Unlock 2024 Exam Success: [Financial Reporting, Financial Statement Analysis, and Valuation A Strategic Perspective,Stickney ,6e] Solutions Manual
Financial Reporting, Financial Statement Analysis, and Valuation A Strategic Perspective, Stickney - Solutions, summaries, and outlines. 2022 updated
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Student:
1. At the date of an acquisition which is not a bargain purchase, the acquisition method
A. consolidates the subsidiary's assets at fair value and the liabilities at book value.
B. consolidates all subsidiary assets and liabilities at book value.
C. consolidates all subsidiary assets and liabilities at fair value.
D. consolidates current assets and liabilities at book value, long-term assets and liabilities at
fair value.
E. consolidates the subsidiary's assets at book value and the liabilities at fair value.
2. In an acquisition where control is achieved, how would the land accounts of the parent
and the land accounts of the subsidiary be combined?
A. Option A
B. Option B
C. Option C
D. Option D
E. Option E
3. Lisa Co. paid cash for all of the voting common stock of Victoria Corp. Victoria will continue
to exist as a separate corporation. Entries for the consolidation of Lisa and Victoria would be
recorded in
A. a worksheet.
B. Lisa's general journal.
C. Victoria's general journal.
D. Victoria's secret consolidation journal.
E. the general journals of both companies.
4. Using the acquisition method for a business combination, goodwill is generally defined as:
A. Cost of the investment less the subsidiary's book value at the beginning of the year.
B. Cost of the investment less the subsidiary's book value at the acquisition date.
C. Cost of the investment less the subsidiary's fair value at the beginning of the year.
D. Cost of the investment less the subsidiary's fair value at acquisition date.
E. is no longer allowed under federal law.
5. Direct combination costs and stock issuance costs are often incurred in the process of
making a controlling investment in another company. How should those costs be
accounted for in a pre-2009 purchase transaction?
A. Option A
B. Option B
C. Option C
D. Option D
E. Option E
,6. How are direct and indirect costs accounted for when applying the acquisition method for a business
combination?
A. Option A
B. Option B
C. Option C
D. Option D
E. Option E
7. What is the primary accounting difference between accounting for when the subsidiary is dissolved and
when the subsidiary retains its incorporation?
A. If the subsidiary is dissolved, it will not be operated as a separate division.
B. If the subsidiary is dissolved, assets and liabilities are consolidated at their book values.
C. If the subsidiary retains its incorporation, there will be no goodwill associated with the acquisition.
D. If the subsidiary retains its incorporation, assets and liabilities are consolidated at their book values.
E If the subsidiary retains its incorporation, the consolidation is not formally recorded in the
accounting
records of the acquiring company.
8. According to GAAP, the pooling of interest method for business combinations
A. Is preferred to the purchase method.
B. Is allowed for all new acquisitions.
C. Is no longer allowed for business combinations after June 30, 2001.
D. Is no longer allowed for business combinations after December 31, 2001.
E. Is only allowed for large corporate mergers like Exxon and Mobil.
9. Acquired in-process research and development is considered as
A. a definite-lived asset subject to amortization.
B. a definite-lived asset subject to testing for impairment.
C. an indefinite-lived asset subject to amortization.
D. an indefinite-lived asset subject to testing for impairment.
E. a research and development expense at the date of acquisition.
10. Which one of the following is a characteristic of a business combination accounted for as an acquisition?
A. The combination must involve the exchange of equity securities only.
B. The transaction establishes an acquisition fair value basis for the company being acquired.
C.The two companies may be about the same size, and it is difficult to determine the acquired company
and the acquiring company.
D. The transaction may be considered to be the uniting of the ownership interests of the companies
involved.
E. The acquired subsidiary must be smaller in size than the acquiring parent.
, 11. Which one of the following is a characteristic of a business combination that is accounted for as an
acquisition?
A Fair value only for items received by the acquirer can enter into the determination of the acquirer's
. accounting valuation of the acquired company.
BFair value only for the consideration transferred by the acquirer can enter into the determination of the
. acquirer's accounting valuation of the acquired company.
CFair value for the consideration transferred by the acquirer as well as the fair value of items received
. by the acquirer can enter into the determination of the acquirer's accounting valuation of the
acquiredcompany.
DFair value for only consideration transferred and identifiable assets received by the acquirer can enter
. into the determination of the acquirer's accounting valuation of the acquired company.
E Only fair value of identifiable assets received enters into the determination of the acquirer's accounting
. valuation of the acquired company.
12. A statutory merger is a(n)
A. business combination in which only one of the two companies continues to exist as a legal
corporation.
B. business combination in which both companies continue to exist.
C. acquisition of a competitor.
D. acquisition of a supplier or a customer.
E. legal proposal to acquire outstanding shares of the target's stock.
13. 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?
A. Stock issuance costs are a part of the acquisition costs, and the direct combination costs are expensed.
B.Direct combination costs are a part of the acquisition costs, and the stock issuance costs are a reduction
to additional paid-in capital.
C. Direct combination costs are expensed and stock issuance costs are a reduction to additional
paid-incapital.
D. Both are treated as part of the acquisition consideration transferred.
E. Both are treated as a reduction to additional paid-in capital.
14. Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January 1, 2013. The book
value and fair value of Vicker's accounts on that date (prior to creating the combination) follow, along
with the book value of Bullen's accounts:
Assume that Bullen issued 12,000 shares of common stock with a $5 par value and a $47 fair value to
obtain all of Vicker's outstanding stock. In this acquisition transaction, how much goodwill should be
recognized?
A. $144,000.
B. $104,000.
C. $64,000.
D. $60,000.
E. $0.
, Assume that Bullen issued 12,000 shares of common stock with a $5 par value and a $42 fair value
for all of the outstanding stock of Vicker. What is the consolidated balance for Land as a result of this
acquisition transaction?
A. $460,000.
B. $510,000.
C. $500,000.
D. $520,000.
E. $490,000.
17. Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January 1, 2013. The book
value and fair value of Vicker's accounts on that date (prior to creating the combination) follow, along
with the book value of Bullen's accounts:
Assume that Bullen issued 12,000 shares of common stock with a $5 par value and a $42 fair value for
all of the outstanding shares of Vicker. What will be the consolidated Additional Paid-In Capital and
Retained Earnings (January 1, 2013 balances) as a result of this acquisition transaction?
A. $60,000 and $490,000.
B. $60,000 and $250,000.
C. $380,000 and $250,000.
D. $464,000 and $250,000.
E. $464,000 and $420,000.
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