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Assignment Name: Fischer/Taylor: Advanced Accounting "Interactive Quizzes" Chapter 1 Summary of Results Total Possible: 10.0 Time Spent: 00:00:24

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Which of the following could be considered an economic advantage of a business combination? a. The filing of a consolidated tax return may allow losses of one of the affiliated companies to offset net income of another affiliated company. b. Since the business combination results in duplicate assets and management teams, it is difficult to experience cost savings and coordination of business activities. c. By selling their ownership interest in exchange for debt instruments, the owners of the acquired firm permanently avoid paying taxes on the transaction. d. For tax purposes, operating losses are always carried forward to offset future taxable income.

status: not answered () correct: a your answer: Which of the following statements about business combinations is true? a. Leveraged buyouts occur when the management of one company purchases the controlling interest of another company. b. Control of another company is gained by acquiring shares of that firms stock. 2 c. All of the three statements are true.

d. Accounting procedures are more involved when control is achieved through a stock acquisition than through an asset acquisition.

status: not answered () correct: d your answer: Use the Chateau Company information to answer this question. What is the total amount of cash Bordeaux Company would pay for acquiring the net assets of Chateau Company but not record any goodwill? a. $1,000,000

b. $1,030,000 3 c. $830,000

d. $970,000

status: not answered () correct: b your answer: Use the Chateau Company information to answer this question. If Bordeaux pays $900,000 for Chateau plus acquisition costs, how much would Bordeaux record for the goodwill? a. $100,000

b. $0 4 c. $18,889

d. $130,000

status: not answered () correct: b your answer: Use the Chateau Company information to answer this question. If Bordeaux pays $900,000 plus acquisition costs for Chateau, how much would Bordeaux record for the equipment? a. $250,000

b. $182,500 5 c. $200,000

d. $400,000

status: not answered () correct: c your answer: Use the Chateau Company information to answer this question. If Bordeaux pays $1,200,000 plus acquisition costs

for Chateau, how much would Bordeaux record for goodwill? a. $200,000

b. $230,000 6 c. $0, goodwill is never recorded

d. $400,000

status: not answered () correct: a your answer: In applying the acquisition method, it is necessary to measure the fair value of the acquiree. Because of the complexities involved, a measurement period is allowed. Which of the following statements is false? a. Changes in value caused by events that occur after the acquisition date are not included in the measurement period adjustment. b. All statements are correct. 7 c. If a gain had been reported on the acquisition date, it would be adjusted at the end of the measurement period. This could result in an adjustment to retained earnings. d. The measurement period ends (1) when improved information is available, (2) when a determination that no better information will become available is made, or (3) upon the one year anniversary of the acquisition date. status: not answered () correct: b your answer: In the period in which the acquisition occurs, which of the following does not have to be disclosed? a. Information concerning transactions between the companies that are not recorded as part of the acquisition.

b. The primary reasons for the acquisition and the factors that contributed to the recording of goodwill (if any). 8 c. The goodwill that will be deductible for tax purposes.

d. The sales goals of the consolidated company.

status: not answered () correct: d your answer: Which of the following statements about goodwill is true? a. Impairment testing must be done at the end of every period. c. In applying impairment testing, goodwill must be allocated to reporting units if the purchased company contains more than one reporting unit. 9 b. Goodwill is considered to be impaired if the implied fair value of the

c. For financial reporting purposes, goodwill should be amortized over a 40-year life or, if impaired, over a 5year life. status: not answered () correct: your answer: (Appendix) The CEO of Megaplex Theater Company is contemplating selling the business. The cumulative earnings for the past 4 years amounted to $1,600,000. The annual earnings, based on an average rate of return on investment for this industry, would have been $230,000. If excess earnings are to be capitalized at 10%, then the implied goodwill in this transaction is: a. $2,125,000

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b. $1,700,000

c. $680,000

d. $1,020,000

status: not answered () correct: b your answer: