Question 1

What is the basic objective of all consolidations?

Accepted Answer

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

Question 2

Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2010. At that date, Glen owns only three assets and has no liabilities:

If Watkins pays $450,000 in cash for Glen, at what amount would Glen's Inventory acquired be represented in a December 31, 2010 consolidated balance sheet?

A) $40,000.
B) $50,000.
C) $0.
D) $10,000.
E) $90,000.

Accepted Answer

The answer of Watkins, Inc. acquires all of the outstanding...

Question 3

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...

Question 4

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 5

Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2010. 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, 2010 consolidation?

A) $200,000.
B) $225,000.
C) $273,000.
D) $279,000.
E) $300,000.

Accepted Answer

The answer of Watkins, Inc. acquires all of the outstanding...

Question 6

Avery Company acquires Billings Company in a combination accounted for as an acquisition and adopts the equity method to account for Investment in Billings. At the end of four years, the Investment in Billings account on Avery's books is $198,984. What items constitute this balance?

Accepted Answer

The answer of Avery Company acquires Billings Company in a...

Question 7

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 8

According to the FASB ASC regarding the testing procedures for Goodwill Impairment, the proper procedure for conducting impairment testing is:
A) Goodwill recognized in consolidation may be amortized uniformly and only tested if the amortization method originally chosen is changed.
B) Goodwill recognized in consolidation must only be impairment tested prior to disposal of the consolidated unit to eliminate the impairment of goodwill from the gain or loss on the sale of that specific entity.
C) Goodwill recognized in consolidation may be impairment tested in a two-step approach, first by quantitative assessment of the possible impairment of the fair value of the unit relative to the book value, and then a qualitative assessment as to why the impairment, if any, occurred for disclosure.
D) Goodwill recognized in consolidation may be impairment tested in a two-step approach, first by qualitative assessment of the possibility of impairment of the unit fair value relative to the book value, and then quantitative assessments as to how much impairment, if any, occurred for disclosure.
E) Goodwill recognized in consolidation may be impairment tested in a two-step approach, first by qualitative assessment of the possibility of impairment of the unit fair value relative to the book value, and then quantitative assessments as to how much impairment, if any, occurred for asset write-down.

Accepted Answer

The answer of According to the FASB ASC regarding the...

Question 9

Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2010. 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, 2012, assuming the book value of the building at that date is still $200,000?

A) $200,000.
B) $285,000.
C) $290,000.
D) $295,000.
E) $300,000.

Accepted Answer

The answer of Watkins, Inc. acquires all of the outstanding...

Question 10

Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2010. At that date, Glen owns only three assets and has no liabilities:

If Watkins pays $450,000 in cash for Glen, and Glen earns $50,000 in net income and pays $20,000 in dividends during 2010, what amount would be reflected in consolidated net income for 2010 as a result of the acquisition?

A) $20,000 under the initial value method.
B) $30,000 under the partial equity method.
C) $50,000 under the partial equity method.
D) $44,500 under the equity method.
E) $45,500 regardless of the internal accounting method used.

Accepted Answer

The answer of Watkins, Inc. acquires all of the outstanding...

Question 11

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

Accepted Answer

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

Question 12

Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2010. 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, 2012, assuming the book value of the equipment at that date is still $80,000?

A) $70,000.
B) $73,500.
C) $75,000.
D) $76,500.
E) $80,000.

Accepted Answer

The answer of Watkins, Inc. acquires all of the outstanding...

Question 13

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

Accepted Answer

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

Question 14

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

Accepted Answer

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

Question 15

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 16

Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2010. At that date, Glen owns only three assets and has no liabilities:

If Watkins pays $450,000 in cash for Glen, what acquisition-date fair value allocation, net of amortization, should be attributed to the subsidiary's Equipment in consolidation at December 31, 2012?

A) $(5,000.)
B) $80,000.
C) $75,000.
D) $73,500.
E) $(3,500.)

Accepted Answer

The answer of Watkins, Inc. acquires all of the outstanding...

Question 17

Paperless Co. acquired Sheetless Co. and in effecting this business combination, there was a cash-flow performance contingency to be paid in cash, and a market-price performance contingency to be paid in additional shares of stock. In what accounts and in what section(s) of a consolidated balance sheet are these contingent consideration items shown?

Accepted Answer

The answer of Paperless Co. acquired Sheetless Co. and in...

Question 18

Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2010. 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, 2012, assuming the book value of the building at that date is still $200,000?

A) $200,000.
B) $285,000.
C) $260,000.
D) $268,000.
E) $300,000.

Accepted Answer

The answer of Watkins, Inc. acquires all of the outstanding...

Question 19

When is a goodwill impairment loss recognized?
A) Only after both a quantitative and qualitative assessment of the fair value of goodwill of a reporting unit.
B) After only definitive quantitative assessments of the fair value of goodwill is completed.
C) After only definitive qualitative assessments of the fair value of goodwill is completed.
D) If the fair value of a reporting unit falls to zero or below its original acquisition price.
E) Never.

Accepted Answer

The answer of When is a goodwill impairment loss recognized?
A)...

Question 20

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...

Quiz 3: Consolidationssubsequent to the Date of Acquisition

What is the basic objective of all consolidations?

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.

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?

Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2010. 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, 2010 consolidation?

Avery Company acquires Billings Company in a combination accounted for as an acquisition and adopts the equity method to account for Investment in Billings. At the end of four years, the Investment in Billings account on Avery's books is $198,984. What items constitute this balance?

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

According to the FASB ASC regarding the testing procedures for Goodwill Impairment, the proper procedure for conducting impairment testing is:

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

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

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

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?

When is a goodwill impairment loss recognized?

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?