Quiz 6 Consolidation
Accounting 323 – Intermediate Accounting III
Summer 2013
Quiz # 6
Ch. 2 Consolidation of Financial Information
Name
1. In a transaction accounted for using the acquisition method where the consideration transferred is more than fair value of net assets acquired, which statement is true?
A.
Goodwill is recorded.
B.
A deferred credit is recorded.
C.
A gain on bargain purchase is recorded.
D.
Negative goodwill is recorded
2. Assume that Company A acquires 100% of all of the outstanding voting common stock of Company B and transfers Company B’s net assets to its own books, and then Company B is legally dissolved (i.e. it is no longer a separately incorporated entity) which of the following statements is true:
A. Company B will continue to prepare separate financial statements
B. Company B’s books are closed out and Company A should record Company B’s assets and liabilities on its books using Company B’s book values as of the acquisition date
C. Company B is now permanently consolidated with Company A as of the combination (acquisition) date
D. Company B is the surviving entity
3. In an acquisition accounted for as a business combination, pre-existing goodwill on the books of the acquired entity should be ignored by the acquiring company when allocating the acquisition date fair value to the net assets acquired.
A. True
B. False
4. What is the appropriate accounting treatment for the value assigned to in-process research and development acquired in a business combination?
A. Expense upon acquisition
B. Capitalize as an asset
C. Expense if there is no alternative use for the assets used in the research and development and technological feasibility has yet to be reached
D. Expense until future economic benefits become certain and then capitalize as an asset
5. Botkins issued 5,600,000 new shares of its common stock valued at $3.00 per share for all of the outstanding stock of
Summer 2013
Quiz # 6
Ch. 2 Consolidation of Financial Information
Name
1. In a transaction accounted for using the acquisition method where the consideration transferred is more than fair value of net assets acquired, which statement is true?
A.
Goodwill is recorded.
B.
A deferred credit is recorded.
C.
A gain on bargain purchase is recorded.
D.
Negative goodwill is recorded
2. Assume that Company A acquires 100% of all of the outstanding voting common stock of Company B and transfers Company B’s net assets to its own books, and then Company B is legally dissolved (i.e. it is no longer a separately incorporated entity) which of the following statements is true:
A. Company B will continue to prepare separate financial statements
B. Company B’s books are closed out and Company A should record Company B’s assets and liabilities on its books using Company B’s book values as of the acquisition date
C. Company B is now permanently consolidated with Company A as of the combination (acquisition) date
D. Company B is the surviving entity
3. In an acquisition accounted for as a business combination, pre-existing goodwill on the books of the acquired entity should be ignored by the acquiring company when allocating the acquisition date fair value to the net assets acquired.
A. True
B. False
4. What is the appropriate accounting treatment for the value assigned to in-process research and development acquired in a business combination?
A. Expense upon acquisition
B. Capitalize as an asset
C. Expense if there is no alternative use for the assets used in the research and development and technological feasibility has yet to be reached
D. Expense until future economic benefits become certain and then capitalize as an asset
5. Botkins issued 5,600,000 new shares of its common stock valued at $3.00 per share for all of the outstanding stock of