E push down proponents argue that a change in

E. Push-down proponents argue that a change in ownership creates a new basis
for subsidiary assets and liabilities.
AACSB: Reflective thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-08 Understand in general the requirements of push-down accounting and when its use
is appropriate.
Topic: Push-Down Accounting
3-103

36. Which of the following is false regarding contingent consideration in business
combinations?
A. Contingent consideration payable in cash is reported under
liabilities.
B. Contingent consideration payable in stock shares is reported under
stockholders' equity.
C. Contingent consideration is recorded because of its substantial probability of
eventual payment.
D. The contingent consideration fair value is recognized as part of the acquisition
regardless of whether eventual payment is based on future performance of the
target firm or future stock price of the acquirer.
E. Contingent consideration is reflected in the acquirer's balance sheet at the
present value of the potential expected future payment.
AACSB: Reflective thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 03-07 Understand the accounting and reporting for contingent consideration subsequent to
a business acquisition.
Topic: Contingent Consideration
37. Factors that should be considered in determining the useful life of an intangible
asset include
A. Legal, regulatory, or contractual
provisions.
B. The residual value of the
asset.
C. The entity's expected use of the
intangible asset.
D. The effects of obsolescence, competition, and
technological change.
E. All of these choices are used in determining the useful life of an
intangible asset.
AACSB: Reflective thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 03-06 Describe the procedures for conducting a goodwill impairment test.
Topic: Qualitative Assessment Option
3-104

38. Consolidated net income using the equity method for an acquisition combination is
computed as follows:
A. Parent company's income from its own operations plus the equity from
subsidiary's income recorded by the parent.
B. Parent's reported net
income.
C. Combined revenues less combined expenses less equity in subsidiary's income
less amortization of fair-value allocations in excess of book value.
D. Parent's revenues less expenses for its own operations plus the equity from
subsidiary's income recorded by parent.
E. All of
these.
AACSB: Reflective thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 03-03a Prepare consolidated financial statements subsequent to acquisition when the
parent has applied in its internal records: The equity method.