Question 1

REFERENCE: Ref.03_12
Watkins,Inc.acquires all of the outstanding stock of Glen Corporation on January 1,2009.At that date,Glen owns only three assets and has no liabilities: 
-If Watkins issued common stock valued at $410,000 for Glen,rather than paying cash,in a pooling of interests on June 15,1999,at what amount would the subsidiary's Building be represented in a December 31,2009,consolidation,assuming there are no acquisitions or disposals of buildings and equipment?

Accepted Answer

The answer of REFERENCE: Ref.03_12
Watkins,Inc.acquires all of the outstanding stock...

Question 2

What advantages might push-down accounting offer for internal reporting?

Accepted Answer

The answer of What advantages might push-down accounting offer for...

Question 3

Consolidations subsequent to the date of combination are generally considered to be easier for a pooling of interests than for an acquisition.Why is this so?

Accepted Answer

The answer of Consolidations subsequent to the date of combination...

Question 4

REFERENCE: Ref.03_12
Watkins,Inc.acquires all of the outstanding stock of Glen Corporation on January 1,2009.At that date,Glen owns only three assets and has no liabilities: 
-If the transaction instead occurred on January 1,2008 under a SFAS 141 purchase combination,and Watkins pays $300,000 in cash for Glen,at what amount would the subsidiary's Equipment be represented in a December 31,2011 consolidation?

Accepted Answer

Under a SFAS 141 purchase combination, the fair value of the subsidiary's assets is recorded at the acquisition date. Therefore, on January 1, 2008, when Watkins acquires Glen, the $300,000 purchase price will have to be allocated to the three assets Glen owns- Equipment, Land, and Building. 
Assuming the fair value of Land and Building remain the same, and the Equipment has a useful life of 5 years, the depreciation for the equipment recorded in 2008, 2009, 2010 and 2011 would be $54,000 ($108,000/2 years * 4 years).
Therefore, as of December 31, 2011, the Equipment would have a net book value of $46,000 ($100,000 - $54,000), and would be represented at fair value of $52,000 ($46,000 + $6,000 goodwill) in the consolidated financial statements.
Thus, the correct answer is C.

Question 5

REFERENCE: Ref.03_12
Watkins,Inc.acquires all of the outstanding stock of Glen Corporation on January 1,2009.At that date,Glen owns only three assets and has no liabilities: 
-If Watkins pays $450,000 in cash for Glen,what amount would be represented as the subsidiary's Building in a consolidation at December 31,2011,assuming the book value at that date is still $200,000?

Accepted Answer

The answer of REFERENCE: Ref.03_12
Watkins,Inc.acquires all of the outstanding stock...

Question 6

What is the basic objective of all consolidations?

Accepted Answer

The answer of What is the basic objective of all...

Question 7

For an acquisition when the subsidiary retains its incorporation,which method of internal recordkeeping gives the most accurate portrayal of the accounting results for the entire business combination?

Accepted Answer

The answer of For an acquisition when the subsidiary retains...

Question 8

REFERENCE: Ref.03_11
Prince Company acquires Duchess,Inc.on January 1,2009.The consideration transferred exceeds the fair value of Duchess' net assets.On that date,Prince has a building with a book value of $1,200,000 and a fair value of $1,500,000.Duchess has a building with a book value of $400,000 and fair value of $500,000.
-If push-down accounting is not used,what amounts in the Building account appear on Duchess' separate balance sheet and on the consolidated balance sheet immediately after acquisition?

Accepted Answer

Under the purchase method, the excess consideration paid over the fair value of the net assets acquired is attributed to goodwill. Without push-down accounting, the building accounts of Prince and Duchess will be carried forward as follows:

Prince building: $1,200,000
Duchess building: $400,000

In the consolidated balance sheet, the buildings will be shown at their fair values on the acquisition date, as follows:

Prince building: $1,500,000
Duchess building: $500,000

Therefore, the amounts that will appear in the Building account on Duchess' separate balance sheet and on the consolidated balance sheet are $400,000 and $1,700,000, respectively. Hence, the best answer choice is C.

Question 9

REFERENCE: Ref.03_12
Watkins,Inc.acquires all of the outstanding stock of Glen Corporation on January 1,2009.At that date,Glen owns only three assets and has no liabilities: 
-If Watkins pays $300,000 in cash for Glen,at what amount would the subsidiary's Building be represented in a January 2,2009 consolidation?

Accepted Answer

The answer of REFERENCE: Ref.03_12
Watkins,Inc.acquires all of the outstanding stock...

Question 10

REFERENCE: Ref.03_12
Watkins,Inc.acquires all of the outstanding stock of Glen Corporation on January 1,2009.At that date,Glen owns only three assets and has no liabilities: 
-If Watkins issued common stock valued at $410,000 for Glen,rather than paying cash,in a pooling of interests on June 15,1999,at what amount would the subsidiary's Equipment be represented in a December 31,2009,consolidation,assuming no acquisitions or disposals of buildings or equipment?

Accepted Answer

Since a pooling of interests is used, Watkins will record the assets and liabilities of Glen at their carrying values. Therefore, the Equipment will be recorded at its original cost of $80,000 and will not be adjusted to fair value. In a consolidation, the Equipment will be eliminated and Glen's net assets will be added to Watkins' net assets at the carrying amount of $410,000. Therefore, the Equipment will not be represented in the consolidation.

Question 11

For an acquisition when the subsidiary retains its incorporation,which method of internal recordkeeping is the easiest for the parent to use?

Accepted Answer

The answer of For an acquisition when the subsidiary retains...

Question 12

REFERENCE: Ref.03_12
Watkins,Inc.acquires all of the outstanding stock of Glen Corporation on January 1,2009.At that date,Glen owns only three assets and has no liabilities: 
-If Watkins pays $450,000 in cash for Glen,what allocation should be assigned to the subsidiary's Equipment in preparing for consolidation at December 31,2011,assuming the book value at that date is still $80,000?

Accepted Answer

The answer of REFERENCE: Ref.03_12
Watkins,Inc.acquires all of the outstanding stock...

Question 13

What is the partial equity method? How does it differ from the equity method? What are its advantages and disadvantages compared to the equity method?

Accepted Answer

The answer of What is the partial equity method? How...

Question 14

From which methods can a parent choose for its internal recordkeeping related to the operations of a subsidiary?

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The answer of From which methods can a parent choose...

Question 15

For an acquisition when the subsidiary maintains its incorporation,under the partial equity method,what adjustments are made to the balance of the investment account?

Accepted Answer

The answer of For an acquisition when the subsidiary maintains...

Question 16

REFERENCE: Ref.03_12
Watkins,Inc.acquires all of the outstanding stock of Glen Corporation on January 1,2009.At that date,Glen owns only three assets and has no liabilities: 
-If Watkins pays $400,000 in cash for Glen,what amount would be represented as the subsidiary's Building in a consolidation at December 31,2011,assuming the book value at that date is still $200,000?

Accepted Answer

Since Watkins acquired all the outstanding stock of Glen Corporation, it owns all the assets and liabilities of Glen. Therefore, in the consolidation, the building would be represented at the fair value of $285,000, which is the total cost of the acquisition ($400,000) minus the book value of the building at the acquisition date ($115,000 = $200,000 - $85,000 accumulated depreciation from 2009 to 2011).

Question 17

What accounting method requires a subsidiary to record acquisition fair value allocations and the amortization of allocations in its accounting records?

Accepted Answer

The answer of What accounting method requires a subsidiary to...

Question 18

REFERENCE: Ref.03_11
Prince Company acquires Duchess,Inc.on January 1,2009.The consideration transferred exceeds the fair value of Duchess' net assets.On that date,Prince has a building with a book value of $1,200,000 and a fair value of $1,500,000.Duchess has a building with a book value of $400,000 and fair value of $500,000.
-If push-down accounting is used,what amounts in the Building account appear on Duchess' separate balance sheet and on the consolidated balance sheet immediately after acquisition?

Accepted Answer

The answer of REFERENCE: Ref.03_11
Prince Company acquires Duchess,Inc.on January 1,2009.The...

Question 19

REFERENCE: Ref.03_12
Watkins,Inc.acquires all of the outstanding stock of Glen Corporation on January 1,2009.At that date,Glen owns only three assets and has no liabilities: 
-If Watkins pays $450,000 in cash for Glen,what amount would be represented as the subsidiary's Equipment in a consolidation at December 31,2011,assuming the book value at that date is still $80,000?

Accepted Answer

The answer of REFERENCE: Ref.03_12
Watkins,Inc.acquires all of the outstanding stock...

Question 20

Yules Co.acquired Noel Co.in an acquisition transaction.Yules decided to use the partial equity method to account for the investment.The current balance in the investment account is $416,000.Describe in words how this balance was derived.

Accepted Answer

The answer of Yules Co.acquired Noel Co.in an acquisition transaction.Yules...

Quiz 3: Consolidations - Subsequent to the Date of Acquisition

What advantages might push-down accounting offer for internal reporting?

Consolidations subsequent to the date of combination are generally considered to be easier for a pooling of interests than for an acquisition.Why is this so?

What is the basic objective of all consolidations?

For an acquisition when the subsidiary retains its incorporation,which method of internal recordkeeping gives the most accurate portrayal of the accounting results for the entire business combination?

For an acquisition when the subsidiary retains its incorporation,which method of internal recordkeeping is the easiest for the parent to use?

What is the partial equity method? How does it differ from the equity method? What are its advantages and disadvantages compared to the equity method?

From which methods can a parent choose for its internal recordkeeping related to the operations of a subsidiary?

For an acquisition when the subsidiary maintains its incorporation,under the partial equity method,what adjustments are made to the balance of the investment account?

What accounting method requires a subsidiary to record acquisition fair value allocations and the amortization of allocations in its accounting records?

Yules Co.acquired Noel Co.in an acquisition transaction.Yules decided to use the partial equity method to account for the investment.The current balance in the investment account is $416,000.Describe in words how this balance was derived.