Exercises pour Chapter 1

Exercises pour Chapter 1 - Indiana University of...

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Indiana University of Pennsylvania Department of Accounting ACCT 401/501: Advanced Accounting Dr. Rahman Sample Quiz for Chapter 1 Part I. Select the best choice. 1. A business combination in which a new corporation is created and two or more existing corporations are combined into the newly created corporation is called a a. merger. b. purchase transaction. c. pooling-of-interests. d. consolidation. 2. A business combination occurs when a company acquires an equity interest in another entity and has a. at least 20% ownership in the entity. b. more than 50% ownership in the entity. c. 100% ownership in the entity. d. control over the entity, irrespective of the percentage owned. 3. FASB favors consolidation of two entities when a. one acquires less than 20% equity ownership of the other. b. one company’s ownership interest in another gives it control of the acquired company, yet the acquiring company does not have a majority ownership in the acquired. Typically, this is in the 20%-50% interest range. c. one acquires two thirds equity ownership in the other. d. one gains control over the entity, irrespective of the equity percentage owned. 4. Michangelo Co. paid $100,000 in fees to its accountants and lawyers in acquiring Florence Company. Michangelo will treat the $100,000 as a. an expense for the current year. b. a prior period adjustment to retained earnings. c. additional cost to investment of Florence on the consolidated balance sheet. d. a reduction in paid-in capital. 5. Picasso Co. issued 10,000 shares of its $1 par common stock, valued at $400,000, to acquire shares of Bull Company in an all-stock transaction. Picasso paid the investment bankers $35,000. Picasso will treat the investment banker fee as: a. an expense for the current year. b. a prior period adjustment to Retained Earnings. c. additional goodwill on the consolidated balance sheet. d. a reduction in paid-in capital.
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6. Durer Inc. acquired Sea Corporation in a business combination and Sea Corp went out of existence. Sea Corp developed a patent listed as an asset on Sea Corp’s books at the patent office filing cost. In recording the combination
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This note was uploaded on 09/21/2011 for the course ECON 101 taught by Professor Flah during the Spring '10 term at Punjab Engineering College.

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Exercises pour Chapter 1 - Indiana University of...

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