Beruflich Dokumente
Kultur Dokumente
Multiple Choice
Answer: c
Answer: b
Answer: a
Answer: d
Answer: d
Answer: b
Answer: d
Answer: b
Answer: c
Answer: d
Answer: b
Answer: a
Answer: c
Answer: b
Answer: d
Answer: c
Answer: a
Answer: d
Leslie acquires 100 percent of the outstanding voting shares of Marcie Company on January 1, 2013. To
obtain these shares, Leslie pays $100,000 cash and issues 5,000 shares of $10 par value common stock
on this date. Leslie's stock had a fair value of $18 per share. Leslie also pays an additional $2,500 in
stock issuance costs. At date of acquisition, the book values and fair values of Marcie's net assets
amounted to $140,000 and $165,000, respectively.
Answer: c
Answer: b
Richland Company acquires Seameyer, Inc., by issuing 20,000 shares of $1 par common stock with a
market price of $25 per share on the acquisition date and paying $100,000 cash. The assets and
liabilities on Seameyer's balance sheet were valued at fair values except equipment that was undervalued
by $175,000. There was also an unrecorded patent valued at $32,500, as well as an unrecorded
trademark valued at $80,000. In addition, the agreement provided for additional consideration, valued at
$60,000, if certain earnings targets were met.
The pre-acquisition balance sheets for the two companies at acquisition date are presented below.
Richland Seameyer
Cash $ 130,550 $ 17,300
Accounts receivable 64,000 116,000
Inventory 97,000 149,000
Property, plant, and equipment 1,611,050 179,350
$1,902,600 $461,650
Answer: d
Answer: b
Answer: a
Answer: b
Answer: c
Answer: d
Answer: a
Answer: c
Answer: d
Answer: b
On January 1, 2014 Perez Company purchased 100% of the common stock Hinske Enterprises for
$280,000. On that date, Hinske had common stock of $50,000 and retained earnings of $190,000.
Equipment and land were both undervalued by $10,000 on Hinske's books. There was a $5,000
overvaluation of Bonds Payable, as well a $15,000 undervaluation of inventory.
Answer: a
Answer: c
Answer: b
Answer: a
Answer: c
Answer: b
Answer: d
Hairington Corporation issues 20,000 shares of its common stock for all of the outstanding shares of
Alton, Inc. Hairington shares have a par value of $10 and a market value of $18 per share.
Answer: c
Answer: b
Answer: d
Required:
a. Prepare the entry on Mackeys books to record the purchase.
b. Prepare all necessary consolidation entries.
Answer:
a. Equity Investment 200,000
Common Stock 20,000
Additional paid-in capital 180,000
To record the investment on investor's books.
Land 50,000
Equity Investment 50,000
To bring Land to fair value and eliminate Equity Investment.
Required:
a. Prepare the entry on McClellans books to record the purchase.
b. Prepare all necessary consolidation entries.
Answer:
a. Equity Investment 150,000
Cash 150,000
To record the investment on investor's books.
Patents 60,000
Goodwill 30,000
Equity Investment 90,000
To eliminate Equity Investment and allocate acquisition cost to identifiable assets and
Goodwill.
Kiefer Enterprises acquired all of the common shares of HRL Corporation by issuing 5,000 shares
of its own common stock valued at $75 per share. Kiefer incurred stock issuance costs of $2,500
and paid $18,750 in direct clerical and legal costs of the combination. Kiefer also agreed to pay
an additional $25,000 if HRL achieved certain profit goals within the first three years. The
contingent payment was determined to have a market value of $7,500.
Required:
a. What is the acquisition cost of the combination?
b. How do the stock issuance costs affect Kiefer's balance sheet?
c. How do the direct costs of the combination affect Kiefer's balance sheet?
d. Without performing computations, how will HRL's revenues and expenses for 2013 affect the
consolidated totals?
e. What will be the accounting treatment of the In-process R & D?
Answer:
a. Acquisition cost: (5,000 x $75) + 7,500 = $382,500
c. The balance sheet effect of the direct combination costs is a reduction of $18,750 in retained
earnings. Such costs are expensed.
d. Only the post-acquisition revenues and expenses of the subsidiary are included in
consolidated totals. Therefore, the 2013 revenues and expenses will not affect consolidated
totals.
e. In-process R & D will be an asset on the consolidated balance sheet, valued at $75,000.
McCoy's assets and liabilities had book values equal to market values except for inventory, land
and building which were undervalued by $30,000, $20,000, and $25,000, respectively. On
January 2, 2013, Express Corp. purchased all of McCoy's common stock for $475,000 cash.
There was no contingent consideration in the agreement to combine.
Required: Prepare all necessary consolidation entries for a January 2, 2013 balance sheet.
Answer:
Allocate acquisition cost to assets:
Investment Cost $475,000
Book Value-Net Assets 375,000
Excess $100,000
Allocated as follows:
Land $ 20,000
Building 25,000
Inventory 30,000
Goodwill 25,000
Total Allocated $100,000
Consolidation Entries:
Common Stock 50,000
Additional paid-in capital 100,000
Retained Earnings 225,000
Equity Investment 375,000
To eliminate subsidiary's stockholders' equity.
Land 20,000
Building 25,000
Inventory 30,000
Goodwill 25,000
Equity Investment 100,000
To eliminate Equity Investment; bring assets to fair values; with the unallocated cost assigned
to goodwill.
Required: Compute the amount of goodwill that would appear on the January 1, 2014 balance
sheet.
Answer:
Compute excess of Investment over book value of net assets:
$4,100,000 - 3,200,000 = $900,000
Answer:
Equity Investment 600,000
Common Stock 200,000
Additional paid-in capital 400,000
To record acquisition of subsidiary's stock.
Required: Prepare a consolidated balance sheet for Illinois Corporation immediately after the
business combination.
Answer:
Consolidated Balance Sheet:
Cash $150,000 + 240,000 = $ 390,000
Inventories 320,000 + 800,000 = 1,120,000
Other current assets 500,000 + 1,000,000 = 1,500,000
Land 350,000 + 500,000 = 850,000
Plant assets-net 4,000,000 + 3,000,000 = 7,000,000
Goodwill 180,000 (See Computation)
Total Assets $11,040,000
Computation of Goodwill:
Acquisition Cost $3,800,000
Subsidiary net assets (3,620,000)
Goodwill $ 180,000
Fair values agree with book values except for inventory, land, and equipment that have fair
values of $400,000, $50,000 and $70,000, respectively. Carbury has unrecorded patent rights
valued at $20,000.
Required:
a. Prepare a schedule to allocate the purchase price to Carburys assets and liabilities
assuming Mendol paid $560,000 cash for the acquisition.
b. Prepare the consolidation entries for a January 2, 2014 consolidated balance sheet.
Answer:
a. Acquisition price $ 560,000
Book Value-Net Assets (490,000)
Excess $ 70,000
Allocation of Excess:
Inventory $40,000
Land 10,000
Equipment (10,000)
Patent 20,000
$60,000
Unallocated-Goodwill 10,000
$70,000
Goodwill 10,000
Inventory 40,000
Land 10,000
Patent 20,000
Equipment 10,000
Equity Investment 70,000
To eliminate Equity Investment and adjust assets to fair values.
Required: Prepare all necessary entries for a January 1, 2013, consolidated balance sheet.
Answer:
Compute excess of acquisition price over book value of subsidiary's net assets:
Allocation of Excess:
Inventory $ 10,000
Land 40,000
Building/Equipment 60,000
Bonds Payable 10,000
Goodwill 80,000
Total $200,000
Consolidation Entries:
Inventory 10,000
Land 40,000
Buildings/Equipment 60,000
Bonds Payable 10,000
Goodwill 80,000
Equity Investment 200,000
To eliminate investment and allocate to assets and liabilities.
Parent Subsidiary
Cash $ 455,250 $ 201,600
Accounts Receivable 192,000 417,600
Inventory 791,000 536,400
Equity Investment 2,200,000
Property, plant and equipment (net) 899,800 992,400
$4,538,050 $2,148,000
Accounts payable $ 94,050 $ 127,000
Salaries payable 110,400 221,000
Long-Term Notes Payable 500,000 600,000
Common Stock 110,000 120,000
Additional paid-in capital 2,970,000 150,000
Retained earnings 753,600 930,000
$4,538,050 $2,148,000
Required: At what amounts will each of the following appear on the consolidated balance sheet?
a. Inventory
b. Equity Investment
c. Property, plant and equipment (net of accumulated depreciation)
d. Goodwill
e. Common Stock
f. Additional paid-in capital
g. Retained Earnings
h. Total Intangible Assets
Allocation of Excess:
Equipment 500,000
Secret Formula 250,000
Customer List 100,000
850,000
Goodwill 150,000
Total Allocation 1,000,000