Choose the BEST answer for the following questions.
_____ 1. The currently acceptable method(s) of accounting for a business combination is (are):
a. statutory merger
b. pooling of interests
c. acquisition
d.
...
Choose the BEST answer for the following questions.
_____ 1. The currently acceptable method(s) of accounting for a business combination is (are):
a. statutory merger
b. pooling of interests
c. acquisition
d. both acquisition and pooling
_____ 2. The general idea of the acquisition method is the:
a. acquiring company is buying an asset.
b. acquiring and the acquired companies are joining as if they were always together.
c. acquisition always results in parent-subsidiary relationship.
d. assets of the acquired company are recorded at their fair market values.
_____ 3. The advantages of an acquisition include:
a. one company acquires another and control passes.
b. the transaction is based on book values given and received.
c. the companies report as if they had always been together.
d. earnings per share are generally higher than in a pooling.
_____ 4. What is parent’s cost in an acquisition?
a. The par value of the stock issued
b. The fair value of the net assets acquired
c. The book value of the net assets acquired
d. The cash, debt, or fair value of stock given up
_____ 5. What is goodwill?
a. The excess of cost over fair value of net assets acquired
b. The excess of cost over book value of net assets acquired
c. The excess of fair value of net assets acquired over cost
d. The amortized excess of fair value of assets acquired over their book value
_____ 6. What is the current technique for the disposition of goodwill acquired in a business combination?
a. Amortized over some period not to exceed 40 years
b. Amortized over some period not to exceed 20 years
c. Expensed in the year of combination
d. Capitalized at original value unless impairment occurs
_____ 7. What is a bargain acquisition?
a. When parent’s cost is far above the fair value of S’s net assets acquired
b. When parent cannot determine a fair value of its stock issued in the acquisition
c. When parent purchases S for less than the fair market value of the net assets acquired
d. When parent increases the value of the long-lived assets to reflect its excess cost
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