Narcisa Tacuri

Advanced Accounting
Strong Candidate Questions: Chapter 2
November 1, 2015
1. At the date of an acquisition, which is not a bargain purchase, the acquisition
method
A. Consolidates the subsidiary assets at F.V and the Liabilities at B.V.
B. Consolidates all subsidiary assets and liabilities at B.V.
C. Consolidates all subsidiary assets and liabilities at F.V.
D. Consolidates current assets and liabilities at B.V and long-term assets
and liabilities at F.V.
E. Consolidates the subsidiary assets at B.V and liabilities at F.V.
2. Lisa co. paid cash for all of the voting stock of Victorias corporation,
Victorian will continue to exist as a separate corporation. Entries for the
consolidation of Lisa and Victoria would be recorded in
A. a worksheet
B. Lisas general journal
C. Victorias general journal
D. Victorias secret general journal
E. The general journal of both companies
3. A statutory merger is
A. A business combination in which only one of the two companies in
which continues to exist as a legal corporation
B. Business combo in which none (or all) company continue to exist as a
legal Corporation.
C. Acquisition of a competitors
D. Acquisition of a supplier or consumer
E. Legal proposal to acquire outstanding shares of the targets stock
4. How are stock issuance cost and direct combination cost treated in a
business combination, which is accounted for as on acquisition when the
subsidiary will retain its incorporation

A. stock issuance cost are a part of the acquisition cost and the direct
combination cost are expensed
B. Direct combination cost are a part of the acquisition cost and the stock
issuance cost are a reduction to paid in capital
C. Direct combination cost are expensed and stock issuance cost are a
reduction to additional paid in capital
D. Both are treated as a reduction to additional paid in capital
5. Which of the following statements is true regarding a statuary consolidation
A. The original companies dissolve while remaining as separate divisions
of the newly created company.
B. Both companies remain inexistence as Legal Corporation with one
corporation now a subsidiary of the acquiring company.
C. The acquired company dissolve as a separate corporation and
becomes a division of the acquiring company.
D. The acquired company acquires the stock of the acquired company as
an in the vestment.
E. A statutory consolidation is no longer a legal option
6. In a transition accounted for using the acquisition method where
consideration transferred is less than F.V of the net assets acquired, which
statement is true
A. Negative goodwill is recorded
B. A deferred credit is recorded
C. A gain on bargain purchase price is recorded
D. Long term assets of the acquired company are reduced in proportion
to their fair values, any excess is recorded as a deferred credit
E. Long term assets liabilities of the acquired company are reduced in
proportion to their fair values, any excess is recorded as an
extraordinary gain

7. Which of the following statements is true regarding the acquisition method

of accounting for a business consolidation
A. Net assets of the acquired company are reported at their F.V.
B. Net assets of the acquired company are reported at their B.V.

C. Any goodwill associated with the acquisition is reported as a

development cost.
D. The acquisition can only be affected by a mutual exchange of voting
common stock.
E. Indirect cost at the combo reduce APTC
NOTES:
What is to be consolidated?
If separate incorporation is maintained, only the financial statement (not the actual
records) is consolidated.
How are the accounting records affected?
If dissolution takes place, the surviving companys accounts are adjusted to
include appropriate balances of the dissolved company. The dissolved companys
records are closed out.
If separate incorporation is maintained, each company continues to retain its own
records. Using worksheets facilitates the periodic consolidation process without
disturbing the individual accounting systems.
ACQUSITION METHOD:
What if the consideration not transferred DOES NOT EQUAL THE F.V of the
assets acquired?
***If the consideration is MORE THAN F.V. of the assets acquired the difference
is attributed to GOODWILL***
***If the consideration is LESS THAN F.V. of the assets acquired we got a
BARGAIN and WE WILL RECORD A GAIN on the acquisition***