Homework Answers
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Answer
a) reasonably estimated fair value
According to the statement , the acquirer will recognize the assets
acquired, the liabilities assumed, and any noncontrolling interest
in the acquiree at the acquisition date, measured at their fair
values
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6. According to FASB Statement No. 141, liabilities assumed in an acquisition will be valued at...
There are three valuation methods that reflect historical values: acquisition cost, adjusted acquisition cost, and present...
There are three valuation methods that reflect historical values: acquisition cost, adjusted acquisition cost, and present value of cash flows using historical interest rates. For each of three methods discuss what the valuation represents and provide an example of a balance sheet item that is valued using the method. In addition, for each of the three methods valuation methods explain its advantages and disadvantages.
Which of the following valuation methods reflects current values? A. acquisition cost B. present value of...
Which of the following valuation methods reflects current values? A. acquisition cost B. present value of cash flows using historical interest rates C. net realizable value D. adjusted acquisition cost
QUESTION 6 Kestral Inc. owns 100% of Mouse Company. In the most recent year, Mouse had...
QUESTION 6 Kestral Inc. owns 100% of Mouse Company. In the most recent year, Mouse had net earnings of $60,000 and paid dividends of $8,000. Kestral's accountant mistakenly assumed considerable influence and used the equity method instead of the cost method. What is the impact on the investment account and net earnings, respectively? a. Understate and overstate. b. Overstate and understate. c. Overstate and overstate. d. Understate and understate. QUESTION 7 The first step in assigning the cost of an...
Which of the following statement about the acquisition method (to prepare for consolidated financial statement) is...
Which of the following statement about the acquisition method (to prepare for consolidated financial statement) is true? Multiple Choice Consideration transferred is recognized using fair value only if there is no contingent payment. Goodwill is recognized as the excess of the fair value of consideration transferred over book value of the subsidiary's net assets. Both companies' assets and liabilities are consolidated at their fair values.. The parent does not use acquisition method if it owns more than 51% of the...
Pepper Company acquired the assets (with the exception of cash) and assumed the liabilities of Salt...
Pepper Company acquired the assets (with the exception of cash) and assumed the liabilities of Salt Company on January 2, 2020. As compensation, Pepper gave 30,000 shares of its common stock, 15,000 shares of its Preferred Stock, and cash of $50,000 to the Salt stockholders. On the acquisition date, Pepper Company stock had the following characteristics. STOCK Common $10 $25 Preferred $100 $100 Immediately prior to the acquisition, Salt Corporation's balance sheet reflected the following book and fair values. Salt...
17. Pell Corporation acquires all of the assets and liabilities of Sason Co. at an acquisition...
17. Pell Corporation acquires all of the assets and liabilities of Sason Co. at an acquisition cost that is $50 million above the fair value of identifiable net assets acquired. Three months after the acquisition, land belonging to Sason at the date of acquisition is discovered. The land has a fair value of $5,000,000 Using the T-account template below, prepare the entry, if any, to recognize this new information. LIABILITIES + EQUITY ASSETS Non-current Assets Property, Plant & Intangible Equipment...
Amgen, Inc., reports the following footnote to its 10-K report. Immunex acquisition. On July 15, 2002,...
Amgen, Inc., reports the following footnote to its 10-K report. Immunex acquisition. On July 15, 2002, the Company acquired all of the outstanding common stock of Immunex in a transaction accounted for as a business combination. Immunex was a leading biotechnology company dedicated to developing immune system science to protect human health. The acquisition enhanced Amgen’s strategic position within the biotechnology industry by strengthening and diversifying its (1) product base and product pipeline in key therapeutic areas, and (2) discovery...
Pharma Company acquired the assets (with the exception of cash) and assumed the liabilities of Astra...
Pharma Company acquired the assets (with the exception of cash) and assumed the liabilities of Astra Company on January 2, 2020 paying $720,000 cash. Astra Company's December 31, 2019 balance sheet reflecting both book and fair values is shown below: Book Value Fair Value $65,000 99,000 162,000 450,000 288,000 $1,064,000 Accounts Receivable, net Inventory Land Buildings, net Equipment,net Total Accounts Payable Note Payable Common Stock $2 par value Other Contributed Capital Retained Earnings Total $72,000 86,000 110,000 369,000 237,000 $874,000...
Powell Corporation paid $15 million in cash to acquire the assets and liabilities of Sloan Company....
Powell Corporation paid $15 million in cash to acquire the assets and liabilities of Sloan Company. Powell also agreed to make an additional cash payment in the future, with an expected present value of $600,000, if certain performance targets are met. Powell paid legal and consulting fees of $300,000 in cash in connection with the merger. A comparison of book and fair values of Sloan’s reported assets and liabilities follows: (in thousands) Book Value Fair Value Current assets $ 600...
Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume ...
Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a parent company acquires an 80% interest in its subsidiary for a purchase price of $620,800. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiary's Stockholders' Equity is assigned to a building (in PPE, net) that the parent believes is worth $50,000 more than its book value, an: unrecorded Patent that the parent valued...
Pepper Company acquired the assets (with the exception of cash) and assumed the liabilities of Salt Company on January 2, 2020. As compensation, Pepper gave 30,000 shares of its common stock, 15,000 shares of its Preferred Stock, and cash of $50,000 to the Salt stockholders. On the acquisition date, Pepper Company stock had the following characteristics. STOCK Common $10 $25 Preferred $100 $100 Immediately prior to the acquisition, Salt Corporation's balance sheet reflected the following book and fair values. Salt...
17. Pell Corporation acquires all of the assets and liabilities of Sason Co. at an acquisition cost that is $50 million above the fair value of identifiable net assets acquired. Three months after the acquisition, land belonging to Sason at the date of acquisition is discovered. The land has a fair value of $5,000,000 Using the T-account template below, prepare the entry, if any, to recognize this new information. LIABILITIES + EQUITY ASSETS Non-current Assets Property, Plant & Intangible Equipment...
Pharma Company acquired the assets (with the exception of cash) and assumed the liabilities of Astra Company on January 2, 2020 paying $720,000 cash. Astra Company's December 31, 2019 balance sheet reflecting both book and fair values is shown below: Book Value Fair Value $65,000 99,000 162,000 450,000 288,000 $1,064,000 Accounts Receivable, net Inventory Land Buildings, net Equipment,net Total Accounts Payable Note Payable Common Stock $2 par value Other Contributed Capital Retained Earnings Total $72,000 86,000 110,000 369,000 237,000 $874,000...
Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a parent company acquires an 80% interest in its subsidiary for a purchase price of $620,800. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiary's Stockholders' Equity is assigned to a building (in PPE, net) that the parent believes is worth $50,000 more than its book value, an: unrecorded Patent that the parent valued...
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