Long-term debt 200 200 Total liabilities 350 350 Common stock 150 150 Paid-in capital 80 80 Retained earnings 220 Total shareholders’ equity 450 Total liabilities and shareholders’ equity $800 The amount of goodwill resulting from this purchase, if any, would be A. $200,000 B. $150,000 C. $100,000 Answer (C) is correct . Goodwill is the excess of (1) the sum of the acquisition-date fair values of (a) the consideration transferred ($600,000), (b) any noncontrolling interest in the acquiree ($0), and (c) the acquirer’s previously held equity interest in the acquiree ($0) over (2) the net of the acquisition-date fair values of the identifiable assets acquired ($850,000) and liabilities assumed ($350,000). The amount of goodwill is calculated as follows: Consideration transferred $600,000 Acquisition-date fair value of net assets acquired ($850,000 – $350,000) (500,000)
ﻝﻭﺩ ﻥﻳﺗﺎﻧﻘﻟﺍ ﻰﻠﻋ ﺎﻫﻭﻗﻼﺗﺣ ﺎﻫﻭﺟﺎﺗﺣﺗ ﻲﻠﻟﺍ ﻪﻠﺋﺳﻻﺍﻭ ﺏﺗﻛﻟﺍ ﻝﻛ Goodwill $100,000 D. $0 Question: 5 Entity X owns 90% of Entity Y. Early in the year, X lent Y $1,000,000. No payments have been made on the debt by year end. Proper accounting at year end in the consolidated financial statements would A. Eliminate 100% of the receivable, the payable, and the related interest. Answer (A) is correct . In a consolidated statement of financial position, reciprocal balances, such as receivables and payables, between a parent and a consolidated subsidiary should be eliminated in their entirety regardless of the portion of the subsidiary’s shares held by the parent. Thus, all effects of the $1,000,000 loan should be eliminated in the preparation of the year-end consolidated statement of financial position. B. Eliminate 100% of the receivable and the payable but not any related interest. C. Eliminate 90% of the receivable, the payable, and the related interest. D. Eliminate 90% of the receivable and the payable but not any related interest. Question: 6 How should the acquirer recognize a bargain purchase in a business acquisition? A. As negative goodwill in the statement of financial position. B. As goodwill in the statement of financial position. C. As a gain in earnings at the acquisition date. Answer (C) is correct . A bargain purchase is recognized in the consolidated financial statements as an ordinary gain at the acquisition date. A bargain purchase occurs when the net of the acquisition-date fair values of identifiable assets acquired and liabilities assumed exceeds the sum of the acquisition-date fair values of the consideration transferred, any noncontrolling interest recognized, and any previously held equity interest in the acquiree. D. As a deferred gain that is amortized into earnings over the estimated future periods benefited. Question: 7 A corporation owns 60% of S Corp.’s outstanding capital stock. On May 1, the corporation advanced S $70,000 in cash, which was still outstanding at December 31. What portion of this advance should be eliminated in the preparation of the December 31 consolidated balance sheet?
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