Chapter 1 - Intercorprate Acquisitions and Investments in Other Entities - Exercises and Problems
101 Pages

Chapter 1 - Intercorprate Acquisitions and Investments in Other Entities - Exercises and Problems

Course Number: BUSI 607, Spring 2013

College/University: Kean

Word Count: 5437

Rating:

Document Preview

Exercises Page 1 of9 ., Advanced Accounting 9ie Content Financial eBook Chapter1: Intercorporate Acquisitions and Investments .._-------- Exercises in Other Entities ._------ E1-1 Multiple-Choice Questions on Complex Organizations LOi, L03 Select the correct answer for each of the following questions. 1. Growth in the complexity of the U.S. business environment...

Unformatted Document Excerpt
Coursehero >> New Jersey >> Kean >> BUSI 607

Course Hero has millions of student submitted documents similar to the one
below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.

Course Hero has millions of student submitted documents similar to the one below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.

Page Exercises 1 of9 ., Advanced Accounting 9ie Content Financial eBook Chapter1: Intercorporate Acquisitions and Investments .._-------- Exercises in Other Entities ._------ E1-1 Multiple-Choice Questions on Complex Organizations LOi, L03 Select the correct answer for each of the following questions. 1. Growth in the complexity of the U.S. business environment a. Has led to increased use of partnerships to avoid legal liability. b. Has led to increasingly complex organizational structures as management has attempted to achieve its business objectives. c. Has encouraged companies to reduce the number of operating divisions and product lines so they may better control those they retain. d. Has had no particular impact on the organizational structures or the way in which companies are managed. 2. Which of the following is not an appropriate reason for establishing a subsidiary? a. The parent wishes to protect existing operations by shifting new activities with greater risk to a newly created subsidiary. b. The parent wishes to avoid subjecting all of its operations to regulatory control by establishing a subsidiary that focuses its operations in regulated industries. . c. The parent wishes to reduce its taxes by establishing a subsidiary that focuses its operations in areas where special tax benefits are available. d. The parent wishes to be able to increase its reported sales by transferring products to the subsidiary at the end of the fiscal year. 3. Which of the following actions is likely to result in recording goodwill on Randolph Company's books? a. Randolph acquires Penn Corporation in a business combination recorded as a merger. b. Randolph acquires a majority of Penn's common stock in a business combination and continues to operate it as a subsidiary. c. Randolph distributes ownership of a newly created subsidiary in a distribution considered to be a spin-off. d. Randolph distributes ownership of a newly created subsidiary in a distribution considered to be a split-Off. 4. When an existing company creates a new subsidiary and transfers a portion of its assets and liabilities to the new entity a. The new entity records both the assets and liabilities it received at fair values. b. The new entity records both the assets and liabilities it received at the carrying values of the original company. c. The original company records a gain or loss on the difference between its carrying values and the fair values of the assets transferred to the new entity. d. The original company records the difference between the carrying values and the fair values of the assets transferred to the new entity as goodwill. 5. When a company assigns goodwill to a reporting unit acquired in a business combination. it must record .an impairment loss if a. The fair value of the net identifiable assets held by a reporting unit decreases. b. The fair value of the reporting unit decreases. c. The carrying value of the reporting unit is less than the fair value of the reporting unit. d. The fair value of the reporting unit is less than its carrying value and the carrying value of goodwill is more than the implied value of its goodwill. E1-2 Multiple-Choice Questions on Recording Business Combinations [AICPA Adapted] L04, LOS Select the correct answer for each of the following questions. 1. Goodwill represents the excess of the sum of the consideration given over the a. Sum of the fair values assigned to identifiable assets acquired less liabilities assumed . .b. Sum of the fair values assigned to tangible assets acquired less liabilities assumed. c. Sum of the fair values assigned to intangible assets acquired less liabilities assumed. d. Book value of an acquired company. 2. In a business combination. costs of registering equity securities to be issued by the acquiring company are a(n) a. Expense of the combined company for the period in which the costs were incurred. b. Direct addition to stoc::l5hQlders' equity of the. combined company. c. Reduction of the otherwise determinable fair value of the securities. http://highered.mcgraw-hill.com!sites/0077 41960xlstudent_ viewO/ebook/chapter lIchend2/... 211312013 Exercises Page 2 of9 d. Addition to goodwill. 3. Which of the following is the appropriate basis for valuing fixed assets acquired in a business combination carried out by exchanging cash for common stock? a. Historical cost. b. Book value. c. Cost plus any excess of purchase price over book value of assets acquired. d. Fair value. 4. In a business combination, the fair value of the net identifiable assets acquired exceeds the fair value of the consideration given. The excess should be reported as a a. Deferred credit. b. Reduction of the values assigned to current assets and a deferred credit for any unallocated portion. C. Pro rata reduction of the values assigned to current and noncurrent assets and a deferred credit for any unallocated portion. d. No answer listed is correct. 5. A and B Companies have been operating separately for five years. Each company has a minimal amount of liabilities and a simple capital structure consisting solely of voting common stock. A Company, in exchange for 40 percent of its voting stock, acquires 80 percent of the common stock of B Company. This is a "tax-free" stock-tor-stock (type B) exchange for tax purposes. B Company assets have a total net fair market value of $800,000 and a total net book value of $580,000. The fair market value of the A stock used in the exchange is $700,000 and the fair value of the noncontrolling interest is $175,000. The goodwill reported following the acquisition would be a. Zero. b. $60,000. c. $75,000. d. $295,000. E1-3 Multiple-Choice Questions on Reported Balances [AICPA Adapted] L04, LOS Select the correct answer for each of the following questions. 1. OnDecember31,20X3,SaxeCorporationwasmergedintoPoeCorporation.Inthebusinesscombination,Poeissued 200,000 shares of its $10 par common stock, with a market price of $18 a share, for all of Saxe's common stock. The stockholders' equity section of each company's balance sheet immediately before the combination was: In the December 31, 20X3, consolidated balance sheet, additional paid-in capital should be reported at a. $950,000. b. $1,300,000. c. $1,450,000. d. $2,900,000. 2. OnJanuary1,20X1,RolanCorporationissued10,000sharesofcommonstockinexchangeforallofSandinCorporation's outstanding stock. Condensed balance sheets of Rolan and Sandin immediately before the combination follow: Rolan'scommonstockhadamarketpriceof$60pershareonJanuary 1,20X1.ThemarketpriceofSandin'sstockwasnot readily determinable. The fair value of Sandin's net identifiable assets was determined to be $570,000. Rolan's investment in Sandin's stock will be stated in Rolan's balance sheet immediately after the combination in the amount of a. $350,000. b. $500,000. c. $570,000. d. $600,000. 3. On April 1, 20X2, Jack Company paid $800,000 for all of Ann Corporation's issued and outstanding common stock. Ann's http://highered.mcgraw-hi11.com!sites/007741960x/studenCviewOlebooklchapterllchend2/... 211312013 Exercises Page 4 of9 Pale Company was established on January 1, 20X1. Along with other assets, it immediately purchased land for $80,000, a building for $240,000, and equipment for $90,000. On January 1, 20X5, Pale transferred these assets, cash of $21,000, and inventory costing $37,000 to a newly created subsidiary, Bright Company, in exchange for 10,000 shares of Bright's $6 par value stock. Pale uses straight-line depreciation and useful lives of 40 years and 10 years for the building and equipment, respectively, with no estimated residual values. Required a. Give the journal entry that Pale recorded when it transferred the assets to Bright. b. Give the journal entry that Bright recorded for the receipt of assets and issuance of common stock to Pale. E1-6 Creation of New Subsidiary L02 Lester Company transferred the following assets to a newly created subsidiary, Mumby Corporation, in exchange for 40,000 shares of its $3 par value stock: Required a. Give the journal entry in which Lester recorded the transfer of assets to Mumby Corporation, b. Give the journal entry in which Mumby recorded the receipt of assets and issuance of common stock to Lester. p.31. E1-7 Balance Sheet Totals of Parent Company L02, L04 Foster Corporation established Kline Company as a wholly owned subsidiary. Foster reported the following balance sheet amounts immediately before and after it transferred assets and accounts payable to Kline Company in exchange for 4,000 shares of $12 par value common stock: Required a. Give the journal entry that Foster recorded when it transferred its assets and accounts payable to Kline. b. Give the journal entry that Kline recorded upon receipt of the assets and accounts payable from Foster. E1-8 Creation of Partnership L02 Glover Corporation entered into an agreement with Renfro Company to establish G&R Partnership. Glover agreed to transfer the following assets to G&R for 90 percent ownership, and Renfro agreed to transfer $50,000 cash to the partnership for 10 percent ownership. Required a. Give the journal entry that Glover recorded at the time of its transfer of assets to G&R. b. Give the journal entry that Renfro recorded at the time of its transfer of cash to G&R. c. Give the journal entry that G&R recorded upon the receipt of assets from Glover and Renfro. E1-9 Acquisition of Net Assets L04, L05 Sun Corporation concluded the fair value of Tender Company was $60,000 and paid that amount to acquire its net assets. Tender reported assets with a book value of $55,000 and fair value of $71,000 and liabilities with a book value and fair value of $20,000 on the date of combination. Sun also paid $4,000 to a search firm for finder's fees related to the acquisition. http://highered.mcgraw-hill.com/sites/0077 41960x/student_ viewO/ebookichapter lIchend2/... 2/13/2013 Exercises Page 5 of9 Required Give the journal entries to be made by Sun to record its investment in Tender and its payment of the finder's fees. E1-10 ReportingGoodwill L05 Samper Company reported the book value of its net assets at $160,000 when Public Corporation acquired 100 percent ownership for $310,000. The fair value of Samper's net assets was determined to be $190,000 on that date. Required Determine the amount of goodwill to be reported in consolidated financial statements presented immediately following the combination and the amount at which Public will record its investment in Sam per if the amount paid by Public is a. $310,000. b. $196,000. c. $150,000. E1-11 StockAcquisition L04 McDermott Corporation has been in the midst of a major expansion program. Much of its growtl1 had been internal, but in 20X1 McDermott decided to continue its expansion through the acquisition of other companies. The first company acquired was Tippy Inc., a small manufacturer of inertial guidance systems for aircraft and missiles. On June 10, 20X1, McDermott issued 17,000 shares of its $25 par common stock for all 40,000 of Tippy'S $10 par common shares. At the date of combination, Tippy reported additional paid-in capital of $100,000 and retained earnings of $350,000. McDermott's stock was selling for $58 per share immediately prior to the combination. Subsequent to the combination, Tippy operated as a subsidiary of McDermott. Required Present the journal entry or entries that McDermott would make to record the business combination with Tippy. E1-12 BalancesReportedFollowingCombination L04. LOS Elm Corporation and Maple Company have announced terms of an exchange agreement under which Elm will issue 8,000 shares of its $10 par value common stock to acquire all of Maple Company's assets. Elm shares currently are trading at $50, and Maple $5 par value shares are trading at $18 each. Historical cost and fair value balance sheet data on January 1, 20X2, are as follows: Required What amount will be reported immediately following the business combination for each of the following items in the combined company's balance sheet? a. Common Stock. b. Cash and Receivables. c. Land. d. Buildings and Equipment (net). e. Goodwill. f. Additional Paid-In Capital. g. Retained Earninqs, E1-13 GoodwillRecognition L05 Spur Corporation reported the following balance sheet amounts on December 31, 20X1: http://highered.mcgraw-hill.com!sites/0077 41960xlstudenC viewO/ebook/chapterl/chend2/... 2/1312013 Exercises Page 6 of9 Required Blanket acquired Spur Corporation's assets and liabilities for $670,000 cash on December 31, 20X1. Give the entry that Blanket made to record the purchase. E1-14 Acquisition Using Debentures L04 Fortune Corporation used debentures with a par value of $625,000 to acquire 100 percent of Sorden Company's net assets on January 1, 20X2. On that date, the fair value of the bonds issued by Fortune was $608,000. The following balance sheet data were reported by Sorden: Required Give the journal entry that Fortune recorded at the time of exchange. E1-15 Bargain Purchase L05 Using the data presented in E1-14 determine the amount Fortune Corporation would record as a gain on bargain purchase and prepare the journal entry Fortune would record at the time of the exchange if Fortune issued bonds with a par value of $580,000 and a fair value of $564,000 in completing the acquisition of Sorden. E1-16 Impairment of Goodwill LOS Mesa Corporation purchased Kwick Company's net assets and assigned goodwill of $80,000 to Reporting Division K. The following assets and liabilities are assigned to Reporting Division K: Required Determine the amount of goodwill to be reported for Division K and the amount of goodwill impairment to be recognized, if any, if Division K's fair value is determined to be a. $340,000. b. $280,000. c. $260,000. E1-17 Assignment of Goodwill LOS Double Corporation acquired all of the common stock of Simple Company for $450,000 on January 1, 20X4. On that date, Simple's identifiable net assets had a fair value of $390,000. The assets acquired in the purchase of Simple are considered to be a separate reporting unit of Double. The carrying value of Double's investment at December 31, 20X4, is $500,000. http://highered.mcgraw-hill.comisites/007741960xlstudencviewO/ebook/chapterllchend2/... 2113/2013 Exercises Page 7 of9 Required Determine the amount of goodwill impairment, if any, that should be recognized at December 31, 20X4, if the fair value of the net assets (excluding goodwill) at that date is $440,000 and the fair value of the reportinq unit is determined to be a. $530,000. b. $485,000. c. $450,000. El18 Goodwill Assigned to Reporting Units LOS Groft Company purchased Strobe Company's net assets and assigned them to four separate reporting units. Total goodwill of $186,000 is assigned to the reporting units as indicated: A.dvanceg. ty~uide .com P:...~~.. Required Determine the amount of goodwill that Groft should report at year-end. Show how you computed it. El19 Goodwill Measurement LOS Washer Company has a reporting unit resulting from an earlier business combination. The reporting unit's current assets and liabilities are Required Determine the amount of goodwill to be reported and the amount of goodwill impairment, if any, if the fair value of the reporting unitisdetermined tobe 8. $580,000. b. $540,000. c. $500,000. d. $460,000. E120 Computation of Fair Value L04, LOS Grant Company acquired all of Bedford Corporation's assets and liabilities on January 1, 20X2, in a business combination. At that date, Bedford reported assets with a book value of $624,000 and liabilities of $356,000. Grant noted that Bedford had $40,000 of research and development costs on its books at the acquisition date that did not appear to be of value. Grant also determined that patents developed by Bedford had a fair value of $120,000 but had not been recorded by Bedford. Except for buildings and equipment, Grant determined the fair value of all other assets and liabilities reported by Bedford approximated the recorded amounts. In recording the transfer of assets and liabilities to its books, Grant recorded goodwill of $93,000. Grant paid $517,000 to acquire Bedford's assets and liabilities. If the book value of Bedford's buildings and equipment was $341 ,000 at the date of acquisition, what was their fair value? El21 Computation of Shares Issued and Goodwill L04, LOS Dunyain Company acquired Allsap Corporation on January 1, 20X1, through an exchange of common shares. All of Allsap's assets and liabilities were immediately transferred to Dunyain, which reported total par value of shares outstanding of $218,400 and $327,600 and additional paid-in capital of $370,000 and $650,800 immediately before and after the business combination, respectively. A.d.y'gn!<~g. S!udyo'uJde Required ,C.QID. 8. Assuming that Dunyain's common stock had a market value of $25 per share at the time of sxchanqe, what number of shares was issued? b. What is the par value per share of Dunyain's common stock? c. Assuming that Allsap's identifiable assets had a fair value of $476,000 and its liabilities had a fair value of $120,000, what amount of goodwill did Dunyain record at the time of the business combination? E1-22 Combined Balance Sheet L04 http://highered.mcgraw-hill.com/sites/007741960xlstudencviewOlebook/chapter1/chend2/... 2/13/2013 Exercises Page 8 of 9 The following balance sheets were prepared for Adam Corporation and Best Company on January 1, 20X2, just before they entered into a business combination: .;,c'"",,", cO.Poratloli .. .F<l/rVitlu. ('B,h and R<!a!l\rabl", 1n.""".lIlIy BuDdingsand Equipment .~ [~S';: AcCUmulated Oepr.dali<in lOtil Assots AciOlJnts,p~Q Notes Payable> . ,CQrnl'llQll; Siock: ." ,~8 parvalUl> " $6 par vallIi\' "... ....' Afldi!ion'alPald~capita\ ' ~tai~qd Earnlngs , , ~i~~~bti~,~nd~qujti~~. Adam acquired all of Best Company's assets and liabilities on January 1, 20X2, in exchange for its common shares. Adam issued 8,000 shares of stock to complete the business combination. Prepare Required a balance sheet of the combined company immediately following the acquisition, assuming Adam's shares were trading at $60 each. E1-23 Recording a Business Combination L04 The following financial statement information was prepared for Blue Corporation and Sparse Company at December 31, 20X2: 'A~<oonts~~ good. Pay;ob!<>' Bi:iod~ comrooriStock AddiOOtJ9lI'aid'in CaPitah> '. Reta1n<!drwnill9', 'Tot","ljiiQ1Iit1~~ a~ Blue and Sparse agreed to combine as of January 1, 20X3. To effect the merger, Blue paid finder's fees of $30,000 and legal fees of $24,000. Blue also paid $15,000 of audit fees related to the issuance of stock, stock registration fees of $8,000, and stock listing application fees of $6,000. At January 1, 20X3, book values of Sparse Company's assets and liabilities approximated market value except for inventory with a market value of $200,000, buildings and equipment with a market value of $350,000, and bonds payable with a market value of $105,000. All assets and liabilities were immediately recorded on Blue's books. Required Give all journal entries that Blue recorded assuming Blue issued 40,000 shares of $8 par value common stock to acquire all of Sparse's assets and liabilities in a business cornbination. Blue common stock was trading at $14 per share on January 1, 20X3. E1-24 Reporting Income L04 On July 1, 20X2, Alan Enterprises merged with Cherry Corporation through an exchange of stock and the subsequent liquidation of Cherry. Alan issued 200,000 shares of its stock to effect the combination. The book values of Cherry's assets and liabilities were equal to their fair values at the date of combination, and the value of the shares exchanged was equal to Cherry's book value. Information relating to income for the companies is as follows: Alan Enterprises had 1,000,000 shares of stock outstanding prior to the combination. Required Compute the net income and earnings-per-share amounts that would be reported in Alan's 20X2 comparative income http://highered_mcgraw-hill.comlsites/007741960xlstudenLviewO/ebook/chapterl/chend2/... 211312013 Exercises Page 9 of9 statements for both 20X2 and 20X1. 2011 McGraw-Hili Higher Education Any use is subject to the renns .of Use and ErivaCY..Ng.!i.~. Mk.rS!-w-I:![iU:lighelEliJLcatio.!) is one of the many fine businesses of nllLM~\Y..:J:illLCgmpii!l.@,~. http://highered_mcgraw-hill.comlsites/0077 41960x/studenC viewO/ebooklchapter l/chendz/.; 2/13/2013 Problems Page 1 of 8 Advanced Financial Accounting eBook gie Content Chapter1: intercorporate Acquisitions and Investments in Other Entities Problems P1-25AssetsandAccountsPayableTransferredtoSubsidiary L02 Tab Corporation decided to establish Callan Company as a wholly owned subsidiary by lransferring some of its existing assets and liabilities to the new entity. In exchange, Callan issued Tab 30,000 shares of $6 par value common stock. The following information is provided on the assets and accounts payable transferred: Required a. Give the journal entry that Tab recorded for the transfer of assets and accounts payable to Callan. b. Give the journal entry that Callan recorded for the receipt of assets and accounts payable from Tab. P1-26CreationofNewSubsidiary L02 Eagle Corporation established a subsidiary to enter into a new line of business considered to be substantially more risky than Eagle's current business. Eagle transferred the following assets and accounts payable to Sand Corporation in exchange for 5,000 shares of $10 par value stock of Sand: e. 44~ Required a. Give the journal entry that Eagle recorded for the transfer of assets and accounts payable to Sand. b. Give the journal entry that Sand recorded for receipt of the assets and accounts payable from Eagle. P1-27 Incomplete Dataon Creationof Subsidiary Thumb Company created New Company as a wholly owned subsidiary by transferring assets and accounts exchange for its common stock. New recorded the following entry when it received the assets and accounts L02 payable to New in payable: Required a. What was Thumb's book value of the total assets transferred to New Company? b. What amount did Thumb report as its investment in New after the transfer? c. What number of shares of $5 par value stock did New issue to Thumb? d. What impact did the transfer of assets and accounts payable have on the amount reported by Thumb as total assets? e. What impact did the transfer of assets and accounts payable have on the amount that Thumb and the consolidated entity reported as shares outstanding? P128EstablishingaPartnership L02 http://highered.mcgraw -hill.com/sites/0077 41960xlstudenC viewOIebook/ chapter II chend2/... 211312013 Problems Page 2 of 8 Krantz Company and Dull Corporation decided to form a partnership. Krantz agreed to transfer the following assets and accounts payable to K&D Partnership in exchange for 60 percent ownership: Dull agreed to contribute cash of $200.000 to K&D Partnership. Required a. GivethejournalentriesthatK&DrecordedforitsreceiptofassetsandaccountspayablefromKrantzandDull. b. Give the journal entries that Krantz and Dull recorded for their transfer of assets and accounts payable to K&D Partnership. P1-29 Balance Sheet Data for Companies Establishing a Partnership L02 Good Corporation and Nevall Company formed G&W Partnership in which Good received 75 percent ownership and Nevall received 25 percent ownership. The following assets were transferred by Good and Nevall: Required a. Give the journal entry that Good recorded for its transfer of assets to G&W Partnership. b. Give the journal entry that Nevall recorded for its transfer of assets to G&W Partnership. c. Give the journal entry that G&W recorded for its receipt of assets from Good and Nevall. P1-30 Acquisition in Multiple Steps L04 Deal Corporation issued 4.000 shares of its $10 par value stock with a market value of $85.000 to acquire 85 percent ownership of Mead Company on August 31. 20X3. The fair value of Mead was determined to be $100.000 on that date. Deal had earlier purchased 15 percent of Mead's shares for $9.000 and used the cost method in accounting for its investment in Mead. Deal later paid appraisal fees of $3.500 and stock issue costs of $2.000 incurred in completing the acquisition of the additional shares. Required Give thejournal entriestoberecorded byDealincompleting theacquisition oftheadditional sharesofMead. P1-31 Journal Entries to Record a Business Combination L04 OnJanuary 1.20X2.FrostCompanyacquiredallofTKKCorporation'sassetsand liabilities by issuing 24.000 shares of its $4 par value common stock. At that date. Frost shares were selling at $22 per share. Historical cost and fair value balance sheet data for TKK at the time of acquisition were as follows: HirtonalCost .F~irVal~ Ci1s!iand~bll!s . IllV1!JlWty' 8uildings ;md F;quipment . less: ArolmulatedDepredatlon Total Frost paid legal fees for the transfer of assets and liabilities of $14,000. Frost also paid audit fees of $21.000 and listing application fees of $7.000. both related to the issuance of new shares. Required Prepare the journal entries made by Frost to record the business combination. P1-32 Recording Business Combinations L04 Flint Corporation exchanged shares of its $2 par common stock for all of Mark Company's assets and liabilities in a planned merger. Immediately prior to the combination. Mark's assets and liabilities were as follows: http://highered.mcgraw-hill.com/sites/0077 41960x/student_ viewO/ebook/chapter lIchend2/... 2/13/2013 Problems Page 3 of 8 Immediately prior to the combination, Flint reported $250,000 additional paid-in capital and $1,350,000 retained earnings. The fair values of Mark's assets and liabilities were equal to their book values on the date of combination except that Mark's buildings were worth $1,500,000 and its equipment was worth $300,000. Costs associated with planning and completing the business combination totaled $38,000, and stock issue costs totaled $22,000. The market value 01Flint's stock at the date of combination was $4 per share. Required Prepare the journal entries that would appear P1-33 Business Combination with Goodwill on Flint's books to record the combination if Flint issued 450,000 shares. L04. LOS Anchor Corporation paid cash of $178,000 to acquire Zink Company's net assets February 1, 20X3. The balance sheet data for the two companies and fair value information for Zink immediately before the business combination were: on M'\!i!n"~d $t!JdyG!,Iig~ .P'QITl Required a. Give the journal entry recorded by Anchor Corporation when it acquired Zink's net assets. b. Prepare a balance sheet for Anchor immediately following the acquisition. c. Give the journal entry to be recorded by Anchor if it acquires all of Zink's common stock for $178,000. P1-34 Bargain Purchase L04, LOS Bower Company purchased Lark Corporation's net assets on January 3, 20X2, for $625,000 cash. In addition, $5,000 of direct costs were incurred in consummating the combination. At the time of acquisition, Lark reported the following historical cost and current market data: Agv~nCeg SludyGuide &.Q.m. F1equired http://highered.mcgraw-hill.comisites!0077 41960xlstudenC viewu/ebook/chapter lIchend2/. .. 2/13/2013 Problems Page 4 of 8 Give the journal entry or entries with which Bower recorded its acquisition of Lark's net assets. Pl-35 ComputationofAccountBalances L04, L05 Aspro Division is considered to be an individual reporting unit of Tabor Company. Tabor acquired the division by issuing 100,000 shares of its common stock with a market price of $7.60 each. Tabor management was able to identify assets with fair values of $810,000 and liabilities of $190,000 at the date of acquisition. At the end of the first year, the reporting unit had assets with a fair value of $950,000, and the fair value of the reporting entity was $930,000. Tabor's accountants concluded it must recognize impairment of goodwill in the amount of $30,000 at the end of the first year. Required a. Determine the fair value of the reporting unit's liabilities at the end of the first year. Show your computation. b. If the reporting unit's liabilities at the end of the period had been $70,000, what would the fair value of the reporting unit have to have been to avoid recognizing an impairment of goodwill? Show your computation. Pl-36 GoodwillAssignedtoMultipleReportingUnits L05 The fair values of assets and liabilities held by three reporting units and other information related to the reporting units owned by Rover Company are as follows: ~~.... Required a. Determine the amount of goodwill that Rover should report in its current financial statements. b. Determine the amount, if any, that Rover should report as impairment of goodwill for the current period. Pl-37 Journal Entries L04 On January 1, 20X3, PURE Products Corporation issued 12,000 shares of its $10 par value stock to acquire the net assets of Ught Steel Company. Underlying book value and fair value information for the balance sheet items of Light Steel at the time of acquisition follow: Ught Steel shares were selling at $18 and PURE Products shares were selling at $50 just before the merger announcement. Additional cash payments made by PURE Products in completing the acquisition were Required Prepare all journal entries to record the business combination on PURE Products' books. Pl-38 PurchaseatMorethanBookValue L04, L05 Ramrod Manufacturing acquired all the assets and liabilities of Stafford Industries on January 1, 20X2, in exchange for 4,000 shares of Ramrod's $20 par value common stock. Balance sheet data for both companies just before the merger are given as follows: http://highered,mcgraw-hill.com!sitesI0077 41960xlstudenC viewO/ebook/chapter lIchend21 ... 2/13/2013 Problems Page 5 of 8 P...:~!!..-.... Ramrod shares were selling for $150 on the date of acquisition. Required Prepare the following: a. Journal entries to record the acquisition on Ramrod's books. b. A balance sheet for the combined enterprise immediately following the business combination. P1-39BusinessCombination L04 Following are the balance sheets of Boogie Musical Corporation and Toot-Toot Tuba Company as of December 31, 20X5. In preparation for a possible business combination, a team of experts from Boogie Musical made a thorough examination and audit of Toot-Toot Tuba. They found that Toot-Toot's assets and liabilities were correctly stated except that they estimated uncollectible accounts at $1,400. The experts also estimated the market value of the inventory at $35,000 and the market value of the plant and equipment at $500,000. The business combination took place on January 1, 20X6, and on that date Boogie Musical acquired all the assets and liabilities of Toot-Toot Tuba. On that date, Boogie's common stock was selling for $55 per share. Required Record the combination on Boogie's books assuming that Boogie issued g,OOOof its $10 par common shares in exchange for Toot-Toot's assets and liabilities. P1-40 Combined Balance Sheet L04 Bilge Pumpwoiks and Seaworthy Rope Company agreed to merge on January 1, 20X3. On the date of the merger agreement, the companies reported the following data: http://highered.mcgraw -hill.comlsites/0077 41960xlstudenc viewOIebook/chapter 11chend2/... 2/13/2013 Problems " Page 6of8 Bilge Pumpworks has 10,000 shares of its $20 par value shares outstanding on January 1, 20X3, and Seaworthy has 4,000 shares of $5 par value stock outstanding. The market values of the shares are $300 and $50, respectively. Required a. Bilge issues 700 shares of stock in exchange for all of Seaworthy's net assets. Prepare a balance sheet for the combined entity immediately following the merger. b. Prepare the stockholders' equity section of the combined company's balance sheet, assuming Bilge acquires all of Seaworthy's net assets by issuing: 1. 1,100 shares of common. 2. 1,800 shares of common. 3. 3,000 shares of common. P1-41 Incomplete Data Problem L04, LOS On January 1, 20X2, End Corporation acquired all of Cork Corporation's assets and liabilities by issuing shares of its common stock. Partial balance sheet data for the companies prior to the business combination and immediately following the combination are as follows: Required a. What number of shares did End issue to acquire Cork's assets and liabilities? b. What was the market value of the shares issued by End? c. What was the fair value of the inventory held by Cork at the date of combination? d. What was the fair value of the net assets held by Cork at the date of combination? e. What amount of goodwill, if any, will be reported by the combined entity immediately following the combination? f. What balance in retained earnings will the combined entity report immediately following the combination? g. If the depreciable assets held by Cork had an average remaining life of 10 years at the date of acquisition, what amount of depreciation expense will be reported on those assets in 20X2? P1-42 Incomplete DataFollowing Purchase L04, LOS On January 1, 20Xl, Alpha Corporation acquired all of Bravo Company's assets and liabilities by issuing shares of its $3 par value stock to the owners of Bravo Company in a business combination. Alpha also made a cash payment to Banker Corporation for stock issue costs. Partial balance sheet data for Alpha and Bravo, before the cash payment and issuance of shares, and a combined balance sheet following the business combination Ml!i!n.<;~Q are as follows: $tI,l9yGl!ige C_Q!11 2/1312013 http://highered.mcgraw-hill.com!sites/007741960x/studenLviewO/ebookfchapterllchend2/... Problems Page 7 of 8 Required a. What number of its $5 par value shares did Bravo have outstanding at January 1, 20X1? b. Assuming that all of Bravo's shares were issued when the company was started, what was the price per share received at the time of issue? c. How many shares of Alpha were issued at the date of combination? d. What amount of cash did Alpha pay as stock issue costs? e. What was the market value of Alpha's shares issued at the date of combination? f. What was the fair value of Bravo's inventory at the date of combination? g. What was the fair value of Bravo's net assets at the date of combination? h. What amount of goodwill, if any, will be reported in the combined balance sheet following the combination? P1-43 Comprehensive Business Combination Problem L04, L05 Bigtime Industries Inc. entered into a business combination agreement with Hydrolized Chemical Corporation (HCC) to ensure an uninterrupted supply of key raw materials and to realize certain economies from combining the operating processes and the marketing efforts of the two companies. Under the terms of the agreement, Bigtime issued 180,000 shares of its $1 par common stock in exchange for all of HCC's assets and liabilities. The Bigtime shares then were distributed to HCC's shareholders, and HCC was liquidated. E:..??..... Immediately prior to the combination, HCC's balance sheet appeared as follows, with fair values also indicated: Immediately prior to the combination, Bigtime's common stock was selling for $14 per share. Bigtime incurred direct costs of $135,000 in arranging the business combination and $42,000 of costs associated with registering and issuing the common stock used in the combination. Required a. Prepare all journal entries that Bigtime should have entered on its books to record the business combination. b. Present all journal entries that should have been entered on HCC's books to record the combination and the distribution of the stock received. 2011 McGrawHiII Higher Education Any use is subject to the I[lm ..Q.U,I .e.and [>!iY.ili<y.1'lQ,iQ.e.. McGf!w...:.tJ.ill..tiigbpr Ectl!\&!iQ.!l is one of the many fine businesses of The.MkG!:awJJjJI..CQIl1P.!li..eJ!.. http://highered.mcgraw-hill.com/sites/0077 41960x/studenC viewO/ebook/chapter lIchend2/... 2/13/2013 Problems Page 8 of 8 http://highered.mcgraw-hill.com!sites/0077 41960xlstudenc viewO/ebookichapter1/chend2/... 2/13/2013

Find millions of documents on Course Hero - Study Guides, Lecture Notes, Reference Materials, Practice Exams and more. Course Hero has millions of course specific materials providing students with the best way to expand their education.

Below is a small sample set of documents:

Temple - ACCT - 4501
50,000600,000(360,000)60,000(31,000)$497,000Salaries payableInterest payableLiability for customer lawsuitRent received in advanceBonus payableTaxes payableBorrowing from TownBankBuilding loan319$11,0002,50032,000120,000Capit
North Dakota - T&L - 335
earning to read.Word recognition - This view states, “Reading is primarily a process of recognizing words.”Comprehensive – This view elaborates on the idea that the teacher should provide “a balance ofskills. Strategies, materials, and soc
Brown - ANTH - 100
Current FieldsMedical AnthropologyAnthropology of GlobalizationAnthropology of DevelopmentVirtual AnthropologyMedical Anthropology- Sickness and distress do windows into understanding cultural knowledgeand practice more generallyMedical anthropolog
Point Loma - PHL - 210
Jessica EscorzaPHL 201Professor WrightOctober 17, 2013PHL 201 Midterm Short-Answer Questions1. Describe the problems regarding the answers the pre-Socratics gave to the question:what is reality?The pre-Socratics did not exactly agree when it came t
Wayne State University - BIO 2870 - 2870
e l e d &quot; 15. &quot;A ) sa r t or i u sB) st er n ocl e i d o m ast o i dC) p l a t ys m aD ) st y l o h y o i dE ) r i so r i u s81)82) I d en t i f y t h e m u scl e l a b e l e d &quot; 19. &quot;A ) l i nea a lbaB) i l i a c u sC ) r e ct u s a b d
Marketing Institute of Singapore - D - ad
005 Học lạ i DO HOC NHAM MONQH01 4 06R K09 4 06 12010 K09nguy ễn hoà ng bả o tra ngXH01 xã hội họcTFF50120131 3Học lạ i35 K09 4 06R K09 4 06 1222 n khắ c mạ nh vũphaI S 13 Phâ n tí ch và thiết kế hệ thống F
Wilfrid Laurier - CT - 227
JAN 21stSummary reviewTerror Management TheoryProximal Defenses, ( Im not going to die till im 100)Distal Defenses, (More long term, use more symbolically (not seeing) you have the sameworld view as elders.Moderating Defenses (Elders are living well
Kean - BUSI - 607
CHAPTER 1INTERCORPORATE ACQUISITIONS AND INVESTMENTS IN OTHER ENTITIESANSWERS TO QUESTIONSQ1-1 Complex organizational structures often result when companies do business in acomplex business environment. New subsidiaries or other entities may be formed
Kean - BUSI - 607
CHAPTER 1INTERCORPORATE ACQUISITIONS AND INVESTMENTS IN OTHER ENTITIESANSWERS TO QUESTIONSQ1-1 Complex organizational structures often result when companies do business in acomplex business environment. New subsidiaries or other entities may be formed
Kean - ACCT - 203
Chapter 1The Government and Not-For-Profit EnvironmentTRUE/FALSE (CHAPTER 1)1. F The main objective of a typical governmental or not-for-profit entity is to earn a profit.2. T A governments budget may be backed by the force of law.3. F Governmental e
Kean - ACCT - 203
MULTIPLE CHOICE (CHAPTER 1)1. A primary characteristic that distinguishes governmental entities from business entities is1. The need to generate revenues equal to or in excess of expenditures/expenses.2. The importance of the budget in the governing pr
Kean - ACCT - 203
ESSAY (CHAPTER 1)1. In the United States, educational services can be provided by federal governmentalentities, by non-federal governmental entities, by not-for-profit entities, and by for-profitentities. Are the accounting and financial reporting stan
Kean - ACCT - 203
Chapter 2Fund AccountingTRUE/FALSE (CHAPTER 2)1. TFund accounting promotes control and accountability over restricted resources.2. TThe basis of accounting determines when transactions and events are recognized.3. TIf an entity adopts a full accrual
Kean - ACCT - 203
MULTIPLE CHOICE (CHAPTER 2)1. What is the primary reason that governmental entities use fund accounting?1. Fund accounting is required by law.2. Fund accounting is required by GAAP.3. Fund accounting promotes control and accountability over restricted
Kean - ACCT - 203
ANSWERS TO ESSAYS (CHAPTER 2)1. Governmental and not-for-profit entities use fund accounting to demonstrateaccountability. By segregating the assets, entities are able to demonstrate clearly that theassets were used for the intended purposes. By segreg
Kean - ACCT - 203
ANSWERS TO ESSAYS (CHAPTER 6)1. Debt service activities of special assessments debt for which the City is not obligated inany manner are accounted for differently than are debt service activities of specialassessments for which the City is obligated.T
Kean - ACCT - 203
MULTIPLE CHOICE (CHAPTER 6)1. The capital projects fund of a governmental entity is accounted for using which of thefollowing bases of accounting?1. Budgetary basis.2. Cash basis.3. Modified accrual basis.4. Accrual basis.2.1.2.3.4.In which fu
Kean - ACCT - 203
Chapter 6Accounting for Capital Projects and Debt ServiceTRUE/FALSE (CHAPTER 6)1. TThe resources to service all general long-term debts of the governmental entity are typicallyaccounted for in debt service funds.2. TWhen governments establish capital
Kean - ACCT - 203
ANSWERS TO ESSAY (CHAPTER 5)1. Although it does appear that the cost of the asset has been expensed twice, the apparentdouble counting of the expenditures does not misstate fund balance. At the time ofacquisition the asset is treated as an expenditure
Kean - ACCT - 203
MULTIPLE CHOICE (CHAPTER 5)1. Which of the following funds would use the modified accrual basis ofaccounting in preparing its fund financial statements?1.2.3.4.City Electric Utility Enterprise Fund.City Hall Capital Project Fund.City Motor Pool I
Kean - ACCT - 203
Chapter 5Recognizing Expenditures in Governmental FundsTRUE/FALSE (CHAPTER 5)1. TExpenditures are generally recognized when resources are acquired; expenses whenresources are consumed.2. TGovernmental fund liabilities are considered current only when
Kean - ACCT - 203
ANSWERS TO ESSAY (CHAPTER 4)1.(a) Basis of accounting refers to when transactions and events are recognized. Modified accrualaccounting is a basis of accounting that recognizes expenditures when the related fundliability is incurred or asset used and
Kean - ACCT - 203
MULTIPLE CHOICE (CHAPTER 4)1. As used in governmental accounting, interperiod equity refers to a concept of1. providing the same level of services to citizens each year.2. measuring whether current year revenues are sufficient to pay for current years
Kean - ACCT - 203
Chapter 4Recognizing Revenue in Governmental FundsTRUE/FALSE (CHAPTER 4)1. FIf an entity elects to focus on all economic resources, then it should adopt a modified accrualbasis of accounting.2. TThe budgetary measurement focus of governments is deter
Kean - ACCT - 203
ANSWERS TO ESSAYS (CHAPTER 9)1. Governments commonly use internal service funds (ISF) as cost centers. They permit agovernment to accumulate all costs (including depreciation) of providing a specificservice to other activities or functions of the gover
Kean - ACCT - 203
MULTIPLE CHOICE (CHAPTER 9)1. The appropriate measurement focus for the business-type activities of the City ofRockford is1. Current financial resources.2. Economic resources.3. Both (a) and (b).4. None of the above.2.1.2.3.4.Which of the foll
Kean - ACCT - 203
Chapter 9Business-Type ActivitiesTRUE/FALSE (CHAPTER 9)1. In both the fund statements and the government-wide statements, business-type activitiesand internal service funds are on a full accrual basis, and their measurement focus is onall economic re
Kean - ACCT - 203
ANSWERS TO ESSAYS (CHAPTER 8)1. Conduit debt refers to obligations issued in the name of government on behalf of anongovernmental entity, such as a business or not-for-profit organization.The current reporting standards require only that governments pr
Kean - ACCT - 203
MULTIPLE CHOICE (CHAPTER 8)1. A governmental entity that is unable to satisfy claims against it1. Is prohibited from filing bankruptcy.2. May seek protection under the federal Bankruptcy Code, using the same section that isused by businesses.3. May s
Kean - ACCT - 203
Chapter 8Long-term ObligationsTRUE/FALSE (CHAPTER 8)1. Unlike individuals and businesses, governments cannot seek protection under the FederalBankruptcy Code.2. General obligation debt is the obligation of the government at large and is thereby backe
Kean - ACCT - 203
ANSWERS TO ESSAYS (CHAPTER 7)1. Arguments against reporting depreciation in governmental funds are as follows: Financial statement users are concerned primarily with the flow of financial resources.Depreciation-related information would do little to fa
Kean - ACCT - 203
MULTIPLE CHOICE (CHAPTER 7)1. The objectives of financial reporting for fixed assets should be to provide information1. About a governmental entitys physical resources.2. That can be used to assess the service potential of a governmental entitys physic
Kean - ACCT - 203
Capitals Assets and Investments in Marketable securities1. General capital assets are distinguished from the capital assets of proprietary funds andfiduciary funds.2. General capital assets are excluded from governmental funds, themselves, because of t
Kean - ACCT - 203
Chapter 1The Government and Not-For-Profit EnvironmentTRUE/FALSE (CHAPTER 1)1. F The main objective of a typical governmental or not-for-profit entity is to earn a profit.2. TA governments budget may be backed by the force of law.3. FGovernmental ent
Kean - ACCT - 203
MULTIPLE CHOICE (CHAPTER 13)1. Financial statements for Smith College, a church-supported college, should be preparedaccording to standards set by1. AICPA.2. FASB.3. GASB.4. Smith may choose any of the above.2. For a not-for-profit hospital, which
Kean - ACCT - 203
Chapter 13Health Care Providers and Colleges and UniversitiesTRUE/FALSE (CHAPTER 13)1. The statement of financial position of a not-for-profit health care organization shoulddistinguish among unrestricted, temporarily restricted, and permanently restr
Kean - ACCT - 203
ESSAY ANSWERS (CHAPTER 12)1. [Note: Asking for the students explanations of WHY the FASB prohibited/permittedrecognition of specific types of contributed services is designed to elicit thought by the student.There are no technically correct answers to
Kean - ACCT - 203
MULTIPLE CHOICE (CHAPTER 12)1. The basis of accounting used by not-for-profit organizations in their external financialreports is1. Industry-specific basis of accounting.2. Cash basis of accounting.3. Modified accrual basis of accounting.4. Accrual
Kean - ACCT - 203
Chapter 12Not-for-Profit OrganizationsTRUE/FALSE (CHAPTER 12)1. FASB Statement No. 117 directs that revenues and expenses be reported in a statement offinancial position.2. In the statement of activities, FASB Statement No. 117 requires revenues to b
Kean - ACCT - 203
ANSWERS TO ESSAY (CHAPTER 11)1. The Authority is a separate legal entity but it does not have a popularly electedgoverning body. Since the Governor appoints the Board, the Authority is apotential component unit. Because the State backs the older bond i
Kean - ACCT - 203
MULTIPLE CHOICE (CHAPTER 11)1. The financial reporting entity is composed of1. The primary government.2. The primary government and all legally separate governments for which theprimary government is financial accountable.3. The primary government an
Kean - ACCT - 203
Chapter 11Issues of Reporting, Disclosure, and Financial AnalysisTRUE/FALSE (CHAPTER 11)1. Governments must combine their blended component units into both the fund andgovernment-wide statements.2. Governments must combine their discretely presented
Kean - ACCT - 203
MULTIPLE CHOICE (CHAPTER 10)1. A governmental entity receives a gift of cash and investments with a fair valueof $200,000. The donor specified that the earnings from the gift must be used tobeautify city-owned parks and the principal must be re-investe
Kean - ACCT - 203
ANSWERS TO ESSAY QUESTIONS (CHAPTER 10)1. GASB reporting standards are different from FASB reporting standards for pension plans.Governments, unlike businesses, tend to be on-going organizations that will be around tohonor their pension commitments. FA
Kean - ACCT - 203
TRUE/FALSE (CHAPTER 10)1. Per GASB Statement No. 34, permanent funds are classified as fiduciary funds.2. In accounting for permanent funds only the income can be spent; the principal must bepreserved intact.3. Fiduciary funds focus on current financi
Kean - ACCT - 203
ANSWERS TO ESSAYS (CHAPTER 16)1. The board is titled advisory because technically it has the authority only to recommendaccounting standards to the Treasury, the OMB and the GAO the three agenciesthrough whose combined efforts the board was established
Kean - ACCT - 203
MULTIPLE CHOICE (CHAPTER 16)1. Which of the following is a unique characteristic of the federal government thatnecessitates special accounting and reporting practices?1. The types of its expenditures.2. The size of its obligations.3. The extent of it
Kean - ACCT - 203
Chapter 16Federal Government AccountingTRUE/FALSE (CHAPTER 16)1. If the federal Treasury, GAO, or OMB objects to a FASAB standard, it is returned to theBoard for reconsideration.2. Federal operations consist of 5 fund typesthe general fund, special f
Kean - ACCT - 203
Chapter 1The Government and Not-For-Profit EnvironmentTRUE/FALSE (CHAPTER 1)1. F The main objective of a typical governmental or not-for-profit entity is to earn a profit.2. TA governments budget may be backed by the force of law.3. FGovernmental ent
Kean - ACCT - 203
MULTIPLE CHOICE (CHAPTER 15)7. The GAO publication Government Auditing Standards (commonly known as the YellowBook) is applicable in which of the following audit situations?1. To independent CPAs conducting a performance audit of a governmental entity
Kean - ACCT - 203
Chapter 15Auditing Governments and Not-For-Profit OrganizationsTRUE/FALSE (CHAPTER 15)5. A cognizant agency can be either an employee of a federal agency or of an independentaccounting firm.6. The Single Audit Act of 1984 was passed to eliminate the
Kean - ACCT - 203
ANSWERS TO ESSAYS (CHAPTER 14)1. One problem with goals such as these is that accomplishment is difficult to measure. Howdoes one measure &quot;valuable, contributing member of society&quot;? How does one measure&quot;meaningful career as a professional accountant&quot;?
Kean - ACCT - 203
MULTIPLE CHOICE (CHAPTER 14)1. In which of the following steps of the management cycle of governmental and not-forprofit entities are accountants least involved?1. Performing cost benefit analysis on proposed programs.2. Selecting among alternative pro
Kean - ACCT - 203
Chapter 14Managing for ResultsTRUE/FALSE (CHAPTER 14)1. Zero-based budgeting requires the periodic review of all programs, not just new ones.2. It is difficult for accountants to have a role beyond auditing the financial statements ofgovernments and
University of Phoenix - COM - 155
Week 1 DQ 4A good paragraph has three key parts, one of which is a topic sentence. Whatdo you think would be the reaction of a reader if the topic sentences in anessay did not align with the supporting points? Why?The topic sentence combines the main
San Diego Mesa College - ECON - 234
Shangze Li021863746January 9, 20131-1. Globalization and the MNE. The term globalization has become very widely used inrecent years. How would you define it?Narayana Murthys quote is a good place to start any discussion of globalization:I define glo
San Diego Mesa College - ECON - 234
Shangze Li021863746January 9, 20133-2.CausesofDevaluation.If a country follows a fixed exchange rate regime, what macroeconomic variables couldcausethefixedexchangeratetobedevalued?The following macroeconomic variables could cause the fixe
San Diego Mesa College - ECON - 234
Shangze Li021863746January 9, 20137-4.Real Effective Exchange Rates: Japan and the United States.Exhibit 7.3 shows that the real effective exchange rate has varied considerably fromyear to year for both the U.S. dollar and the Japanese yen, and the d
San Diego Mesa College - ECON - 234
Shangze Li021863746January 28, 2013.9-1. Triumvirate of Risks. Define and explain the three main financial risks facing amultinational enterprise.The three financial price risks facing all MNEs are exchange rate risk, interest rate risk,and commodit
San Diego Mesa College - ECON - 234
Shangze Li021863746January 30, 2013.12-2.Exposure Type Comparison. From a cash flow measurement perspective, what isthe major difference between losses from transaction exposure and from operatingexposure?Both exposures deal with changes in expecte
San Diego Mesa College - ECON - 234
FINAL EXAMPart I 25-27 M/C T/F 3 per chapterPart II 3 ProblemsPart III 3 DiscussionsSignificant ConceptsChapter 5Securitization Transmitter of the DiseaseInvestment Vehicles CDOs, Credit Default SwapPage 129 Debt Issue / Deregulation / Derivatives