Question 1
4 / 4 pts
(TCO 2) Which of the following internal record-keeping
methods can a parent choose to account for a subsidiary acquired in a business
combination?
Initial value or
book value
Initial value, lower
of cost or market value, or equity
Initial value,
equity, or partial equity
Initial value,
equity, or book value
Initial value, lower
of cost or market value, or partial equity
Question 2
0 / 4 pts
(TCO 3) One company acquires another company in a
combination that is accounted for as an acquisition. The acquiring company
decides to apply the initial value method in accounting for the combination.
Which is one reason the acquiring company might have made this decision?
It is the only
method allowed by the SEC.
It is relatively
easy to apply.
It is the only
internal reporting method allowed by generally accepted accounting principles.
Operating results on
the parent’s financial records reflect consolidated totals.
When the initial
method is used, no worksheet entries are required in the consolidation process.
Question 3
4 / 4 pts
(TCO 3) Which of the following accounts would not appear on
the consolidated financial statements at the end of the first fiscal period of
the combination?
Goodwill
Equipment
Investment in
subsidiary
Common stock
Additional paid-in capital
Question 4
0 / 4 pts
(TCO 3) Parent Corp. bought 100% of Jack Inc. on January 1,
20×1, at a price in excess of the subsidiary’s fair value. On that date,
Parent’s equipment (10-year life) had a book value of $360,000 but a fair value
of $480,000. Jack had equipment (10-year life) with a book value of $240,000
and a fair value of $350,000. Parent used the partial equity method to record
its investment in Jack. On December 31, 20×3, Parent had equipment with a book
value of $250,000 and a fair value of $400,000. Jack had equipment with a book
value of $170,000 and a fair value of $320,000. Which is the consolidated
balance for the equipment account as of December 31, 20×3?
$710,000
$580,000
$474,000
$497,000
$565,000
Question 5
0 / 4 pts
(TCO 3) On September 1, 20×1, Peter Inc. issued common stock
in exchange for 20% of Sal Inc.’s outstanding common stock. In July of 20×3,
Peter issued common stock for an additional 75% of Sal’s outstanding common
stock. Sal continues in existence as Peter’s subsidiary. How much of Sal’s 20×3
net income should be reported as accruing to Peter?
20% of Sal’s net
income to June 30 and all of Sal’s net income from July 1 to December 31
20% of Sal’s net
income to June 30 and 95% of Sal’s net income from July 1 to December 31
95% of Sal’s net
income
All of Sal’s net
income
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