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A statutory ______________ results when one company acquires all the net assets of another company and the acquired company ceases to exist as a separate legal entity

A statutory ______________ results when one company acquires all the net assets of another company and the acquired company ceases to exist as a separate legal entity
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Advance Accounting
Unit 5 Week 5 Midterm Exam

1. A statutory ______________ results when one company acquires all the net assets of another company and the acquired company ceases to exist as a separate legal entity. (Points : 8)

2. The defense tactic that involves purchasing shares held by the would-be acquiring company at a price substantially in excess of their fair value is called (Points : 8)

3. The objectives of FASB 141R (Business Combinations) and FASB 160 (NonControlling Interests in Consolidated Financial Statements) are as follows: (Points : 8)

4. A business combination in which the boards of directors of the potential combining companies negotiate mutually agreeable terms is a(n) (Points : 8)

5. Under SFAS 141R, what value of the assets and liabilities are reflected in the financial statements on the acquisition date of a business combination? (Points : 8)

6. With an acquisition, direct and indirect expenses are (Points : 8)

7. In a business combination accounted for as an acquisition, how should the excess of fair value of net assets acquired over the consideration paid be treated? (Points : 8)

8. If an impairment loss is recorded on previously recognized goodwill due to the transitional goodwill impairment test, the loss should be treated as a(n): (Points : 8)

9. When the acquisition price of an acquired firm is less than the fair value of the identifiable net assets, all of the following are recorded at fair value except (Points : 8)

10. On the consolidated balance sheet, consolidated stockholders' equity is (Points : 8)

11. Reasons a parent company may pay more than book value for the subsidiary company's stock include all of the following except (Points : 8)

12. Pine Corp. owns 60% of Sage Corp.'s outstanding common stock. On May 1, 2011, Pine advanced Sage $90,000 in cash, which was still outstanding at December 31, 2011. What portion of this advance should be eliminated in the preparation of the December 31, 2011 consolidated balance sheet? (Points : 8)

13. What is the method of presentation required by SFAS 160 of “non-controlling interest” on a consolidated balance sheet? (Points : 8)

14. Hall, Inc., owns 40% of the outstanding stock of Gloom Company. During 2011, Hall received a $4,000 cash dividend from Gloom. What effect did this dividend have on Hall’s 2011 financial statements? (Points : 8)

15. Masters, Inc. owns 40% of Fields Corporation. During the year, Fields had net earnings of $200,000 and paid dividends of $50,000. Masters used the cost method of accounting. What effect would this have on the investment account, net earnings, and retained earnings, respectively? (Points : 8)

16. In the preparation of a consolidated statements workpaper, dividend income recognized by a parent company for dividends distributed by its subsidiary is (Points : 8)

17. Under the cost method, the workpaper entry to establish reciprocity (Points : 8)

18. On the consolidated statement of cash flows, the parent’s acquisition of additional shares of the subsidiary’s stock directly from the subsidiary is reported as (Points : 8)

19. On January 1, 2010, Lester Company purchased 70% of Stork Corporation's $5 par common stock for $600,000. The book value of Stork net assets was $640,000 at that time. The fair value of Stork's identifiable net assets were the same as their book value except for equipment that was $40,000 in excess of the book value. In the January 1, 2010, consolidated balance sheet, goodwill would be reported at (Points : 8)

20. Under push down accounting, the workpaper entry to eliminate the investment account includes a (Points : 8)

21. Dividends declared by a subsidiary are eliminated against dividend income recorded by the parent under the (Points : 8)

22. In preparing consolidated working papers, beginning retained earnings of the parent company will be adjusted in years subsequent to acquisition with an elimination entry whenever: (Points : 8)

23. A parent company regularly sells merchandise to its 80%-owned subsidiary. Which of the following statements describes the computation of noncontrolling interest income? (Points : 8)

24. Paige, Inc. owns 80% of Sigler, Inc. During 2011, Paige sold goods with a 40% gross profit to Sigler. Sigler sold all of these goods in 2011. For 2011 consolidated financial statements, how should the summation of Paige and Sigler income statement items be adjusted? (Points : 8)

25. The noncontrolling interest’s share of the selling affiliate’s profit on intercompany sales is considered to be realized under (Points : 8)

26. P Corporation acquired a 60% interest in S Corporation on January 1, 2011, at book value equal to fair value. During 2011, P sold merchandise that cost $135,000 to S for $189,000. One-third of this merchandise remained in S’s inventory at December 31, 2011. S reported net income of $120,000 for 2011. P’s income from S for 2011 is: (Points : 8)

27. P Company purchased land from its 80% owned subsidiary at a cost of $100,000 greater than it subsidiary’s book value. Two years later P sold the land to an outside entity for $50,000 more than it’s cost. In its current year consolidated income statement P and its subsidiary should report a gain on the sale of land of: (Points : 8)

28. The amount of the adjustment to the noncontrolling interest in consolidated net assets is equal to the noncontrolling interest’s percentage of the (Points : 8)

29. In years subsequent to the upstream intercompany sale of nondepreciable assets, the necessary consolidated workpaper entry under the cost method is to debit the (Points : 8)

30. When preparing consolidated financial statement workpapers, unrealized intercompany gains, as a result of equipment or inventory sales by affiliates, are allocated proportionately by percent of ownership between parent and subsidiary only when the selling affiliate is (Points : 8)



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