Question 1

For business combinations involving less than 100 percent ownership, the acquirer recognizes and measures all of the following at the acquisition date except:
A) Identifiable assets acquired, at fair value.
B) Liabilities assumed, at book value.
C) Non-controlling interest, at fair value.
D) Goodwill, or a gain from bargain purchase.
E) None of these choices is correct.

Accepted Answer

Liabilities assumed are recognized at fair value, not at book value, as part of the acquisition accounting process.

Question 2

What is the effect of including Kailey in consolidated net income for 2019?
A) $31,000.
B) $33,000.
C) $55,000.
D) $60,000.
E) $39,000.

Accepted Answer

Including Kailey in consolidated net income for 2019 would increase the net income by $55,000, which is the amount of Kailey's net income for the year. The other options do not reflect the correct amount of Kailey's net income or the impact on consolidated net income.

Question 3

What amount of goodwill should be attributed to Perch at the date of acquisition?
A) $150,000.
B) $250,000.
C) $ 0.
D) $120,000.
E) $170,000.

Accepted Answer

D

Question 4

What is the amount of excess land allocation attributed to the noncontrolling interest at the acquisition date?
A) $ 0.
B) $30,000.
C) $22,500.
D) $ 7,500.
E) $17,500.

Accepted Answer

The answer of What is the amount of excess land...

Question 5

What amount of consolidated net income for 2019 should be allocated to Femur's controlling interest in Harbor?
A) $ 582,000
B) $1,050,000
C) $1,358,000
D) $1,808,000
E) $2,140,000

Accepted Answer

The answer of What amount of consolidated net income for...

Question 6

What is the amount of Kailey's net income to the controlling interest for 2019?
A) $31,000.
B) $33,000.
C) $55,000.
D) $60,000.
E) $39,000.

Accepted Answer

The answer of What is the amount of Kailey's net...

Question 7

What is the amount of the noncontrolling interest's share of Kailey's income for 2019?
A) $22,000.
B) $24,000.
C) $48,000.
D) $66,000.
E) $72,000.

Accepted Answer

The noncontrolling interest's share of Kailey's income is 20% of the consolidated net income of $110,000, which is $22,000.

Question 8

What is the dollar amount of fair value over book value differences attributed to Perch at the date of acquisition?
A) $120,000.
B) $150,000.
C) $280,000.
D) $350,000.
E) $370,000.

Accepted Answer

The fair value over book value differences attributed to Perch at the date of acquisition is $280,000. This is calculated by determining the difference between the fair value of the acquired assets and liabilities and their respective book values at the time of acquisition.

Question 9

In consolidation, the total amount of expenses related to Kailey, and to Denber's acquisition of Kailey, for 2019 is determined to be
A) $153,750.
B) $161,250.
C) $205,000.
D) $210,000.
E) $215,000.

Accepted Answer

The answer of In consolidation, the total amount of expenses...

Question 10

What amount of goodwill should be attributed to the noncontrolling interest at the date of acquisition?
A) $ 0.
B) $ 20,000.
C) $ 30,000.
D) $100,000.
E) $120,000.

Accepted Answer

Goodwill attributed to the noncontrolling interest is calculated based on the fair value of the noncontrolling interest and the excess of the purchase price over the fair value of net identifiable assets. If the noncontrolling interest is 30% and the total goodwill is $100,000, then 30% of $100,000 is $30,000.

Question 11

What amount should have been reported for the land in a consolidated balance sheet at the acquisition date?
A) $ 52,500.
B) $ 70,000.
C) $ 75,000.
D) $ 92,500.
E) $100,000.

Accepted Answer

The land should be reported at its fair value at the acquisition date, which is $100,000.

Question 12

MacHeath Inc.bought 60% of the outstanding common stock of Nomes Inc.in an acquisition that resulted in the recognition of goodwill.Nomes owned a piece of land that cost $250,000 but was worth $600,000 at the date of acquisition.What value would be attributed to this land in a consolidated balance sheet at the date of acquisition?
A) $250,000.
B) $150,000.
C) $600,000.
D) $360,000.
E) $460,000.

Accepted Answer

In a consolidated balance sheet, assets are recorded at their fair value at the date of acquisition. Therefore, the land would be valued at its fair value of $600,000.

Question 13

What is the dollar amount of Float Corp.'s net assets that would be represented in a consolidated balance sheet prepared at the date of acquisition?
A) $1,600,000.
B) $1,480,000.
C) $1,200,000.
D) $1,780,000.
E) $1,850,000.

Accepted Answer

The answer of What is the dollar amount of Float...

Question 14

Which of the following methods is not used to value a noncontrolling interest under circumstances where a control premium is applied to determine the appropriate value for such interest?
A) Valuation models based on subsidiary discounted cash flows.
B) Valuation models based on subsidiary residual income projections.
C) Comparison with comparable investments.
D) The application of a safe harbor discount rate.
E) Fair value based on market trades.

Accepted Answer

The application of a safe harbor discount rate is used when valuing a noncontrolling interest when a control premium is not applied. It is not used when a control premium is applied to determine the appropriate value for such interest. A, B, C, and E are all valid methods used when valuing a noncontrolling interest where a control premium is applied.

Question 15

What is the total amount of goodwill recognized at the date of acquisition?
A) $150,000.
B) $250,000.
C) $ 0.
D) $120,000.
E) $170,000.

Accepted Answer

Goodwill is recognized at the date of acquisition as the excess of the purchase price over the fair value of identifiable net assets. In this case, the purchase price is $400,000 and the fair value of identifiable net assets is $250,000. Therefore, the total amount of goodwill recognized at the date of acquisition is $150,000.

Question 16

What is the dollar amount of noncontrolling interest that should appear in a consolidated balance sheet prepared at the date of acquisition?
A) $350,000.
B) $300,000.
C) $400,000.
D) $370,000.
E) $0.

Accepted Answer

The answer of What is the dollar amount of noncontrolling...

Question 17

What is the amount of excess land allocation attributed to the controlling interest at the acquisition date?
A) $ 0.
B) $30,000.
C) $22,500.
D) $25,000.
E) $17,500.

Accepted Answer

The excess land allocation refers to the amount by which the fair value of the land acquired exceeds the recorded value of the land on the seller's books. From the given information, the fair value of the land is $75,000, while the recorded value of the land is $52,500 ($45,000 + $7,500). Therefore, the excess land allocation is $22,500 ($75,000 - $52,500). This excess land allocation is attributed to the controlling interest at the acquisition date, as it represents the increase in the value of the land that the controlling interest now owns.

Question 18

The noncontrolling interest's share of the earnings of Harbor Corp.for 2019 is calculated to be
A) $132,000.
B) $150,000.
C) $168,000.
D) $160,000.
E) $0.

Accepted Answer

The noncontrolling interest's share of the earnings is calculated based on their ownership percentage in Harbor Corp. The given options suggest that $132,000 is the correct calculation for their share.

Question 19

What amount would Femur Co.report as consolidated net income for 2019?
A) $440,000.
B) $500,000.
C) $1,500,000.
D) $1,940,000.
E) $2,000,000.

Accepted Answer

Femur Co. owns 80% of Tibia in 2019. Femur Co.'s net income from Tibia would be 80% of Tibia's net income of $500,000 in 2019, which is $400,000. Femur Co.'s individual net income is reported as $1,600,000. Therefore, consolidated net income would be the sum of Femur Co.'s individual net income and its share of Tibia's net income ($1,600,000 + $400,000 = $2,000,000). However, Femur Co. also had $60,000 of intercompany sales to Tibia that need to be eliminated in consolidation. Thus, the consolidated net income for 2019 is $2,000,000 - $60,000 = $1,940,000.

Question 20

What is the total amount of excess land allocation at the acquisition date?
A) $ 0.
B) $30,000.
C) $22,500.
D) $25,000.
E) $17,500.

Accepted Answer

Excess land allocation = $30,000 - $7,500 = $22,500

Quiz 4: Consolidated Financial Statements and Outside Ownership

For business combinations involving less than 100 percent ownership, the acquirer recognizes and measures all of the following at the acquisition date except:

What is the effect of including Kailey in consolidated net income for 2019?

What amount of goodwill should be attributed to Perch at the date of acquisition?

What is the amount of excess land allocation attributed to the noncontrolling interest at the acquisition date?

What amount of consolidated net income for 2019 should be allocated to Femur's controlling interest in Harbor?

What is the amount of Kailey's net income to the controlling interest for 2019?

What is the amount of the noncontrolling interest's share of Kailey's income for 2019?

What is the dollar amount of fair value over book value differences attributed to Perch at the date of acquisition?

In consolidation, the total amount of expenses related to Kailey, and to Denber's acquisition of Kailey, for 2019 is determined to be

What amount of goodwill should be attributed to the noncontrolling interest at the date of acquisition?

What amount should have been reported for the land in a consolidated balance sheet at the acquisition date?

What is the dollar amount of Float Corp.'s net assets that would be represented in a consolidated balance sheet prepared at the date of acquisition?

Which of the following methods is not used to value a noncontrolling interest under circumstances where a control premium is applied to determine the appropriate value for such interest?

What is the total amount of goodwill recognized at the date of acquisition?

What is the dollar amount of noncontrolling interest that should appear in a consolidated balance sheet prepared at the date of acquisition?

What is the amount of excess land allocation attributed to the controlling interest at the acquisition date?

The noncontrolling interest's share of the earnings of Harbor Corp.for 2019 is calculated to be

What amount would Femur Co.report as consolidated net income for 2019?

What is the total amount of excess land allocation at the acquisition date?