Question 1

REFERENCE: Ref.02_09
Salem Co.had the following account balances as of February 1,2008:
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  Bellington Inc.paid $1.7 million in cash and issued 12,000 shares of its $30 par value common stock (valued at $90 per share)for all of Salem's outstanding common stock.This investment is accounted for using the purchase method.
-Determine the balance for Goodwill that would be included in a February 1,2008,consolidation.

Accepted Answer

The answer of REFERENCE: Ref.02_09
Salem Co.had the following account balances...

Question 2

Elon Corp.obtained all of the common stock of Finley Co. ,paying slightly less than the fair value of Finley's net assets acquired.How should the difference between the consideration transferred and the fair value of the net assets be treated if the transaction is accounted for as an acquisition?

Accepted Answer

The answer of Elon Corp.obtained all of the common stock...

Question 3

For purchase accounting,why are assets and liabilities of the subsidiary consolidated at fair value?

Accepted Answer

The answer of For purchase accounting,why are assets and liabilities...

Question 4

Fine Co.issued its common stock in exchange for the common stock of Dandy Corp.in a business combination that was neither a pooling of interests nor a bargain purchase.At the date of the combination,Fine had land with a book value of $480,000 and a fair value of $620,000.Dandy had land with a book value of $170,000 and a fair value of $190,000.
Required:
If a consolidated balance sheet was prepared at the date of the combination,what was the consolidated balance for Land?

Accepted Answer

The answer of Fine Co.issued its common stock in exchange...

Question 5

Jernigan Corp.had the following account balances at 12/31/X1:
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Several of Jernigan's accounts have fair values that differ from book value: Land - $480,000;Building - $720,000;Inventory - $336,000;and Liabilities - $396,000.
Inglewood Inc.obtained all of the outstanding common shares of Jernigan by issuing 20,000 shares of common stock having a $6 par value,but a $66 fair value.Stock issuance costs amounted to $12,000.
Required:
Prepare a fair value allocation and goodwill schedule at the date of the combination.

Accepted Answer

The answer of Jernigan Corp.had the following account balances at...

Question 6

REFERENCE: Ref.02_10
The financial statements for Jode Inc.and Lakely Corp. ,just prior to their combination,for the year ending December 31,2009,follow.Lakely's buildings were undervalued on its financial records by $60,000.
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  On December 31,2009,Jode issued 54,000 new shares of its $10 par value stock to the owners of Lakely in exchange for all of the outstanding shares of that company.Jode's shares had a fair value on that date of $35 per share.Jode paid $34,000 to an investment bank for assisting in the arrangements.Jode also paid $24,000 in stock issuance costs.This combination is accounted for as an acquisition.
-Required:
Determine consolidated Net Income for at December 31,2009.

Accepted Answer

The answer of REFERENCE: Ref.02_10
The financial statements for Jode Inc.and...

Question 7

REFERENCE: Ref.02_10
The financial statements for Jode Inc.and Lakely Corp. ,just prior to their combination,for the year ending December 31,2009,follow.Lakely's buildings were undervalued on its financial records by $60,000.
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  On December 31,2009,Jode issued 54,000 new shares of its $10 par value stock to the owners of Lakely in exchange for all of the outstanding shares of that company.Jode's shares had a fair value on that date of $35 per share.Jode paid $34,000 to an investment bank for assisting in the arrangements.Jode also paid $24,000 in stock issuance costs.This combination is accounted for as an acquisition.
-Prepare the journal entries to record (1)the issuance of stock by Jode and (2)the payment of the combination costs.

Accepted Answer

The answer of REFERENCE: Ref.02_10
The financial statements for Jode Inc.and...

Question 8

How are bargain purchases different between SFAS 141 and SFAS 141(R)Business Combinations?

Accepted Answer

The answer of How are bargain purchases different between SFAS...

Question 9

Goodwill is often created,or purchased,during a business combination.Why doesn't Goodwill show up on the Parent company's trial balance as a separate account?

Accepted Answer

The answer of Goodwill is often created,or purchased,during a business...

Question 10

What are the three departures from SFAS 141 according to SFAS 141(R)Business Combinations?

Accepted Answer

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Question 11

What is the difference in consolidated results between a business combination whereby the acquired company is dissolved,and a business combination whereby separate incorporation is maintained?

Accepted Answer

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Question 12

Bale Co.acquired Silo Inc.on October 1,20X1,in a business combination transaction.Bale's net income for the year was $1,400,000,while Silo had net income of $400,000 earned evenly during the year.There was no goodwill and there were no other allocations.
Required:
What is consolidated net income for 20X1?

Accepted Answer

The answer of Bale Co.acquired Silo Inc.on October 1,20X1,in a...

Question 13

On January 1,2010,Chester Inc.acquires 100% of Festus Corp.'s outstanding common stock by exchanging 37,500 shares of Chester's $2 par value common voting stock.On January 1,2010,Chester's voting common stock had a fair value of $40 per share.Festus' voting common shares were selling for $6.50 per share.Festus' balances on the acquisition date,just prior to acquisition are listed below.Chester is accounting for the investment in Festus using the acquisition method.
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Required:
Compute the value of the Goodwill account on the date of acquisition,1/1/10.

Accepted Answer

The answer of On January 1,2010,Chester Inc.acquires 100% of Festus...

Question 14

Lorne Co.issued its common stock in exchange for the common stock of Fenn Corp.in a combination accounted for as a pooling of interests.At the date of the combination,Lorne had land with a book value of $700,000 and a fair value of $980,000.Fenn had land with a book value of $280,000 and a fair value of $250,000.The purchase was not a bargain purchase.
Required:
If a consolidated balance sheet was prepared at the date of the combination,what was the consolidated balance for Land?

Accepted Answer

The answer of Lorne Co.issued its common stock in exchange...

Question 15

Assume that Bellington paid cash of $2.8 million.No stock is issued.An additional $50,000 is paid in direct combination costs.
Required:
For Goodwill,determine what balance would be included in a February 1,2008 consolidation.

Accepted Answer

The answer of Assume that Bellington paid cash of $2.8...

Question 16

Describe the accounting for direct costs,indirect costs,and issuance costs under: (1)The pooling-of-interests method; (2)The purchase method;and (3)The acquisition method.

Accepted Answer

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Question 17

How is contingent consideration accounted for according to SFAS 141(R)Business Combinations?

Accepted Answer

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Question 18

Determine consolidated Paid-in Capital at December 31,2009.

Accepted Answer

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Question 19

The following are preliminary financial statements for Black Co.and Blue Co.for the year ending December 31,2008.
  
On December 31,2008 (subsequent to the preceding statements),Black exchanged 10,000 shares of its $10 par value common stock for all of the outstanding shares of Blue.Black's stock on that date has a fair value of $60 per share.Black was willing to issue 10,000 shares of stock because Blue's land was appraised at $204,000.Black also paid $14,000 to several attorneys and accountants who assisted in creating this combination.
Required:
Assuming that these two companies retained their separate legal identities,prepare a consolidation worksheet as of December 31,2008 assuming the transaction is treated as a purchase combination.

Accepted Answer

The answer of The following are preliminary financial statements for...

Question 20

Elon Corp.purchased all of the common stock of Finley Co. ,paying slightly less than the fair value of Finley's net assets.How should the difference between the purchase price and the fair value be treated if the transaction is treated as a purchase?

Accepted Answer

The answer of Elon Corp.purchased all of the common stock...

Quiz 2: Consolidation of Financial Information