Acc407 Advanced Accounting: Week 2 Quiz (Version 1)

Acc407 Advanced Accounting Week 2 Quiz (Version 1) 1. Under the equity method of accounting for a stock investment, the investment initially should be recorded at: (Points : 1) cost. cost minus any differential. proportionate share of the fair value of the investee company's net assets. proportionate share of the book value of the investee company's net assets. 2. Paul Corp. acquired 100 percent of Sam Inc.'s voting stock on July 1, 20X1. The following information was available as of December 31, 20X1: How much net income should be reported in Paul Corp's income statement for 20X1? (Points : 1) $370,000 $720,000 $940,000 $1,090,000 3. Assuming no impairment in value prior to transfer, assets transferred by a parent company to another entity it has created should be recorded by the newly created entity at the assets': (Points : 1) cost to the parent company. book value on the parent company's books at the date of transfer. fair value at the date of transfer. fair value of consideration exchanged by the newly created entity. 4. FASB 141R (ASC 805) requires contingent consideration in a business combination to be classified as: (Points : 1) An asset A liability or equity An asset or equity An asset or a liability 5. Burrough Corporation paid $80,000 to acquire all of Helyar Company's net assets. Helyar reported assets with a book value of $60,000 and fair value of $98,000 and liabilities with a book value and fair value of $23,000 on the date of combination. Burrough also paid $3,000 to a search firm for finder's fees related to the acquisition. What amount will be recorded as goodwill by Burrough Corporation while recording its investment in Helyar? (Points : 1) $0 $5,000 $8,000 $13,000 6. Under the cost method of accounting for a stock investment, the differential: (Points : 1) is written off. is amortized. is written down if related to limited-life assets. is not amortized or written off. 7. Which of the following observations is consistent with the equity method of accounting? (Points : 1) Dividends declared by the investee are treated as income by the investor. It is used when the investor lacks the ability to exercise significant influence over the investee. It may be used in place of consolidation. Its primary use is in reporting nonsubsidiary investments. 8. A statutory consolidation is a type of business combination in which: (Points : 1) one of the combining companies survives and the other loses its separate identity. one company acquires the voting shares of the other company and the two companies continue to operate as separate legal entities. two publicly traded companies agree to share a board of directors. each of the combining companies is dissolved and the net assets of both companies are transferred to a newly created corporation. 9. If Push Company owned 51 percent of the outstanding common stock of Shove Company, which reporting method would be appropriate? (Points : 1) Cost method Consolidation Equity method Merger method 10. For all acquired contingencies, the acquirer should do all of the following except: (Points : 1) Provide documentation from the acquirer's attorney regarding pending lawsuits and loan guarantees Provide a description of each contingency Disclose the amount recognized at the acquisition date Describe the estimated range of possible undiscounted outcomes of the contingency