29 Jun Question 15. nBalter Inc. acquired Jersey C
Question
15. nBalter Inc. acquired Jersey Company on January 1, 20X5. When the purchase occurred Jersey Company had the following information related to fixed assets:
Land
$ 80,000
Building
200,000
Accumulated Depreciation
(100,000)
Equipment
100,000
Accumulated Depreciation
(50,000)
The building has a 10-year remaining useful life and the equipment has a 5-year remaining useful life. The fair value of the assets on that
date were: Land Building Equipment
What is the 20X5 depreciation expense Balter will record related to purchasing Jersey Company?
a. $8,000
b. $15,000
c. $28,000
d. $30,000
ANS: C DIF: M OBJ: 6
1-5
Chapter 1
16. In performing the 20X7 impairment test for goodwill, the company had the following 20X6 and 20X7 information is available.
20X6 20X7 Implied fair value of reporting unit $350,000 $400,000 Net book value of reporting unit (including goodwill) $380,000 $360,000
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Based upon this information what are the 20X6 and 20X7 adjustment to goodwill, if any?
a. 20X6 $0
20X7 $40,000 decrease
b. 20X6 $30,000 increase
20X7 $40,000 decrease
c. 20X6 $30,000 decrease
20X7 $40,000 decrease
d. 20X6 $30,000 decrease
20X7 $0
ANS: D DIF: D OBJ: 7
17. Couples Corporation purchases Players Corporation. The fair value of the net assets of Players is $750,000 and the fair value of priority accounts (including a deduction for depreciation) is $600,000. Which of the following purchase prices would require using allocation procedures?
a. $500,000
b. $600,000
c. $700,000
d. $800,000
ANS: B DIF: D OBJ: 7
18. ACME Co. paid $110,000 for the net assets of Comb Corp. At the time of the acquisition the following information was available related to Comb’s balance sheet:
Current Assets
Book Value
Fair Value
$50,000
$ 50,000
Building
80,000
100,000
Equipment
40,000
50,000
Liabilities
30,000
30,000
What is the amount recorded by ACME for the Building?
a. $40,000
b. $60,000
c. $80,000
d. $100,000
ANS: B DIF: D OBJ: 7
19. Which of the following business combination expenses would NOT qualify as a direct acquisition expense for a purchase?
a. Fees for purchase audit
b. Outside legal fees
c. Stock issuance fees
d. All are direct acquisition expenses.
1-6
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