $840,000 because land has a fair value above its book value. Goodwill from the combination is computed as: Answer Selected Answer: $90,000.

Correct Answer: $90,000.

Question 9
2 out of 2 points

SFAS 141R requires that all business combinations be accounted for using Answer Selected Answer: the acquisition method. Correct Answer: the acquisition method.

Question 10
2 out of 2 points

Under SFAS 141R, what value of the assets and liabilities are reflected in the financial statements on the acquisition date of a business combination? Answer Selected Answer: Fair value Correct Answer: Fair value

Question 11
2 out of 2 points

Potter Corporation acquired Sims Company through an exchange of common shares. All of Sims assets and liabilities were immediately transferred to Potter. Potter Companys common stock was trading at $20 per share at the time of exchange. The following selected information is also available: Potter Company Before Acquisition Par value of shares outstanding $200,000 After Acquisition $250,000

Additional Paid in Capital

350,000

550,000

What number of shares was issued at the time of the exchange? Answer Selected Answer: 12,500 Correct Answer: 12,500

Question 12
2 out of 2 points

With an acquisition, direct and indirect expenses are Answer Selected Answer: expensed in the period incurred. Correct Answer: expensed in the period incurred.

Question 13
2 out of 2 points

In a period in which an impairment loss occurs, SFAS No. 142 requires each of the following note disclosures except Answer Selected Answer: the amount of goodwill by reporting segment. Correct Answer: the amount of goodwill by reporting segment.

Question 14
2 out of 2 points

A business combination is accounted for properly as an acquisition. Which of the following expenses related to effecting the business combination should enter into the determination of net income of the combined corporation for the period in which the expenses are incurred? Security issue Overhead allocated to costs the merger Yes Yes Yes No No Yes No No

a. b. c. d. Answer

Selected Answer: c Correct Answer: c

Question 15
2 out of 2 points

In a business combination accounted for as an acquisition, how should the excess of fair value of net assets acquired over the consideration paid be treated? Answer Selected Answer: Recorded as an ordinary gain. Correct Answer: Recorded as an ordinary gain.

Question 16
2 out of 2 points

A merger between a supplier and a customer is a(n) Answer Selected Answer: vertical combination. Correct Answer: vertical combination.

Question 17
2 out of 2 points

The difference between normal earnings and expected future earnings is Answer Selected Answer: excess earnings. Correct Answer: excess earnings.

Question 18
2 out of 2 points

The view that only the parent company's share of the unrealized intercompany profit recognized by the selling affiliate that remains in assets should be eliminated in the preparation of consolidated financial statements is consistent with the Answer Selected Answer: parent company concept. Correct Answer: parent company concept.

Question 19
2 out of 2 points

The parent company concept adjusts subsidiary net asset values for the Answer Selected Answer: differences between cost and book value. Correct Answer: differences between cost and book value.

Question 20

2 out of 2 points

Which of the following statements would not be a valid or logical reason for entering into a business combination? Answer Selected Answer: Correct Answer: the operating costs of the combined entity would be more than the sum of the separate entities. the operating costs of the combined entity would be more than the sum of the separate entities.

Question 21
2 out of 2 points

Which of the following situations best describes a business combination to be accounted for as a statutory merger? Answer Selected Answer: Correct Answer: Only one of the combining companies survives and the other loses its separate identity. Only one of the combining companies survives and the other loses its separate identity.

Question 22
2 out of 2 points

The view that the noncontrolling interest in income reflects the noncontrolling stockholders' allocated share of consolidated income is consistent with the Answer Selected Answer: economic unit concept. Correct Answer: economic unit concept.

Question 23
2 out of 2 points

The third period of business combinations started after World War II and is called Answer Selected Answer: merger mania. Correct Answer: merger mania.

Question 24
2 out of 2 points

A statutory ______________ results when one company acquires all the net assets of another company and the acquired company ceases to exist as a separate legal entity. Answer Selected Answer: merger. Correct Answer: merger.

Question 25
2 out of 2 points

The excess of the amount offered in an acquisition over the prior stock price of the acquired firm is the Answer Selected Answer: takeover premium. Correct Answer: takeover premium.

Question 26

2 out of 2 points

When following the economic unit concept in the preparation of consolidated financial statements, the basis for valuing the noncontrolling interest in net assets is the Answer Selected Answer: fair values of subsidiary assets and liabilities. Correct Answer: fair values of subsidiary assets and liabilities.

Question 27
2 out of 2 points

The view that consolidated financial statements represent those of a single economic entity with several classes of stockholder interest is consistent with the Answer Selected Answer: economic unit concept. Correct Answer: economic unit concept.

Question 28
2 out of 2 points

A potential offering price for a company is computed by adding the estimated goodwill to the Answer Selected Answer: fair value of the companys net identifiable assets. Correct Answer: fair value of the companys net identifiable assets.

Question 29
2 out of 2 points

Stock given as consideration for a business combination is valued at Answer Selected Answer: fair market value Correct Answer: fair market value

Question 30
2 out of 2 points

A business combination in which the boards of directors of the potential combining companies negotiate mutually agreeable terms is a(n) Answer Selected Answer: friendly combination. Correct Answer: friendly combination.