Chap002 - Chapter 02 - Consolidation of Financial...

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Unformatted text preview: Chapter 02 - Consolidation of Financial Information Chapter 02 Consolidation of Financial Information Multiple Choice Questions 1. At the date of an acquisition which is not a bargain purchase, the acquisition method A. Consolidates the subsidiary's assets at fair value and the liabilities at book value B. Consolidates all subsidiary assets and liabilities at book value C. Consolidates all subsidiary assets and liabilities at fair value D. Consolidates current assets and liabilities at book value, long-term assets and liabilities at fair value E. Consolidates the subsidiary's assets at book value and the liabilities at fair value Difficulty: Easy 2. In a purchase or acquisition where control is achieved, how would the land accounts of the parent and the land accounts of the subsidiary be combined? A. Entry A B. Entry B C. Entry C D. Entry D E. Entry E Difficulty: Medium 2-1 Chapter 02 - Consolidation of Financial Information 3. Lisa Co. paid cash for all of the voting common stock of Victoria Corp. Victoria will continue to exist as a separate corporation. Entries for the consolidation of Lisa and Victoria would be recorded in A. A worksheet B. Lisa's general journal C. Victoria's general journal D. Victoria's secret consolidation journal E. The general journals of both companies Difficulty: Easy 4. Using the purchase method, goodwill is generally defined as: A. Cost of the investment less the subsidiary's book value at the beginning of the year B. Cost of the investment less the subsidiary's book value at the acquisition date C. Cost of the investment less the subsidiary's Fair Value at the beginning of the year D. Cost of the investment less the subsidiary's Fair Value at acquisition date E. Is no longer allowed under federal law Difficulty: Medium 5. Direct combination costs and stock issuance costs are often incurred in the process of making a controlling investment in another company. How should those costs be accounted for in a Purchase transaction? A. Entry A B. Entry B C. Entry C D. Entry D E. Entry E Difficulty: Medium 2-2 Chapter 02 - Consolidation of Financial Information 6. Direct combination costs and stock issuance costs are often incurred in the process of making a controlling investment in another company. How should those costs be accounted for in an Acquisition transaction? A. Entry A B. Entry B C. Entry C D. Entry D E. Entry E Difficulty: Medium 7. What is the primary accounting difference between accounting for when the subsidiary is dissolved and when the subsidiary retains its incorporation? A. If the subsidiary is dissolved, it will not be operated as a separate division B. If the subsidiary is dissolved, assets and liabilities are consolidated at their book values C. If the subsidiary retains its incorporation, there will be no goodwill associated with the acquisition D. If the subsidiary retains its incorporation, assets and liabilities are consolidated at their book values E. If the subsidiary retains its incorporation, the consolidation is not formally recorded in the...
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This note was uploaded on 12/17/2011 for the course ACC 220 ACC220 taught by Professor Leslie during the Spring '11 term at University of Phoenix.

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Chap002 - Chapter 02 - Consolidation of Financial...

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