Advanced acct final

REFER TO: 03-03 19. On the consolidated financial statements for 2017, what amount should have been shown for consolidated dividends? A) $ 900,000. B) $1,020,000. C) $ 876,000. D) $ 996,000. E) $ 948,000.

A) $ 900,000. Feedback: $900,000 Parent's Dividends Only

REFER TO: 03-01 13. What is the balance in Cale's investment in subsidiary account at the end of 2017? A) $1,099,000. B) $1,020,000. C) $1,096,200. D) $1,098,000. E) $1,144,400.

A) $1,099,000. Feedback: $1,020,000 + ($126,000 + $1,000) - $48,000 = $1,099,000

REFER TO: 03-06 49. Assume the partial equity method is applied. How much equity income will Kaye report on its internal accounting records as a result of Fiore's operations? A) $400 B) $300 C) $380 D) $280 E) $480

A) $400 Feedback: 2018 Income = $400

REFER TO: 03-07 61. Compute the December 31, 2020, consolidated common stock. A) $450,000. B) $530,000. C) $555,000. D) $635,000. E) $525,000.

A) $450,000. Feedback: $450,000 (Parent Only)

REFER TO: 03-05 40. Compute the amount of Hurley's inventory that would be reported in a January 1, 2017, consolidated balance sheet. A) $800. B) $100. C) $900. D) $150. E) $ 0.

A) $800. Feedback: Fair Value at Acquisition = $800

when is goodwill impairment loss recognized?

After only definitive quantitative assessments of the fair value of goodwill is completed

Under the partial equity method of accounting for an investment

Amortization of the excess of fair value allocations over book value is ignored in regard to the investment account.

When a company applies the initial value method in accounting for its investment in a subsidiary, and the subsidiary reports income in excess of dividends paid, what entry would be made for a consolidation worksheet for the second year? A) Retained earnings Investment in subsidiary B) Investment in subsidiary Retained earnings C) Investment in subsidiary Equity in subsidiary's income D) Equity in subsidiary's income Investment in subsidiary E) Additional paid-in capital Retained earnings

B) Investment in subsidiary Retained earnings

REFER TO: 03-03 18. On the consolidated financial statements for 2017, what amount should have been shown for Equity in Subsidiary Earnings? A) $432,000. B) $ -0- C) $408,000. D) $120,000. E) $288,000.

B) $ -0- Feedback: $0; (Income is eliminated from the investment account)

REFER TO: 03-05 39. Compute goodwill, if any, at January 1, 2017. A) $ 150. B) $ 250. C) $ 700. D) $1,200. E) $ 550.

B) $ 250. Feedback: Excess (from above) $700 + $300 buildings - $250 equipment - $400 Land -$100 liabilities = $250 Excess Unidentified (Goodwill)

REFER TO: 03-08 68. If Goehler applies the equity method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2018? A) $1,080,000. B) $1,104,000. C) $1,100,000. D) $1,468,000. E) $1,475,000.

B) $1,104,000. Feedback: Excess amortizations: (120,000-90,000=30,000/10 = 3,000 per year). 2018 Balance Goehler Bv 975,000+ Kenneth BV 105,000 + Fair value adjustment 30,000 - amortization for 2017 and 2018 (3,000 ? 2) = 1,104,000

REFER TO: 03-08 69. If Goehler applies the partial equity method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2018? A) $1,080,000. B) $1,104,000. C) $1,100,000. D) $1,468,000. E) $1,475,000.

B) $1,104,000. Feedback: Same as above

Parrett Corp. acquired one hundred percent of Jones Inc. on January 1, 2016, at a price in excess of the subsidiary's fair value. On that date, Parrett's equipment (ten-year life) had a book value of $360,000 but a fair value of $480,000. Jones had equipment (ten-year life) with a book value of $240,000 and a fair value of $350,000. Parrett used the partial equity method to record its investment in Jones. On December 31, 2018, Parrett had equipment with a book value of $250,000 and a fair value of $400,000. Jones had equipment with a book value of $170,000 and a fair value of $320,000. What is the consolidated balance for the Equipment account as of December 31, 2018? A) $387,000. B) $497,000. C) $508.000. D) $537,000. E) $570,000.

B) $497,000. Feedback: Excess of Sub's FV = $110,000 + Parent's BV $250,000 + Sub's BV $170,000 - Excess Amortization ($11,000 ? 3yrs) = $497,000

REFER TO: 03-04 22. If the equity method had been applied, what would be the Investment in Tysk Corp. account balance within the records of Jans at the end of 2018? A) $612,100. B) $744,000. C) $774,150. D) $372,000. E) $844,150.

B) $744,000. Feedback: Initial Investment $372,000 2016 Entries: $180,000 - $70,000 - $18,000 = $92,000 2017 Entries: $216,000 - $70,000 - $18,000 = $128,000 2018 Entries: $240,000 - $70,000 - $18,000 = $152,000 $372,000 + $92,000 + $128,000 + $152,000 = $744,000

REFER TO: 03-07 62. Compute the December 31, 2020, consolidated additional paid-in capital. A) $210,000. B) $75,000. C) $1,102,500. D) $942,500. E) $525,000.

B) $75,000. Feedback: $75,000 (Parent Only)

Which of the following will result in the recognition of an impairment loss on goodwill? A) Goodwill amortization is to be recognized annually on a systematic and rational basis. B) Both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying values. C) The fair value of the entity declines significantly. D) The fair value of a reporting unit falls below the original consideration transferred for the acquisition. E) The entity is investigated by the SEC and its reputation has been severely damaged.

B) Both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying values.

REFER TO: 03-05 44. Compute the amount of Hurley's buildings that would be reported in a December 31, 2018, consolidated balance sheet. A) $1,620. B) $1,380. C) $1,320. D) $1,080. E) $1,500.

C) $1,320. Feedback: FV $1,200 + Excess Amortization ($300 / 5) $60 ? 2 = $1,320

REFER TO: 03-05 43. Compute the amount of Hurley's long-term liabilities that would be reported in a December 31, 2017, consolidated balance sheet. A) $1,800. B) $1,700. C) $1,725. D) $1,675. E) $3,500.

C) $1,725. Feedback: FV $1,700 + Excess Amortization ($100 / 4) $25 = $1,725

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.

C) Contingent consideration is recorded because of its substantial probability of eventual payment.

Which one of the following accounts would not appear in the consolidated financial statements at the end of the first fiscal period of the combination? A) Goodwill. B) Equipment. C) Investment in Subsidiary. D) Common Stock. E) Additional Paid-In Capital.

C) Investment in Subsidiary.

Racer Corp. acquired all of the common stock of Tangiers Co. in 2016. Tangiers maintained its incorporation. Which of Racer's account balances would vary between the equity method and the initial value method? A) Goodwill, Investment in Tangiers Co., and Retained Earnings. B) Expenses, Investment in Tangiers Co., and Equity in Subsidiary Earnings. C) Investment in Tangiers Co., Equity in Subsidiary Earnings, and Retained Earnings. D) Common Stock, Goodwill, and Investment in Tangiers Co. E) Expenses, Goodwill, and Investment in Tangiers Co.

C) Investment in Tangiers Co., Equity in Subsidiary Earnings, and Retained Earnings.

Which of the following is false regarding contingent consideration in business combinations?

Contingent consideration is recorded because of its substantial probability of eventual payment.

REFER TO: 03-05 42. Compute the amount of Hurley's equipment that would be reported in a December 31, 2017, consolidated balance sheet. A) $1,000. B) $1,250. C) $ 875. D) $1,125. E) $ 750.

D) $1,125. Feedback: FV $1,250 - Excess Amortization ($250 / 2) $125 = $1,125

REFER TO: 03-05 47. Compute the amount of Hurley's long-term liabilities that would be reported in a December 31, 2018, consolidated balance sheet. A) $1,700. B) $1,800. C) $1,650. D) $1,750. E) $3,500.

D) $1,750. Feedback: FV $1,700 + Excess Amortization ($100 / 4) $25 ? 2 = $1,750

REFER TO: 03-06 50. Assume the initial value method is applied. How much equity income will Kaye report on its internal accounting records as a result of Fiore's operations? A) $400 B) $300 C) $380 D) $100 E) $210

D) $100 Feedback: 2018 Dividends = $100

REFER TO: 03-01 12. In Cale's accounting records, what amount would appear on December 31, 2017 for equity in subsidiary earnings? A) $77,000. B) $79,000. C) $125,000. D) $127,000. E) $81,800.

D) $127,000. Feedback: $126,000 + $1,000 = $127,000

REFER TO: 03-03 20. What is the amount of consolidated net income for the year 2017? A) $3,180,000. B) $3,612,000. C) $3,300,000. D) $3,588,000. E) $3,420,000.

D) $3,588,000. Feedback: Parent Income $3,180,000 + Sub Income $432,000 - Amortization Allocations $24,000 = Consolidated Net Income $3,588,000

Under the equity method of accounting for an investment: A) The investment account remains at initial value. B) Dividends received are recorded as revenue. C) Goodwill is amortized over 20 years. D) Income reported by the subsidiary increases the investment account. E) Dividends received increase the investment account.

D) Income reported by the subsidiary increases the investment account.

One company acquires another company in a combination accounted for under the acquisition method. The acquiring company decides to apply the equity method in accounting for the combination. What is one reason the acquiring company might have made this decision? A) It is the only method allowed by the SEC. B) It is relatively easy to apply. C) It is the only internal reporting method allowed by generally accepted accounting principles. D) Operating results on the parent's financial records reflect consolidated totals. E) When the equity method is used, no worksheet entries are required in the consolidation process.

D) Operating results on the parent's financial records reflect consolidated totals.

Which one of the following varies between the equity, initial value, and partial equity methods of accounting for an investment? A) The amount of consolidated net income. B) Total assets on the consolidated balance sheet. C) Total liabilities on the consolidated balance sheet. D) The balance in the investment account on the parent's books. E) The amount of consolidated cost of goods sold.

D) The balance in the investment account on the parent's books.

Which of the following is not a factor to be considered when determining the useful life of an intangible asset? A) Legal, regulatory or contractual provisions. B) The effects of obsolescence. C) The expected use of the asset by the organization. D) The fair value of the asset. E) The level of maintenance expenditures that will be required to obtain expected future benefits.

D) The fair value of the asset.

All of the following are acceptable methods to account for a majority-owned investment in subsidiary except A) The equity method. B) The initial value method. C) The partial equity method. D) The fair-value method. E) Book value method.

D) The fair-value method.

Under the initial value method, when accounting for an investment in a subsidiary, A) Dividends received by the subsidiary decrease the investment account. B) The investment account is adjusted to fair value at year-end. C) Income reported by the subsidiary increases the investment account. D) The investment account does not change from year to year. E) Dividends received are ignored.

D) The investment account does not change from year to year.

When consolidating parent and subsidiary financial statements, which of the following statements is true? A) Goodwill is never recognized. B) Goodwill required is amortized over 20 years. C) Goodwill may be recorded on the parent company's books. D) The value of any goodwill should be tested annually for impairment in value. E) Goodwill should be expensed in the year of acquisition.

D) The value of any goodwill should be tested annually for impairment in value.

Hoyt Corporation agreed to the following terms in order to acquire the net assets of Brown Company on January 1, 2018: (1.) To issue 400 shares of common stock ($10 par) with a fair value of $45 per share. (2.) To assume Brown's liabilities which have a book value of $1,600 and a fair value of $1,500. On the date of acquisition, the consideration transferred for Hoyt's acquisition of Brown would be A) $18,000. B) $16,500. C) $20,000. D) $18,500. E) $19,500.

E) $19,500. Feedback: Common Stock (400 shares ? $45) $18,000 + Liabilities Assumed $1,500 = $19,500

With respect to identifiable intangible assets other than goodwill, which of the following is true?

If a qualitative assessment of the asset performed by an entity indicates impairment is likely, a quantitative assessment must be performed to determine whether there has been a loss in fair value.

Under the equity method of accounting for an investment:

Income reported by the subsidiary increases the investment account.

Racer Corp. acquired all of the common stock of Tangiers Co. in 2016. Tangiers maintained its incorporation. Which of Racer's account balances would vary between the equity method and the initial value method?

Investment in Tangiers Co., Equity in Subsidiary Earnings, and Retained Earnings

When a company applies the initial value method in accounting for its investment in a subsidiary, and the subsidiary reports income in excess of dividends paid, what entry would be made for a consolidation worksheet for the second year?

Investment in subsidiary Retained earnings

When consolidating parent and subsidiary financial statements, which of the following statements is true?

The value of any goodwill should be tested annually for impairment in value.

An impairment model is used

To assess whether asset write-downs are appropriate for indefinite-lived assets

With respect to the recognition of goodwill in a business combination, which of the following statements is true?

US GAAP standards require goodwill to be allocated to reporting units expected to benefit from the goodwill.

How does the partial equity method differ from the equity method?

Under the partial equity method, the balance in the investment account is not decreased by amortization on allocations made in the acquisition of the subsidiary.

When is a goodwill impairment loss recognized?

When both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying values.

Which of the following internal record-keeping methods can a parent choose to account for a subsidiary acquired in a business combination?

initial value, equity, partial equity

Which one of the following accounts would not appear in the consolidated financial statements at the end of the first fiscal period of the combination?

investment in subsidiary

Under the partial equity method, the parent recognizes income when

it is earned by the sub

Which one of the following varies between the equity, initial value, and partial equity methods of accounting for an investment?

the balance in the investment account on the parents books

All of the following are acceptable methods to account for a majority-owned investment in subsidiary except

the fair value method

REFER TO: 03-07 63. Compute the December 31, 2020 consolidated retained earnings. A) $1,645,375. B) $1,350,000. C) $1,565,375. D) $1,840,375. E) $1,265,375.

A) $1,645,375. Feedback: Parent Beg RE: $1,350,000 + Consolidated Net Income $490,375 - Consolidated Dividends $195,000 = Consolidated RE $1,645,375

REFER TO: 03-06 51. Assume the partial equity method is used. In the years following acquisition, what additional worksheet entry must be made for consolidation purposes, but is not required for the equity method? A) Retained earnings 20 Investment in Fiore 20 B) Investment in Fiore 20 Retained earnings 20 C) Expenses 20 Investment in Fiore 20 D) Expenses 20 Retained earnings 20 E) Retained earnings 20 Additional paid-in capital 20 A) Entry A. B) Entry B. C) Entry C. D) Entry D. E) Entry E.

A) Retained earnings 20 Investment in Fiore 20

When a company applies the initial value method in accounting for its investment in a subsidiary and the subsidiary reports income less than dividends paid, what entry would be made for a consolidation worksheet in the second year? A) Retained earnings Investment in subsidiary B) Investment in subsidiary Retained earnings C) Investment in subsidiary Equity in subsidiary's income D) Investment in subsidiary Additional paid-in capital E) Retained earnings Additional paid-in capital

A) Retained earnings Investment in subsidiary

When a company applies the partial equity method in accounting for its investment in a subsidiary and the subsidiary's equipment has a fair value greater than its book value, what consolidation worksheet entry is made in a year subsequent to the initial acquisition of the subsidiary? A) Retained earnings Investment in subsidiary B) Investment in subsidiary Retained earnings C) Investment in subsidiary Equity in subsidiary's income D) Investment in subsidiary Additional paid-in capital E) Retained earnings Additional paid-in capital

A) Retained earnings Investment in subsidiary

REFER TO: 03-07 55. Compute the December 31, 2020, consolidated revenues. A) $1,400,000. B) $ 800,000. C) $ 500,000. D) $1,590,375. E) $1,390,375.

A) $1,400,000. Feedback: $900,000 + $500,000 = $1,400,000

Jansen Inc. acquired all of the outstanding common stock of Merriam Co. on January 1, 2017, for $257,000. Annual amortization of $19,000 resulted from this acquisition. Jansen reported net income of $70,000 in 2017 and $50,000 in 2018 and paid $22,000 in dividends each year. Merriam reported net income of $40,000 in 2017 and $47,000 in 2018 and paid $10,000 in dividends each year. What is the Investment in Merriam Co. balance on Jansen's books as of December 31, 2018, if the equity method has been applied? A) $286,000. B) $295,000. C) $276,000. D) $344,000. E) $324,000.

A) $286,000. Feedback: $257,000 + $40,000 + $47,000 - $10,000 - $19,000 - $10,000 - $19,000 = $286,000

An impairment model is used A) To assess whether asset write-downs are appropriate for indefinite-lived assets. B) To calculate the fair value of intangible assets. C) To calculate the amortization of indefinite-lived assets over their useful lives. D) To determine whether the fair value of assets should be recognized. E) To determine the likelihood that the fair value of an assumed liability will increase.

A) To assess whether asset write-downs are appropriate for indefinite-lived assets.

REFER TO: 03-05 38. Compute the consideration transferred in excess of book value acquired at January 1, 2017. A) $ 150. B) $ 700. C) $2,200. D) $ 550. E) $2,900.

B) $ 700. Feedback: Acquisition Price $3,800 - Total Equity at Acquisition $3,100 = $700

REFER TO: 03-07 54. Compute the book value of Vega at January 1, 2016. A) $ 997,500. B) $ 857,500. C) $1,200,000. D) $1,600,000. E) $ 827,500.

B) $ 857,500. Feedback: Common Stock Fair Value $997,500 - Fair Value Asset Adjustment (Land $40,000 - Building $30,000 + Equipment $80,000 + Unrecorded Trademark $50,000) $140,000 = $857,500

REFER TO: 03-05 45. Compute the amount of Hurley's equipment that would be reported in a December 31, 2018, consolidated balance sheet. A) $ 0. B) $1,000. C) $1,250. D) $1,125. E) $1,200.

B) $1,000. Feedback: FV $1,250 - Excess Amortization ($250 / 2) $125 ? 2 = $1,000

REFER TO: 03-07 57. Compute the December 31, 2020, consolidated buildings. A) $1,037,500. B) $1,007,500. C) $1,000,000. D) $1,022,500. E) $1,012,500.

B) $1,007,500. Feedback: $750,000 + $280,000 - $30,000 = $1,000,000 + Amortization ($1,500 ? 5) = $1,007,500

REFER TO: 03-08 70. If Goehler applies the initial value method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2018? A) $1,080,000. B) $1,104,000. C) $1,100,000. D) $1,468,000. E) $1,475,000.

B) $1,104,000. Feedback: Same as above,

REFER TO: 03-05 41. Compute the amount of Hurley's buildings that would be reported in a December 31, 2017, consolidated balance sheet. A) $1,560. B) $1,260. C) $1,440. D) $1,160. E) $1,140.

B) $1,260. Feedback: FV $1,200 + Excess Amortization ($300 / 5) $60 = $1,260

REFER TO: 03-05 46. Compute the amount of Hurley's land that would be reported in a December 31, 2018, consolidated balance sheet. A) $ 900. B) $1,300. C) $ 400. D) $1,450. E) $2,200.

B) $1,300. Feedback: FV $1,300

One company acquires another company in a combination accounted for under the acquisition method. The acquiring company decides to apply the initial value method in accounting for the combination. What is one reason the acquiring company might have made this decision? A) It is the only method allowed by the SEC. B) It is relatively easy to apply. C) It is the only internal reporting method allowed by generally accepted accounting principles. D) Operating results on the parent's financial records reflect consolidated totals. E) When the initial method is used, no worksheet entries are required in the consolidation process.

B) It is relatively easy to apply.

When consolidating a subsidiary under the equity method, which of the following statements is true with regard to the subsidiary subsequent to the year of acquisition? A) All net assets are revalued to fair value and must be amortized over their useful lives. B) Only net assets that had excess fair value over book value when acquired by the parent must be amortized over their useful lives. C) All depreciable net assets are revalued to fair value at date of acquisition and must be amortized over their useful lives. D) Only depreciable net assets that have excess fair value over book value must be amortized over their useful lives. E) Only assets that have excess fair value over book value must be amortized over their useful lives.

B) Only net assets that had excess fair value over book value when acquired by the parent must be amortized over their useful lives.

REFER TO: 03-07 59. Compute the December 31, 2020, consolidated land. A) $220,000. B) $180,000. C) $670,000. D) $630,000. E) $450,000.

C) $670,000. Feedback: $450,000 + $180,000 +$40,000= $670,000

REFER TO: 03-06 52. Assume the initial value method is used. In the year subsequent to acquisition, what additional worksheet entry must be made for consolidation purposes that is not required for the equity method? A) Investment in Fiore 380 Retained earnings 380 B) Retained earnings 380 Investment in Fiore 380 C) Investment in Fiore 280 Retained earnings 280 D) Retained earnings 280 Investment in Fiore 280 E) Additional paid-in capital 280 Retained earnings 280 A) Entry A. B) Entry B. C) Entry C. D) Entry D. E) Entry E.

C) Investment in Fiore 280 Retained earnings 280

Red Co. acquired 100% of Green, Inc. on January 1, 2017. On that date, Green had land with a book value of $42,000 and a fair value of $52,000. Also, on the date of acquisition, Green had a building with a book value of $200,000 and a fair value of $390,000. Green had equipment with a book value of $350,000 and a fair value of $280,000. The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life. How much total expense will be in the consolidated financial statements for the year ended December 31, 2017 related to the acquisition allocations of Green? A) $43,000. B) $33,000. C) $ 5,000. D) $15,000. E) $0.

C) $ 5,000. Feedback: Land ($0 excess amortization) + Building ($190,000/10 = $19,000 excess amortization) + Equipment ($70,000/5 = $14,000 reduction of amortization expense) = ($19,000 - $14,000) = $5,000 excess amortization

REFER TO: 03-01 14. At the end of 2017, the consolidation entry to eliminate Cale's accrual of Kaltop's earnings would include a credit to Investment in Kaltop Co. for A) $124,400. B) $126,000. C) $127,000. D) $ 76,400. E) $ 0.

C) $127,000. Feedback: $126,000 + $1,000 = $127,000

REFER TO: 03-02 16. How much difference would there have been in Franel's income with regard to the effect of the investment, between using the equity method or using the initial value method of internal recordkeeping? A) $190,000. B) $360,000. C) $164,000. D) $354,000. E) $150,000.

C) $164,000. Feedback: Initial Value Method = $190,000 Recognized from Sub Income (only dividend income) Equity Method = $360,000 - $6,000=$354,000 (Sub income less amortizations). $354,000 - $190,000 = $164,000 difference in equity method and initial value

REFER TO: 03-06 48. Assume the equity method is applied. How much equity income will Kaye report on its internal accounting records as a result of Fiore's operations? A) $400 B) $300 C) $380 D) $280 E) $480

C) $380 Feedback: 2018 Income $400 - Amortization $20 = $380

REFER TO: 03-01 15. If Cale Corp. had net income of $444,000 in 2017, exclusive of the investment, what is the amount of consolidated net income? A) $569,000. B) $570,000. C) $571,000. D) $566,400. E) $444,000.

C) $571,000. Feedback: $444,000 + ($126,000 + $1,000) = $571,000

REFER TO: 03-04 21. If the partial equity method had been applied, what was 2018 consolidated net income? A) $840,000. B) $768,400. C) $822,000. D) $240,000. E) $600,000.

C) $822,000. Feedback: Excess amortizations: Equipment ($46,000/10) = $4,600 Customer list ($67,000/5) = $13,400 Total: $4,600 + $13,400 = $18,000 Parent $1,080,000 - $480,000 = $600,000; Sub $840,000 - $600,000 = $240,000; $600,000 + $240,000 = $840,000 - $18,000 = $822,000

REFER TO: 03-07 58. Compute the December 31, 2020, consolidated equipment. A) $800,000. B) $808,000. C) $840,000. D) $760,000. E) $848,000.

C) $840,000. Feedback: $300,000 + $580,000 = $880,000 - Amortization ($8,000 ? 5) = $840,000

Consolidated net income using the equity method for an acquisition combination is computed as follows: A) Parent company's revenues from its own operations plus subsidiary retained earnings. B) Parent's reported net income plus subsidiary dividends. C) Combined revenues less combined expenses less equity in subsidiary's earnings 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 earnings less subsidiary dividends. E) None of these answer choices are correct.

C) Combined revenues less combined expenses less equity in subsidiary's earnings less amortization of fair-value allocations in excess of book value.

According to GAAP regarding amortization of goodwill, which of the following statements is true? A) Goodwill recognized in consolidation must be amortized over 20 years. B) Goodwill recognized in consolidation must be expensed in the period of acquisition. C) Goodwill recognized in consolidation will not be amortized but subject to an annual test for impairment. D) Goodwill recognized in consolidation can never be written off. E) Goodwill recognized in consolidation must be amortized over 40 years.

C) Goodwill recognized in consolidation will not be amortized but subject to an annual test for impairment.

Which of the following internal record-keeping methods can a parent choose to account for a subsidiary acquired in a business combination? A) Initial value or book value. B) Initial value, lower-of-cost-or-market-value, or equity. C) Initial value, equity, or partial equity. D) Initial value, equity, or book value. E) Initial value, lower-of-cost-or-market-value, or partial equity.

C) Initial value, equity, or partial equity.

When is a goodwill impairment loss recognized? A) Annually on a systematic and rational basis. B) Never. C) When both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying values. D) If the fair value of a reporting unit falls below its original acquisition price. E) Whenever the fair value of the entity declines significantly.

C) When both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying values.

Consolidated net income using the equity method for an acquisition combination is computed as follows:

Combined revenues less combined expenses less equity in subsidiary's earnings less amortization of fair-value allocations in excess of book value.

REFER TO: 03-02 17. How much difference would there have been in Franel's income with regard to the effect of the investment, between using the equity method or using the partial equity method of internal recordkeeping? A) $170,000. B) $354,000. C) $164,000. D) $ 6,000. E) $174,000.

D) $ 6,000. Feedback: Equity Method = $360,000 - $6,000 = $354,000 Equity income Partial Equity Method = $360,000 - $0 (amortizations not recorded under partial equity method); $354,000 - $360,000 = $6,000 difference

REFER TO: 03-07 60. Compute the December 31, 2020, consolidated trademark. A) $50,000. B) $46,875. C) $ 0. D) $34,375. E) $37,500.

D) $34,375. Feedback: $50,000 - Amortization ($3,125 ? 5) = $34,375

REFER TO: 03-07 56. Compute the December 31, 2020, consolidated total expenses. A) $620,000. B) $280,000. C) $900,000. D) $909,625. E) $299,625.

D) $909,625. Feedback: COGS ($360,000 + $200,000) + Depreciation ($140,000 + $40,000) + Other Exp ($100,000 + $60,000) + Excess FV Amortization (Blg [$1,500] + Equip $8,000 + Trademark $3,125) = $909,625

REFER TO: 03-01 11. The 2017 total excess amortization of fair-value allocations is calculated to be A) $4,000. B) $6,400. C) ($2,400). D) ($1,000). E) $3,800.

D) ($1,000). Feedback: Building = FV $268,000 - BV $240,000 = $28,000 / 20 yrs = $1,400 Equipment = FV $516,000 - BV $540,000 = ($24,000) / 10 yrs = ($2,400) ($2,400) + $1,400 = ($1,000)

Under the partial equity method of accounting for an investment, A) The investment account remains at initial value. B) Dividends received are recorded as revenue. C) The allocations for excess fair value allocations over book value of net assets at date of acquisition are applied over their useful lives to reduce the investment account. D) Amortization of the excess of fair value allocations over book value is ignored in regard to the investment account. E) Dividends received increase the investment account.

D) Amortization of the excess of fair value allocations over book value is ignored in regard to the investment account.

Which of the following is not an example of an intangible asset? A) Customer list B) Database C) Lease agreement D) Broken equipment E) Trademark

D) Broken equipment

Prince Company acquires Duchess, Inc. on January 1, 2016. At the date of acquisition, Duchess has long-term debt with a fair value of $1,500,000 and a carrying amount of $1,200,000. With respect to long-term debt consolidation worksheet adjustments in periods following the acquisition, which of the following is correct:

Debit Long-Term Debt and Credit Interest Expense

With respect to identifiable intangible assets other than goodwill, which of the following is true? A) If the value of the identified asset meets a de minimis exception, the entity may elect to treat it as goodwill. B) An identifiable intangible asset with an indefinite useful life must be assessed for impairment once every three years. C) If the average fair value of the asset is less than the average carrying amount of the asset with respect to, and determined for, the preceding three-year period, the asset is considered impaired and the entity may recognize a loss. D) A quantitative evaluation of value is required each year regardless of circumstances. E) If a qualitative assessment of the asset performed by an entity indicates impairment is likely, a quantitative assessment must be performed to determine whether there has been a loss in fair value.

E) If a qualitative assessment of the asset performed by an entity indicates impairment is likely, a quantitative assessment must be performed to determine whether there has been a loss in fair value.

Under the partial equity method, the parent recognizes income when A) Dividends are received from the investee. B) Dividends are declared by the investee. C) The related expense has been incurred. D) The related contract is signed by the subsidiary. E) It is earned by the subsidiary.

E) It is earned by the subsidiary.

How does the partial equity method differ from the equity method? A) In the total assets reported on the consolidated balance sheet. B) In the treatment of dividends. C) In the total liabilities reported on the consolidated balance sheet. D) Under the partial equity method, subsidiary income does not increase the balance in the parent's investment account. E) Under the partial equity method, the balance in the investment account is not decreased by amortization on allocations made in the acquisition of the subsidiary.

E) Under the partial equity method, the balance in the investment account is not decreased by amortization on allocations made in the acquisition of the subsidiary.

According to the FASB ASC regarding the testing procedures for Goodwill Impairment, the proper procedure for conducting impairment testing is:

Goodwill recognized in consolidation may be impairment tested in a two-step approach, first by qualitative assessment of the possibility of impairment of the unit fair value relative to the book value, and then quantitative assessments as to how much impairment, if any, occurred for asset write-down.

According to GAAP regarding amortization of goodwill, which of the following statements is true?

Goodwill recognized in consolidation will not be amortized but subject to an annual test for impairment

How is the fair value allocation of an intangible asset allocated to expense when the asset has no legal, regulatory, contractual, competitive, economic, or other factors that limit its life?

No amortization, but annually reviewed for impairment and adjusted accordingly

When consolidating a subsidiary under the equity method, which of the following statements is true with regard to the subsidiary subsequent to the year of acquisition?

Only net assets that had excess fair value over book value when acquired by the parent must be amortized over their useful lives

One company acquires another company in a combination accounted for under the acquisition method. The acquiring company decides to apply the equity method in accounting for the combination. What is one reason the acquiring company might have made this decision?

Operating results on the parent's financial records reflect consolidated totals

When a company applies the initial value method in accounting for its investment in a subsidiary and the subsidiary reports income less than dividends paid, what entry would be made for a consolidation worksheet in the second year?

Retained earnings Investment in subsidiary

When a company applies the partial equity method in accounting for its investment in a subsidiary and the subsidiary's equipment has a fair value greater than its book value, what consolidation worksheet entry is made in a year subsequent to the initial acquisition of the subsidiary?

Retained earnings Investment in subsidiary

One company acquires another company in a combination accounted for under the acquisition method. The acquiring company decides to apply the initial value method in accounting for the combination. What is one reason the acquiring company might have made this decision?

it is relatively easy to apply

broken equipment

not an intangible asset

Which of the following is not a factor to be considered when determining the useful life of an intangible asset?

the fair value of the asset

Under the initial value method, when accounting for an investment in a subsidiary

the investment account does not change from year to year