front 1 At the date of an acquisition which is not a bargain purchase, the acquisition method | back 1 Consolidates all subsidiary assets and liabilities at fair value |
front 2 A statutory merger is a(n) | back 2 Business combination in which only one of the two companies continues to exist as a legal corporation |
front 3 A company has been using the fair-value method to account for its investment. The company now has the ability to significantly control the investee and the equity method has been deemed appropriate. Which of the following statements is true? | back 3 A retrospective change in accounting principle must occur |
front 4 What is the primary accounting difference between accounting for when the subsidiary is dissolved and when the subsidiary retains its incorporation? | back 4 If the subsidiary retains its incorporation, the consolidation is not formally recorded in the accounting records of the acquiring company |
front 5 How are stock issuance costs and direct combination costs treated in a business combination which is accounted for as an acquisition when the subsidiary will retain its incorporation? | back 5 Direct combination costs are expensed and stock issuance costs are a reduction to additional paid-in capital |
front 6 Which one of the following accounts would not appear on the consolidated financial statements at the end of the first fiscal period of the combination? | back 6 Investment in Subsidiary |
front 7 A company has been using the equity method to account for its investment. The company sells shares and does not continue to have significant control. Which of the following statements is true? | back 7 A prospective change in accounting principle must occur. |
front 8 In a transaction accounted for using the acquisition method where consideration transferred is less than fair value of net assets acquired, which statement is true? | back 8 A gain on bargain purchase is recorded. |
front 9 Impairment losses on equity method (20% - 50%) investments are | back 9 reported on the income statement. |
front 10 A company acquires all of the assets and liabilities of another company. Which one of the following increases the amount of goodwill the acquiring company reports? | back 10 The acquiring company's inventory is undervalued. |
front 11 Held-to-maturity investments are reported at | back 11 amortized cost. |
front 12 ABC Company uses the equity method to report its investments in 25% of the stock of XYZ Company. Its original investment cost exceeded 25% of the book value of XYZ by a large amount. ABC is computing equity in net income of XYZ for the current year, which is five years after the acquisition. Which situation below requires ABC to adjust the equity in net income number for write-offs of the difference between investment cost and XYZ’s book value? Attribute the difference to | back 12 plant assets with a 20-year life. |
front 13 The U.S. GAAP impairment test for equity method investments requires recognition of impairment losses when | back 13 fair value less than cost and the decline in value is other than temporary. |
front 14 Following U.S. GAAP, when should a company use the equity method to report an intercorporate investment? | back 14 The company significantly influences the decisions of the investee. |
front 15 A gain should be reported on an acquisition if | back 15 the fair value of the consideration paid plus the present value of any earnings contingency is less than the fair value of identifiable net assets acquired. |
front 16 Company P acquires all of the stock of Company S. How are Company S's research and development costs of ongoing projects reported at the date of acquisition? | back 16 Asset, at fair value. |
front 17 In a business combination, an acquiree's previously unreported in-process R&D | back 17 decreases goodwill. |
front 18 When consolidating the balance sheets of a parent and its subsidiary at the date of acquisition, consolidation eliminating entries | back 18 Remove the full balance of the parent's investment account and the subsidiary's equity accounts, and adjust the subsidiary's assets and liabilities to fair value at the date of acquisition. |
front 19 According to U.S. GAAP, when should the financial information of Company A and Company B be consolidated on one balance sheet? | back 19 Company A controls the decisions made by Company B's managers. |
front 20 Which one of the following accounts of an acquired company will not appear on a consolidated balance sheet? | back 20 Additional paid-in capital |