F3-acquistion method

Question 1

Direct costs

Answer 1

expensed in the period incurred

Question 2

In an acquisition, the net income of a newly acquired subsidiary will only be included in consolidated net income

Answer 2

from the date of acquisition. Therefore, only 20% of Sago net income is included in consolidated earnings until June 30 and 95% thereafter.

Question 3

With acquisition accounting the net assets acquired are based on

Answer 3

fair market value

Question 4

The fair value of finished goods and merchandise inventory are based upon

Answer 4

selling price less disposal costs and a reasonable profit allowance

Question 5

When the acquisition price exceeds the fair value of net assets acquired

Answer 5

assets and liabilities should be presented at fair value.

Question 6

Consolidated retained earnings

Answer 6

are the same as the parent company retained earnings under the acquisition method.

Question 7

consolidated total current assets

Answer 7

Add up these:
CA of Purl
CA of Scott
FV adjustment

Question 8

Consolidated net income

Answer 8

is the same as parent company net income, when the equity method is used.

Question 9

When an investor sells shares and goes from control to non-control,

Answer 9

the investor must recognize a gain or loss from the sale of the stock and then remeasure the remaining non-consolidating interest to fair value.

Question 10

Consolidated common stock

Answer 10

are same as parent’s common stock under acquisition method