29 Jun Question Pursuing an inorganic growth
Question
Pursuing an inorganic growth strategy, Wilson Company acquired Venus Company’s net assets and assigned them to four separate reporting divisions. Wilson assigned total goodwill of $134,000 to the four reporting divisions as given below:
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30. Based on the preceding information, what amount of goodwill will be reported for Alpha at year-end?
A. $0
B. $20,000
C. $30,000
D. $10,000
31. Based on the preceding information, what amount of goodwill will be reported for Beta at year-end?
A. $0
B. $14,000
C. $34,000
D. $50,000
32. Based on the preceding information, for Gamma:
A. no goodwill should be reported at year-end.
B. goodwill impairment of $30,000 should be recognized at year-end.
C. goodwill impairment of $20,000 should be recognized at year-end.
D. goodwill of $30,000 should be reported at year-end.
33. Based on the preceding information, for Delta:
A. no goodwill should be reported at year-end.
B. goodwill impairment of $15,000 should be recognized at year-end.
C. goodwill impairment of $20,000 should be recognized at year-end.
D. goodwill of $30,000 should be reported at year-end.
34. Based on the preceding information, what would be the total amount of goodwill that Wilson should report at year-end?
A. $0
B. $69,000
C. $79,000
D. $94,000
35. Which of the following observations is (are) consistent with the acquisition method of accounting for business combinations?
I. Expenses related to the business combination are expensed.
II. Stock issue costs are treated as a reduction in the issue price.
III. All merger and stock issue costs are expensed.
IV. No goodwill is ever recorded.
A. III
B. IV
C. I and II
D. I, II, and IV
36. Which of the following observations refers to the term differential?
A. Excess of consideration exchanged over fair value of net identifiable assets.
B. Excess of fair value over book value of net identifiable assets.
C. Excess of consideration exchanged over book value of net identifiable assets.
D. Excess of fair value over historical cost of net identifiable assets.
37. Which of the following observations concerning “goodwill” is NOT correct?
A. Once written down, it may be written up for recoveries.
B. It must be tested for impairment at least annually.
C. Goodwill impairment losses are recognized in income from continuing operations or income before extraordinary gains and losses.
D. It must be reported as a separate line item in the balance sheet.
38. Big Company acquired the following assets and liabilities of Little Company (fair values listed below) for $470,000 cash.
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Assuming these items are all recorded at their acquisition date fair values, what additional item needs to be recorded and how will it be accounted for in the future?
A. $30,000 Goodwill, capitalized and tested for impairment
B. $30,000 Bargain purchase, recognized in current earnings
C. $30,000 Bargain purchase, capitalized and recognized over time
D. $30,000 Goodwill, capitalized and amortized over time
39. Paul Corp. acquired 100 percent of Sam Inc.’s voting stock on July 1, 20X1. The following information was available as of December 31, 20X1:
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How much net income should be reported in Paul Corp’s income statement for 20X1?
A. $370,000
B. $720,000
C. $940,000
D. $1,090,000
40. Point Co. purchased 90% of Sharpe Corp.’s voting stock on January 1, 20X2 for $5,580,000. Prior to the acquisition, Point held a 10% equity position in Sharpe Company. On January 1, 20X2 Point’s 10% 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:
A. Debit Gain on revaluation of Sharpe’s stock $280,000
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