Homework Answers
B. B. Reported as a gain on the Income Statement
If an acquiring company pays less than the fair value of the identifiable asset less liabilities acquired then the difference is called negative goodwill. Negative goodwill must be recognized as a “gain on acquisition” in the acquirer’s income statement, under non-cash sources of income.
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QUESTION 19 If an acquiring company pays less than the fair value of the identifiable assets...
5. Company A buys Company B and pays $5 million more than the fair value of...
5. Company A buys Company B and pays $5 million more than the fair value of the identifiable assets and liabilities. The $5 million was recorded as Goodwill. Which of the following statements is true? A. Goodwill is amortized to expense over 40 years. C B. The rules have changed so that goodwill is now expensed immediately C. Goodwill must be checked for impairment periodically and reduced if impaired. D. Goodwill is amortized over an appropriate period of 40 years...
14. A company acquires the assets and liabilities of another company. The fair value of the...
14. A company acquires the assets and liabilities of another company. The fair value of the acquired company's identifiable net assets is $5,000,000. The acquisition transaction includes the following: $5,000,000 in cash paid to the former owners of the acquired company 150,000 new shares of stock with a market value $45/share. Registration fees, paid in cash, were $1,000,000 $4,000,000 in cash paid to the underwriter for consulting services Earnings contingency with an expected present value of $3,000,000 at the date...
3. Under the provisions of the business combination rules, when the fair value of identifiable net assets acquired exce...
3. Under the provisions of the business combination rules, when the fair value of identifiable net assets acquired exceeds the investment cost, which of the following statements is correct? A) A gain from a bargain purchase is recognized for the amount that the fair value of the identifiable net assets acquired exceeds the acquisition price. B) The difference is allocated first to reduce proportionately (according to market value) non-current assets, then to non-monetary current assets, and any negative remainder is...
Kelly Corporation acquires all of the assets and liabilities of Lawson Co. at an acquisition cost...
Kelly Corporation acquires all of the assets and liabilities of Lawson Co. at an acquisition cost that is $50 million above the fair value of identifiable net assets acquired. Three months after the acquisition, it is determined that because of a downturn in the economy after the acquisition, acquired brand names with indefinite lives are worth $5,000,000 less than originally estimated. The entry to reflect this new information includes: A. A credit to goodwill of $5,000,000 B. A debit to...
Provided are the consolidated trial balances of a parent and its less-than-wholly-owned subsidiary. Account Dr (Cr)...
Provided are the consolidated trial balances of a parent and its less-than-wholly-owned subsidiary. Account Dr (Cr) Current assets $ 4,000 Property, net 95,000 Intangible assets, net 15,000 Goodwill 100,000 Liabilities (180,140) Capital stock (10,000) Retained earnings, beginning (16,000) Accumulated other comprehensive income, beginning (500) Noncontrolling interest (2,000) Dividends 500 Sales revenue (390,000) Cost of sales and operating expenses 385,000 Other comprehensive income (1,000) Noncontrolling interest in net income 150 Noncontrolling interest in other comprehensive loss (10) Total $ 0 The...
A company acquires all of the assets and liabilities of another company. Which statement is false?...
A company acquires all of the assets and liabilities of another company. Which statement is false? A. The acquiring company does not report acquired intangible assets unless they are already reported on the acquired company's books. B. The acquired company no longer exists as a separate entity. C. The acquiring company reports the acquired assets and liabilities at fair value at the date of acquisition. D. The acquiring company does not revalue its assets and liabilities to fair value at...
12. When a private company acquires another company, GMP for private companies allows which identifiable intangible...
12. When a private company acquires another company, GMP for private companies allows which identifiable intangible assets to be combined with goodwill and not separately capitalized! Brand names b. Technology Software licenses d. Noncompetition agreements d. . Textbook page number that supports your answer: 13. Company A has unreported identifiable intangible assets that are very valuable, and would like investors to know about them. Which one of the following actions will allow these intangible assets to be reported? a. Get...
Ewok Enterprises recently elected the fair value option to account for its investment in Yoda Inc....
Ewok Enterprises recently elected the fair value option to account for its investment in Yoda Inc. Ewok purchased the shares for $209,000 and the shares are currently trading for $195,000 at year-end. What is the amount of gain or loss reported at year-end for this investment and where is this gain or loss reported? O A. Unrealized Gain of $14,000, reported as part of Net Income. OB. Unrealized Gain of $14,000, reported as part of Other Comprehensive Income. O C....
PR Company pays $20,000 in cash and issues stock with a fair value of $50,000 to...
PR Company pays $20,000 in cash and issues stock with a fair value of $50,000 to acquire all of SX Corporation's stock. SX will be a subsidiary of PR. Balance sheet accounts just prior to the acquisition are as follows, in trial balance format: PR Company SX Corporation Book value Book value Fair value Dr (Cr) Dr (Cr) Dr (Cr) Current assets $12,000 $ 5,500 $ 7,300 Property, plant & equipment, net 108,000 12,000 9,500 Identifiable intangible assets 2,000 8,000...
QUESTION 5 Wilder Company purchased the net assets of Stocks Company for $225,000. On the date...
QUESTION 5 Wilder Company purchased the net assets of Stocks Company for $225,000. On the date of Wilder's purchase, Stocks Company had $30,000 (book and fair value) of liabilities The fair values of Stocks Company's assets, when acquired, were Current assets $ 120,000 Noncurrent assets 180.000 Total $300,000 How should the 545,000 difference between the fair value of the net assets acquired (5270,000) and the consideration paid ($225,000) be accounted for by Wilder Company? A. The $45.000 difference should be...
5. Company A buys Company B and pays $5 million more than the fair value of the identifiable assets and liabilities. The $5 million was recorded as Goodwill. Which of the following statements is true? A. Goodwill is amortized to expense over 40 years. C B. The rules have changed so that goodwill is now expensed immediately C. Goodwill must be checked for impairment periodically and reduced if impaired. D. Goodwill is amortized over an appropriate period of 40 years...
14. A company acquires the assets and liabilities of another company. The fair value of the acquired company's identifiable net assets is $5,000,000. The acquisition transaction includes the following: $5,000,000 in cash paid to the former owners of the acquired company 150,000 new shares of stock with a market value $45/share. Registration fees, paid in cash, were $1,000,000 $4,000,000 in cash paid to the underwriter for consulting services Earnings contingency with an expected present value of $3,000,000 at the date...
3. Under the provisions of the business combination rules, when the fair value of identifiable net assets acquired exceeds the investment cost, which of the following statements is correct? A) A gain from a bargain purchase is recognized for the amount that the fair value of the identifiable net assets acquired exceeds the acquisition price. B) The difference is allocated first to reduce proportionately (according to market value) non-current assets, then to non-monetary current assets, and any negative remainder is...
12. When a private company acquires another company, GMP for private companies allows which identifiable intangible assets to be combined with goodwill and not separately capitalized! Brand names b. Technology Software licenses d. Noncompetition agreements d. . Textbook page number that supports your answer: 13. Company A has unreported identifiable intangible assets that are very valuable, and would like investors to know about them. Which one of the following actions will allow these intangible assets to be reported? a. Get...
Ewok Enterprises recently elected the fair value option to account for its investment in Yoda Inc. Ewok purchased the shares for $209,000 and the shares are currently trading for $195,000 at year-end. What is the amount of gain or loss reported at year-end for this investment and where is this gain or loss reported? O A. Unrealized Gain of $14,000, reported as part of Net Income. OB. Unrealized Gain of $14,000, reported as part of Other Comprehensive Income. O C....
QUESTION 5 Wilder Company purchased the net assets of Stocks Company for $225,000. On the date of Wilder's purchase, Stocks Company had $30,000 (book and fair value) of liabilities The fair values of Stocks Company's assets, when acquired, were Current assets $ 120,000 Noncurrent assets 180.000 Total $300,000 How should the 545,000 difference between the fair value of the net assets acquired (5270,000) and the consideration paid ($225,000) be accounted for by Wilder Company? A. The $45.000 difference should be...
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