Question 1

For an acquisition when the subsidiary retains its incorporation,which method of internal recordkeeping is the easiest for the parent to use?

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Question 2

What is the basic objective of all consolidations?

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Question 3

Avery Company acquires Billings Company in a combination accounted for as an acquisition and adopts the equity method to account for Investment in Billings.At the end of four years,the Investment in Billings account on Avery's books is $198,984.What items constitute this balance?

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Question 4

REFERENCE: 03-12
Watkins,Inc.acquires all of the outstanding stock of Glen Corporation on January 1,2017.At that date,Glen owns only three assets and has no liabilities:
 $$\begin{array} { | l | c | c | } 
\hline & \text { Book } & \text { Fair } \
\hline & \text { Value } & \text { Value } \
\hline \text { Land } & \$ 40,000 & \$ 50,000 \
\hline \text { Equipment (10-year life) } & 80,000 & 75,000 \
\hline \text { Building (20-year life) } & 200,000 & 300,000 \
\hline
\end{array}$$
-If Watkins pays $450,000 in cash for Glen,what acquisition-date fair value allocation,net of amortization,should be attributed to the subsidiary's Equipment in consolidation at December 31,2019?
A)($5,000).
B)$80,000.
C)$75,000.
D)$73,500.
E)($3,500).

Accepted Answer

The answer of REFERENCE: 03-12
Watkins,Inc.acquires all of the outstanding stock...

Question 5

Yules Co.acquired Noel Co.and applied the acquisition method.Yules decided to use the partial equity method to account for the investment.The current balance in the investment account is $416,000.Describe in words how this balance was derived.

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The answer of Yules Co.acquired Noel Co.and applied the acquisition...

Question 6

REFERENCE: 03-12
Watkins,Inc.acquires all of the outstanding stock of Glen Corporation on January 1,2017.At that date,Glen owns only three assets and has no liabilities:
 $$\begin{array} { | l | c | c | } 
\hline & \text { Book } & \text { Fair } \
\hline & \text { Value } & \text { Value } \
\hline \text { Land } & \$ 40,000 & \$ 50,000 \
\hline \text { Equipment (10-year life) } & 80,000 & 75,000 \
\hline \text { Building (20-year life) } & 200,000 & 300,000 \
\hline
\end{array}$$
-If Watkins pays $300,000 in cash for Glen,at what amount would the subsidiary's Building be represented in a January 2,2017 consolidation?
A)$200,000.
B)$225,000.
C)$273,000.
D)$279,000.
E)$300,000.

Accepted Answer

The answer of REFERENCE: 03-12
Watkins,Inc.acquires all of the outstanding stock...

Question 7

Dutch Co.has loaned $90,000 to its subsidiary,Hans Corp. ,which retains separate incorporation.How would this loan be treated on a consolidated balance sheet?

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The answer of Dutch Co.has loaned $90,000 to its subsidiary,Hans...

Question 8

REFERENCE: 03-12
Watkins,Inc.acquires all of the outstanding stock of Glen Corporation on January 1,2017.At that date,Glen owns only three assets and has no liabilities:
 $$\begin{array} { | l | c | c | } 
\hline & \text { Book } & \text { Fair } \
\hline & \text { Value } & \text { Value } \
\hline \text { Land } & \$ 40,000 & \$ 50,000 \
\hline \text { Equipment (10-year life) } & 80,000 & 75,000 \
\hline \text { Building (20-year life) } & 200,000 & 300,000 \
\hline
\end{array}$$
-If Watkins pays $450,000 in cash for Glen,what amount would be represented as the subsidiary's Equipment in a consolidation at December 31,2019,assuming the book value of the equipment at that date is still $80,000?
A)$70,000.
B)$73,500.
C)$75,000.
D)$76,500.
E)$80,000.

Accepted Answer

The answer of REFERENCE: 03-12
Watkins,Inc.acquires all of the outstanding stock...

Question 9

A business combination results in $90,000 of goodwill.Several years later a worksheet is being produced to consolidate the two companies.Describe in words at what amount goodwill will be reported at this date.

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Question 10

For recognized intangible assets that are considered to possess indefinite lives,what is the accounting treatment for purposes of income recognition?

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Question 11

What should an entity evaluate when making an initial impairment assessment of an intangible asset (other than goodwill)?

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Question 12

From which methods can a parent choose for its internal recordkeeping related to the operations of a subsidiary?

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Question 13

For an acquisition when the subsidiary maintains its incorporation,under the partial equity method,what adjustments are made to the balance of the investment account?

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Question 14

According to the FASB ASC regarding the testing procedures for Goodwill Impairment,the proper procedure for conducting impairment testing is:
A)Goodwill recognized in consolidation may be amortized uniformly and only tested if the amortization method originally chosen is changed.
B)Goodwill recognized in consolidation must only be impairment tested prior to disposal of the consolidated unit to eliminate the impairment of goodwill from the gain or loss on the sale of that specific entity.
C)Goodwill recognized in consolidation may be impairment tested in a two-step approach,first by quantitative assessment of the possible impairment of the fair value of the unit relative to the book value,and then a qualitative assessment as to why the impairment,if any,occurred for disclosure.
D)Goodwill recognized in consolidation may be impairment tested in a two-step approach,first by qualitative assessment of the possibility of impairment of the unit fair value relative to the book value,and then quantitative assessments as to how much impairment,if any,occurred for disclosure.
E)Goodwill recognized in consolidation may be impairment tested in a two-step approach,first by qualitative assessment of the possibility of impairment of the unit fair value relative to the book value,and then quantitative assessments as to how much impairment,if any,occurred for asset write-down.

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The answer of According to the FASB ASC regarding the...

Question 15

REFERENCE: 03-12
Watkins,Inc.acquires all of the outstanding stock of Glen Corporation on January 1,2017.At that date,Glen owns only three assets and has no liabilities:
 $$\begin{array} { | l | c | c | } 
\hline & \text { Book } & \text { Fair } \
\hline & \text { Value } & \text { Value } \
\hline \text { Land } & \$ 40,000 & \$ 50,000 \
\hline \text { Equipment (10-year life) } & 80,000 & 75,000 \
\hline \text { Building (20-year life) } & 200,000 & 300,000 \
\hline
\end{array}$$
-If Watkins pays $400,000 in cash for Glen,what amount would be represented as the subsidiary's Building in a consolidation at December 31,2019,assuming the book value of the building at that date is still $200,000?
A)$200,000.
B)$285,000.
C)$260,000.
D)$268,000.
E)$300,000.

Accepted Answer

The answer of REFERENCE: 03-12
Watkins,Inc.acquires all of the outstanding stock...

Question 16

When is a goodwill impairment loss recognized?
A)Only after both a quantitative and qualitative assessment of the fair value of goodwill of a reporting unit.
B)After only definitive quantitative assessments of the fair value of goodwill is completed.
C)After only definitive qualitative assessments of the fair value of goodwill is completed.
D)If the fair value of a reporting unit falls to zero or below its original acquisition price.
E)Never.

Accepted Answer

The answer of When is a goodwill impairment loss recognized?
A)Only...

Question 17

REFERENCE: 03-12
Watkins,Inc.acquires all of the outstanding stock of Glen Corporation on January 1,2017.At that date,Glen owns only three assets and has no liabilities:
 $$\begin{array} { | l | c | c | } 
\hline & \text { Book } & \text { Fair } \
\hline & \text { Value } & \text { Value } \
\hline \text { Land } & \$ 40,000 & \$ 50,000 \
\hline \text { Equipment (10-year life) } & 80,000 & 75,000 \
\hline \text { Building (20-year life) } & 200,000 & 300,000 \
\hline
\end{array}$$
-If Watkins pays $450,000 in cash for Glen,and Glen earns $50,000 in net income and pays $20,000 in dividends during 2017,what amount representing Glen would be reflected in consolidated net income for the year ended December 31,2017?
A)$20,000 under the initial value method.
B)$30,000 under the partial equity method.
C)$50,000 under the partial equity method.
D)$44,500 under the equity method.
E)$45,500 regardless of the internal accounting method used.

Accepted Answer

The answer of REFERENCE: 03-12
Watkins,Inc.acquires all of the outstanding stock...

Question 18

For an acquisition when the subsidiary retains its incorporation,which method of internal recordkeeping gives the most accurate portrayal of the accounting results for the entire business combination?

Accepted Answer

The answer of For an acquisition when the subsidiary retains...

Question 19

Paperless Co.acquired Sheetless Co.and in effecting this business combination,there was a cash-flow performance contingency to be paid in cash,and a market-price performance contingency to be paid in additional shares of stock.In what accounts and in what section(s)of a consolidated balance sheet are these contingent consideration items shown?

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The answer of Paperless Co.acquired Sheetless Co.and in effecting this...

Question 20

What is the partial equity method? How does it differ from the equity method? What are its advantages and disadvantages compared to the equity method?

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Quiz 3: Consolidations - Subsequent to the Date of Acquisition

For an acquisition when the subsidiary retains its incorporation,which method of internal recordkeeping is the easiest for the parent to use?

What is the basic objective of all consolidations?

Avery Company acquires Billings Company in a combination accounted for as an acquisition and adopts the equity method to account for Investment in Billings.At the end of four years,the Investment in Billings account on Avery's books is $198,984.What items constitute this balance?

Yules Co.acquired Noel Co.and applied the acquisition method.Yules decided to use the partial equity method to account for the investment.The current balance in the investment account is $416,000.Describe in words how this balance was derived.

Dutch Co.has loaned $90,000 to its subsidiary,Hans Corp. ,which retains separate incorporation.How would this loan be treated on a consolidated balance sheet?

A business combination results in $90,000 of goodwill.Several years later a worksheet is being produced to consolidate the two companies.Describe in words at what amount goodwill will be reported at this date.

For recognized intangible assets that are considered to possess indefinite lives,what is the accounting treatment for purposes of income recognition?

What should an entity evaluate when making an initial impairment assessment of an intangible asset (other than goodwill)?

From which methods can a parent choose for its internal recordkeeping related to the operations of a subsidiary?

For an acquisition when the subsidiary maintains its incorporation,under the partial equity method,what adjustments are made to the balance of the investment account?

According to the FASB ASC regarding the testing procedures for Goodwill Impairment,the proper procedure for conducting impairment testing is:

When is a goodwill impairment loss recognized?

For an acquisition when the subsidiary retains its incorporation,which method of internal recordkeeping gives the most accurate portrayal of the accounting results for the entire business combination?

What is the partial equity method? How does it differ from the equity method? What are its advantages and disadvantages compared to the equity method?