Quiz 1

which of the following situations do accounting standards not require that the financial statements of the parent and subsidiary be consolidated?

A corporation owns less-than a controlling interest in an unincorporated company

Assuming no impairment in value prior to transfer, assets transferred by a parent company to another entity it has created should be recorded by the newly created entity at the assets':

book value on the parent company's books at the date of transfer

Simmons Corporation paid $170,000 to acquire all of Bush Company's net assets. Bush reported assets with a book value of $189,000 and a fair value of $206,000 and liabilities with a book value and fair value of $48,000 on the date of the combination. Simmons also paid $8,000 to a search firm for a finder's fee related to the acquisition. What amount will be recorded as goodwill by Simmons Corporation when recording its investment in Bush?

12,000 206,000-170,000-48000

The fair value of net identifiable assets of a reporting unit of X Company is $300,000. On X Company's books, the carrying value of this reporting unit's net assets is $350,000, which includes $60,000 of goodwill. If the fair value of the reporting unit as a whole is $335,000, what amount of goodwill impairment will be recognized for this unit?

15,000 1. Calculate the Total Carrying Value: • Carrying value = $350,000 2. Compare with Fair Value of the Reporting Unit: • Fair value of reporting unit = $335,000 • Impairment = Carry 3. Allocate the Impairment to Goodwill: • Goodwill impairment = $15,000

A statutory consolidation is a type of business combination in which:

Each of the combining companies is dissolved and the net assets of both companies are transferred to a newly created corporation.

Given the increased development of complex business structures, which of the following regulators is responsible for the continued usefulness of accounting reports?

Financial Accounting Standards Board (FASB) Public Company Accounting Oversight Board (PCAOB) Securities and Exchange Commission (SEC)

Which of the following observations concerning "goodwill" is NOT correct?

Once written down, it may be written up for recoveries.

Point Company purchased 90 percent of Sharpe Corporation's voting stock on January 1, 20X2 for $5,580,000. Prior to the acquisition, Point held a 10 percent equity position in Sharpe Company. On January 1, 20X2 Pointe's 10 percent investment in Sharpe has a book value of $340,000 and a fair value of $620,000. On January 1, 20X2 Point records the following:

credit Gain on Revaluation of Sharpe's Stock $280,000. 620,000-360,000 A gain is a credit

ASC 805 requires contingent consideration in a business combination to be classified as:

liability or equity

For all acquired contingencies, the acquirer should do all of the following except:

provide documentation from the acquirer's attorney regarding pending lawsuits and loan guarantees.