Deck 2: Consolidation of Financial Information

Question 1

REFERENCE: 02-01
Bullen Inc.acquired 100% of the voting common stock of Vicker Inc.on January 1,2018.The book value and fair value of Vicker's accounts on that date (prior to creating the combination)are as follows,along with the book value of Bullen's accounts:
$\begin{array}{lrrr}&\text { Bullen } & \text { Vicker } & \text { Vickei } \\&\text { Book } & \text { Book } & \text { Fair } \\&\text { Value } & \text { Value } & \text { Value }\\\text { Retained earnings, 1/1/20 } & \$ 250,000 & \$ 240,000 & \\\text { Cash and receivables } & 170,000 & 70,000 & \$ 70,000 \\\text { Inventory } & 230,000 & 170,000 & 210,000 \\\text { Land } & 280,000 & 220,000 & 240,000 \\\text { Buildings (net) } & 480,000 & 240,000 & 270,00 \\\text { Equipment (net) } & 120,000 & 90,000 & 90,00 \\\text { Liabilities } & 650,000 & 430,000 & 420,000 \\\text { Common stock } & 360,000 & 80,000 & \\\text { Additional paid-in capital } & 20,000 & 40,000 &\end{array}$


-Assume that Bullen issued 12,000 shares of common stock with a $5 par value and a $47 fair value for all of the outstanding stock of Vicker.What is the consolidated balance for Land as a result of this acquisition transaction?

A)$460,000.
B)$510,000.
C)$500,000.
D)$520,000.
E)$490,000.

Answer 1

$520,000.

Question 2

In a business combination where a subsidiary retains its incorporation and which is accounted for under the acquisition method,how should stock issuance costs and direct combination costs be treated?

A)Stock issuance costs and direct combination costs are expensed as incurred.
B)Direct combination costs are ignored,and the stock issuance costs result in a reduction to additional paid-in capital.
C)Direct combination costs are expensed as incurred and stock issuance costs result in a reduction to additional paid-in capital.
D)Both are treated as part of the acquisition consideration transferred.
E)Both reduce additional paid-in capital.

Answer 2

C

Question 3

Direct combination costs and amounts incurred to register and issue stock in connection with a business combination.How should those costs be accounted for in a pre-2009 business combination?
$\quad$$\text { Direct Combination Costs}$ $\quad$$\text { Stock Issuance Costs}$

A) $\begin{array}{ll}\text { Increase Investment} & \quad\quad\quad\text {Decrease Investment} \end{array}$
B) $\begin{array}{ll} \text {Increase Investment} &\quad\quad\quad\quad\text { Decrease Additional Paid-in Capital }\end{array}$
C) $\begin{array}{ll} \text { Increase Investment} & \quad\quad\quad\text {Increase Expenses} \end{array}$
D) $\begin{array}{ll} \text { Decrease Additional Paid-in Capital} & \text {Increase Investment }\end{array}$
E) $\begin{array}{ll} \text { Increase Expenses} & \quad\quad\quad\quad\text {Decrease Investment}\end{array}$

Answer 3

B

Question 4

How are direct and indirect costs accounted for when applying the acquisition method for a business combination? $\begin{array} { cc } &&& \text { Direct Costs } &&&&&& \text { Indirect Costs } \\\end{array}$

A) $\begin{array} { cc } &&& \text { Expensed } &&&&&&& \text { Expensed } \\\end{array}$
B) $\begin{array} { cc } & \text { Increase investment account } & \text { Decrease additional paid-in capital } \\\end{array}$
C) $\begin{array} { cc } & &&\text { Expensed } &&&&&&& \text { Decrease additional paid-in capital } \\\end{array}$
D) $\begin{array} { cc } & \text { Increase investment account } & \text { Expensed } \\\end{array}$
E) $\begin{array} { cc } & \text { Increase investment account } & \text { Increase investment account } \\\end{array}$

Question 5

Which of the following examples accurately describes a difference in the types of business combinations?

A)A statutory merger can only be effected through an asset acquisition while a statutory consolidation can only be effected through a capital stock acquisition.
B)A statutory merger can only be effected through a capital stock acquisition while a statutory consolidation can only be effected through an asset acquisition.
C)A statutory merger requires the dissolution of the acquired company while a statutory consolidation requires dissolution of the companies involved in the combination following the transfer of assets or stock to a newly formed entity.
D)A statutory consolidation requires dissolution of the acquired company while a statutory merger does not require dissolution.
E)Both a statutory merger and a statutory consolidation can only be effected through an asset acquisition but only a statutory consolidation requires dissolution of the acquired company.

Question 6

What is the primary difference between: (i)accounting for a business combination when the subsidiary is dissolved;and (ii)accounting for a business combination when the subsidiary retains its incorporation?

A)If the subsidiary is dissolved,it will not be operated as a separate division.
B)If the subsidiary is dissolved,assets and liabilities are consolidated at their book values.
C)If the subsidiary retains its incorporation,there will be no goodwill associated with the acquisition.
D)If the subsidiary retains its incorporation,assets and liabilities are consolidated at their book values.
E)If the subsidiary retains its incorporation,the consolidation is not formally recorded in the accounting records of the acquiring company.

Question 7

Which of the following statements is true regarding the acquisition method of accounting for a business combination?

A)The combination must involve the exchange of equity securities only.
B)The transaction establishes an acquisition fair value basis for the company being acquired.
C)The two companies may be about the same size,and it is difficult to determine the acquired company and the acquiring company.
D)The transaction may be considered to be the uniting of the ownership interests of the companies involved.
E)The acquired subsidiary must be smaller in size than the acquiring parent.

Question 8

According to GAAP,which of the following is true with respect to the pooling of interest method of accounting for business combinations?

A)It was the only method used prior to 2002.
B)It must be used for all new acquisitions.
C)GAAP allowed its use prior to 2002.
D)It,or the acquisition method,may be used at the acquirer's discretion.
E)GAAP requires it to be used instead of the acquisition method for business combinations for which $50 billion or more in consideration is transferred.

Question 9

REFERENCE: 02-01
Bullen Inc.acquired 100% of the voting common stock of Vicker Inc.on January 1,2018.The book value and fair value of Vicker's accounts on that date (prior to creating the combination)are as follows,along with the book value of Bullen's accounts:
$\begin{array}{lrrr}&\text { Bullen } & \text { Vicker } & \text { Vickei } \\&\text { Book } & \text { Book } & \text { Fair } \\&\text { Value } & \text { Value } & \text { Value }\\\text { Retained earnings, 1/1/20 } & \$ 250,000 & \$ 240,000 & \\\text { Cash and receivables } & 170,000 & 70,000 & \$ 70,000 \\\text { Inventory } & 230,000 & 170,000 & 210,000 \\\text { Land } & 280,000 & 220,000 & 240,000 \\\text { Buildings (net) } & 480,000 & 240,000 & 270,00 \\\text { Equipment (net) } & 120,000 & 90,000 & 90,00 \\\text { Liabilities } & 650,000 & 430,000 & 420,000 \\\text { Common stock } & 360,000 & 80,000 & \\\text { Additional paid-in capital } & 20,000 & 40,000 &\end{array}$


-Assume that Bullen paid a total of $480,000 in cash for all of the shares of Vicker.In addition,Bullen paid $35,000 for secretarial and management time allocated to the acquisition transaction.What will be the balance in consolidated goodwill?

A)$ 0.
B)$20,000.
C)$35,000.
D)$55,000.
E)$65,000.

Question 10

REFERENCE: 02-02
Prior to being united in a business combination,Botkins Inc.and Volkerson Corp.had the following stockholders' equity figures: $$\begin{array} { l r r r } & { \text { Botkins } } & & \text { Volkerson } \\ \text { Common stock (\$1 par value) } & \$ 220,000 & & \$ 54,000 \\\text { Additional paid-in capital } & 110,000 & & 25,000 \\\text { Retained earnings } & 360,000 & & 130,000\end{array}$$ Botkins issued 56,000 new shares of its common stock valued at $3.25 per share for all of the outstanding stock of Volkerson.

-Assume that Botkins acquired Volkerson on January 1,2017 and that Volkerson maintains a separate corporate existence.At what amount did Botkins record the investment in Volkerson?

A)$ 56,000.
B)$182,000.
C)$209,000.
D)$261,000.
E)$312,000.

Question 11

Acquired in-process research and development is considered as

A)A definite-lived asset subject to amortization.
B)A definite-lived asset subject to testing for impairment.
C)An indefinite-lived asset subject to amortization.
D)An indefinite-lived asset subject to testing for impairment.
E)A research and development expense at the date of acquisition.

Question 12

REFERENCE: 02-01
Bullen Inc.acquired 100% of the voting common stock of Vicker Inc.on January 1,2018.The book value and fair value of Vicker's accounts on that date (prior to creating the combination)are as follows,along with the book value of Bullen's accounts:
$\begin{array}{lrrr}&\text { Bullen } & \text { Vicker } & \text { Vickei } \\&\text { Book } & \text { Book } & \text { Fair } \\&\text { Value } & \text { Value } & \text { Value }\\\text { Retained earnings, 1/1/20 } & \$ 250,000 & \$ 240,000 & \\\text { Cash and receivables } & 170,000 & 70,000 & \$ 70,000 \\\text { Inventory } & 230,000 & 170,000 & 210,000 \\\text { Land } & 280,000 & 220,000 & 240,000 \\\text { Buildings (net) } & 480,000 & 240,000 & 270,00 \\\text { Equipment (net) } & 120,000 & 90,000 & 90,00 \\\text { Liabilities } & 650,000 & 430,000 & 420,000 \\\text { Common stock } & 360,000 & 80,000 & \\\text { Additional paid-in capital } & 20,000 & 40,000 &\end{array}$


-Assume that Bullen issued 12,000 shares of common stock with a $5 par value and a $47 fair value for all of the outstanding shares of Vicker.What will be the consolidated Additional Paid-In Capital and Retained Earnings (January 1,2018 balances)as a result of this acquisition transaction?

A)$60,000 and $490,000.
B)$60,000 and $250,000.
C)$380,000 and $250,000.
D)$524,000 and $250,000.
E)$524,000 and $420,000.

Question 13

In an acquisition where 100% control is acquired,how would the land accounts of the parent and the land accounts of the subsidiary be reported on consolidated financial statements?
$\begin{array} { cc} &&& \text { Parent } && \text { Subsidlary } \\\end{array}$

A) $\begin{array} { cc} & \text { Buok Value } & \text { Baok Value } \\\end{array}$
B) $\begin{array} { cc} & \text { Bouk Value } & \text { Fair Value } \\\end{array}$
C) $\begin{array} { cc} & \text { Fair Value } & \text { Fair Value } \\\end{array}$
D) $\begin{array} { cc} & \text { Fair Value } & \text { Bouk Value } \\\end{array}$
E) $\begin{array} { cc} & \text { Cost } &&&& \text { Cost } \\\end{array}$

Question 14

REFERENCE: 02-01
Bullen Inc.acquired 100% of the voting common stock of Vicker Inc.on January 1,2018.The book value and fair value of Vicker's accounts on that date (prior to creating the combination)are as follows,along with the book value of Bullen's accounts:
$\begin{array}{lrrr}&\text { Bullen } & \text { Vicker } & \text { Vickei } \\&\text { Book } & \text { Book } & \text { Fair } \\&\text { Value } & \text { Value } & \text { Value }\\\text { Retained earnings, 1/1/20 } & \$ 250,000 & \$ 240,000 & \\\text { Cash and receivables } & 170,000 & 70,000 & \$ 70,000 \\\text { Inventory } & 230,000 & 170,000 & 210,000 \\\text { Land } & 280,000 & 220,000 & 240,000 \\\text { Buildings (net) } & 480,000 & 240,000 & 270,00 \\\text { Equipment (net) } & 120,000 & 90,000 & 90,00 \\\text { Liabilities } & 650,000 & 430,000 & 420,000 \\\text { Common stock } & 360,000 & 80,000 & \\\text { Additional paid-in capital } & 20,000 & 40,000 &\end{array}$


-Assume that Bullen issued preferred stock with a par value of $240,000 and a fair value of $500,000 for all of the outstanding shares of Vicker in an acquisition business combination.What will be the balance in the consolidated Inventory and Land accounts?

A)$440,000,$496,000.
B)$440,000,$520,000.
C)$425,000,$505,000.
D)$400,000,$500,000.
E)$427,000,$510,000.

Question 15

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

A)A worksheet.
B)Lisa's general journal.
C)Victoria's general journal.
D)Victoria's secret consolidation journal.
E)The general journals of both companies.

Question 16

Using the acquisition method for a business combination,goodwill is generally calculated as the:

A)Cost of the investment less the subsidiary's book value at the beginning of the year.
B)Cost of the investment less the subsidiary's book value at the acquisition date.
C)Cost of the investment less the subsidiary's fair value at the beginning of the year.
D)Cost of the investment less the subsidiary's fair value at acquisition date.
E)Zero,it is no longer allowed under federal law.

Question 17

REFERENCE: 02-01
Bullen Inc.acquired 100% of the voting common stock of Vicker Inc.on January 1,2018.The book value and fair value of Vicker's accounts on that date (prior to creating the combination)are as follows,along with the book value of Bullen's accounts:
$\begin{array}{lrrr}&\text { Bullen } & \text { Vicker } & \text { Vickei } \\&\text { Book } & \text { Book } & \text { Fair } \\&\text { Value } & \text { Value } & \text { Value }\\\text { Retained earnings, 1/1/20 } & \$ 250,000 & \$ 240,000 & \\\text { Cash and receivables } & 170,000 & 70,000 & \$ 70,000 \\\text { Inventory } & 230,000 & 170,000 & 210,000 \\\text { Land } & 280,000 & 220,000 & 240,000 \\\text { Buildings (net) } & 480,000 & 240,000 & 270,00 \\\text { Equipment (net) } & 120,000 & 90,000 & 90,00 \\\text { Liabilities } & 650,000 & 430,000 & 420,000 \\\text { Common stock } & 360,000 & 80,000 & \\\text { Additional paid-in capital } & 20,000 & 40,000 &\end{array}$


-Assume that Bullen issued 12,000 shares of common stock,with a $5 par value and a $47 fair value,to obtain all of Vicker's outstanding stock.In this acquisition transaction,how much goodwill should be recognized?

A)$144,000.
B)$104,000.
C)$ 64,000.
D)$ 60,000.
E)$ 0.

Question 18

With respect to recognizing and measuring the fair value of a business combination in accordance with the acquisition method of accounting,which of the following should the acquirer consider when determining fair value?

A)Only assets received by the acquirer.
B)Only consideration transferred by the acquirer.
C)The consideration transferred by the acquirer plus the fair value of assets received less liabilities assumed.
D)The par value of stock transferred by the acquirer,and the book value of identifiable assets transferred by the entity acquired.
E)The book value of identifiable assets transferred to the acquirer as part of the business combination less any liabilities assumed.

Question 19

A statutory merger is a(n)

A)Business combination in which only one of the two companies continues to exist as a legal corporation.
B)Business combination in which both companies continue to exist.
C)Acquisition of a competitor.
D)Acquisition of a supplier or a customer.
E)Legal proposal to acquire outstanding shares of the target's stock.

Question 20

At the date of an acquisition which is not a bargain purchase,the acquisition method

A)Consolidates the subsidiary's assets at fair value and the liabilities at book value.
B)Consolidates all subsidiary assets and liabilities at book value.
C)Consolidates all subsidiary assets and liabilities at fair value.
D)Consolidates current assets and liabilities at book value,and long-term assets and liabilities at fair value.
E)Consolidates the subsidiary's assets at book value and the liabilities at fair value.

Question 21

Which of the following statements is true?

A)The pooling of interests for business combinations is an alternative to the acquisition method.
B)The purchase method for business combinations is an alternative to the acquisition method.
C)Neither the purchase method nor the pooling of interests method is allowed for new business combinations.
D)Any previous business combination originally accounted for under purchase or pooling of interests accounting method will now be accounted for under the acquisition method of accounting for business combinations.
E)Companies previously using the purchase or pooling of interests accounting method must report a change in accounting principle when consolidating those subsidiaries with new acquisition combinations.

Question 22

REFERENCE: 02-03
The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,2018,prior to the business combination whereby Goodwin acquired Corr,are as follows (in thousands): $\begin{array}{lrr}\text { Revenues } & \$ 2,700 & \$ 600 \\\text { Expenses } & \underline{1,980} & \underline{400} \\\text { Net income } & \$ 720&\$ 200\\\\\text { Retained eamings } 1 / 1 & \$ 2,400 & \$ 400 \\\text { Net income } & 720 & 200 \\\text { Dividends } & (270) & (0) \\\quad \text { Retained eamings, } 12 / 31 & \$ 2,850 & \$ 600\\\\\text { Cash } & \$ 240 & \$ 220 \\\text { Receivables and inv entory } & 1,200 & 340 \\\text { Buildings (net) } & 2,700 & 600 \\\text { Equipment (net) } & 2,100 & \underline{1,200} \\\quad \text { Total assets } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}} \\\\\text { Liabilities } & \$ 1,500 & \$ 820 \\\text { Common stock } & 1,080 & 400 \\\text { Additional paid-in capital } & 810 & 540 \\\text { Retained earnings } & 2,850 & \underline{600} \\\quad \text { Total liabilities \& stockholders' equity } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}}\end{array}$
On December 31,2018,Goodwin obtained a loan for $600 and used the proceeds,along with the transfer of 30 shares of its $10 par value common stock,in exchange for all of Corr's common stock.At the time of the transaction,Goodwin's common stock had a fair value of $40 per share.
In connection with the business combination,Goodwin paid $25 to a broker for arranging the transaction and $35 in stock issuance costs.At the time of the transaction,Corr's equipment was actually worth $1,400 but its buildings were only valued at $560.

-Compute the consolidated expenses for 2018.

A)$1,980.
B)$2,005.
C)$2,040.
D)$2,380.
E)$2,405.

Question 23

Which of the following statements is true regarding a statutory consolidation?

A)The original companies dissolve while remaining as separate divisions of a newly created company.
B)Both companies remain in existence as legal corporations with one corporation now a subsidiary of the acquiring company.
C)The acquired company dissolves as a separate corporation and becomes a division of the acquiring company.
D)The acquiring company acquires the stock of the acquired company as an investment.
E)A statutory consolidation is no longer a legal option.

Question 24

REFERENCE: 02-03
The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,2018,prior to the business combination whereby Goodwin acquired Corr,are as follows (in thousands): $\begin{array}{lrr}\text { Revenues } & \$ 2,700 & \$ 600 \\\text { Expenses } & \underline{1,980} & \underline{400} \\\text { Net income } & \$ 720&\$ 200\\\\\text { Retained eamings } 1 / 1 & \$ 2,400 & \$ 400 \\\text { Net income } & 720 & 200 \\\text { Dividends } & (270) & (0) \\\quad \text { Retained eamings, } 12 / 31 & \$ 2,850 & \$ 600\\\\\text { Cash } & \$ 240 & \$ 220 \\\text { Receivables and inv entory } & 1,200 & 340 \\\text { Buildings (net) } & 2,700 & 600 \\\text { Equipment (net) } & 2,100 & \underline{1,200} \\\quad \text { Total assets } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}} \\\\\text { Liabilities } & \$ 1,500 & \$ 820 \\\text { Common stock } & 1,080 & 400 \\\text { Additional paid-in capital } & 810 & 540 \\\text { Retained earnings } & 2,850 & \underline{600} \\\quad \text { Total liabilities \& stockholders' equity } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}}\end{array}$
On December 31,2018,Goodwin obtained a loan for $600 and used the proceeds,along with the transfer of 30 shares of its $10 par value common stock,in exchange for all of Corr's common stock.At the time of the transaction,Goodwin's common stock had a fair value of $40 per share.
In connection with the business combination,Goodwin paid $25 to a broker for arranging the transaction and $35 in stock issuance costs.At the time of the transaction,Corr's equipment was actually worth $1,400 but its buildings were only valued at $560.

-Compute the consolidated equipment (net)account at December 31,2018.

A)$2,100.
B)$3,500.
C)$3,300.
D)$3,000.
E)$3,200.

Question 25

REFERENCE: 02-03
The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,2018,prior to the business combination whereby Goodwin acquired Corr,are as follows (in thousands): $\begin{array}{lrr}\text { Revenues } & \$ 2,700 & \$ 600 \\\text { Expenses } & \underline{1,980} & \underline{400} \\\text { Net income } & \$ 720&\$ 200\\\\\text { Retained eamings } 1 / 1 & \$ 2,400 & \$ 400 \\\text { Net income } & 720 & 200 \\\text { Dividends } & (270) & (0) \\\quad \text { Retained eamings, } 12 / 31 & \$ 2,850 & \$ 600\\\\\text { Cash } & \$ 240 & \$ 220 \\\text { Receivables and inv entory } & 1,200 & 340 \\\text { Buildings (net) } & 2,700 & 600 \\\text { Equipment (net) } & 2,100 & \underline{1,200} \\\quad \text { Total assets } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}} \\\\\text { Liabilities } & \$ 1,500 & \$ 820 \\\text { Common stock } & 1,080 & 400 \\\text { Additional paid-in capital } & 810 & 540 \\\text { Retained earnings } & 2,850 & \underline{600} \\\quad \text { Total liabilities \& stockholders' equity } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}}\end{array}$
On December 31,2018,Goodwin obtained a loan for $600 and used the proceeds,along with the transfer of 30 shares of its $10 par value common stock,in exchange for all of Corr's common stock.At the time of the transaction,Goodwin's common stock had a fair value of $40 per share.
In connection with the business combination,Goodwin paid $25 to a broker for arranging the transaction and $35 in stock issuance costs.At the time of the transaction,Corr's equipment was actually worth $1,400 but its buildings were only valued at $560.

-Compute the consolidated revenues for 2018.

A)$2,700.
B)$ 720.
C)$ 920.
D)$3,300.
E)$1,540.

Question 26

REFERENCE: 02-03
The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,2018,prior to the business combination whereby Goodwin acquired Corr,are as follows (in thousands): $\begin{array}{lrr}\text { Revenues } & \$ 2,700 & \$ 600 \\\text { Expenses } & \underline{1,980} & \underline{400} \\\text { Net income } & \$ 720&\$ 200\\\\\text { Retained eamings } 1 / 1 & \$ 2,400 & \$ 400 \\\text { Net income } & 720 & 200 \\\text { Dividends } & (270) & (0) \\\quad \text { Retained eamings, } 12 / 31 & \$ 2,850 & \$ 600\\\\\text { Cash } & \$ 240 & \$ 220 \\\text { Receivables and inv entory } & 1,200 & 340 \\\text { Buildings (net) } & 2,700 & 600 \\\text { Equipment (net) } & 2,100 & \underline{1,200} \\\quad \text { Total assets } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}} \\\\\text { Liabilities } & \$ 1,500 & \$ 820 \\\text { Common stock } & 1,080 & 400 \\\text { Additional paid-in capital } & 810 & 540 \\\text { Retained earnings } & 2,850 & \underline{600} \\\quad \text { Total liabilities \& stockholders' equity } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}}\end{array}$
On December 31,2018,Goodwin obtained a loan for $600 and used the proceeds,along with the transfer of 30 shares of its $10 par value common stock,in exchange for all of Corr's common stock.At the time of the transaction,Goodwin's common stock had a fair value of $40 per share.
In connection with the business combination,Goodwin paid $25 to a broker for arranging the transaction and $35 in stock issuance costs.At the time of the transaction,Corr's equipment was actually worth $1,400 but its buildings were only valued at $560.

-Compute the goodwill arising from this acquisition at December 31,2018.

A)$ 0.
B)$100.
C)$125.
D)$160.
E)$ 45.

Question 27

REFERENCE: 02-03
The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,2018,prior to the business combination whereby Goodwin acquired Corr,are as follows (in thousands): $\begin{array}{lrr}\text { Revenues } & \$ 2,700 & \$ 600 \\\text { Expenses } & \underline{1,980} & \underline{400} \\\text { Net income } & \$ 720&\$ 200\\\\\text { Retained eamings } 1 / 1 & \$ 2,400 & \$ 400 \\\text { Net income } & 720 & 200 \\\text { Dividends } & (270) & (0) \\\quad \text { Retained eamings, } 12 / 31 & \$ 2,850 & \$ 600\\\\\text { Cash } & \$ 240 & \$ 220 \\\text { Receivables and inv entory } & 1,200 & 340 \\\text { Buildings (net) } & 2,700 & 600 \\\text { Equipment (net) } & 2,100 & \underline{1,200} \\\quad \text { Total assets } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}} \\\\\text { Liabilities } & \$ 1,500 & \$ 820 \\\text { Common stock } & 1,080 & 400 \\\text { Additional paid-in capital } & 810 & 540 \\\text { Retained earnings } & 2,850 & \underline{600} \\\quad \text { Total liabilities \& stockholders' equity } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}}\end{array}$
On December 31,2018,Goodwin obtained a loan for $600 and used the proceeds,along with the transfer of 30 shares of its $10 par value common stock,in exchange for all of Corr's common stock.At the time of the transaction,Goodwin's common stock had a fair value of $40 per share.
In connection with the business combination,Goodwin paid $25 to a broker for arranging the transaction and $35 in stock issuance costs.At the time of the transaction,Corr's equipment was actually worth $1,400 but its buildings were only valued at $560.

-Compute the consolidated receivables and inventory for 2018.

A)$1,200.
B)$1,515.
C)$1,540.
D)$1,800.
E)$2,140.

Question 28

Which of the following is a not a reason for a business combination to take place?

A)Cost savings through elimination of duplicate facilities.
B)Quick entry for new and existing products into domestic and foreign markets.
C)Diversification of business risk.
D)Vertical integration.
E)Increase in stock price of the acquired company.

Question 29

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?

A)Negative goodwill is recorded.
B)A deferred credit is recorded.
C)A gain on bargain purchase is recorded.
D)Long-term assets of the acquired company are reduced in proportion to their fair values.Any excess is recorded as a deferred credit.
E)Long-term assets and liabilities of the acquired company are reduced in proportion to their fair values.Any excess is recorded as gain.

Question 30

REFERENCE: 02-03
The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,2018,prior to the business combination whereby Goodwin acquired Corr,are as follows (in thousands): $\begin{array}{lrr}\text { Revenues } & \$ 2,700 & \$ 600 \\\text { Expenses } & \underline{1,980} & \underline{400} \\\text { Net income } & \$ 720&\$ 200\\\\\text { Retained eamings } 1 / 1 & \$ 2,400 & \$ 400 \\\text { Net income } & 720 & 200 \\\text { Dividends } & (270) & (0) \\\quad \text { Retained eamings, } 12 / 31 & \$ 2,850 & \$ 600\\\\\text { Cash } & \$ 240 & \$ 220 \\\text { Receivables and inv entory } & 1,200 & 340 \\\text { Buildings (net) } & 2,700 & 600 \\\text { Equipment (net) } & 2,100 & \underline{1,200} \\\quad \text { Total assets } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}} \\\\\text { Liabilities } & \$ 1,500 & \$ 820 \\\text { Common stock } & 1,080 & 400 \\\text { Additional paid-in capital } & 810 & 540 \\\text { Retained earnings } & 2,850 & \underline{600} \\\quad \text { Total liabilities \& stockholders' equity } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}}\end{array}$
On December 31,2018,Goodwin obtained a loan for $600 and used the proceeds,along with the transfer of 30 shares of its $10 par value common stock,in exchange for all of Corr's common stock.At the time of the transaction,Goodwin's common stock had a fair value of $40 per share.
In connection with the business combination,Goodwin paid $25 to a broker for arranging the transaction and $35 in stock issuance costs.At the time of the transaction,Corr's equipment was actually worth $1,400 but its buildings were only valued at $560.

-Assuming that Corr retains a separate corporate existence after this acquisition,at what amount is the investment recorded on Goodwin's books?

A)$1,540.
B)$1,800.
C)$1,860.
D)$1,825.
E)$1,625.

Question 31

REFERENCE: 02-03
The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,2018,prior to the business combination whereby Goodwin acquired Corr,are as follows (in thousands): $\begin{array}{lrr}\text { Revenues } & \$ 2,700 & \$ 600 \\\text { Expenses } & \underline{1,980} & \underline{400} \\\text { Net income } & \$ 720&\$ 200\\\\\text { Retained eamings } 1 / 1 & \$ 2,400 & \$ 400 \\\text { Net income } & 720 & 200 \\\text { Dividends } & (270) & (0) \\\quad \text { Retained eamings, } 12 / 31 & \$ 2,850 & \$ 600\\\\\text { Cash } & \$ 240 & \$ 220 \\\text { Receivables and inv entory } & 1,200 & 340 \\\text { Buildings (net) } & 2,700 & 600 \\\text { Equipment (net) } & 2,100 & \underline{1,200} \\\quad \text { Total assets } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}} \\\\\text { Liabilities } & \$ 1,500 & \$ 820 \\\text { Common stock } & 1,080 & 400 \\\text { Additional paid-in capital } & 810 & 540 \\\text { Retained earnings } & 2,850 & \underline{600} \\\quad \text { Total liabilities \& stockholders' equity } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}}\end{array}$
On December 31,2018,Goodwin obtained a loan for $600 and used the proceeds,along with the transfer of 30 shares of its $10 par value common stock,in exchange for all of Corr's common stock.At the time of the transaction,Goodwin's common stock had a fair value of $40 per share.
In connection with the business combination,Goodwin paid $25 to a broker for arranging the transaction and $35 in stock issuance costs.At the time of the transaction,Corr's equipment was actually worth $1,400 but its buildings were only valued at $560.

-Compute the consolidated cash account at December 31,2018.

A)$460.
B)$425.
C)$400.
D)$435.
E)$240.

Question 32

REFERENCE: 02-03
The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,2018,prior to the business combination whereby Goodwin acquired Corr,are as follows (in thousands): $\begin{array}{lrr}\text { Revenues } & \$ 2,700 & \$ 600 \\\text { Expenses } & \underline{1,980} & \underline{400} \\\text { Net income } & \$ 720&\$ 200\\\\\text { Retained eamings } 1 / 1 & \$ 2,400 & \$ 400 \\\text { Net income } & 720 & 200 \\\text { Dividends } & (270) & (0) \\\quad \text { Retained eamings, } 12 / 31 & \$ 2,850 & \$ 600\\\\\text { Cash } & \$ 240 & \$ 220 \\\text { Receivables and inv entory } & 1,200 & 340 \\\text { Buildings (net) } & 2,700 & 600 \\\text { Equipment (net) } & 2,100 & \underline{1,200} \\\quad \text { Total assets } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}} \\\\\text { Liabilities } & \$ 1,500 & \$ 820 \\\text { Common stock } & 1,080 & 400 \\\text { Additional paid-in capital } & 810 & 540 \\\text { Retained earnings } & 2,850 & \underline{600} \\\quad \text { Total liabilities \& stockholders' equity } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}}\end{array}$
On December 31,2018,Goodwin obtained a loan for $600 and used the proceeds,along with the transfer of 30 shares of its $10 par value common stock,in exchange for all of Corr's common stock.At the time of the transaction,Goodwin's common stock had a fair value of $40 per share.
In connection with the business combination,Goodwin paid $25 to a broker for arranging the transaction and $35 in stock issuance costs.At the time of the transaction,Corr's equipment was actually worth $1,400 but its buildings were only valued at $560.

-In this acquisition business combination,what total amount of common stock and additional paid-in capital should Goodwin recognize on its consolidated financial statements?

A)$ 265.
B)$1,165.
C)$1,200.
D)$1,235.
E)$1,765.

Question 33

REFERENCE: 02-02
Prior to being united in a business combination,Botkins Inc.and Volkerson Corp.had the following stockholders' equity figures: $$\begin{array} { l r r r } & { \text { Botkins } } & & \text { Volkerson } \\ \text { Common stock (\$1 par value) } & \$ 220,000 & & \$ 54,000 \\\text { Additional paid-in capital } & 110,000 & & 25,000 \\\text { Retained earnings } & 360,000 & & 130,000\end{array}$$ Botkins issued 56,000 new shares of its common stock valued at $3.25 per share for all of the outstanding stock of Volkerson.

-Assume that Botkins acquired Volkerson on January 1,2017.Immediately afterwards,what is the value of the consolidated Common Stock?

A)$456,000.
B)$402,000.
C)$274,000.
D)$276,000.
E)$330,000.

Question 34

Which of the following statements is true regarding a statutory merger?

A)The original companies dissolve while remaining as separate divisions of a newly created company.
B)Both companies remain in existence as legal corporations with one corporation now a subsidiary of the acquiring company.
C)The acquired company dissolves as a separate corporation and becomes a division of the acquiring company.
D)The acquiring company acquires the stock of the acquired company as an investment.
E)A statutory merger is no longer a legal option.

Question 35

Which of the following statements is true regarding the acquisition method of accounting for a business combination?

A)Net assets of the acquired company are reported at their fair values.
B)Net assets of the acquired company are reported at their book values.
C)Any goodwill associated with the acquisition is reported as a development cost.
D)The acquisition can only be effected by a mutual exchange of voting common stock.
E)Indirect costs of the combination reduce additional paid-in capital.

Question 36

In a transaction accounted for using the acquisition method where consideration transferred exceeds book value of the acquired company,which statement is true for the acquiring company with regard to its investment?

A)Net 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.
B)Net assets of the acquired company are maintained at book value and any excess of consideration transferred over book value of net assets acquired is allocated to goodwill.
C)Acquired assets are revalued to their fair values.Acquired liabilities are maintained at book values.Any excess is allocated to goodwill.
D)Acquired long-term assets are revalued to their fair values.Any excess is allocated to goodwill.

Question 37

Chapel Hill Company had common stock of $350,000 and retained earnings of $490,000.Blue Town Inc.had common stock of $700,000 and retained earnings of $980,000.On January 1,2018,Blue Town issued 34,000 shares of common stock with a $12 par value and a $35 fair value for all of Chapel Hill Company's outstanding common stock.This combination was accounted for using the acquisition method.Immediately after the combination,what was the amount of total consolidated net assets?

A)$2,520,000.
B)$1,190,000.
C)$1,680,000.
D)$2,870,000.
E)$2,030,000.

Question 38

REFERENCE: 02-03
The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,2018,prior to the business combination whereby Goodwin acquired Corr,are as follows (in thousands): $\begin{array}{lrr}\text { Revenues } & \$ 2,700 & \$ 600 \\\text { Expenses } & \underline{1,980} & \underline{400} \\\text { Net income } & \$ 720&\$ 200\\\\\text { Retained eamings } 1 / 1 & \$ 2,400 & \$ 400 \\\text { Net income } & 720 & 200 \\\text { Dividends } & (270) & (0) \\\quad \text { Retained eamings, } 12 / 31 & \$ 2,850 & \$ 600\\\\\text { Cash } & \$ 240 & \$ 220 \\\text { Receivables and inv entory } & 1,200 & 340 \\\text { Buildings (net) } & 2,700 & 600 \\\text { Equipment (net) } & 2,100 & \underline{1,200} \\\quad \text { Total assets } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}} \\\\\text { Liabilities } & \$ 1,500 & \$ 820 \\\text { Common stock } & 1,080 & 400 \\\text { Additional paid-in capital } & 810 & 540 \\\text { Retained earnings } & 2,850 & \underline{600} \\\quad \text { Total liabilities \& stockholders' equity } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}}\end{array}$
On December 31,2018,Goodwin obtained a loan for $600 and used the proceeds,along with the transfer of 30 shares of its $10 par value common stock,in exchange for all of Corr's common stock.At the time of the transaction,Goodwin's common stock had a fair value of $40 per share.
In connection with the business combination,Goodwin paid $25 to a broker for arranging the transaction and $35 in stock issuance costs.At the time of the transaction,Corr's equipment was actually worth $1,400 but its buildings were only valued at $560.

-Compute the consolidated buildings (net)account at December 31,2018.

A)$2,700.
B)$3,370.
C)$3,300.
D)$3,260.
E)$3,340.

Question 39

REFERENCE: 02-03
The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,2018,prior to the business combination whereby Goodwin acquired Corr,are as follows (in thousands): $\begin{array}{lrr}\text { Revenues } & \$ 2,700 & \$ 600 \\\text { Expenses } & \underline{1,980} & \underline{400} \\\text { Net income } & \$ 720&\$ 200\\\\\text { Retained eamings } 1 / 1 & \$ 2,400 & \$ 400 \\\text { Net income } & 720 & 200 \\\text { Dividends } & (270) & (0) \\\quad \text { Retained eamings, } 12 / 31 & \$ 2,850 & \$ 600\\\\\text { Cash } & \$ 240 & \$ 220 \\\text { Receivables and inv entory } & 1,200 & 340 \\\text { Buildings (net) } & 2,700 & 600 \\\text { Equipment (net) } & 2,100 & \underline{1,200} \\\quad \text { Total assets } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}} \\\\\text { Liabilities } & \$ 1,500 & \$ 820 \\\text { Common stock } & 1,080 & 400 \\\text { Additional paid-in capital } & 810 & 540 \\\text { Retained earnings } & 2,850 & \underline{600} \\\quad \text { Total liabilities \& stockholders' equity } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}}\end{array}$
On December 31,2018,Goodwin obtained a loan for $600 and used the proceeds,along with the transfer of 30 shares of its $10 par value common stock,in exchange for all of Corr's common stock.At the time of the transaction,Goodwin's common stock had a fair value of $40 per share.
In connection with the business combination,Goodwin paid $25 to a broker for arranging the transaction and $35 in stock issuance costs.At the time of the transaction,Corr's equipment was actually worth $1,400 but its buildings were only valued at $560.

-Compute the consolidated common stock account at December 31,2018.

A)$1,080.
B)$1,480.
C)$1,380.
D)$2,280.
E)$2,680.

Question 40

REFERENCE: 02-03
The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,2018,prior to the business combination whereby Goodwin acquired Corr,are as follows (in thousands): $\begin{array}{lrr}\text { Revenues } & \$ 2,700 & \$ 600 \\\text { Expenses } & \underline{1,980} & \underline{400} \\\text { Net income } & \$ 720&\$ 200\\\\\text { Retained eamings } 1 / 1 & \$ 2,400 & \$ 400 \\\text { Net income } & 720 & 200 \\\text { Dividends } & (270) & (0) \\\quad \text { Retained eamings, } 12 / 31 & \$ 2,850 & \$ 600\\\\\text { Cash } & \$ 240 & \$ 220 \\\text { Receivables and inv entory } & 1,200 & 340 \\\text { Buildings (net) } & 2,700 & 600 \\\text { Equipment (net) } & 2,100 & \underline{1,200} \\\quad \text { Total assets } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}} \\\\\text { Liabilities } & \$ 1,500 & \$ 820 \\\text { Common stock } & 1,080 & 400 \\\text { Additional paid-in capital } & 810 & 540 \\\text { Retained earnings } & 2,850 & \underline{600} \\\quad \text { Total liabilities \& stockholders' equity } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}}\end{array}$
On December 31,2018,Goodwin obtained a loan for $600 and used the proceeds,along with the transfer of 30 shares of its $10 par value common stock,in exchange for all of Corr's common stock.At the time of the transaction,Goodwin's common stock had a fair value of $40 per share.
In connection with the business combination,Goodwin paid $25 to a broker for arranging the transaction and $35 in stock issuance costs.At the time of the transaction,Corr's equipment was actually worth $1,400 but its buildings were only valued at $560.

-Compute the consideration transferred for this acquisition at December 31,2018.

A)$ 900.
B)$1,165.
C)$1,200.
D)$1,765.
E)$1,800.

Question 41

REFERENCE: 02-06
The financial balances for the Atwood Company and the Franz Company as of December 31,2018,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 31,2018.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.

Question 42

REFERENCE: 02-06
The financial balances for the Atwood Company and the Franz Company as of December 31,2018,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 31,2018.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 the date of acquisition.

A)$1,000.
B)$2,980.
C)$2,400.
D)$3,400.
E)$3,730.

Question 43

REFERENCE: 02-05
Carnes has the following account balances as of December 31,2017 before an acquisition transaction takes place.
The fair value of Carnes' Land and Buildings are $650,000 and $550,000,respectively.On December 31,2017,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.
$$\begin{array} { l r } \text { Inventory } & \$ 100,000 \\\text { Land } & 400,000 \\\text { Buildings (net) } & 500,000 \\\text { Common stock (\$10 par) } & 600,000 \\\text { Additional paid-in capital } & 200,000 \\\text { Retained Earnings } & 200,000 \\\text { Revenues } & 450,000 \\\text { Expenses } & 250,000\end{array}$$

-At the date of acquisition,by how much does Riley's additional paid-in capital increase or decrease?

A)$ 0.
B)$440,000 increase.
C)$450,000 increase.
D)$640,000 increase.
E)$650,000 decrease.

Question 44

REFERENCE: 02-05
Carnes has the following account balances as of December 31,2017 before an acquisition transaction takes place.
The fair value of Carnes' Land and Buildings are $650,000 and $550,000,respectively.On December 31,2017,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.
$$\begin{array} { l r } \text { Inventory } & \$ 100,000 \\\text { Land } & 400,000 \\\text { Buildings (net) } & 500,000 \\\text { Common stock (\$10 par) } & 600,000 \\\text { Additional paid-in capital } & 200,000 \\\text { Retained Earnings } & 200,000 \\\text { Revenues } & 450,000 \\\text { Expenses } & 250,000\end{array}$$

-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.

Question 45

REFERENCE: 02-04
On January 1,2018,the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company.To acquire these shares,Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share.Moody paid $20 to lawyers,accountants,and brokers for assistance in bringing about this acquisition.Another $15 was paid in connection with stock issuance costs.Prior to these transactions,the balance sheets for the two companies were as follows: $$\begin{array} { l r c } & \text { Moody } & \text { Osorio } \\\text { Cash } & \$ 180 & \$ 40 \\\text { Receivables } & 810 & 180 \\\text { Inventories } & 1,080 & 280 \\\text { Land } & 600 & 360 \\\text { Buildings (net) } & 1,260 & 440 \\\text { Equipment (net) } & 480 & 100 \\\text { Accounts payable } & ( 450 ) & ( 80 ) \\\text { Long-term liabilities } & ( 1,290 ) & ( 400 ) \\\text { Common stock (\$1 par) } & ( 330 ) & \\\text { Common stock } ( \$ 20 \text { par) } & & ( 240 ) \\\text { Additional paid-in capital } & ( 1,080 ) & ( 340 ) \\\text { Retained earnings } & ( 1,260 ) & ( 340 )\end{array}$$ Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio,three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10,Land by $40,and Buildings by $60.

-If Osorio retains a separate corporate existence,what amount was recorded as the investment in Osorio?

A)$930.
B)$820.
C)$800.
D)$835.
E)$815.

Question 46

REFERENCE: 02-06
The financial balances for the Atwood Company and the Franz Company as of December 31,2018,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 31,2018.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.

Question 47

REFERENCE: 02-05
Carnes has the following account balances as of December 31,2017 before an acquisition transaction takes place.
The fair value of Carnes' Land and Buildings are $650,000 and $550,000,respectively.On December 31,2017,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.
$$\begin{array} { l r } \text { Inventory } & \$ 100,000 \\\text { Land } & 400,000 \\\text { Buildings (net) } & 500,000 \\\text { Common stock (\$10 par) } & 600,000 \\\text { Additional paid-in capital } & 200,000 \\\text { Retained Earnings } & 200,000 \\\text { Revenues } & 450,000 \\\text { Expenses } & 250,000\end{array}$$

-What will the consolidated common stock account be as a result of this acquisition?

A)$ 300,000.
B)$ 990,000.
C)$1,000,000.
D)$1,590,000.
E)$1,600,000.

Question 48

REFERENCE: 02-06
The financial balances for the Atwood Company and the Franz Company as of December 31,2018,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 31,2018.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 amount of the consideration transferred by Atwood to acquire Franz.

A)$1,750.
B)$1,760.
C)$1,775.
D)$1,300.
E)$1,120.

Question 49

REFERENCE: 02-04
On January 1,2018,the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company.To acquire these shares,Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share.Moody paid $20 to lawyers,accountants,and brokers for assistance in bringing about this acquisition.Another $15 was paid in connection with stock issuance costs.Prior to these transactions,the balance sheets for the two companies were as follows: $$\begin{array} { l r c } & \text { Moody } & \text { Osorio } \\\text { Cash } & \$ 180 & \$ 40 \\\text { Receivables } & 810 & 180 \\\text { Inventories } & 1,080 & 280 \\\text { Land } & 600 & 360 \\\text { Buildings (net) } & 1,260 & 440 \\\text { Equipment (net) } & 480 & 100 \\\text { Accounts payable } & ( 450 ) & ( 80 ) \\\text { Long-term liabilities } & ( 1,290 ) & ( 400 ) \\\text { Common stock (\$1 par) } & ( 330 ) & \\\text { Common stock } ( \$ 20 \text { par) } & & ( 240 ) \\\text { Additional paid-in capital } & ( 1,080 ) & ( 340 ) \\\text { Retained earnings } & ( 1,260 ) & ( 340 )\end{array}$$ Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio,three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10,Land by $40,and Buildings by $60.

-Compute the amount of consolidated equipment at date of acquisition.

A)$480.
B)$580.
C)$559.
D)$570.
E)$560.

Question 50

REFERENCE: 02-05
Carnes has the following account balances as of December 31,2017 before an acquisition transaction takes place.
The fair value of Carnes' Land and Buildings are $650,000 and $550,000,respectively.On December 31,2017,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.
$$\begin{array} { l r } \text { Inventory } & \$ 100,000 \\\text { Land } & 400,000 \\\text { Buildings (net) } & 500,000 \\\text { Common stock (\$10 par) } & 600,000 \\\text { Additional paid-in capital } & 200,000 \\\text { Retained Earnings } & 200,000 \\\text { Revenues } & 450,000 \\\text { Expenses } & 250,000\end{array}$$

-On December 31,2017,assuming that Cames will retain its separate corporate existence,what value is assigned to Riley's investment account?

A)$ 150,000.
B)$ 300,000.
C)$ 750,000.
D)$ 760,000.
E)$1,350,000.

Question 51

REFERENCE: 02-04
On January 1,2018,the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company.To acquire these shares,Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share.Moody paid $20 to lawyers,accountants,and brokers for assistance in bringing about this acquisition.Another $15 was paid in connection with stock issuance costs.Prior to these transactions,the balance sheets for the two companies were as follows: $$\begin{array} { l r c } & \text { Moody } & \text { Osorio } \\\text { Cash } & \$ 180 & \$ 40 \\\text { Receivables } & 810 & 180 \\\text { Inventories } & 1,080 & 280 \\\text { Land } & 600 & 360 \\\text { Buildings (net) } & 1,260 & 440 \\\text { Equipment (net) } & 480 & 100 \\\text { Accounts payable } & ( 450 ) & ( 80 ) \\\text { Long-term liabilities } & ( 1,290 ) & ( 400 ) \\\text { Common stock (\$1 par) } & ( 330 ) & \\\text { Common stock } ( \$ 20 \text { par) } & & ( 240 ) \\\text { Additional paid-in capital } & ( 1,080 ) & ( 340 ) \\\text { Retained earnings } & ( 1,260 ) & ( 340 )\end{array}$$ Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio,three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10,Land by $40,and Buildings by $60.

-Compute the amount of consolidated cash after recording the acquisition transaction.

A)$220.
B)$185.
C)$200.
D)$205.
E)$215.

Question 52

REFERENCE: 02-04
On January 1,2018,the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company.To acquire these shares,Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share.Moody paid $20 to lawyers,accountants,and brokers for assistance in bringing about this acquisition.Another $15 was paid in connection with stock issuance costs.Prior to these transactions,the balance sheets for the two companies were as follows: $$\begin{array} { l r c } & \text { Moody } & \text { Osorio } \\\text { Cash } & \$ 180 & \$ 40 \\\text { Receivables } & 810 & 180 \\\text { Inventories } & 1,080 & 280 \\\text { Land } & 600 & 360 \\\text { Buildings (net) } & 1,260 & 440 \\\text { Equipment (net) } & 480 & 100 \\\text { Accounts payable } & ( 450 ) & ( 80 ) \\\text { Long-term liabilities } & ( 1,290 ) & ( 400 ) \\\text { Common stock (\$1 par) } & ( 330 ) & \\\text { Common stock } ( \$ 20 \text { par) } & & ( 240 ) \\\text { Additional paid-in capital } & ( 1,080 ) & ( 340 ) \\\text { Retained earnings } & ( 1,260 ) & ( 340 )\end{array}$$ Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio,three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10,Land by $40,and Buildings by $60.

-Compute the amount of consolidated additional paid-in capital at date of acquisition.

A)$1,080.
B)$1,420.
C)$1,065.
D)$1,425.
E)$1,440.

Question 53

REFERENCE: 02-04
On January 1,2018,the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company.To acquire these shares,Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share.Moody paid $20 to lawyers,accountants,and brokers for assistance in bringing about this acquisition.Another $15 was paid in connection with stock issuance costs.Prior to these transactions,the balance sheets for the two companies were as follows: $$\begin{array} { l r c } & \text { Moody } & \text { Osorio } \\\text { Cash } & \$ 180 & \$ 40 \\\text { Receivables } & 810 & 180 \\\text { Inventories } & 1,080 & 280 \\\text { Land } & 600 & 360 \\\text { Buildings (net) } & 1,260 & 440 \\\text { Equipment (net) } & 480 & 100 \\\text { Accounts payable } & ( 450 ) & ( 80 ) \\\text { Long-term liabilities } & ( 1,290 ) & ( 400 ) \\\text { Common stock (\$1 par) } & ( 330 ) & \\\text { Common stock } ( \$ 20 \text { par) } & & ( 240 ) \\\text { Additional paid-in capital } & ( 1,080 ) & ( 340 ) \\\text { Retained earnings } & ( 1,260 ) & ( 340 )\end{array}$$ Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio,three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10,Land by $40,and Buildings by $60.

-Compute the amount of consolidated common stock at date of acquisition.

A)$370.
B)$570.
C)$610.
D)$330.
E)$530.

Question 54

REFERENCE: 02-03
The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,2018,prior to the business combination whereby Goodwin acquired Corr,are as follows (in thousands): $\begin{array}{lrr}\text { Revenues } & \$ 2,700 & \$ 600 \\\text { Expenses } & \underline{1,980} & \underline{400} \\\text { Net income } & \$ 720&\$ 200\\\\\text { Retained eamings } 1 / 1 & \$ 2,400 & \$ 400 \\\text { Net income } & 720 & 200 \\\text { Dividends } & (270) & (0) \\\quad \text { Retained eamings, } 12 / 31 & \$ 2,850 & \$ 600\\\\\text { Cash } & \$ 240 & \$ 220 \\\text { Receivables and inv entory } & 1,200 & 340 \\\text { Buildings (net) } & 2,700 & 600 \\\text { Equipment (net) } & 2,100 & \underline{1,200} \\\quad \text { Total assets } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}} \\\\\text { Liabilities } & \$ 1,500 & \$ 820 \\\text { Common stock } & 1,080 & 400 \\\text { Additional paid-in capital } & 810 & 540 \\\text { Retained earnings } & 2,850 & \underline{600} \\\quad \text { Total liabilities \& stockholders' equity } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}}\end{array}$
On December 31,2018,Goodwin obtained a loan for $600 and used the proceeds,along with the transfer of 30 shares of its $10 par value common stock,in exchange for all of Corr's common stock.At the time of the transaction,Goodwin's common stock had a fair value of $40 per share.
In connection with the business combination,Goodwin paid $25 to a broker for arranging the transaction and $35 in stock issuance costs.At the time of the transaction,Corr's equipment was actually worth $1,400 but its buildings were only valued at $560.

-Compute the consolidated additional paid-in capital at December 31,2018.

A)$ 810.
B)$1,350.
C)$1,675.
D)$1,910.
E)$1,875.

Question 55

REFERENCE: 02-04
On January 1,2018,the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company.To acquire these shares,Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share.Moody paid $20 to lawyers,accountants,and brokers for assistance in bringing about this acquisition.Another $15 was paid in connection with stock issuance costs.Prior to these transactions,the balance sheets for the two companies were as follows: $$\begin{array} { l r c } & \text { Moody } & \text { Osorio } \\\text { Cash } & \$ 180 & \$ 40 \\\text { Receivables } & 810 & 180 \\\text { Inventories } & 1,080 & 280 \\\text { Land } & 600 & 360 \\\text { Buildings (net) } & 1,260 & 440 \\\text { Equipment (net) } & 480 & 100 \\\text { Accounts payable } & ( 450 ) & ( 80 ) \\\text { Long-term liabilities } & ( 1,290 ) & ( 400 ) \\\text { Common stock (\$1 par) } & ( 330 ) & \\\text { Common stock } ( \$ 20 \text { par) } & & ( 240 ) \\\text { Additional paid-in capital } & ( 1,080 ) & ( 340 ) \\\text { Retained earnings } & ( 1,260 ) & ( 340 )\end{array}$$ Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio,three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10,Land by $40,and Buildings by $60.

-Compute the amount of consolidated inventories at date of acquisition.

A)$1,080.
B)$1,350.
C)$1,360.
D)$1,370.
E)$ 290.

Question 56

REFERENCE: 02-04
On January 1,2018,the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company.To acquire these shares,Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share.Moody paid $20 to lawyers,accountants,and brokers for assistance in bringing about this acquisition.Another $15 was paid in connection with stock issuance costs.Prior to these transactions,the balance sheets for the two companies were as follows: $$\begin{array} { l r c } & \text { Moody } & \text { Osorio } \\\text { Cash } & \$ 180 & \$ 40 \\\text { Receivables } & 810 & 180 \\\text { Inventories } & 1,080 & 280 \\\text { Land } & 600 & 360 \\\text { Buildings (net) } & 1,260 & 440 \\\text { Equipment (net) } & 480 & 100 \\\text { Accounts payable } & ( 450 ) & ( 80 ) \\\text { Long-term liabilities } & ( 1,290 ) & ( 400 ) \\\text { Common stock (\$1 par) } & ( 330 ) & \\\text { Common stock } ( \$ 20 \text { par) } & & ( 240 ) \\\text { Additional paid-in capital } & ( 1,080 ) & ( 340 ) \\\text { Retained earnings } & ( 1,260 ) & ( 340 )\end{array}$$ Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio,three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10,Land by $40,and Buildings by $60.

-What is the amount of goodwill arising from this acquisition?

A)$230.
B)$120.
C)$520.
D)None.There is a gain on bargain purchase of $230.
E)None.There is a gain on bargain purchase of $265.

Question 57

REFERENCE: 02-04
On January 1,2018,the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company.To acquire these shares,Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share.Moody paid $20 to lawyers,accountants,and brokers for assistance in bringing about this acquisition.Another $15 was paid in connection with stock issuance costs.Prior to these transactions,the balance sheets for the two companies were as follows: $$\begin{array} { l r c } & \text { Moody } & \text { Osorio } \\\text { Cash } & \$ 180 & \$ 40 \\\text { Receivables } & 810 & 180 \\\text { Inventories } & 1,080 & 280 \\\text { Land } & 600 & 360 \\\text { Buildings (net) } & 1,260 & 440 \\\text { Equipment (net) } & 480 & 100 \\\text { Accounts payable } & ( 450 ) & ( 80 ) \\\text { Long-term liabilities } & ( 1,290 ) & ( 400 ) \\\text { Common stock (\$1 par) } & ( 330 ) & \\\text { Common stock } ( \$ 20 \text { par) } & & ( 240 ) \\\text { Additional paid-in capital } & ( 1,080 ) & ( 340 ) \\\text { Retained earnings } & ( 1,260 ) & ( 340 )\end{array}$$ Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio,three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10,Land by $40,and Buildings by $60.

-Compute the amount of consolidated land at date of acquisition.

A)$1,000.
B)$ 960.
C)$ 920.
D)$ 400.
E)$ 320.

Question 58

REFERENCE: 02-03
The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,2018,prior to the business combination whereby Goodwin acquired Corr,are as follows (in thousands): $\begin{array}{lrr}\text { Revenues } & \$ 2,700 & \$ 600 \\\text { Expenses } & \underline{1,980} & \underline{400} \\\text { Net income } & \$ 720&\$ 200\\\\\text { Retained eamings } 1 / 1 & \$ 2,400 & \$ 400 \\\text { Net income } & 720 & 200 \\\text { Dividends } & (270) & (0) \\\quad \text { Retained eamings, } 12 / 31 & \$ 2,850 & \$ 600\\\\\text { Cash } & \$ 240 & \$ 220 \\\text { Receivables and inv entory } & 1,200 & 340 \\\text { Buildings (net) } & 2,700 & 600 \\\text { Equipment (net) } & 2,100 & \underline{1,200} \\\quad \text { Total assets } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}} \\\\\text { Liabilities } & \$ 1,500 & \$ 820 \\\text { Common stock } & 1,080 & 400 \\\text { Additional paid-in capital } & 810 & 540 \\\text { Retained earnings } & 2,850 & \underline{600} \\\quad \text { Total liabilities \& stockholders' equity } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}}\end{array}$
On December 31,2018,Goodwin obtained a loan for $600 and used the proceeds,along with the transfer of 30 shares of its $10 par value common stock,in exchange for all of Corr's common stock.At the time of the transaction,Goodwin's common stock had a fair value of $40 per share.
In connection with the business combination,Goodwin paid $25 to a broker for arranging the transaction and $35 in stock issuance costs.At the time of the transaction,Corr's equipment was actually worth $1,400 but its buildings were only valued at $560.

-Compute the consolidated liabilities at December 31,2018.

A)$1,500.
B)$2,100.
C)$2,320.
D)$2,920.
E)$2,885.

Question 59

REFERENCE: 02-03
The financial statements for Goodwin,Inc. ,and Corr Company for the year ended December 31,2018,prior to the business combination whereby Goodwin acquired Corr,are as follows (in thousands): $\begin{array}{lrr}\text { Revenues } & \$ 2,700 & \$ 600 \\\text { Expenses } & \underline{1,980} & \underline{400} \\\text { Net income } & \$ 720&\$ 200\\\\\text { Retained eamings } 1 / 1 & \$ 2,400 & \$ 400 \\\text { Net income } & 720 & 200 \\\text { Dividends } & (270) & (0) \\\quad \text { Retained eamings, } 12 / 31 & \$ 2,850 & \$ 600\\\\\text { Cash } & \$ 240 & \$ 220 \\\text { Receivables and inv entory } & 1,200 & 340 \\\text { Buildings (net) } & 2,700 & 600 \\\text { Equipment (net) } & 2,100 & \underline{1,200} \\\quad \text { Total assets } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}} \\\\\text { Liabilities } & \$ 1,500 & \$ 820 \\\text { Common stock } & 1,080 & 400 \\\text { Additional paid-in capital } & 810 & 540 \\\text { Retained earnings } & 2,850 & \underline{600} \\\quad \text { Total liabilities \& stockholders' equity } & \$ \underline{\underline{6,240}} & \$ \underline{\underline{2,360}}\end{array}$
On December 31,2018,Goodwin obtained a loan for $600 and used the proceeds,along with the transfer of 30 shares of its $10 par value common stock,in exchange for all of Corr's common stock.At the time of the transaction,Goodwin's common stock had a fair value of $40 per share.
In connection with the business combination,Goodwin paid $25 to a broker for arranging the transaction and $35 in stock issuance costs.At the time of the transaction,Corr's equipment was actually worth $1,400 but its buildings were only valued at $560.

-Compute the consolidated retained earnings at December 31,2018.

A)$2,800.
B)$2,825.
C)$2,850.
D)$3,425.
E)$3,450.

Question 60

REFERENCE: 02-04
On January 1,2018,the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company.To acquire these shares,Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share.Moody paid $20 to lawyers,accountants,and brokers for assistance in bringing about this acquisition.Another $15 was paid in connection with stock issuance costs.Prior to these transactions,the balance sheets for the two companies were as follows: $$\begin{array} { l r c } & \text { Moody } & \text { Osorio } \\\text { Cash } & \$ 180 & \$ 40 \\\text { Receivables } & 810 & 180 \\\text { Inventories } & 1,080 & 280 \\\text { Land } & 600 & 360 \\\text { Buildings (net) } & 1,260 & 440 \\\text { Equipment (net) } & 480 & 100 \\\text { Accounts payable } & ( 450 ) & ( 80 ) \\\text { Long-term liabilities } & ( 1,290 ) & ( 400 ) \\\text { Common stock (\$1 par) } & ( 330 ) & \\\text { Common stock } ( \$ 20 \text { par) } & & ( 240 ) \\\text { Additional paid-in capital } & ( 1,080 ) & ( 340 ) \\\text { Retained earnings } & ( 1,260 ) & ( 340 )\end{array}$$ Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio,three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10,Land by $40,and Buildings by $60.

-Compute the amount of consolidated buildings (net)at date of acquisition.

A)$1,700.
B)$1,760.
C)$1,640.
D)$1,320.
E)$ 500.

Question 61

REFERENCE: 02-07
Presented below are the financial balances for the Boxwood Company and the Tranz Company as of December 31,2017,immediately before Boxwood acquired Tranz.Also included are the fair values for Tranz Company's net assets at that date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31,2017.Boxwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Tranz.Stock issuance costs of $15 (in thousands)and direct costs of $10 (in thousands)were paid to effect this acquisition transaction.To settle a difference of opinion regarding Tranz's fair value,Boxwood promises to pay an additional $5.2 (in thousands)to the former owners if Tranz's earnings exceed a certain sum during the next year.Given the probability of the required contingency payment and utilizing a 4% discount rate,the expected present value of the contingency is $5 (in thousands).

-Compute consolidated buildings (net)immediately following the acquisition.

A)$2,450.
B)$2,340.
C)$1,800.
D)$ 650.
E)$1,690.

Question 62

REFERENCE: 02-07
Presented below are the financial balances for the Boxwood Company and the Tranz Company as of December 31,2017,immediately before Boxwood acquired Tranz.Also included are the fair values for Tranz Company's net assets at that date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31,2017.Boxwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Tranz.Stock issuance costs of $15 (in thousands)and direct costs of $10 (in thousands)were paid to effect this acquisition transaction.To settle a difference of opinion regarding Tranz's fair value,Boxwood promises to pay an additional $5.2 (in thousands)to the former owners if Tranz's earnings exceed a certain sum during the next year.Given the probability of the required contingency payment and utilizing a 4% discount rate,the expected present value of the contingency is $5 (in thousands).

-Compute consolidated retained earnings as a result of this acquisition.

A)$1,160.
B)$1,170.
C)$1,265.
D)$1,280.
E)$1,650.

Question 63

REFERENCE: 02-07
Presented below are the financial balances for the Boxwood Company and the Tranz Company as of December 31,2017,immediately before Boxwood acquired Tranz.Also included are the fair values for Tranz Company's net assets at that date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31,2017.Boxwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Tranz.Stock issuance costs of $15 (in thousands)and direct costs of $10 (in thousands)were paid to effect this acquisition transaction.To settle a difference of opinion regarding Tranz's fair value,Boxwood promises to pay an additional $5.2 (in thousands)to the former owners if Tranz's earnings exceed a certain sum during the next year.Given the probability of the required contingency payment and utilizing a 4% discount rate,the expected present value of the contingency is $5 (in thousands).

-Compute the consolidated cash upon completion of the acquisition.

A)$1,350.
B)$1,110.
C)$1,080.
D)$1,085.
E)$ 635.

Question 64

REFERENCE: 02-07
Presented below are the financial balances for the Boxwood Company and the Tranz Company as of December 31,2017,immediately before Boxwood acquired Tranz.Also included are the fair values for Tranz Company's net assets at that date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31,2017.Boxwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Tranz.Stock issuance costs of $15 (in thousands)and direct costs of $10 (in thousands)were paid to effect this acquisition transaction.To settle a difference of opinion regarding Tranz's fair value,Boxwood promises to pay an additional $5.2 (in thousands)to the former owners if Tranz's earnings exceed a certain sum during the next year.Given the probability of the required contingency payment and utilizing a 4% discount rate,the expected present value of the contingency is $5 (in thousands).

-Compute the investment to be recorded at the date of acquisition.

A)$1,750.
B)$1,755.
C)$1,725.
D)$1,760.
E)$1,765.

Question 65

REFERENCE: 02-08
Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1,2018.To obtain these shares,Flynn pays $400 cash (in thousands)and issues 10,000 shares of $20 par value common stock on this date.Flynn's stock had a fair value of $36 per share on that date.Flynn also pays $15 (in thousands)to a local investment firm for arranging the acquisition.An additional $10 (in thousands)was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1,2018 follow.The fair value of each of Flynn and Macek accounts is also included.In addition,Macek holds a fully amortized trademark that still retains a $40 (in thousands)value.The figures below are in thousands.Any related question also is in thousands.
$\begin{array}{lrrr}& \text { Flynn, Inc. } & &{ \text { Macek Company } } \\& & \text { Book Value } & \text { Fair Value } \\\text { Cash } & \$ 900& \$ 80 & \$ 80\\\text { Receivables } & 480& 180 & 160 \\\text { Inventory } & 660& 260& 300 \\\text { Land } & 300& 120& 130 \\\text { Buildings (net) } & 1,200 & 220 & 280 \\\text { Equipment } & 360 & 100& 75 \\\text { Accounts payable } & 480& 6 0& 60 \\\text { Long-term liabilities } & 1,140 & 340 & 300 \\\text { Common stock } & 1,000 & 80& \\\text { Additional paid-in capital } & 200 & 0 & \\\text { Retained earnings } & 1,080& 480&\end{array}$

-By how much will Flynn's additional paid-in capital increase as a result of this acquisition?

A)$150,000.
B)$160,000.
C)$230,000.
D)$350,000.
E)$360,000.

Question 66

REFERENCE: 02-06
The financial balances for the Atwood Company and the Franz Company as of December 31,2018,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 31,2018.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.

Question 67

REFERENCE: 02-06
The financial balances for the Atwood Company and the Franz Company as of December 31,2018,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 31,2018.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.

Question 68

REFERENCE: 02-07
Presented below are the financial balances for the Boxwood Company and the Tranz Company as of December 31,2017,immediately before Boxwood acquired Tranz.Also included are the fair values for Tranz Company's net assets at that date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31,2017.Boxwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Tranz.Stock issuance costs of $15 (in thousands)and direct costs of $10 (in thousands)were paid to effect this acquisition transaction.To settle a difference of opinion regarding Tranz's fair value,Boxwood promises to pay an additional $5.2 (in thousands)to the former owners if Tranz's earnings exceed a certain sum during the next year.Given the probability of the required contingency payment and utilizing a 4% discount rate,the expected present value of the contingency is $5 (in thousands).

-Compute consolidated expenses immediately following the acquisition.

A)$2,735.
B)$2,760.
C)$2,770.
D)$2,785.
E)$3,380.

Question 69

REFERENCE: 02-07
Presented below are the financial balances for the Boxwood Company and the Tranz Company as of December 31,2017,immediately before Boxwood acquired Tranz.Also included are the fair values for Tranz Company's net assets at that date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31,2017.Boxwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Tranz.Stock issuance costs of $15 (in thousands)and direct costs of $10 (in thousands)were paid to effect this acquisition transaction.To settle a difference of opinion regarding Tranz's fair value,Boxwood promises to pay an additional $5.2 (in thousands)to the former owners if Tranz's earnings exceed a certain sum during the next year.Given the probability of the required contingency payment and utilizing a 4% discount rate,the expected present value of the contingency is $5 (in thousands).

-Compute consolidated land immediately following the acquisition.

A)$2,060.
B)$1,800.
C)$ 260.
D)$2,050.
E)$2,070.

Question 70

REFERENCE: 02-07
Presented below are the financial balances for the Boxwood Company and the Tranz Company as of December 31,2017,immediately before Boxwood acquired Tranz.Also included are the fair values for Tranz Company's net assets at that date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31,2017.Boxwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Tranz.Stock issuance costs of $15 (in thousands)and direct costs of $10 (in thousands)were paid to effect this acquisition transaction.To settle a difference of opinion regarding Tranz's fair value,Boxwood promises to pay an additional $5.2 (in thousands)to the former owners if Tranz's earnings exceed a certain sum during the next year.Given the probability of the required contingency payment and utilizing a 4% discount rate,the expected present value of the contingency is $5 (in thousands).

-Compute consolidated equipment immediately following the acquisition.

A)$ 400.
B)$ 660.
C)$1,060.
D)$1,040.
E)$1,050.

Question 71

REFERENCE: 02-06
The financial balances for the Atwood Company and the Franz Company as of December 31,2018,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 31,2018.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 retained earnings at the date of the acquisition.

A)$1,160.
B)$1,170.
C)$1,280.
D)$1,290.
E)$1,640.

Question 72

REFERENCE: 02-06
The financial balances for the Atwood Company and the Franz Company as of December 31,2018,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 31,2018.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 cash at the completion of the acquisition.

A)$1,350.
B)$1,085.
C)$1,110.
D)$ 870.
E)$ 845.

Question 73

REFERENCE: 02-06
The financial balances for the Atwood Company and the Franz Company as of December 31,2018,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 31,2018.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.

Question 74

REFERENCE: 02-07
Presented below are the financial balances for the Boxwood Company and the Tranz Company as of December 31,2017,immediately before Boxwood acquired Tranz.Also included are the fair values for Tranz Company's net assets at that date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31,2017.Boxwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Tranz.Stock issuance costs of $15 (in thousands)and direct costs of $10 (in thousands)were paid to effect this acquisition transaction.To settle a difference of opinion regarding Tranz's fair value,Boxwood promises to pay an additional $5.2 (in thousands)to the former owners if Tranz's earnings exceed a certain sum during the next year.Given the probability of the required contingency payment and utilizing a 4% discount rate,the expected present value of the contingency is $5 (in thousands).

-Compute consolidated revenues immediately following the acquisition.

A)$3,540.
B)$2,880.
C)$1,170.
D)$1,650.
E)$4,050.

Question 75

REFERENCE: 02-06
The financial balances for the Atwood Company and the Franz Company as of December 31,2018,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 31,2018.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 expenses immediately following the acquisition.

A)$2,760.
B)$2,770.
C)$2,785.
D)$3,380.
E)$3,390.

Question 76

REFERENCE: 02-06
The financial balances for the Atwood Company and the Franz Company as of December 31,2018,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 31,2018.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.

Question 77

REFERENCE: 02-06
The financial balances for the Atwood Company and the Franz Company as of December 31,2018,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 31,2018.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 revenues immediately following the acquisition.

A)$3,540.
B)$2,880.
C)$1,170.
D)$1,650.
E)$4,050.

Question 78

REFERENCE: 02-06
The financial balances for the Atwood Company and the Franz Company as of December 31,2018,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 31,2018.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.

Question 79

REFERENCE: 02-07
Presented below are the financial balances for the Boxwood Company and the Tranz Company as of December 31,2017,immediately before Boxwood acquired Tranz.Also included are the fair values for Tranz Company's net assets at that date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31,2017.Boxwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Tranz.Stock issuance costs of $15 (in thousands)and direct costs of $10 (in thousands)were paid to effect this acquisition transaction.To settle a difference of opinion regarding Tranz's fair value,Boxwood promises to pay an additional $5.2 (in thousands)to the former owners if Tranz's earnings exceed a certain sum during the next year.Given the probability of the required contingency payment and utilizing a 4% discount rate,the expected present value of the contingency is $5 (in thousands).

-Compute consolidated inventory immediately following the acquisition.

A)$1,650.
B)$1,810.
C)$1,230.
D)$ 580.
E)$1,830.

Question 80

REFERENCE: 02-07
Presented below are the financial balances for the Boxwood Company and the Tranz Company as of December 31,2017,immediately before Boxwood acquired Tranz.Also included are the fair values for Tranz Company's net assets at that date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31,2017.Boxwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Tranz.Stock issuance costs of $15 (in thousands)and direct costs of $10 (in thousands)were paid to effect this acquisition transaction.To settle a difference of opinion regarding Tranz's fair value,Boxwood promises to pay an additional $5.2 (in thousands)to the former owners if Tranz's earnings exceed a certain sum during the next year.Given the probability of the required contingency payment and utilizing a 4% discount rate,the expected present value of the contingency is $5 (in thousands).

-Compute consolidated goodwill immediately following the acquisition.

A)$440.
B)$442.
C)$450.
D)$455.
E)$452.