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MAT Company Purchased 100% of the Stock of the LOWA Company.



MAT Company Purchased 100% of the Stock of the LOWA Company. MAT Company will record the LOWA Assets and Liabilities at
• Fair value of the consideration given up by MAT Company
• The Fair value of the shares obtained from the owners of MAT Company
• It depend if we use the purchase or acquisition method
• None of the above is correct
MICKKEY Company buys all of the outstanding stock of Small Company on November 1, Year One for $500,000 and is now preparing consolidated financial statements at the end of Year One.
Small company Earned Revenues of $10,000 per month during Year One along with expenses of $8,000 per month.
On November 1, Year One, Small company had only one asset a piece of land with a cost of $300,000 and a Fair value of $450,000—and no Liabilities.
The land continues to appreciate in value and is worth $470,000 at the end of Year One. Which of the following statements is true about the consolidated financial statements at the end of Year One?
• Consolidated net income will include $120,000 minus $96,000 earned by Small
• Goodwill at the end of Year One is reported as 0 under the acquisition method
• The gain on the land owned by Small is reported as a $30,000 gain
• All above are wrong
FASB is the primary source for Accounting for Investments?
• FAS 123
• FAS 115
• SAS 112
• None are source for application of investment accounting.
SELECT FINANCING ACTIVITY
• Gain on the sale of common stock
• Selling short term investments
• Buying equipment
• None
SELECT TRUE FOR CASH FLOW STATEMENT
• The operations section (using the direct method) starts with net income
• An increase in accounts receivable adds back cash using the indirect method
• The financing section is the same under either the direct or indirect method
• None of the above is a true statement
Held to maturity securities includes
• Short term trading securities
• Preferred stock in an investee
• A 10 year bond held as investment
• None of the above are held to maturity securities
OF THE FOLLOWING which is TRUE STATEMENT
• Amortization of a premium causes the effective rate to be higher than the face rate on held to maturity investments
• Amortization of a premium causes the effective rate to be lower than the face rate on held to maturity investments.
• Since it is an investment there is no need to test for impairment
• None are True
SELECT TRUE STATEMENT Regarding Trading Securities
• Adjustments to FMV is a part of comprehensive income
• Adjustments to FMV flows though the income statement
• Amortization of a discount decreases the carrying value
• None
OF THE FOLLOWING Cost of available- for -sale Securities include
• Purchase price plus consulting fees
• Purchase price plus brokerage fees
• Gains on sale of securities used to purchase the new securities
• None
SELECT TRUE STATE Regarding available for sale securities?
• If FMV is greater than cost write up to market and recognizes gain as part of operations in the income statement
• Test available for sale securities for impairment
• Subsequent increases in value (after adjusting down for impairment) are allowed
• None



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