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Chapter_02_back of chapter - CHAPTER 2 CONSOLIDATION OF...

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Unformatted text preview: CHAPTER 2 CONSOLIDATION OF FINANCIAL INFORMATION 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 2-1 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 680,000 Goodwill $120,000 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)................................. 51,000 Additional paid-in capital (new shares) .................................. $102,000 Additional paid-in capital (existing shares) ........................... 90,000 Consolidated additional paid-in capital.................................. $192,000 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.................................................... 10,000 Goodwill....................................................................... $15,000 12. A Only the subsidiarys 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. 2-2 b. Trademarksusually meet both the separability and legal/contractual criteria. A customer listusually meets the separability criterion....
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Chapter_02_back of chapter - CHAPTER 2 CONSOLIDATION OF...

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