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Unformatted text preview: http://websites.swlearning.com/cgi-wadsworth/course_products_wp.pl? fid=M20b&product_isbn_issn=9780324304015&discipline_number=400 ( ban 9) http://websites.swlearning.com/cgi-wadsworth/course_products_wp.pl? fid=M20bI&flag=instructor&product_isbn_issn=9780324378900&disciplinenumber=3000&templ ate=ASIA ( ban 1) 1. The CEO of Megaplex Theater Company is contemplating selling the business. The cumulative earnings for the past 4 years amounted to $1,600,000. The annual earnings, based on an average rate of return on investment for this industry, would have been $230,000. If excess earnings are to be capitalized at 10%, then the implied goodwill in this transaction is __________. a. $680,000 b. $1,020,000 c. $1,700,000 d. $2,125,000 2. Couples Corporation purchases Players Corporation. The market value of the net assets of Players is $225,000 and the market value of priority accounts is $180,000. Which of the following purchase prices would require using allocation procedures? a. $175,000 b. $200,000 c. $225,000 d. $250,000 3. A business combination occurred halfway through the fiscal year of the acquiring firm. The stock exchanged for the interest of the combining firm far exceeded the book value of the combining firm's assets. If the transaction is considered a purchase, fixed assets would be raised to a higher market value and goodwill would be created. Net income will be higher if the transaction is accounted for as a pooling as compared to a purchase because a. Depreciation expense is higher in the purchase. b. Amortization of identifiable intangible assets with determinable lives is required in the purchase. c. Pooling will include the first half-year of the combiner's income. d. All of the above. 4. Comparative statements of an acquiring firm, which include income from periods prior to a business combination, include the income of the acquired firm under the Purchase Method Pooling Method a. No No b. No Yes c. Yes No d. Yes Yes 5. What is the amount of cash Bordeaux Company would pay for Chateau Company in order to not record any goodwill? Chateau Company Balance Sheet Assets Receivables $300,000 Inventory 200,000 Equipment 400,000 Accumulated Depreciation (150,000) Plant 850,000 Accumulated Depreciation (400,000) Total $1,200,000 ======== Liabilities and Equity Current liabilities $100,000 Bonds Payable 300,000 Common stock, $1 par 600,000 Paid-in capital in excess of par 50,000 Retained Earnings 150,000 Total $1,200,000 ======== Fair Values: Inventory $250,000 Equipment 200,000 Plant 600,000 Bonds Payable 250,000 Direct acquisition costs...
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- Spring '11