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At the date of an acquisition, which is not a bargain purchase, the acquisition method |
consolidates all subsidiary assets and liabilities at fair value. |
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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 worksheet. |
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Using the acquisition method for a business combination, goodwill is generally defined as: |
Cost of the investment less the subsidiary’s fair value at acquisition date. |
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What is the primary accounting difference between accounting for when the subsidiary is dissolved and when the subsidiary retains its incorporation? |
If the subsidiary retains its incorporation, the consolidation is not formally recorded in the accounting records of the acquiring company. |
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An example of a difference in types of business combination is: |
A statutory merger requires dissolution of the acquired company while a statutory consolidation does not require dissolution. |
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Acquired in-process research and development is considered as |
an indefinite-lived asset subject to testing for impairment. (no amortization) |
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Which one of the following is a characteristic of a business combination accounted for as an acquisition? |
The transaction establishes an acquisition fair value basis for the company being acquired. |
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Which one of the following is a characteristic of a business combination that is |
Fair value for the consideration transferred by the acquirer as well as the fair value of items received by the acquirer can enter into the determination of the acquirer’s accounting valuation of the acquired company. |
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A statutory merger is a(n) |
business combination in which only one of the two companies continues to exist as a legal corporation. |
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How are stock issuance costs and direct combination costs treated in a business combination which is accounted for as an acquisition when the subsidiary will retain its incorporation? |
Direct combination costs are expensed and stock issuance costs are a reduction to additional paid-in capital. |
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Which of the following is a not a reason for a business combination to take place? |
Increase in stock price of the acquired company. |
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Which of the following statements is true regarding a statutory merger? |
The acquired company dissolves as a separate corporation and becomes a division of the acquiring company. |
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Which of the following statements is true regarding a statutory consolidation? |
The original companies dissolve while remaining as separate divisions of a newly created company. |
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In a transaction accounted for using the acquisition method where consideration transferred exceeds book value of the acquired company, which statement is true for the acquiring company with regard to its investment? |
Net assets of the acquired company are revalued to their fair values and any excess of consideration transferred over fair value of net assets acquired is allocated to goodwill. |
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In a transaction accounted for using the acquisition method where consideration transferred is less than fair value of net assets acquired, which statement is true? |
A gain on bargain purchase is recorded. – consideration transferred < FV net assets |
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Which of the following statements is true regarding the acquisition method of accounting for a business combination? |
Net assets of the acquired company are reported at their fair values. |
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