Question 1

Intangible assets other than goodwill are recognized as assets apart from goodwill in a business combination only if the intangibles have indefinite useful economic lives.

Accepted Answer

Intangible assets other than goodwill are recognized as assets apart from goodwill in a business combination if they are identifiable and meet either the separability criterion or the contractual-legal criterion, regardless of whether they have indefinite or finite useful economic lives.

Question 2

Intangible assets other than goodwill are recognized as assets apart from goodwill in a business combination only if the intangibles (1) arise from a contractual or legal right or (2) do not arise from a contractual or legal right but are separable.

Accepted Answer

Intangible assets other than goodwill are recognized as assets in a business combination if they either arise from contractual or legal rights or are separable, meaning they can be separated or divided from the entity and sold, transferred, licensed, rented, or exchanged.

Question 3

Intangible assets other than goodwill are recognized as assets apart from goodwill in a business combination only if the intangibles arise from a contractual or legal right.

Accepted Answer

Intangible assets other than goodwill are recognized as assets apart from goodwill in a business combination if they arise from contractual or legal rights or if they are separable, meaning they can be separated or divided from the entity and sold, transferred, licensed, rented, or exchanged.

Question 4

Intangible assets other than goodwill are recognized as assets apart from goodwill in a business combination only if the intangibles are separable.

Accepted Answer

Intangible assets other than goodwill are recognized as assets apart from goodwill in a business combination if they are separable or if they arise from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

Question 5

Intangible assets other than goodwill that are recognized as assets apart from goodwill in a business combination must be subsequently amortized to earnings only if they do not have indefinite useful economic lives.

Accepted Answer

Intangible assets with finite useful lives are amortized over their useful lives, while those deemed to have indefinite useful lives are not amortized but are instead tested for impairment at least annually.

Question 6

Intangible assets other than goodwill that are both (1) recognized as assets apart from goodwill in a business combination and (2) required to be subsequently amortized to earnings, are also subject to impairment testing.

Accepted Answer

Intangible assets, other than goodwill, recognized in a business combination are amortized and also tested for impairment to ensure their carrying value does not exceed their recoverable amount.

Question 7

Intangible assets other than goodwill that are both (1) recognized as assets apart from goodwill in a business combination and (2) required to be subsequently amortized to earnings, are not subject to impairment testing.

Accepted Answer

Intangible assets that are subject to amortization are also reviewed for impairment if there is an indication that the asset might be impaired. This is in addition to the systematic amortization over their useful lives.

Question 8

When control is achieved as a result of a step acquisition, goodwill is determined on a fresh basis using the subsidiary's current values as of the control date.

Accepted Answer

The answer of When control is achieved as a result...

Question 9

When control is achieved as a result of a step acquisition, goodwill is determined in a cumulative "layered" manner.

Accepted Answer

When control is achieved through a step acquisition, goodwill is determined for each transaction leading to control on a cumulative basis, reflecting the "layered" approach where each acquisition step is considered separately for the purpose of calculating goodwill.

Question 10

The step-by-step method is a procedure for analyzing the cost of each separate block of stock acquired using data that pertains to the date control was obtained.

Accepted Answer

The step-by-step method refers to the process of gradually acquiring control over another company by purchasing its shares in stages, not to a procedure for analyzing stock acquisition costs based on control dates.

Question 11

The step-by-step method is a procedure for analyzing the cost of each separate block of stock acquired using data that pertains to the date at which each block of stock was acquired.

Accepted Answer

The step-by-step method involves analyzing the cost of each block of stock based on the acquisition date, allowing for precise tracking of stock costs over time.

Question 12

The step-by-step method can be used only if the parent did not have an ownership interest of less than 20%.

Accepted Answer

The step-by-step method is used for calculating goodwill in a business combination when a parent increases its ownership interest in a subsidiary over time. It can be applied regardless of the parent's initial ownership percentage, not just when the ownership interest was less than 20%.

Question 13

The step-by-step method is compatible with the equity method of accounting.

Accepted Answer

The step-by-step method is used in consolidation when a parent company has control over a subsidiary, and it is compatible with the equity method of accounting, which is used when the parent has significant influence but not full control. The equity method can be a step in the consolidation process for subsidiaries where control is achieved through less than full ownership.

Question 14

The step-by-step method is consistent with the parent company concept as to the extent to which the subsidiary's assets and liabilities are revalued to their current values for consolidated reporting purposes.

Accepted Answer

The step-by-step method aligns with the parent company concept by revaluing the subsidiary's assets and liabilities to their current values, ensuring accurate consolidated financial statements.

Question 15

The date of latest purchase method is a procedure for analyzing the cost of each separate block of stock acquired using data that pertains to the date at which each block of stock was acquired.

Accepted Answer

The date of latest purchase method specifically refers to a procedure for valuing inventory or stock by using the cost of the most recently purchased items first, not by analyzing the cost of each separate block of stock based on acquisition dates.

Question 16

The date of latest purchase method can be used only if the 20-50% ownership range has been bypassed.

Accepted Answer

The date of latest purchase method can only be used if the 20-50% ownership range has been bypassed because the date of latest purchase method is a method of determining the date of death for tax purposes when the decedent has not made a gift within three years of death. The 20-50% ownership range is a method of determining the value of a gift for tax purposes when the decedent has made a gift within three years of death.

Question 17

If the date of latest purchase method is used, the equity method of accounting could be subsequently used.

Accepted Answer

The date of the latest purchase method is a criterion for determining significant influence, which is a prerequisite for using the equity method of accounting. If an investor's share or influence increases with a latest purchase to a level considered significant (usually 20-50% of voting shares), the equity method could subsequently be applied.

Question 18

_____ In purchase accounting in which cash is the consideration given, which of the following items cannot be added to the cost of the acquisition (or does not result in an increase thereto)?
A) The fair value of the consideration given.
B) Direct costs traceable to the acquisition.
C) Contingent consideration relating to securities prices.
D) Contingent consideration relating to other than securities prices.
E) None of the above.

Accepted Answer

Contingent consideration relating to securities prices cannot be added to the cost of acquisition as it is not considered part of the purchase price under purchase accounting rules.

Question 19

_____ In purchase accounting in which cash is the consideration given, which of the following items cannot be added to the cost of the acquisition (or does not result in an increase thereto)?
A) Direct costs traceable to the acquisition.
B) Indirect costs not directly traceable to the acquisition.
C) Contingent consideration relating to other than securities prices.
D) The cost of having the target company's financial statements audited by a company's own auditing firm when the acquirer chooses not to rely on the audit report of the target company's auditor.
E) None of the above.

Accepted Answer

Indirect costs not directly traceable to the acquisition cannot be added to the cost of the acquisition. Direct costs, contingent considerations, and specific audit costs can be included, but general overhead or indirect costs are not capitalized as part of the acquisition cost.

Question 20

_____ In purchase accounting, which of the following items can be added to the cost of the acquisition?
A) Indirect costs not directly traceable to the acquisition.
B) Stock registration costs.
C) Contingent consideration relating to securities prices.
D) An allocated portion of overhead pertaining to an acquisitions department.
E) None of the above.

Accepted Answer

The answer of _____ In purchase accounting, which of the...

Quiz 5: The Purchase Method: at Date of Acquisition-100 Ownership