Acquisition Method

Question 1

Under the acquisition method, 100% of the net assets acquired (regardless of percentage) are recorded at _____ _____ with any unallocated balance remaining creating ______

Answer 1

fair value; goodwill

Question 2

When two companies are consolidated, the sub’s ____ _____ is eliminated

Answer 2

entire equity (APIC, common stock, RE)

Question 3

Under acquisition method, common stock, APIC, and RE of the sub are ______ (_______ in JE)

Answer 3

eliminated; debited

Question 4

The investment in sub is _______ (_____ in JE)

Answer 4

eliminated; credited

Question 5

Noncontrolling interest is _____ (______ in JE)

Answer 5

created; credited

Question 6

The balance sheet of the sub is adjusted to ___ ____ (_____ in JE)

Answer 6

fair value; debited

Question 7

Identifiable intangible assets of the sub are recorded at their ____ _____ (_____ in JE)

Answer 7

fair value; debited

Question 8

Goodwill (or gain) is _______ (______ for goodwill, _____ for a gain)

Answer 8

required; debit; credit

Question 9

RE of the sub can be found using the ______ formula

Answer 9

BASE (beg RE + income - dividends = ending RE)

Question 10

Measured by FV (on the date the acquisition is completed) of the consideration given (Debit: investment in sub)

Answer 10

original cost

Question 11

Finder’s fees and legal fees are:

Answer 11

expensed (debit: expense)

Question 12

Stock registration and issuance costs are a direct ______ of the value of the stock issued. (Debit: _____)

Answer 12

reduction; APIC

Question 13

Indirect costs are:

Answer 13

expenses as incurred

Question 14

Bond issue costs are ______ and ________ (Debit: bond issue costs)

Answer 14

capitalized; amortized

Question 15

Noncontrolling interest must be reported at ____ _____ in the equity section of the consolidated balance sheet, separately from the parent’s equity

Answer 15

fair value

Question 16

In process R&D is carried at _____

Answer 16

cost

Question 17

In process R&D meets the definition of an ______

Answer 17

asset

Question 18

Full goodwill method

Answer 18

FV of sub - FV of sub’s net assets

Question 19

Partial goodwill method

Answer 19

Acquisition cost - FV of sub’s net assets acquired

Question 20

Net cash spent or received in the acquisition must be reported in the _______ section of the statement of cash flows.

Answer 20

investing

Question 21

Gaining control/losing control is a _____ event

Answer 21

remeasurement

Question 22

Acquisition method disclosures (2):

Answer 22

if the business combination is achieved in stages

if the acquirer is a public entity

Question 23

Consolidated financial statements should disclose the _______ _____ that is being followed

Answer 23

consolidation policy

Question 24

Assets - liabilities =

Answer 24

CAR / equity / NBV

Question 25

A bargain purchase is recognized as a _______ in earning at the acquisition date

Answer 25

gain