Chapter 2 reading comprehension

A bargain purchase arises when the price paid to acquire a controlling interest in another company is less than the acquirer’s share of the fair value of net assets of the company being acquired. At the end of your preliminary analysis, you believe that a business combination results in a bargain purchase. What is your next step? A. Recognize an immediate gain in the consolidated statement of profit and loss without further analysis. B. Recognize a liability in the consolidated balance sheet. C. Contact the acquiree to confirm its intention. D. Reassess each step of your analysis to confirm your preliminary findings.

33. A purchaser of a business will generally prefer which of the following? An asset purchase to receive new basis for depreciation A stock purchase because the seller will receive capital gains Utilizing a §338(g) election If the selling entity is an S Corporation making a joint §338(h)(10) election All of the above A,C,&D What form is required to report the allocation of the purchase price? ____________

1. what is the basis for consolidation?2. is goodwill being remeasured to fair value at each reporting period? if false, what is the correct answer?3.a. Before consolidation, entity A's retained is how much? 3.b.he consolidated earning is how much?this is the scenario for #3a and b:entity A acquired 90% interest in ENtity B on January 1, 20x1 when entity B's net assets had a fair value of 100. On December 31, 20x2, Entity B's net assets increased to 200 after adjustments for acquisition date fair values, net of depreciation.

Which of the following statements is true regarding the acquisition method of accounting for a business combination? a. Assets of the acquired company are recorded at book values. b. Assets of the acquired company are recorded at fair value, but only if the acquisition cost equals or exceeds fair value of the subsidiary's net assets. c. Assets of the acquired company are recorded at fair values regardless of the acquisition cost. d. Consulting costs related to the combination reduce additional paid-in capital.

S1: Under the acquisition method, if the fair values of identifiable net assets exceed the value implied by the purchase price of the acquired company, the excess should be accounted for goodwill. S2: With an acquisition, direct and indirect expenses are considered a par of the total cost of the acquired company. Both statements are Only S1 is Only S2 is Both statements are 2. Following the completion of a business combination in the form of a statutory consolidation, what is the balance in the new corporation’s Retained earningsaccount? The acquirer retained earnings accountbalance Thesum of the acquirer and acquiree retained earnings account  The acquiree retained earnings accountbalance Zero 3. S1: The acquisition-related costs in a business combination to be expensed immediately include cost of issuing debt securities. S2: In a business combination any “gain on bargain purchase” shall be recognized in other comprehensive income. Only S2 is Both statements are Both statements…

A(n) ________________ occurs when the management of the target company purchases a controlling interest in that company and the company incurs a significant amount of debt as a result. a. greenmail b. statutory merger c. poison pill d. leveraged buyout

(9) In an asset acquisition: a. A consolidation must be prepared whenever financial statements are issued. b. The acquiring company deals only with existing shareholders, not the company itself. c. The assets and liabilities are recorded by the acquiring company at their book values. d. Statements for the single combined entity are produced automatically and no consolidation process is needed.

ABC Company acquired XYZ Company in an acquisition. What date should be used as the acquisition date for the transaction? * The date ABC signs the contract to purchase the business. The date ABC obtains control of XYZ. The date that all contingencies related to the transaction are resolved. The date ABC purchased more than 20% of the stock of XYZ.

Consolidated Worksheet Preparation You will be creating and entering formulas to complete four worksheets. The first objective is to demonstrate the effect of different methods of accounting for the investments (equity, initial value, and partial equity) on the parent company’s trial balance and on the consolidated worksheet subsequent to acquisition. The second objective is to show the effect on consolidated balances and key financial ratios of recognizing a goodwill impairment loss. Project Scenario Pecos Company acquired 100 percent of Suaro’s outstanding stock for $1,450,000 cash on January 1, 2017, when Suaro had the following balance sheet:(THIS IS IN THE PICTURE)   Following is the consolidated information worksheet. December 31, 2018, trial balances                 Pecos Suaro   revenues  $      (1,052,000)  $      (427,000)   operating expenses  $          821,000  $       262,000   goodwill impairment loss ?     income of Suaro ?     net income ?  $…

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When an entity sells a non-current asset at a profit to another entity within the same group, which of the following adjustments is necessary on consolidation? Select one: a. Dr Asset, DR Gain on sale b. Dr Gain on sale, CR Asset c. Dr Gain on sale, CR Cash d. Dr Asset, CR Cash

TRUE  OR FALSE 1. Subsequent to the date of acquisition worksheet elimination number 1 will not completely remove the Investment in Subsidiary account from the consolidated balance sheet.  2. The consolidation worksheet will only eliminate all of the Investment in Subsidiary account when the parent owns 100 percent of the subsidiary’s stock.  3.

PLEASE EXPLAINATION FULL DETAILS.

Question 11       Subsequent to an acquisition, the parent company and consolidated financial statement amounts would not be the same for       Answers: A.  investments in consolidated subsidiaries.   B.  ending retained earnings.   C.  investments in unconsolidated subsidiaries.   D.  capital stock.       Question 12       Under the provisions of ASC 805-30, in a business combination, when the investment cost exceeds the total fair value of identifiable net assets acquired, which of the following statements is correct?       Answers: A.  The difference is allocated first to reduce proportionately (according to market value) non-current, depreciable assets to zero, and any negative remainder is classified as a deferred credit.   B.  The difference is allocated first to reduce proportionately (according to market value) non-current assets, and any negative remainder is classified as an extraordinary gain.   C.  The…

BUSINESS COMBINATION Answer it with solution:

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An entity acquires a subsidiary exclusively with a view to selling it. The subsidiary meets the criteria to be classified as held for sale. At the balance sheet date, the subsidiary has not yet been sold, and six months have passed since its acquisition. how will the subsidiary be valued in the balance sheet at the date of the first financial statements after acquisition? a. fair value b. lower of its cost and fair value less cost to sell

Outlook Inc. merges with Pinnacle Inc. Only Pinnacle remains.   Refer to Fact Pattern 31-1. Outlook held rights in certain real property. With regard to these assets, in the merger Pinnacle assumes   a.  all of Outlook’s assets.   b.  an amount of assets equal to the ratio of the firms’ pre-merger market values.   c.  none of Outlook’s assets.   d.  only those assets acquired after the merger was proposed.