CH2 Solutions

CH2 Solutions - Chapter 02 Consolidation of Financial Information 2-1 Answers to Acquisition Method Problems 1 D 2 B 3 D 4 B 5 A 6 A 7 B 8 C 9 B

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Unformatted text preview: Chapter 02 - Consolidation of Financial Information 2-1 Answers to Acquisition Method Problems 1. D 2. B 3. D 4. B 5. A 6. A 7. B 8. C 9. B Consideration transferred (fair value) $800,000 Fair value of identifiable assets Chapter 02 - Consolidation of Financial Information 2-2 Cash $150,000 A/R 140,000 Software 320,000 In-process R&D 200,000 Liabilities (130,000 Fair value of net identifiable assets acquired ) Goodwill $120,000 680,000 10. C Atkins records new shares at fair value Value of shares issued (51,000 × $3) ......................................... $153,000 Par value of shares issued (51,000 × $1) ................................... Additional paid-in capital (new shares) ...................................... $102,000 51,000 Additional paid-in capital (existing shares) ................................ Consolidated additional paid-in capital ....................................... $192,000 90,000 At the acquisition date, the parent makes no change to retained earnings. 11. B Consideration transferred (fair value) ............................... $400,000 Book value of subsidiary (assets minus liabilities) ............ (300,000 Fair value in excess of book value ............................... 100,000 ) Allocation of excess fair over book value identified with specific accounts: Inventory ...................................................................... 30,000 Patented technology .................................................... 20,000 Buildings and equipment .............................................. 25,000 Long-term liabilities ...................................................... Goodwill ....................................................................... $15,000 10,000 12. A Only the subsidiary’s post-acquisition income is included in consolidated totals. 13. a. An intangible asset acquired in a business combination is recognized as an asset apart from goodwill if it arises from contractual or other legal rights (regardless of whether those contractual or legal rights are transferable or separable from the acquired enterprise or from other rights and obligations). If an intangible asset does not arise from contractual or other legal rights, it shall be recognized as an asset apart from goodwill only if it is separable, that is, it is capable of being separated or divided from the acquired enterprise and sold, transferred, licensed, rented, or exchanged (regardless of whether there is an intent to do so). An intangible asset that cannot be sold, transferred, licensed, rented, or exchanged individually is considered separable if it can be sold, transferred, licensed, rented, or exchanged with a related contract, asset, or liability. Chapter 02 - Consolidation of Financial Information 2-3 b. Trademarks—usually meet both the separability and legal/contractual criteria....
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This note was uploaded on 11/10/2010 for the course ACCT 401 taught by Professor C.p.carter during the Fall '10 term at UMass Lowell.

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CH2 Solutions - Chapter 02 Consolidation of Financial Information 2-1 Answers to Acquisition Method Problems 1 D 2 B 3 D 4 B 5 A 6 A 7 B 8 C 9 B

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