QUESTION #1
MacHeath Inc. bought 60% of the outstanding common stock of Nomes Inc. in an acquisition business combination that resulted in the recognition of goodwill. Nomes owned a piece of land that cost $250,000 but was worth $600,000 at the date of acquisition. What value would be attributed to this land in a consolidated balance sheet at the date of acquisition?
A) $250,000.
B) $150,000.
C) $600,000.
D) $360,000.
E) $460,000.

QUESTION #2
1. For business combinations involving less than 100 percent ownership, the acquirer recognizes and measures all of the following at the acquisition date except:
A) identifiable assets acquired, at fair value.
B) liabilities assumed, at book value.
C) noncontrolling interest, at fair value.
D) goodwill or a gain from bargain purchase.
E) none of these choices is correct.

REFERENCE: Ref. 04_1
When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000.

QUESTION #3
REFER TO: Ref. 04_1
2. What amount should have been reported for the land in a consolidated balance sheet at the acquisition date?
A) $52,500.
B) $70,000.
C) $75,000.
D) $92,500.
E) $100,000.

QUESTION #4
REFER TO: Ref. 04_01
3. What is the total amount of excess land allocation at the acquisition date?
A) $0.
B) $30,000.
C) $22,500.
D) $25,000.
E) $17,500.

QUESTION #5
REFER TO: Ref. 04_01
4. What is the amount of excess land allocation attributed to the controlling interest at the acquisition date?
A) $0.
B) $30,000.
C) $22,500.
D) $25,000.
E) $17,500.

QUESTION #6
REFER TO: Ref. 04_01
5. What is the amount of excess land allocation attributed to the noncontrolling interest at the acquisition date?
A) $0.
B) $30,000.
C) $22,500.
D) $7,500.
E) $17,500.

REFERENCE: Ref. 04_02
Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's individually identified net assets was $1,850,000, and the book value was $1,500,000. The noncontrolling interest shares of Float Corp. are not actively traded.

QUESTION #7
REFER TO: Ref. 04_02
7. What is the total amount of goodwill recognized at the date of acquisition?
A) $150,000.
B) $250,000.
C) $0.
D) $120,000.
E) $170,000.

QUESTION #8
REFER TO: Ref. 04_02
8. What amount of goodwill should be attributed to Perch at the date of acquisition?
A) $150,000.
B) $250,000.
C) $0.
D) $120,000.
E) $170,000.

QUESTION #9
REFER TO: Ref. 04_02
9. What amount of goodwill should be attributed to the noncontrolling interest at the date of acquisition?
A) $0.
B) $20,000.
C) $30,000.
D) $100,000.
E) $120,000.

QUESTION #10
REFER TO: Ref. 04_02
10. What is the dollar amount of noncontrolling interest that should appear in a consolidated balance sheet prepared at the date of acquisition?
A) $350,000.
B) $300,000.
C) $400,000.
D) $370,000.
E) $0.

QUESTION #11
REFER TO: Ref. 04_02
11. What is the dollar amount of Float Corp.'s individually identified net assets that would be represented in a consolidated balance sheet prepared at the date of acquisition?
A) $1,600,000.
B) $1,480,000.
C) $1,200,000.
D) $1,780,000.
E) $1,850,000.

QUESTION #12
REFER TO: Ref. 04_02
12. What is the dollar amount of fair value over book value differences attributed to Perch at the date of acquisition?
A) $120,000.
B) $150,000.
C) $280,000.
D) $350,000.
E) $370,000.

REFERENCE: Ref. 04_03
Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2010. During 2010, Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of excess cost allocations totaled $60,000 in 2010.

QUESTION #13
REFER TO: Ref. 04_03
13. The noncontrolling interest's share of the earnings of Harbor Corp. is calculated to be
A) $132,000.
B) $150,000.
C) $168,000.
D) $160,000.
E) $0.

QUESTION #14
REFER TO: Ref. 04_03
14. What is the effect of including Harbor in consolidated net income for 2010?
A) $350,000.
B) $308,000.
C) $500,000.
D) $440,000.
E) $290,000.

QUESTION #15
20. Kordel Inc. acquired 75% of the outstanding common stock of Raxston Corp. Raxston currently owes Kordel $500,000 for inventory acquired over the past few months. In preparing consolidated financial statements, what amount of this debt should be eliminated?
A) $375,000
B) $125,000
C) $300,000
D) $500,000
E) $0.

REFERENCE: Ref. 04_07
McGuire company acquired 90 percent of Hogan Company on January 1, 2010, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following:

Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.

QUESTION #16
REFER TO: Ref. 04_07
41. The acquisition value attributable to the noncontrolling interest at January 1, 2010 Is:
A) $23,400.
B) $24,000.
C) $24,900.
D) $26,000.
E) $20,000.

QUESTION #17
42. In consolidation at January 1, 2010, what adjustment is necessary for Hogan's Buildings account?
A) $2,000 increase.
B) $2,000 decrease.
C) $1,800 increase.
D) $1,800 decrease.
E) No change.

QUESTION #18
REFER TO: Ref. 04_07
43. In consolidation at December 31, 2010, what adjustment is necessary for Hogan's Buildings account?
A) $1,620 increase.
B) $1,620 decrease.
C) $1,800 increase.
D) $1,800 decrease.
E) No adjustment is necessary.

QUESTION #19
REFER TO: Ref. 04_07
44. In consolidation at December 31, 2011, what adjustment is necessary for Hogan's Buildings account?
A) $1,440 increase.
B) $1,440 decrease.
C) $1,600 increase.
D) $1,600 decrease.
E) No adjustment is necessary.

QUESTION #20
REFER TO: Ref. 04_07
45. In consolidation at January 1, 2010, what adjustment is necessary for Hogan's Equipment account?
A) $4,000 increase.
B) $4,000 decrease.
C) $3,600 increase.
D) $3,600 decrease.
E) No adjustment is necessary.

QUESTION #21
REFER TO: Ref. 04_07
46. In consolidation at December 31, 2010, what adjustment is necessary for Hogan's Equipment account?
A) $3,000 increase.
B) $3,000 decrease.
C) $2,700 increase.
D) $2,700 decrease.
E) No adjustment is necessary.

QUESTION #22
REFER TO: Ref. 04_07
48. In consolidation at January 1, 2010, what adjustment is necessary for Hogan's Land account?
A) $7,000 increase.
B) $7,000 decrease.
C) $6,300 increase.
D) $6,300 decrease.
E) No adjustment is necessary.

QUESTION #23
REFER TO: Ref. 04_07
49. In consolidation at December 31, 2010, what adjustment is necessary for Hogan's Land account?
A) $8,000 decrease .
B) $7,000 increase.
C) $6,300 increase.
D) $6,300 decrease.
E) No adjustment is necessary.

QUESTION #24
REFER TO: Ref. 04_07
51. In consolidation at January 1, 2010, what adjustment is necessary for Hogan's Patent account?
A) $7,000.
B) $6,300.
C) $11,000.
D) $9,900.
E) No adjustment is necessary.

REFERENCE: Ref. 04_08
Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:

Assume the equity method is applied.

QUESTION #25
REFER TO: Ref. 04_08
54. Compute Pell's investment in Demers at December 31, 2010.
A) $580,000.
B) $574,400.
C) $548,000.
D) $542,400.
E) $541,000.

QUESTION #26
REFER TO: Ref. 04_08
55. Compute Pell's investment in Demers at December 31, 2011.
A) $577,200.
B) $604,000.
C) $592,800.
D) $632,800.
E) $572,000.

QUESTION #27
REFER TO: Ref. 04_08
57. Compute Pell's income from Demers for the year ended December 31, 2010.
A) $74,400.
B) $73,000.
C) $42,400.
D) $41,000.
E) $80,000.

QUESTION #28
REFER TO: Ref. 04_08
58. Compute Pell's income from Demers for the year ended December 31, 2011.
A) $90,400.
B) $89,000.
C) $50,400.
D) $56,000.
E) $96,000.

QUESTION #29
REFER TO: Ref. 04_08
60. Compute the noncontrolling interest in the net income of Demers at December 31, 2010.
A) $20,000.
B) $12,000.
C) $18,600.
D) $10,600.
E) $14,400.

QUESTION #30
REFER TO: Ref. 04_08
61. Compute the noncontrolling interest in the net income of Demers at December 31, 2011.
A) $18,400.
B) $14,400.
C) $22,600.
D) $24,000.
E) $12,600.

QUESTION #31
REFER TO: Ref. 04_08
63. Compute the noncontrolling interest in Demers at December 31, 2010.
A) $135,600.
B) $137,000.
C) $112,000.
D) $100,000.
E) $118,600.

QUESTION #32
REFER TO: Ref. 04_08
64. Compute the noncontrolling interest in Demers at December 31, 2011.
A) $107,000.
B) $126,000.
C) $109,200.
D) $149,600.
E) $148,200.