Multiple Choice Questions

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Multiple Choice Questions

• At the date of an acquisition which is not a bargain purchase, the acquisition method

• consolidates the subsidiary's assets at fair value and the liabilities at book value.

• consolidates all subsidiary assets and liabilities at book value.

• consolidates all subsidiary assets and liabilities at fair value.

• consolidates current assets and liabilities at book value, long-term assets and liabilities at fair

value.

• consolidates the subsidiary's assets at book value and the liabilities at fair value.

• In an acquisition where control is achieved, how would the land accounts of the parent and the

land accounts of the subsidiary be combined?

• Option A

• Option B

• Option C

• Option D

• Option E

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• 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 worksheet.

• Lisa's general journal.

• Victoria's general journal.

• Victoria's secret consolidation journal.

• the general journals of both companies.

• Using the acquisition method for a business combination, goodwill is generally defined as:

• Cost of the investment less the subsidiary's book value at the beginning of the year.

• Cost of the investment less the subsidiary's book value at the acquisition date.

• Cost of the investment less the subsidiary's fair value at the beginning of the year.

• Cost of the investment less the subsidiary's fair value at acquisition date.

• is no longer allowed under federal law.

• 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?

• Option A

• Option B

• Option C

• Option D

• Option E

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• How are direct and indirect costs accounted for when applying the acquisition method for a

business combination?

• Option A

• Option B

• Option C

• Option D

• Option E

• What is the primary accounting difference between accounting for when the subsidiary is dissolved

and when the subsidiary retains its incorporation?

• If the subsidiary is dissolved, it will not be operated as a separate division.

• If the subsidiary is dissolved, assets and liabilities are consolidated at their book values.

• If the subsidiary retains its incorporation, there will be no goodwill associated with the

acquisition.

• If the subsidiary retains its incorporation, assets and liabilities are consolidated at their book

values.

• If the subsidiary retains its incorporation, the consolidation is not formally recorded in the

accounting records of the acquiring company.

• According to GAAP, the pooling of interest method for business combinations

• Is preferred to the purchase method.

• Is allowed for all new acquisitions.

• Is no longer allowed for business combinations after June 30, 2001.

• Is no longer allowed for business combinations after December 31, 2001.

• Is only allowed for large corporate mergers like Exxon and Mobil.

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9. An example of a difference in types of business combination is:

• A statutory merger can only be effected by an asset acquisition while a statutory consolidation

can only be effected by a capital stock acquisition.

• A statutory merger can only be effected by a capital stock acquisition while a statutory

consolidation can only be effected by an asset acquisition.

• A statutory merger requires dissolution of the acquired company while a statutory consolidation

does not require dissolution.

• A statutory consolidation requires dissolution of the acquired company while a statutory merger

does not require dissolution.

• Both a statutory merger and a statutory consolidation can only be effected by an asset

acquisition but only a statutory consolidation requires dissolution of the acquired company.

• Acquired in-process research and development is considered as

• a definite-lived asset subject to amortization.

• a definite-lived asset subject to testing for impairment.

• an indefinite-lived asset subject to amortization.

• an indefinite-lived asset subject to testing for impairment.

• a research and development expense at the date of acquisition.

• Which one of the following is a characteristic of a business combination accounted for as an

acquisition?

• The combination must involve the exchange of equity securities only.

• The transaction establishes an acquisition fair value basis for the company being acquired.

• The two companies may be about the same size, and it is difficult to determine the acquired

company and the acquiring company.

• The transaction may be considered to be the uniting of the ownership interests of the

companies involved.

• The acquired subsidiary must be smaller in size than the acquiring parent.