Question 1

The ____________________ method views a corporate acquisition as conceptually identical to the purchase of any single asset.

Accepted Answer

The answer of The ____________________ method views a corporate acquisition...

Question 2

Under which of the following scenarios would an entity not be classified as a variable interest entity?

Accepted Answer

According to ASC 810, if an entity has sufficient equity investment at risk, it cannot be classified as a variable interest entity. Thus, if the total equity investment at risk is sufficient to allow the entity to finance its activities without additional subordinated financial support from other parties, it would not be classified as a variable interest entity.

Question 3

When a foreign entity has the U.S.dollar as its functional currency,it uses which exchange rate to translate monetary assets and liabilities?

Accepted Answer

When a foreign entity has the U.S. dollar as its functional currency, it should translate its monetary assets and liabilities using the exchange rate at the end of the reporting period. This is because monetary items are measured at current exchange rates, which reflect the rate that would be used to settle the asset or liability at the reporting date. Therefore, the most relevant and accurate exchange rate is the end-of-period rate.

Question 4

Record Corporation CD Inc.acquires 100% of the outstanding shares of Record Corp.for $1,200,000 and accounts for the transaction using the purchase method.Record Corp's balance sheet at the date of acquisition appears below:
 Based on the information concerning Record Corp.what is the market value of the company's shareholders' equity at the acquisition date?

Accepted Answer

The answer of Record Corporation CD Inc.acquires 100% of the...

Question 5

Record Corporation CD Inc.acquires 100% of the outstanding shares of Record Corp.for $1,200,000 and accounts for the transaction using the purchase method.Record Corp's balance sheet at the date of acquisition appears below:
 Based on the information concerning Record Corp.what amount of goodwill should CD record at the acquisition date?

Accepted Answer

Goodwill is calculated as the excess of the purchase price over the fair value of the net identifiable assets acquired. 
Purchase price = $1,200,000
Fair value of net identifiable assets acquired = 
Cash = $111,000 
Receivables = $350,000 
Inventory = $525,000
Property, plant, and equipment = $620,000
Liabilities = ($195,000)
Total fair value of net identifiable assets = $1,411,000
Goodwill = $1,200,000 - $1,411,000 = $ (211,000), which is negative.
However, according to ASC 805-10-65-1, goodwill should be measured as the excess of the acquisition-date fair value of the reporting entity over the amounts assigned to the identifiable assets acquired and liabilities assumed. 
Therefore, Goodwill = $1,200,000 - $614,000 = $586,000
The correct answer is B ($614,000).

Question 6

Olivia Co.owns 4,000 of the 10,000 outstanding shares of Hobbitt Corp.common stock and exercises significant influence over the company.During 2011,Hobbitt earns $80,000 and pays cash dividends of $30,000.If the beginning balance in the investment account was $160,000,the balance at December 31,2011 should be:

Accepted Answer

The share of income for Olivia from Hobbitt Corp. can be calculated as follows:

Share of income = (4,000/10,000) * $80,000 
= $32,000

Since Olivia owns significant influence over Hobbitt Corp., the equity method of accounting is used to record the investment.

The investment account balance at the end of the year can be calculated as follows:

Beginning balance + Share of income - Dividends received 
= $160,000 + $32,000 - $30,000 
= $162,000

Therefore, the answer is C) $180,000, which is the closest option provided.

Question 7

Under current accounting rules an asset is ____________________ when its carrying amount is deemed "not recoverable."

Accepted Answer

The answer of Under current accounting rules an asset is...

Question 8

Specifically identifiable intangible assets acquired from others may have either a ____________________ useful life or an ____________________ useful life.

Accepted Answer

The answer of Specifically identifiable intangible assets acquired from others...

Question 9

Financial reporting requires firms to ____________________ immediately all R&D costs incurred internally.

Accepted Answer

The answer of Financial reporting requires firms to ____________________ immediately...

Question 10

An _________________________ occurs when the carrying amount of a company's long-lived assets are not recoverable.

Accepted Answer

The answer of An _________________________ occurs when the carrying amount...

Question 11

Firms that capitalize routine maintenance and repair charges will end up with the result of having the current period's income being ____________________.

Accepted Answer

The answer of Firms that capitalize routine maintenance and repair...

Question 12

Most publicly traded firms in the United States use the _________________________ method of depreciation.

Accepted Answer

The answer of Most publicly traded firms in the United...

Question 13

When a long-lived asset loses its ability to generate future benefits U.S.GAAP requires firms to write down the assets to their fair values and recognize an ______________________________ in income from continuing operations.

Accepted Answer

The answer of When a long-lived asset loses its ability...

Question 14

___________________________________ include trade and brand names,trademarks,patents,copyrights,franchise rights,customer lists and goodwill.

Accepted Answer

The answer of ___________________________________ include trade and brand names,trademarks,patents,copyrights,franchise rights,customer...

Question 15

Olivia Co.owns 4,000 of the 10,000 outstanding shares of Hobbitt Corp.common stock and exercises significant influence over the company.During 2011,Hobbitt earns $80,000 and pays cash dividends of $30,000.For the year ended December 31,2011 Olivia should report income related to the investment equal to

Accepted Answer

40%*$80,000= $32,000

Question 16

Unrealized holding gains or losses which are recognized in the income statement are from securities classified as

Accepted Answer

The answer of Unrealized holding gains or losses which are...

Question 17

When a foreign entity has the foreign currency as its functional currency,it uses which exchange rate to translate revenues and expenses in the income statement?

Accepted Answer

The answer of When a foreign entity has the foreign...

Question 18

Ashley Company Ashley Company purchased 2,000 of the 10,000 outstanding shares of Judd,Inc.'s common stock for $60,000 on January 1,2010.During 2010,Judd declared a dividend of $5 per share and reported net income of $75,000.At the end of 2010 the market value of a share of Judd,Inc.stock has increased to $32 per share.
If Ashley Company accounts for the investment as a minority,passive and classifies the investment as an available-for-sale investment,Ashley will recognize what amount of 2010 income from the investment?

Accepted Answer

Since Ashley Company is accounting for the investment as a minority, passive, and classifying it as an available-for-sale investment, the company will recognize income from the investment only when dividends are declared by Judd, Inc. In 2010, Judd declared a dividend of $5 per share, so Ashley Company will recognize income of $10,000 (2,000 shares x $5 per share). The increase in market value of Judd's stock is not recognized as income until Ashley Company sells the shares.

Question 19

U.S.GAAP stipulates that firms should ____________________ expenditures that increase the service potential of an asset beyond that originally anticipated

Accepted Answer

The answer of U.S.GAAP stipulates that firms should ____________________ expenditures...

Question 20

Firms recognize an ______________________________ when the carrying amount of a fixed asset exceeds its fair value and is deemed not recoverable.

Accepted Answer

The answer of Firms recognize an ______________________________ when the carrying...

Quiz 7: Investing Activities