ACCt – Multiple Choice Questions Test Bank Set1 Answers

1.

For business combinations involving less than 100 percent ownership, the acquirer recognizes and measures all of the following at the acquisition date except:

2.

When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000.

What amount should have been reported for the land in a consolidated balance sheet at the acquisition date?

3.

When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000.

What is the total amount of excess land allocation at the acquisition date?

4.

When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000.

What is the amount of excess land allocation attributed to the controlling interest at the acquisition date?

5.

When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000.

What is the amount of excess land allocation attributed to the non-controlling interest at the acquisition date?

6.

When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000.

What amount should have been reported for the land in a consolidated balance sheet, assuming the investment was obtained prior to January 1, 2009 and the purchase method of accounting for business combinations was used?

7.

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float’s net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded.

What is the total amount of goodwill recognized at the date of acquisition?

8.

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float’s net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded.

What amount of goodwill should be attributed to Perch at the date of acquisition?

9.

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float’s net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded.

What amount of goodwill should be attributed to the non-controlling interest at the date of acquisition?

10.

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float’s net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded.

What is the dollar amount of non-controlling interest that should appear in a consolidated balance sheet prepared at the date of acquisition?

11.

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float’s net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded.

What is the dollar amount of Float Corp.’s net assets that would be represented in a consolidated balance sheet prepared at the date of acquisition?

12.

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float’s net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded.

What is the dollar amount of fair value over book value differences attributed to Perch at the date of acquisition?

13.

Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2010. During 2010, Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of excess cost allocations totaled $60,000 in 2010.

The non-controlling interest’s share of the earnings of Harbor Corp. is calculated to be

14.

Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2010. During 2010, Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of excess cost allocations totaled $60,000 in 2010.

What is the effect of including Harbor in consolidated net income for 2010?

15.

Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1, 2010. For 2010, Kailey reported revenues of $810,000 and expenses of $630,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000.

In consolidation, the total amount of expenses related to Kailey, and to Denber’s acquisition of Kailey, for 2010 is determined to be

16.

Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1, 2010. For 2010, Kailey reported revenues of $810,000 and expenses of $630,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000.

What is the effect of including Kailey in consolidated net income for 2010?

17.

Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1, 2010. For 2010, Kailey reported revenues of $810,000 and expenses of $630,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000.

What is the amount of net income to the controlling interest for 2010?

18.

Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1, 2010. For 2010, Kailey reported revenues of $810,000 and expenses of $630,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000.

What is the amount of the non-controlling interest’s share of Denber’s income for 2010?

19.

MacHeath Inc. bought 60% of the outstanding common stock of Nomes Inc. in an acquisition business combination that resulted in the recognition of goodwill. Nomes owned a piece of land that cost $250,000 but was worth $600,000 at the date of acquisition. What value would be attributed to this land in a consolidated balance sheet at the date of acquisition?

20.

Kordel Inc. acquired 75% of the outstanding common stock of Raxston Corp. Raxston currently owes Kordel $500,000 for inventory acquired over the past few months. In preparing consolidated financial statements, what amount of this debt should be eliminated?

21.

Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2010 when Park’s book value was $560,000. The Royce stock was not actively traded. On the date of acquisition, Park had equipment (with a ten-year life) that was undervalued in the financial records by $140,000. One year later, the following selected figures were reported by the two companies. Additionally, no dividends have been paid.

What is consolidated net income for 2011 attributable to Royce’s controlling interest?

22.

Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2010 when Park’s book value was $560,000. The Royce stock was not actively traded. On the date of acquisition, Park had equipment (with a ten-year life) that was undervalued in the financial records by $140,000. One year later, the following selected figures were reported by the two companies. Additionally, no dividends have been paid.

What is the non-controlling interest’s share of the subsidiary’s net income for the year ended December 31, 2011 and what is the ending balance of the non-controlling interest in the subsidiary at December 31, 2011?

23.

Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2010 when Park’s book value was $560,000. The Royce stock was not actively traded. On the date of acquisition, Park had equipment (with a ten-year life) that was undervalued in the financial records by $140,000. One year later, the following selected figures were reported by the two companies. Additionally, no dividends have been paid.

What is the consolidated balance of the Equipment account at December 31, 2011?

24.

On January 1, 2010, Palk Corp. and Spraz Corp. had condensed balance sheets as follows:

On January 2, 2010, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2010. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill.

What is consolidated current assets at January 2, 2010?

25.

On January 1, 2010, Palk Corp. and Spraz Corp. had condensed balance sheets as follows:

On January 2, 2010, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2010. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill.

What is consolidated noncurrent assets at January 2, 2010?

26.

On January 1, 2010, Palk Corp. and Spraz Corp. had condensed balance sheets as follows:

On January 2, 2010, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2010. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill.

What are the total consolidated current liabilities at January 2, 2010?

27.

On January 1, 2010, Palk Corp. and Spraz Corp. had condensed balance sheets as follows:

On January 2, 2010, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2010. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill.

What is consolidated stockholders’ equity at January 2, 2010?

28.

In measuring non-controlling interest at the date of acquisition, which of the following would not be indicative of the value attributed to the non-controlling interest?

29.

When a parent uses the equity method throughout the year to account for its investment in an acquired subsidiary, which of the following statements is false before making adjustments on the consolidated worksheet?

30.

When a parent uses the initial value method throughout the year to account for its investment in an acquired subsidiary, which of the following statements is true before making adjustments on the consolidated worksheet?