Student name:__________

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
answers the question.
1) At the date of an acquisition which is not a bargain purchase, the acquisition method

A) Consolidates the subsidiary’s assets at fair value and the liabilities at book value.
B) Consolidates all subsidiary assets and liabilities at book value.
C) Consolidates all subsidiary assets and liabilities at fair value.
D) Consolidates current assets and liabilities at book value, and long-term assets and
liabilities at fair value.
E) Consolidates the subsidiary’s assets at book value and the liabilities at fair value.

2) In an acquisition where 100% control is acquired, how would the land accounts of the
parent and the land accounts of the subsidiary be reported on consolidated financial statements?

Parent Subsidiary

A) Book Value Book Value

B) Book Value Fair Value
C) Fair Value Fair Value
D) Fair Value Book Value
E) Cost Cost

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

3) Lisa Co. paid cash for all of the voting common stock of Victoria Corp. Victoria will
continue to exist as a separate corporation. Entries for the consolidation of Lisa and Victoria
would be recorded in

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 A) A worksheet.
B) Lisa's general journal.
C) Victoria's general journal.
D) Victoria's secret consolidation journal.
E) The general journals of both companies.

4) Using the acquisition method for a business combination, goodwill is generally calculated
as the:

A) Cost of the investment less the subsidiary's book value at the beginning of the year.
B) Cost of the investment less the subsidiary's book value at the acquisition date.
C) Cost of the investment less the subsidiary's fair value at the beginning of the year.
D) Cost of the investment less the subsidiary's fair value at acquisition date.
E) Zero, it is no longer allowed under federal law.

5) How should direct combination costs and amounts incurred to register and issue stock in
connection with a business combination be accounted for in a pre-2009 business combination?

Direct Combination Cost Stock Issuance Costs

A) Increase Investment Decrease Investment

B) Increase Investment Decrease Additional paid-in
Capital
C) Increase Investment Increase Expenses
D) Decrease Additional paid-in Increase Investment
Capital
E) Increase Expenses Decrease Investment

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

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6) How are direct and indirect costs accounted for when applying the acquisition method for
a business combination?

Direct Costs Indirect Costs

A. Expensed Expensed
B. Increase investment account Decrease additional paid-in
Capital
C. Expensed Decrease additional paid-in
capital
D. Increase investment account Expensed
E. Increase investment account Increase investment account

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

7) What is the primary difference between: (i) accounting for a business combination when
the subsidiary is dissolved; and (ii) accounting for a business combination when the subsidiary
retains its incorporation?

A) If the subsidiary is dissolved, it will not be operated as a separate division.

B) If the subsidiary is dissolved, assets and liabilities are consolidated at their book
values.
C) If the subsidiary retains its incorporation, there will be no goodwill associated with
the acquisition.
D) If the subsidiary retains its incorporation, assets and liabilities are consolidated at
their book values.
E) If the subsidiary retains its incorporation, the consolidation is not formally recorded
in the accounting records of the acquiring company.

8) According to GAAP, which of the following is true with respect to the pooling of interest
method of accounting for business combinations?

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 A) It was the only method used prior to 2002.
B) It must be used for all new acquisitions.
C) GAAP allowed its use prior to 2002.
D) It, or the acquisition method, may be used at the acquirer’s discretion.
E) GAAP requires it to be used instead of the acquisition method for business
combinations for which $50 billion or more in consideration is transferred.

9) Which of the following examples accurately describes a difference in the types of

business combinations?

A) A statutory merger can only be effected through an asset acquisition while a

statutory consolidation can only be effected through a capital stock acquisition.
B) A statutory merger can only be effected through a capital stock acquisition while a
statutory consolidation can only be effected through an asset acquisition.
C) A statutory merger requires the dissolution of the acquired company while a
statutory consolidation requires dissolution of the companies involved in the combination
following the transfer of assets or stock to a newly formed entity.
D) A statutory consolidation requires dissolution of the acquired company while a
statutory merger does not require dissolution.
E) Both a statutory merger and a statutory consolidation can only be effected through
an asset acquisition but only a statutory consolidation requires dissolution of the acquired
company.

10) Acquired in-process research and development is considered as

A) A definite-lived asset subject to amortization.

B) A definite-lived asset subject to testing for impairment.
C) An indefinite-lived asset subject to amortization.
D) An indefinite-lived asset subject to testing for impairment.
E) A research and development expense at the date of acquisition.

11) Which of the following statements is true regarding the acquisition method of accounting
for a business combination?

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 A) The combination must involve the exchange of equity securities only.
B) The transaction establishes an acquisition fair value basis for the company being
acquired.
C) The two companies may be about the same size, and it is difficult to determine the
acquired company and the acquiring company.
D) The transaction may be considered to be the uniting of the ownership interests of the
companies involved.
E) The acquired subsidiary must be smaller in size than the acquiring parent.

12) With respect to recognizing and measuring the fair value of a business combination in
accordance with the acquisition method of accounting, which of the following should the
acquirer consider when determining fair value?

A) Only assets received by the acquirer.

B) Only consideration transferred by the acquirer.
C) The consideration transferred by the acquirer and the fair value of assets received
less liabilities assumed.
D) The par value of stock transferred by the acquirer, and the book value of identifiable
assets transferred by the entity acquired.
E) The book value of identifiable assets transferred to the acquirer as part of the
business combination less any liabilities assumed.

13) A statutory merger is a(n)

A) Business combination in which only one of the two companies continues to exist as
a legal corporation.
B) Business combination in which both companies continue to exist.
C) Acquisition of a competitor.
D) Acquisition of a supplier or a customer.
E) Legal proposal to acquire outstanding shares of the target's stock.

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14) In a business combination where a subsidiary retains its incorporation and which is
accounted for under the acquisition method, how should stock issuance costs and direct
combination costs be treated?

A) Stock issuance costs and direct combination costs are expensed as incurred.
B) Direct combination costs are ignored, and the stock issuance costs result in a
reduction to additional paid-in capital.
C) Direct combination costs are expensed as incurred and stock issuance costs result in
a reduction to additional paid-in capital.
D) Both are treated as part of the acquisition consideration transferred.
E) Both reduce additional paid-in capital.

15) Wilkins Inc. acquired 100% of the voting common stock of Granger Inc. on January 1,
2021. The book value and fair value of Granger’s accounts on that date (prior to creating the
combination) are as follows, along with the book value of Wilkins’s accounts:

Wilkins Granger Granger

Book Value Book Value Fair Value
Retained earnings, 1/1/21 $ 250,000 $ 240,000

Cash and receivables 170,000 70,000 $ 70,000

Inventory 230,000 180,000 210,000

Land 320,000 220,000 240,000

Buildings (net) 480,000 240,000 280,000

Equipment (net) 120,000 90,000 90,000

Liabilities 650,000 440,000 430,000

Common stock 360,000 80,000

Additional paid-in capital 60,000 40,000

Assume that Wilkins issued 13,000 shares of common stock, with a $5 par value and a $46 fair
value, to obtain all of Granger’s outstanding stock. In this acquisition transaction, how much
goodwill should be recognized?

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 A) $178,000.
B) $138,000.
C) $98,000.
D) $94,000.
E) $0.

16) Wilkins Inc. acquired 100% of the voting common stock of Granger Inc. on January 1,
2021. The book value and fair value of Granger’s accounts on that date (prior to creating the
combination) are as follows, along with the book value of Wilkins’s accounts:

Wilkins Granger Granger

Book Value Book Value Fair Value
Retained earnings, 1/1/21 $ 250,000 $ 240,000

Cash and receivables 170,000 70,000 $ 70,000

Inventory 230,000 180,000 210,000

Land 320,000 220,000 240,000

Buildings (net) 480,000 240,000 280,000

Equipment (net) 120,000 90,000 90,000

Liabilities 650,000 440,000 430,000

Common stock 360,000 80,000

Additional paid-in capital 60,000 40,000

Assume that Wilkins issued 13,000 shares of common stock with a $5 par value and a $46 fair
value for all of the outstanding stock of Granger. What is the consolidated balance for Land as a
result of this acquisition transaction?

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 A) $500,000.
B) $550,000.
C) $540,000.
D) $560,000.
E) $530,000.

17) Wilkins Inc. acquired 100% of the voting common stock of Granger Inc. on January 1,
2021. The book value and fair value of Granger’s accounts on that date (prior to creating the
combination) are as follows, along with the book value of Wilkins’s accounts:

Wilkins Granger Granger

Book Value Book Value Fair Value
Retained earnings, 1/1/21 $ 250,000 $ 240,000

Cash and receivables 170,000 70,000 $ 70,000

Inventory 230,000 180,000 210,000

Land 320,000 220,000 240,000

Buildings (net) 480,000 240,000 280,000

Equipment (net) 120,000 90,000 90,000

Liabilities 650,000 440,000 430,000

Common stock 360,000 80,000

Additional paid-in capital 60,000 40,000

Assume that Wilkins issued 13,000 shares of common stock with a $5 par value and a $46 fair
value for all of the outstanding shares of Granger. What will be the consolidated Additional Paid-
In Capital and Retained Earnings (January 1, 2021 balances) as a result of this acquisition
transaction?

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 A) $60,000 and $490,000.
B) $60,000 and $250,000.
C) $380,000 and $250,000.
D) $593,000 and $250,000.
E) $593,000 and $490,000.

18) Wilkins Inc. acquired 100% of the voting common stock of Granger Inc. on January 1,
2021. The book value and fair value of Granger’s accounts on that date (prior to creating the
combination) are as follows, along with the book value of Wilkins’s accounts:

Wilkins Granger Granger

Book Value Book Value Fair Value
Retained earnings, 1/1/21 $ 250,000 $ 240,000

Cash and receivables 170,000 70,000 $ 70,000

Inventory 230,000 180,000 210,000

Land 320,000 220,000 240,000

Buildings (net) 480,000 240,000 280,000

Equipment (net) 120,000 90,000 90,000

Liabilities 650,000 440,000 430,000

Common stock 360,000 80,000

Additional paid-in capital 60,000 40,000

Assume that Wilkins issued preferred stock with a par value of $260,000 and a fair value of
$500,000 for all of the outstanding shares of Granger in an acquisition business combination.
What will be the balance in the consolidated Inventory and Land accounts?

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 A) $440,000, $540,000.
B) $440,000, $560,000.
C) $410,000, $540,000.
D) $410,000, $560,000.
E) $390,000, $460,000.

19) Wilkins Inc. acquired 100% of the voting common stock of Granger Inc. on January 1,
2021. The book value and fair value of Granger’s accounts on that date (prior to creating the
combination) are as follows, along with the book value of Wilkins’s accounts:

Wilkins Granger Granger

Book Value Book Value Fair Value
Retained earnings, 1/1/21 $ 250,000 $ 240,000

Cash and receivables 170,000 70,000 $ 70,000

Inventory 230,000 180,000 210,000

Land 320,000 220,000 240,000

Buildings (net) 480,000 240,000 280,000

Equipment (net) 120,000 90,000 90,000

Liabilities 650,000 440,000 430,000

Common stock 360,000 80,000

Additional paid-in capital 60,000 40,000

Assume that Wilkins paid a total of $500,000 in cash for all of the shares of Granger. In addition,
Wilkins paid $42,000 for secretarial and management time allocated to the acquisition
transaction. What will be the balance in consolidated goodwill?

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 A) $0.
B) $20,000.
C) $40,000.
D) $42,000.
E) $82,000.

20) Prior to being united in a business combination, Taunton Inc. and Eubanks Corp. had the
following stockholders' equity figures:

Taunton Eubanks

Common stock ($1 par value) $ 240,000 $ 64,000

Additional paid-in capital 120,000 30,000

Retained earnings 370,000 14,000

Taunton issued 62,000 new shares of its common stock valued at $2.75 per share for all of the
outstanding stock of [Link] that Taunton acquired Eubanks on January 1, 2020 and
that Eubanks maintains a separate corporate existence. At what amount did Taunton record the
investment in Eubanks?

A) $62,000.
B) $108,000.
C) $170,500.
D) $201,500.
E) $234,000.

21) Prior to being united in a business combination, Taunton Inc. and Eubanks Corp. had the
following stockholders' equity figures:

Taunton Eubanks

Common stock ($1 par value) $ 240,000 $ 64,000

Additional paid-in capital 120,000 30,000

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 Retained earnings 370,000 14,000

Taunton issued 62,000 new shares of its common stock valued at $2.75 per share for all of the
outstanding stock of [Link] that Taunton acquired Eubanks on January 1, 2020.
Immediately afterwards, what is the reported amount of the consolidated Common Stock?

A) $240,000.
B) $302,000.
C) $304,000.
D) $366,000.
E) $410,500.

22) Crown Company had common stock of $360,000 and retained earnings of $510,000.
Baker Inc. had common stock of $750,000 and retained earnings of $970,000. On January 1,
2021, Baker issued 32,000 shares of common stock with a $13 par value and a $37 fair value for
all of Crown Company's outstanding common stock. This combination was accounted for using
the acquisition method. Immediately after the combination, what was the amount of total
consolidated net assets?

A) $2,054,000.
B) $2,136,000.
C) $2,590,000.
D) $2,904,000.
E) $3,006,000.

23) Which of the following is a not a reason for a business combination to take place?

A) Cost savings through elimination of duplicate facilities.

B) Quick entry for new and existing products into domestic and foreign markets.
C) Diversification of business risk.
D) Vertical integration.
E) Increase in stock price of the acquired company.

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24) Which of the following statements is true regarding a statutory merger?

A) The original companies dissolve while remaining as separate divisions of a newly

created company.
B) Both companies remain in existence as legal corporations with one corporation now
a subsidiary of the acquiring company.
C) The acquired company dissolves as a separate corporation and becomes a division of
the acquiring company.
D) The acquiring company acquires the stock of the acquired company as an
investment.
E) A statutory merger is no longer a legal option.

25) Which of the following statements is true regarding a statutory consolidation?

A) The original companies dissolve while remaining as separate divisions of a newly

created company.
B) Both companies remain in existence as legal corporations with one corporation now
a subsidiary of the acquiring company.
C) The acquired company dissolves as a separate corporation and becomes a division of
the acquiring company.
D) The acquiring company acquires the stock of the acquired company as an
investment.
E) A statutory consolidation is no longer a legal option.

26) In a transaction accounted for using the acquisition method where consideration
transferred exceeds book value of the acquired company, which statement is true for the
acquiring company with regard to its investment?

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 A) Net assets of the acquired company are revalued to their fair values and any excess
of consideration transferred over fair value of net assets acquired is allocated to goodwill.
B) Net assets of the acquired company are maintained at book value and any excess of
consideration transferred over book value of net assets acquired is allocated to goodwill.
C) Acquired assets are revalued to their fair values. Acquired liabilities are maintained
at book values. Any excess is allocated to goodwill.
D) Acquired long-term assets are revalued to their fair values. Any excess is allocated
to goodwill.
E) Net assets of the acquired company are revalued to their fair values and any excess
of consideration transferred over fair value of net assets acquired is deducted from additional
paid-in capital.

27) In a transaction accounted for using the acquisition method where consideration
transferred is less than fair value of net assets acquired, which statement is true?

A) Negative goodwill is recorded.

B) A deferred credit is recorded.
C) A gain on bargain purchase 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 and liabilities of the acquired company are reduced in proportion
to their fair values. Any excess is recorded as gain.

28) Which of the following statements is true regarding the acquisition method of accounting
for a business combination?

A) Net assets of the acquired company are reported at their fair values.
B) Net assets of the acquired company are reported at their book values.
C) Any goodwill associated with the acquisition is reported as a development cost.
D) The acquisition can only be effected by a mutual exchange of voting common stock.
E) Indirect costs of the combination reduce additional paid-in capital.

29) Which of the following statements is true?

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 A) The pooling of interests for business combinations is an alternative to the acquisition
method.
B) The purchase method for business combinations is an alternative to the acquisition
method.
C) Neither the purchase method nor the pooling of interests method is allowed for new
business combinations.
D) Any previous business combination originally accounted for under purchase or
pooling of interests accounting method will now be accounted for under the acquisition method
of accounting for business combinations.
E) Companies previously using the purchase or pooling of interests accounting method
must report a change in accounting principle when consolidating those subsidiaries with new
acquisition combinations.

30) The financial statements for Campbell, Inc., and Newton Company for the year ended
December 31, 2021, prior to the business combination whereby Campbell acquired Newton, are
as follows (in thousands):

Campbell Newton

Revenues $ 2,600 $ 700

Expenses 1,880 400

Net income $ 720 $ 300

Retained earnings, 1/1 $ 2,400 $ 500

Net income 720 300

Dividends (270 ) 0

Retained earning, 12/31 $ 2,850 $ 800

Cash $ 240 $ 230

Receivables and inventory 1,200 360

Buildings (net) 2,700 650

Equipment (net) 2,100 1,300

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 Total assets $ 6,240 $ 2,540

Liabilities $ 1,500 $ 720

Common stock 1,080 400

Additional paid-in capital 810 620

Retained earnings 2,850 800

Total liabilities & stockholders' equity $ 6,240 $ 2,540

On December 31, 2021, Campbell obtained a loan for $650 and used the proceeds, along with
the transfer of 35 shares of its $10 par value common stock, in exchange for all of Newton’s
common stock. At the time of the transaction, Campbell’s common stock had a fair value of $40
per [Link] connection with the business combination, Campbell paid $25 to a broker for
arranging the transaction and $30 in stock issuance costs. At the time of the transaction,
Newton’s equipment was actually worth $1,450 but its buildings were only valued at
$[Link] that Newton retains a separate corporate existence after this acquisition, at what
amount is the investment recorded on Campbell’s books?

A) $1,000.
B) $1,055.
C) $1,995.
D) $2,050.
E) $2,105.

31) The financial statements for Campbell, Inc., and Newton Company for the year ended
December 31, 2021, prior to the business combination whereby Campbell acquired Newton, are
as follows (in thousands):

Campbell Newton

Revenues $ 2,600 $ 700

Expenses 1,880 400

Net income $ 720 $ 300

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 Retained earnings, 1/1 $ 2,400 $ 500

Net income 720 300

Dividends (270 ) 0

Retained earning, 12/31 $ 2,850 $ 800

Cash $ 240 $ 230

Receivables and inventory 1,200 360

Buildings (net) 2,700 650

Equipment (net) 2,100 1,300

Total assets $ 6,240 $ 2,540

Liabilities $ 1,500 $ 720

Common stock 1,080 400

Additional paid-in capital 810 620

Retained earnings 2,850 800

Total liabilities & stockholders' equity $ 6,240 $ 2,540

On December 31, 2021, Campbell obtained a loan for $650 and used the proceeds, along with
the transfer of 35 shares of its $10 par value common stock, in exchange for all of Newton’s
common stock. At the time of the transaction, Campbell’s common stock had a fair value of $40
per [Link] connection with the business combination, Campbell paid $25 to a broker for
arranging the transaction and $30 in stock issuance costs. At the time of the transaction,
Newton’s equipment was actually worth $1,450 but its buildings were only valued at $[Link]
total amount of additional paid-in capital will Campbell recognize from this acquisition?

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 A) $1,020.
B) $1,050.
C) $1,080.
D) $1,105.
E) $1,400.

32) The financial statements for Campbell, Inc., and Newton Company for the year ended
December 31, 2021, prior to the business combination whereby Campbell acquired Newton, are
as follows (in thousands):

Campbell Newton

Revenues $ 2,600 $ 700

Expenses 1,880 400

Net income $ 720 $ 300

Retained earnings, 1/1 $ 2,400 $ 500

Net income 720 300

Dividends (270 ) 0

Retained earning, 12/31 $ 2,850 $ 800

Cash $ 240 $ 230

Receivables and inventory 1,200 360

Buildings (net) 2,700 650

Equipment (net) 2,100 1,300

Total assets $ 6,240 $ 2,540

Liabilities $ 1,500 $ 720

Common stock 1,080 400

Additional paid-in capital 810 620

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 Retained earnings 2,850 800

Total liabilities & stockholders' equity $ 6,240 $ 2,540

On December 31, 2021, Campbell obtained a loan for $650 and used the proceeds, along with
the transfer of 35 shares of its $10 par value common stock, in exchange for all of Newton’s
common stock. At the time of the transaction, Campbell’s common stock had a fair value of $40
per [Link] connection with the business combination, Campbell paid $25 to a broker for
arranging the transaction and $30 in stock issuance costs. At the time of the transaction,
Newton’s equipment was actually worth $1,450 but its buildings were only valued at
$[Link] the consolidated revenues for 2021.

A) $300.
B) $700.
C) $720.
D) $2,600.
E) $3,300.

33) The financial statements for Campbell, Inc., and Newton Company for the year ended
December 31, 2021, prior to the business combination whereby Campbell acquired Newton, are
as follows (in thousands):

Campbell Newton

Revenues $ 2,600 $ 700

Expenses 1,880 400

Net income $ 720 $ 300

Retained earnings, 1/1 $ 2,400 $ 500

Net income 720 300

Dividends (270 ) 0

Retained earning, 12/31 $ 2,850 $ 800

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 Cash $ 240 $ 230

Receivables and inventory 1,200 360

Buildings (net) 2,700 650

Equipment (net) 2,100 1,300

Total assets $ 6,240 $ 2,540

Liabilities $ 1,500 $ 720

Common stock 1,080 400

Additional paid-in capital 810 620

Retained earnings 2,850 800

Total liabilities & stockholders' equity $ 6,240 $ 2,540

On December 31, 2021, Campbell obtained a loan for $650 and used the proceeds, along with
the transfer of 35 shares of its $10 par value common stock, in exchange for all of Newton’s
common stock. At the time of the transaction, Campbell’s common stock had a fair value of $40
per [Link] connection with the business combination, Campbell paid $25 to a broker for
arranging the transaction and $30 in stock issuance costs. At the time of the transaction,
Newton’s equipment was actually worth $1,450 but its buildings were only valued at
$[Link] the consolidated receivables and inventory for 2021.

A) $470.
B) $1,200.
C) $1,440.
D) $1,560.
E) $2,030.

34) The financial statements for Campbell, Inc., and Newton Company for the year ended
December 31, 2021, prior to the business combination whereby Campbell acquired Newton, are
as follows (in thousands):

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 Campbell Newton

Revenues $ 2,600 $ 700

Expenses 1,880 400

Net income $ 720 $ 300

Retained earnings, 1/1 $ 2,400 $ 500

Net income 720 300

Dividends (270 ) 0

Retained earning, 12/31 $ 2,850 $ 800

Cash $ 240 $ 230

Receivables and inventory 1,200 360

Buildings (net) 2,700 650

Equipment (net) 2,100 1,300

Total assets $ 6,240 $ 2,540

Liabilities $ 1,500 $ 720

Common stock 1,080 400

Additional paid-in capital 810 620

Retained earnings 2,850 800

Total liabilities & stockholders' equity $ 6,240 $ 2,540

On December 31, 2021, Campbell obtained a loan for $650 and used the proceeds, along with
the transfer of 35 shares of its $10 par value common stock, in exchange for all of Newton’s
common stock. At the time of the transaction, Campbell’s common stock had a fair value of $40
per [Link] connection with the business combination, Campbell paid $25 to a broker for
arranging the transaction and $30 in stock issuance costs. At the time of the transaction,
Newton’s equipment was actually worth $1,450 but its buildings were only valued at
$[Link] the consolidated expenses for 2021.

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 A) $1,880.
B) $1,905.
C) $2,280.
D) $2,305.
E) $2,335.

35) The financial statements for Campbell, Inc., and Newton Company for the year ended
December 31, 2021, prior to the business combination whereby Campbell acquired Newton, are
as follows (in thousands):

Campbell Newton

Revenues $ 2,600 $ 700

Expenses 1,880 400

Net income $ 720 $ 300

Retained earnings, 1/1 $ 2,400 $ 500

Net income 720 300

Dividends (270 ) 0

Retained earning, 12/31 $ 2,850 $ 800

Cash $ 240 $ 230

Receivables and inventory 1,200 360

Buildings (net) 2,700 650

Equipment (net) 2,100 1,300

Total assets $ 6,240 $ 2,540

Liabilities $ 1,500 $ 720

Common stock 1,080 400

Additional paid-in capital 810 620

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 Retained earnings 2,850 800

Total liabilities & stockholders' equity $ 6,240 $ 2,540

On December 31, 2021, Campbell obtained a loan for $650 and used the proceeds, along with
the transfer of 35 shares of its $10 par value common stock, in exchange for all of Newton’s
common stock. At the time of the transaction, Campbell’s common stock had a fair value of $40
per [Link] connection with the business combination, Campbell paid $25 to a broker for
arranging the transaction and $30 in stock issuance costs. At the time of the transaction,
Newton’s equipment was actually worth $1,450 but its buildings were only valued at
$[Link] the consolidated cash account at December 31, 2021.

A) $230.
B) $240.
C) $415.
D) $445.
E) $470.

36) The financial statements for Campbell, Inc., and Newton Company for the year ended
December 31, 2021, prior to the business combination whereby Campbell acquired Newton, are
as follows (in thousands):

Campbell Newton

Revenues $ 2,600 $ 700

Expenses 1,880 400

Net income $ 720 $ 300

Retained earnings, 1/1 $ 2,400 $ 500

Net income 720 300

Dividends (270 ) 0

Retained earning, 12/31 $ 2,850 $ 800

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 Cash $ 240 $ 230

Receivables and inventory 1,200 360

Buildings (net) 2,700 650

Equipment (net) 2,100 1,300

Total assets $ 6,240 $ 2,540

Liabilities $ 1,500 $ 720

Common stock 1,080 400

Additional paid-in capital 810 620

Retained earnings 2,850 800

Total liabilities & stockholders' equity $ 6,240 $ 2,540

On December 31, 2021, Campbell obtained a loan for $650 and used the proceeds, along with
the transfer of 35 shares of its $10 par value common stock, in exchange for all of Newton’s
common stock. At the time of the transaction, Campbell’s common stock had a fair value of $40
per [Link] connection with the business combination, Campbell paid $25 to a broker for
arranging the transaction and $30 in stock issuance costs. At the time of the transaction,
Newton’s equipment was actually worth $1,450 but its buildings were only valued at
$[Link] the consolidated buildings (net) account at December 31, 2021.

A) $2,700.
B) $3,290.
C) $3,350.
D) $3,400.
E) $4,150.

37) The financial statements for Campbell, Inc., and Newton Company for the year ended
December 31, 2021, prior to the business combination whereby Campbell acquired Newton, are
as follows (in thousands):

Version 1 24
 Campbell Newton

Revenues $ 2,600 $ 700

Expenses 1,880 400

Net income $ 720 $ 300

Retained earnings, 1/1 $ 2,400 $ 500

Net income 720 300

Dividends (270 ) 0

Retained earning, 12/31 $ 2,850 $ 800

Cash $ 240 $ 230

Receivables and inventory 1,200 360

Buildings (net) 2,700 650

Equipment (net) 2,100 1,300

Total assets $ 6,240 $ 2,540

Liabilities $ 1,500 $ 720

Common stock 1,080 400

Additional paid-in capital 810 620

Retained earnings 2,850 800

Total liabilities & stockholders' equity $ 6,240 $ 2,540

On December 31, 2021, Campbell obtained a loan for $650 and used the proceeds, along with
the transfer of 35 shares of its $10 par value common stock, in exchange for all of Newton’s
common stock. At the time of the transaction, Campbell’s common stock had a fair value of $40
per [Link] connection with the business combination, Campbell paid $25 to a broker for
arranging the transaction and $30 in stock issuance costs. At the time of the transaction,
Newton’s equipment was actually worth $1,450 but its buildings were only valued at
$[Link] the consolidated equipment (net) account at December 31, 2021.

Version 1 25
 A) $1,300.
B) $1,450.
C) $2,100.
D) $3,400.
E) $3,550.

38) The financial statements for Campbell, Inc., and Newton Company for the year ended
December 31, 2021, prior to the business combination whereby Campbell acquired Newton, are
as follows (in thousands):

Campbell Newton

Revenues $ 2,600 $ 700

Expenses 1,880 400

Net income $ 720 $ 300

Retained earnings, 1/1 $ 2,400 $ 500

Net income 720 300

Dividends (270 ) 0

Retained earning, 12/31 $ 2,850 $ 800

Cash $ 240 $ 230

Receivables and inventory 1,200 360

Buildings (net) 2,700 650

Equipment (net) 2,100 1,300

Total assets $ 6,240 $ 2,540

Liabilities $ 1,500 $ 720

Common stock 1,080 400

Additional paid-in capital 810 620

Version 1 26
 Retained earnings 2,850 800

Total liabilities & stockholders' equity $ 6,240 $ 2,540

On December 31, 2021, Campbell obtained a loan for $650 and used the proceeds, along with
the transfer of 35 shares of its $10 par value common stock, in exchange for all of Newton’s
common stock. At the time of the transaction, Campbell’s common stock had a fair value of $40
per [Link] connection with the business combination, Campbell paid $25 to a broker for
arranging the transaction and $30 in stock issuance costs. At the time of the transaction,
Newton’s equipment was actually worth $1,450 but its buildings were only valued at
$[Link] the consideration transferred for this acquisition at December 31, 2021.

A) $1,000.
B) $1,055.
C) $1,995.
D) $2,050.
E) $2,105.

39) The financial statements for Campbell, Inc., and Newton Company for the year ended
December 31, 2021, prior to the business combination whereby Campbell acquired Newton, are
as follows (in thousands):

Campbell Newton

Revenues $ 2,600 $ 700

Expenses 1,880 400

Net income $ 720 $ 300

Retained earnings, 1/1 $ 2,400 $ 500

Net income 720 300

Dividends (270 ) 0

Retained earning, 12/31 $ 2,850 $ 800

Version 1 27
 Cash $ 240 $ 230

Receivables and inventory 1,200 360

Buildings (net) 2,700 650

Equipment (net) 2,100 1,300

Total assets $ 6,240 $ 2,540

Liabilities $ 1,500 $ 720

Common stock 1,080 400

Additional paid-in capital 810 620

Retained earnings 2,850 800

Total liabilities & stockholders' equity $ 6,240 $ 2,540

On December 31, 2021, Campbell obtained a loan for $650 and used the proceeds, along with
the transfer of 35 shares of its $10 par value common stock, in exchange for all of Newton’s
common stock. At the time of the transaction, Campbell’s common stock had a fair value of $40
per [Link] connection with the business combination, Campbell paid $25 to a broker for
arranging the transaction and $30 in stock issuance costs. At the time of the transaction,
Newton’s equipment was actually worth $1,450 but its buildings were only valued at
$[Link] the goodwill arising from this acquisition at December 31, 2021.

A) $0.
B) $55.
C) $100.
D) $140.
E) $230.

40) The financial statements for Campbell, Inc., and Newton Company for the year ended
December 31, 2021, prior to the business combination whereby Campbell acquired Newton, are
as follows (in thousands):

Version 1 28
 Campbell Newton

Revenues $ 2,600 $ 700

Expenses 1,880 400

Net income $ 720 $ 300

Retained earnings, 1/1 $ 2,400 $ 500

Net income 720 300

Dividends (270 ) 0

Retained earning, 12/31 $ 2,850 $ 800

Cash $ 240 $ 230

Receivables and inventory 1,200 360

Buildings (net) 2,700 650

Equipment (net) 2,100 1,300

Total assets $ 6,240 $ 2,540

Liabilities $ 1,500 $ 720

Common stock 1,080 400

Additional paid-in capital 810 620

Retained earnings 2,850 800

Total liabilities & stockholders' equity $ 6,240 $ 2,540

On December 31, 2021, Campbell obtained a loan for $650 and used the proceeds, along with
the transfer of 35 shares of its $10 par value common stock, in exchange for all of Newton’s
common stock. At the time of the transaction, Campbell’s common stock had a fair value of $40
per [Link] connection with the business combination, Campbell paid $25 to a broker for
arranging the transaction and $30 in stock issuance costs. At the time of the transaction,
Newton’s equipment was actually worth $1,450 but its buildings were only valued at
$[Link] the consolidated common stock account at December 31, 2021.

Version 1 29
 A) $750.
B) $1,080.
C) $1,430.
D) $1,480.
E) $1,830.

41) The financial statements for Campbell, Inc., and Newton Company for the year ended
December 31, 2021, prior to the business combination whereby Campbell acquired Newton, are
as follows (in thousands):

Campbell Newton

Revenues $ 2,600 $ 700

Expenses 1,880 400

Net income $ 720 $ 300

Retained earnings, 1/1 $ 2,400 $ 500

Net income 720 300

Dividends (270 ) 0

Retained earning, 12/31 $ 2,850 $ 800

Cash $ 240 $ 230

Receivables and inventory 1,200 360

Buildings (net) 2,700 650

Equipment (net) 2,100 1,300

Total assets $ 6,240 $ 2,540

Liabilities $ 1,500 $ 720

Common stock 1,080 400

Additional paid-in capital 810 620

Version 1 30
 Retained earnings 2,850 800

Total liabilities & stockholders' equity $ 6,240 $ 2,540

On December 31, 2021, Campbell obtained a loan for $650 and used the proceeds, along with
the transfer of 35 shares of its $10 par value common stock, in exchange for all of Newton’s
common stock. At the time of the transaction, Campbell’s common stock had a fair value of $40
per [Link] connection with the business combination, Campbell paid $25 to a broker for
arranging the transaction and $30 in stock issuance costs. At the time of the transaction,
Newton’s equipment was actually worth $1,450 but its buildings were only valued at
$[Link] the consolidated additional paid-in capital at December 31, 2021

A) $810.
B) $1,400.
C) $1,430.
D) $1,830.
E) $1,860.

42) The financial statements for Campbell, Inc., and Newton Company for the year ended
December 31, 2021, prior to the business combination whereby Campbell acquired Newton, are
as follows (in thousands):

Campbell Newton

Revenues $ 2,600 $ 700

Expenses 1,880 400

Net income $ 720 $ 300

Retained earnings, 1/1 $ 2,400 $ 500

Net income 720 300

Dividends (270 ) 0

Retained earning, 12/31 $ 2,850 $ 800

Version 1 31
 Cash $ 240 $ 230

Receivables and inventory 1,200 360

Buildings (net) 2,700 650

Equipment (net) 2,100 1,300

Total assets $ 6,240 $ 2,540

Liabilities $ 1,500 $ 720

Common stock 1,080 400

Additional paid-in capital 810 620

Retained earnings 2,850 800

Total liabilities & stockholders' equity $ 6,240 $ 2,540

On December 31, 2021, Campbell obtained a loan for $650 and used the proceeds, along with
the transfer of 35 shares of its $10 par value common stock, in exchange for all of Newton’s
common stock. At the time of the transaction, Campbell’s common stock had a fair value of $40
per [Link] connection with the business combination, Campbell paid $25 to a broker for
arranging the transaction and $30 in stock issuance costs. At the time of the transaction,
Newton’s equipment was actually worth $1,450 but its buildings were only valued at
$[Link] the consolidated liabilities at December 31, 2021.

A) $1,500.
B) $2,150.
C) $2,200.
D) $2,870.
E) $3,550.

43) The financial statements for Campbell, Inc., and Newton Company for the year ended
December 31, 2021, prior to the business combination whereby Campbell acquired Newton, are
as follows (in thousands):

Version 1 32
 Campbell Newton

Revenues $ 2,600 $ 700

Expenses 1,880 400

Net income $ 720 $ 300

Retained earnings, 1/1 $ 2,400 $ 500

Net income 720 300

Dividends (270 ) 0

Retained earning, 12/31 $ 2,850 $ 800

Cash $ 240 $ 230

Receivables and inventory 1,200 360

Buildings (net) 2,700 650

Equipment (net) 2,100 1,300

Total assets $ 6,240 $ 2,540

Liabilities $ 1,500 $ 720

Common stock 1,080 400

Additional paid-in capital 810 620

Retained earnings 2,850 800

Total liabilities & stockholders' equity $ 6,240 $ 2,540

On December 31, 2021, Campbell obtained a loan for $650 and used the proceeds, along with
the transfer of 35 shares of its $10 par value common stock, in exchange for all of Newton’s
common stock. At the time of the transaction, Campbell’s common stock had a fair value of $40
per [Link] connection with the business combination, Campbell paid $25 to a broker for
arranging the transaction and $30 in stock issuance costs. At the time of the transaction,
Newton’s equipment was actually worth $1,450 but its buildings were only valued at
$[Link] the consolidated retained earnings at December 31, 2021.

Version 1 33
 A) $2,825.
B) $2,875.
C) $2,900.
D) $3,625.
E) $3,650.

44) On January 1, 2021, the Moody Company entered into a transaction for 100% of the
outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in
long-term liabilities and also issued 40 shares of common stock having a par value of $1 per
share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for
assistance in bringing about this acquisition. Another $15 was paid in connection with stock
issuance costs. Prior to these transactions, the balance sheets for the two companies were as
follows:

Moody Osorio

Cash $ 180 $ 40

Receivables 810 180

Inventories 1,080 280

Land 600 360

Buildings (net) 1,260 440

Equipment (net) 480 100

Accounts payable (450 ) (80 )

Long-term liabilities (1,290 ) (400 )

Common stock ($1 par) (330 )

Common stock ($20 par) (240 )

Additional paid-in capital (1,080 ) (340 )

Retained earnings (1,260 ) (340 )

Version 1 34
Note: Parentheses indicate a credit [Link] Moody's appraisal of Osorio, three assets were
deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and
Buildings by $[Link] Osorio retains a separate corporate existence, what amount was recorded as
the investment in Osorio?

A) $400.
B) $440.
C) $800.
D) $820.
E) $835.

45) On January 1, 2021, the Moody Company entered into a transaction for 100% of the
outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in
long-term liabilities and also issued 40 shares of common stock having a par value of $1 per
share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for
assistance in bringing about this acquisition. Another $15 was paid in connection with stock
issuance costs. Prior to these transactions, the balance sheets for the two companies were as
follows:

Moody Osorio

Cash $ 180 $ 40

Receivables 810 180

Inventories 1,080 280

Land 600 360

Buildings (net) 1,260 440

Equipment (net) 480 100

Accounts payable (450 ) (80 )

Long-term liabilities (1,290 ) (400 )

Common stock ($1 par) (330 )

Common stock ($20 par) (240 )

Version 1 35
 Additional paid-in capital (1,080 ) (340 )

Retained earnings (1,260 ) (340 )

Note: Parentheses indicate a credit [Link] Moody's appraisal of Osorio, three assets were
deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and
Buildings by $[Link] is the amount of goodwill arising from this acquisition?

A) $230.
B) $120.
C) $520.
D) None. There is a gain on bargain purchase of $230.
E) None. There is a gain on bargain purchase of $265.

46) On January 1, 2021, the Moody Company entered into a transaction for 100% of the
outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in
long-term liabilities and also issued 40 shares of common stock having a par value of $1 per
share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for
assistance in bringing about this acquisition. Another $15 was paid in connection with stock
issuance costs. Prior to these transactions, the balance sheets for the two companies were as
follows:

Moody Osorio

Cash $ 180 $ 40

Receivables 810 180

Inventories 1,080 280

Land 600 360

Buildings (net) 1,260 440

Equipment (net) 480 100

Accounts payable (450 ) (80 )

Long-term liabilities (1,290 ) (400 )

Version 1 36
 Common stock ($1 par) (330 )

Common stock ($20 par) (240 )

Additional paid-in capital (1,080 ) (340 )

Retained earnings (1,260 ) (340 )

Note: Parentheses indicate a credit [Link] Moody's appraisal of Osorio, three assets were
deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and
Buildings by $[Link] the amount of consolidated inventories at date of acquisition.

A) $1,080.
B) $1,350.
C) $1,360.
D) $1,370.
E) $290.

47) On January 1, 2021, the Moody Company entered into a transaction for 100% of the
outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in
long-term liabilities and also issued 40 shares of common stock having a par value of $1 per
share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for
assistance in bringing about this acquisition. Another $15 was paid in connection with stock
issuance costs. Prior to these transactions, the balance sheets for the two companies were as
follows:

Moody Osorio

Cash $ 180 $ 40

Receivables 810 180

Inventories 1,080 280

Land 600 360

Buildings (net) 1,260 440

Equipment (net) 480 100

Version 1 37
 Accounts payable (450 ) (80 )

Long-term liabilities (1,290 ) (400 )

Common stock ($1 par) (330 )

Common stock ($20 par) (240 )

Additional paid-in capital (1,080 ) (340 )

Retained earnings (1,260 ) (340 )

Note: Parentheses indicate a credit [Link] Moody's appraisal of Osorio, three assets were
deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and
Buildings by $[Link] the amount of consolidated buildings (net) at date of acquisition.

A) $1,700.
B) $1,760.
C) $1,640.
D) $1,320.
E) $500.

48) On January 1, 2021, the Moody Company entered into a transaction for 100% of the
outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in
long-term liabilities and also issued 40 shares of common stock having a par value of $1 per
share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for
assistance in bringing about this acquisition. Another $15 was paid in connection with stock
issuance costs. Prior to these transactions, the balance sheets for the two companies were as
follows:

Moody Osorio

Cash $ 180 $ 40

Receivables 810 180

Inventories 1,080 280

Land 600 360

Version 1 38
 Buildings (net) 1,260 440

Equipment (net) 480 100

Accounts payable (450 ) (80 )

Long-term liabilities (1,290 ) (400 )

Common stock ($1 par) (330 )

Common stock ($20 par) (240 )

Additional paid-in capital (1,080 ) (340 )

Retained earnings (1,260 ) (340 )

Note: Parentheses indicate a credit [Link] Moody's appraisal of Osorio, three assets were
deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and
Buildings by $[Link] the amount of consolidated land at date of acquisition.

A) $1,000.
B) $960.
C) $920.
D) $400.
E) $320.

49) On January 1, 2021, the Moody Company entered into a transaction for 100% of the
outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in
long-term liabilities and also issued 40 shares of common stock having a par value of $1 per
share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for
assistance in bringing about this acquisition. Another $15 was paid in connection with stock
issuance costs. Prior to these transactions, the balance sheets for the two companies were as
follows:

Moody Osorio

Cash $ 180 $ 40

Receivables 810 180

Version 1 39
 Inventories 1,080 280

Land 600 360

Buildings (net) 1,260 440

Equipment (net) 480 100

Accounts payable (450 ) (80 )

Long-term liabilities (1,290 ) (400 )

Common stock ($1 par) (330 )

Common stock ($20 par) (240 )

Additional paid-in capital (1,080 ) (340 )

Retained earnings (1,260 ) (340 )

Note: Parentheses indicate a credit [Link] Moody's appraisal of Osorio, three assets were
deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and
Buildings by $[Link] the amount of consolidated equipment at date of acquisition.

A) $480.
B) $580.
C) $559.
D) $570.
E) $560.

50) On January 1, 2021, the Moody Company entered into a transaction for 100% of the
outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in
long-term liabilities and also issued 40 shares of common stock having a par value of $1 per
share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for
assistance in bringing about this acquisition. Another $15 was paid in connection with stock
issuance costs. Prior to these transactions, the balance sheets for the two companies were as
follows:

Moody Osorio

Version 1 40
 Cash $ 180 $ 40

Receivables 810 180

Inventories 1,080 280

Land 600 360

Buildings (net) 1,260 440

Equipment (net) 480 100

Accounts payable (450 ) (80 )

Long-term liabilities (1,290 ) (400 )

Common stock ($1 par) (330 )

Common stock ($20 par) (240 )

Additional paid-in capital (1,080 ) (340 )

Retained earnings (1,260 ) (340 )

Note: Parentheses indicate a credit [Link] Moody's appraisal of Osorio, three assets were
deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and
Buildings by $[Link] the amount of consolidated common stock at date of acquisition.

A) $370.
B) $570.
C) $610.
D) $330.
E) $530.

Version 1 41
51) On January 1, 2021, the Moody Company entered into a transaction for 100% of the
outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in
long-term liabilities and also issued 40 shares of common stock having a par value of $1 per
share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for
assistance in bringing about this acquisition. Another $15 was paid in connection with stock
issuance costs. Prior to these transactions, the balance sheets for the two companies were as
follows:

Moody Osorio

Cash $ 180 $ 40

Receivables 810 180

Inventories 1,080 280

Land 600 360

Buildings (net) 1,260 440

Equipment (net) 480 100

Accounts payable (450 ) (80 )

Long-term liabilities (1,290 ) (400 )

Common stock ($1 par) (330 )

Common stock ($20 par) (240 )

Additional paid-in capital (1,080 ) (340 )

Retained earnings (1,260 ) (340 )

Note: Parentheses indicate a credit [Link] Moody's appraisal of Osorio, three assets were
deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and
Buildings by $[Link] the amount of consolidated additional paid-in capital at date of
acquisition.

Version 1 42
 A) $1,080.
B) $1,420.
C) $1,065.
D) $1,425.
E) $1,440.

52) On January 1, 2021, the Moody Company entered into a transaction for 100% of the
outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in
long-term liabilities and also issued 40 shares of common stock having a par value of $1 per
share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for
assistance in bringing about this acquisition. Another $15 was paid in connection with stock
issuance costs. Prior to these transactions, the balance sheets for the two companies were as
follows:

Moody Osorio

Cash $ 180 $ 40

Receivables 810 180

Inventories 1,080 280

Land 600 360

Buildings (net) 1,260 440

Equipment (net) 480 100

Accounts payable (450 ) (80 )

Long-term liabilities (1,290 ) (400 )

Common stock ($1 par) (330 )

Common stock ($20 par) (240 )

Additional paid-in capital (1,080 ) (340 )

Retained earnings (1,260 ) (340 )

Version 1 43
Note: Parentheses indicate a credit [Link] Moody's appraisal of Osorio, three assets were
deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and
Buildings by $[Link] the amount of consolidated cash after recording the acquisition
transaction.

A) $220.
B) $185.
C) $200.
D) $205.
E) $215.

53) McCoy has the following account balances as of December 31, 2020 before an
acquisition transaction takes place.

Inventory $125,000
Land 450,000
Buildings (net) 575,000
Common stock ($10 par) 600,000
Additional paid-in capital 300,000
Retained earnings 250,000

The fair value of McCoy’s Land and Buildings are $650,000 and $600,000, respectively. On
December 31, 2020, Ferguson Company issues 30,000 shares of its $10 par value ($30 fair value)
common stock in exchange for all of the shares of McCoy’s common stock. Ferguson paid
$12,000 for costs to issue the new shares of stock. Before the acquisition, Ferguson has $800,000
in its common stock account and $350,000 in its additional paid-in capital [Link] December
31, 2020, assuming that McCoy will retain its separate corporate existence, what value is
assigned to Ferguson’s investment account?

A) $150,000.
B) $300,000.
C) $600,000.
D) $900,000.
E) $912,000.

Version 1 44
54) McCoy has the following account balances as of December 31, 2020 before an
acquisition transaction takes place.

Inventory $125,000
Land 450,000
Buildings (net) 575,000
Common stock ($10 par) 600,000
Additional paid-in capital 300,000
Retained earnings 250,000

The fair value of McCoy’s Land and Buildings are $650,000 and $600,000, respectively. On
December 31, 2020, Ferguson Company issues 30,000 shares of its $10 par value ($30 fair value)
common stock in exchange for all of the shares of McCoy’s common stock. Ferguson paid
$12,000 for costs to issue the new shares of stock. Before the acquisition, Ferguson has $800,000
in its common stock account and $350,000 in its additional paid-in capital [Link] the date of
acquisition, by how much does Ferguson’s additional paid-in capital increase or decrease?

A) $0.
B) $588,000 increase.
C) $600,000 increase.
D) $612,000 increase.
E) $900,000 decrease.

55) McCoy has the following account balances as of December 31, 2020 before an
acquisition transaction takes place.

Inventory $125,000
Land 450,000
Buildings (net) 575,000
Common stock ($10 par) 600,000
Additional paid-in capital 300,000
Retained earnings 250,000

Version 1 45
The fair value of McCoy’s Land and Buildings are $650,000 and $600,000, respectively. On
December 31, 2020, Ferguson Company issues 30,000 shares of its $10 par value ($30 fair value)
common stock in exchange for all of the shares of McCoy’s common stock. Ferguson paid
$12,000 for costs to issue the new shares of stock. Before the acquisition, Ferguson has $800,000
in its common stock account and $350,000 in its additional paid-in capital [Link] will the
consolidated common stock account be as a result of this acquisition?

A) $300,000.
B) $800,000.
C) $1,100,000.
D) $1,400,000.
E) $1,700,000.

56) McCoy has the following account balances as of December 31, 2020 before an
acquisition transaction takes place.

Inventory $125,000
Land 450,000
Buildings (net) 575,000
Common stock ($10 par) 600,000
Additional paid-in capital 300,000
Retained earnings 250,000

The fair value of McCoy’s Land and Buildings are $650,000 and $600,000, respectively. On
December 31, 2020, Ferguson Company issues 30,000 shares of its $10 par value ($30 fair value)
common stock in exchange for all of the shares of McCoy’s common stock. Ferguson paid
$12,000 for costs to issue the new shares of stock. Before the acquisition, Ferguson has $800,000
in its common stock account and $350,000 in its additional paid-in capital [Link] will be
the consolidated additional paid-in capital as a result of this acquisition?

Version 1 46
 A) $350,000.
B) $650,000.
C) $938,000.
D) $950,000.
E) $962,000.

57) The financial statement amounts for the Atwood Company and the Franz Company as of
December 31, 2021, are presented below. Also included are the fair values for Franz Company's
net assets (all numbers are in thousands).

Atwood Franz Co. Franz Co.

Book Value Book Value Fair Value
12/31/2021 12/31/2021 12/31/2021

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings 1/1/18 (1,170 ) (480 )

Revenues (2,880 ) (660 )

Version 1 47
 Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume an acquisition business combination took

place at December 31, 2021. Atwood issued 50 shares of its common stock with a fair value of
$35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were [Link] the amount of the
consideration transferred by Atwood to acquire Franz.

A) $1,750.
B) $1,760.
C) $1,775.
D) $1,300.
E) $1,120.

58) The financial statement amounts for the Atwood Company and the Franz Company as of
December 31, 2021, are presented below. Also included are the fair values for Franz Company's
net assets (all numbers are in thousands).

Atwood Franz Co. Franz Co.

Book Value Book Value Fair Value
12/31/2021 12/31/2021 12/31/2021

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Version 1 48
 Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings 1/1/18 (1,170 ) (480 )

Revenues (2,880 ) (660 )

Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume an acquisition business combination took

place at December 31, 2021. Atwood issued 50 shares of its common stock with a fair value of
$35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were [Link] the consolidated common
stock at the date of acquisition.

A) $1,000.
B) $2,980.
C) $2,400.
D) $3,400.
E) $3,730.

59) The financial statement amounts for the Atwood Company and the Franz Company as of
December 31, 2021, are presented below. Also included are the fair values for Franz Company's
net assets (all numbers are in thousands).

Atwood Franz Co. Franz Co.

Book Value Book Value Fair Value
12/31/2021 12/31/2021 12/31/2021

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Version 1 49
 Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings 1/1/18 (1,170 ) (480 )

Revenues (2,880 ) (660 )

Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume an acquisition business combination took

place at December 31, 2021. Atwood issued 50 shares of its common stock with a fair value of
$35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were [Link] consolidated inventory at
the date of the acquisition.

A) $1,650.
B) $1,810.
C) $1,230.
D) $580.
E) $1,830.

60) The financial statement amounts for the Atwood Company and the Franz Company as of
December 31, 2021, are presented below. Also included are the fair values for Franz Company's
net assets (all numbers are in thousands).

Atwood Franz Co. Franz Co.

Book Value Book Value Fair Value

Version 1 50
 12/31/2021 12/31/2021 12/31/2021

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings 1/1/18 (1,170 ) (480 )

Revenues (2,880 ) (660 )

Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume an acquisition business combination took

place at December 31, 2021. Atwood issued 50 shares of its common stock with a fair value of
$35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were [Link] consolidated land at the
date of the acquisition.

Version 1 51
 A) $2,060.
B) $1,800.
C) $260.
D) $2,050.
E) $2,070.

61) The financial statement amounts for the Atwood Company and the Franz Company as of
December 31, 2021, are presented below. Also included are the fair values for Franz Company's
net assets (all numbers are in thousands).

Atwood Franz Co. Franz Co.

Book Value Book Value Fair Value
12/31/2021 12/31/2021 12/31/2021

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings 1/1/18 (1,170 ) (480 )

Revenues (2,880 ) (660 )

Version 1 52
 Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume an acquisition business combination took

place at December 31, 2021. Atwood issued 50 shares of its common stock with a fair value of
$35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were [Link] consolidated buildings (net)
at the date of the acquisition.

A) $2,450.
B) $2,340.
C) $1,800.
D) $650.
E) $1,690.

62) The financial statement amounts for the Atwood Company and the Franz Company as of
December 31, 2021, are presented below. Also included are the fair values for Franz Company's
net assets (all numbers are in thousands).

Atwood Franz Co. Franz Co.

Book Value Book Value Fair Value
12/31/2021 12/31/2021 12/31/2021

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Version 1 53
 Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings 1/1/18 (1,170 ) (480 )

Revenues (2,880 ) (660 )

Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume an acquisition business combination took

place at December 31, 2021. Atwood issued 50 shares of its common stock with a fair value of
$35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were [Link] consolidated long-term
liabilities at the date of the acquisition.

A) $2,600.
B) $2,700.
C) $2,800.
D) $3,720.
E) $3,820.

63) The financial statement amounts for the Atwood Company and the Franz Company as of
December 31, 2021, are presented below. Also included are the fair values for Franz Company's
net assets (all numbers are in thousands).

Atwood Franz Co. Franz Co.

Book Value Book Value Fair Value
12/31/2021 12/31/2021 12/31/2021

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Version 1 54
 Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings 1/1/18 (1,170 ) (480 )

Revenues (2,880 ) (660 )

Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume an acquisition business combination took

place at December 31, 2021. Atwood issued 50 shares of its common stock with a fair value of
$35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were [Link] consolidated goodwill at
the date of the acquisition.

A) $360.
B) $450.
C) $460.
D) $440.
E) $475.

64) The financial statement amounts for the Atwood Company and the Franz Company as of
December 31, 2021, are presented below. Also included are the fair values for Franz Company's
net assets (all numbers are in thousands).

Atwood Franz Co. Franz Co.

Book Value Book Value Fair Value

Version 1 55
 12/31/2021 12/31/2021 12/31/2021

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings 1/1/18 (1,170 ) (480 )

Revenues (2,880 ) (660 )

Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume an acquisition business combination took

place at December 31, 2021. Atwood issued 50 shares of its common stock with a fair value of
$35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were [Link] consolidated equipment
(net) at the date of the acquisition.

Version 1 56
 A) $400.
B) $660.
C) $1,060.
D) $1,040.
E) $1,050.

65) The financial statement amounts for the Atwood Company and the Franz Company as of
December 31, 2021, are presented below. Also included are the fair values for Franz Company's
net assets (all numbers are in thousands).

Atwood Franz Co. Franz Co.

Book Value Book Value Fair Value
12/31/2021 12/31/2021 12/31/2021

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings 1/1/18 (1,170 ) (480 )

Revenues (2,880 ) (660 )

Version 1 57
 Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume an acquisition business combination took

place at December 31, 2021. Atwood issued 50 shares of its common stock with a fair value of
$35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were [Link] fair value of the net assets
acquired at the date of the acquisition.

A) $1,300.
B) $1,340.
C) $1,500.
D) $1,750.
E) $2,480.

66) The financial statement amounts for the Atwood Company and the Franz Company as of
December 31, 2021, are presented below. Also included are the fair values for Franz Company's
net assets (all numbers are in thousands).

Atwood Franz Co. Franz Co.

Book Value Book Value Fair Value
12/31/2021 12/31/2021 12/31/2021

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Version 1 58
 Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings 1/1/18 (1,170 ) (480 )

Revenues (2,880 ) (660 )

Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume an acquisition business combination took

place at December 31, 2021. Atwood issued 50 shares of its common stock with a fair value of
$35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were [Link] consolidated retained
earnings at the date of the acquisition.

A) $1,160.
B) $1,170.
C) $1,280.
D) $1,290.
E) $1,640.

67) The financial statement amounts for the Atwood Company and the Franz Company as of
December 31, 2021, are presented below. Also included are the fair values for Franz Company's
net assets (all numbers are in thousands).

Atwood Franz Co. Franz Co.

Book Value Book Value Fair Value
12/31/2021 12/31/2021 12/31/2021

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Version 1 59
 Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings 1/1/18 (1,170 ) (480 )

Revenues (2,880 ) (660 )

Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume an acquisition business combination took

place at December 31, 2021. Atwood issued 50 shares of its common stock with a fair value of
$35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were [Link] consolidated revenues
immediately following the acquisition.

A) $3,540.
B) $2,880.
C) $1,170.
D) $1,650.
E) $4,050.

68) The financial statement amounts for the Atwood Company and the Franz Company as of
December 31, 2021, are presented below. Also included are the fair values for Franz Company's
net assets (all numbers are in thousands).

Atwood Franz Co. Franz Co.

Book Value Book Value Fair Value

Version 1 60
 12/31/2021 12/31/2021 12/31/2021

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings 1/1/18 (1,170 ) (480 )

Revenues (2,880 ) (660 )

Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume an acquisition business combination took

place at December 31, 2021. Atwood issued 50 shares of its common stock with a fair value of
$35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were [Link] consolidated cash at the
completion of the acquisition.

Version 1 61
 A) $1,350.
B) $1,085.
C) $1,110.
D) $870.
E) $845.

69) The financial statement amounts for the Atwood Company and the Franz Company as of
December 31, 2021, are presented below. Also included are the fair values for Franz Company's
net assets (all numbers are in thousands).

Atwood Franz Co. Franz Co.

Book Value Book Value Fair Value
12/31/2021 12/31/2021 12/31/2021

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings 1/1/18 (1,170 ) (480 )

Revenues (2,880 ) (660 )

Version 1 62
 Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume an acquisition business combination took

place at December 31, 2021. Atwood issued 50 shares of its common stock with a fair value of
$35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were [Link] consolidated expenses
immediately following the acquisition.

A) $2,760.
B) $2,770.
C) $2,785.
D) $3,380.
E) $3,390.

70) Presented below are the financial balances for the Boxwood Company and the Tranz
Company as of December 31, 2020, immediately before Boxwood acquired Tranz. Also included
are the fair values for Tranz Company's net assets at that date (all amounts in thousands).

Boxwood Tranz Co. Tranz Co.

Book Value Book Value Fair Value
12/31/20 12/31/20 12/31/20

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Version 1 63
 Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings (1,170 ) (480 )

Revenues (2,880 ) (660 )

Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume a business combination took place at

December 31, 2020. Boxwood issued 50 shares of its common stock with a fair value of $35 per
share for all of the outstanding common shares of Tranz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this acquisition transaction.
To settle a difference of opinion regarding Tranz’s fair value, Boxwood promises to pay an
additional $5.2 (in thousands) to the former owners if Tranz’s earnings exceed a certain sum
during the next year. Given the probability of the required contingency payment and utilizing a
4% discount rate, the expected present value of the contingency is $5 (in thousands).Compute the
investment to be recorded at the date of acquisition.

A) $1,750.
B) $1,755.
C) $1,725.
D) $1,760.
E) $1,765.

71) Presented below are the financial balances for the Boxwood Company and the Tranz
Company as of December 31, 2020, immediately before Boxwood acquired Tranz. Also included
are the fair values for Tranz Company's net assets at that date (all amounts in thousands).

Boxwood Tranz Co. Tranz Co.

Book Value Book Value Fair Value
12/31/20 12/31/20 12/31/20

Cash $ 870 $ 240 $ 240

Version 1 64
 Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings (1,170 ) (480 )

Revenues (2,880 ) (660 )

Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume a business combination took place at

December 31, 2020. Boxwood issued 50 shares of its common stock with a fair value of $35 per
share for all of the outstanding common shares of Tranz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this acquisition transaction.
To settle a difference of opinion regarding Tranz’s fair value, Boxwood promises to pay an
additional $5.2 (in thousands) to the former owners if Tranz’s earnings exceed a certain sum
during the next year. Given the probability of the required contingency payment and utilizing a
4% discount rate, the expected present value of the contingency is $5 (in thousands).Compute
consolidated inventory immediately following the acquisition.

Version 1 65
 A) $1,650.
B) $1,810.
C) $1,230.
D) $580.
E) $1,830.

72) Presented below are the financial balances for the Boxwood Company and the Tranz
Company as of December 31, 2020, immediately before Boxwood acquired Tranz. Also included
are the fair values for Tranz Company's net assets at that date (all amounts in thousands).

Boxwood Tranz Co. Tranz Co.

Book Value Book Value Fair Value
12/31/20 12/31/20 12/31/20

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings (1,170 ) (480 )

Revenues (2,880 ) (660 )

Version 1 66
 Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume a business combination took place at

December 31, 2020. Boxwood issued 50 shares of its common stock with a fair value of $35 per
share for all of the outstanding common shares of Tranz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this acquisition transaction.
To settle a difference of opinion regarding Tranz’s fair value, Boxwood promises to pay an
additional $5.2 (in thousands) to the former owners if Tranz’s earnings exceed a certain sum
during the next year. Given the probability of the required contingency payment and utilizing a
4% discount rate, the expected present value of the contingency is $5 (in thousands).Compute
consolidated land immediately following the acquisition.

A) $2,060.
B) $1,800.
C) $260.
D) $2,050.
E) $2,070.

73) Presented below are the financial balances for the Boxwood Company and the Tranz
Company as of December 31, 2020, immediately before Boxwood acquired Tranz. Also included
are the fair values for Tranz Company's net assets at that date (all amounts in thousands).

Boxwood Tranz Co. Tranz Co.

Book Value Book Value Fair Value
12/31/20 12/31/20 12/31/20

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Version 1 67
 Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings (1,170 ) (480 )

Revenues (2,880 ) (660 )

Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume a business combination took place at

December 31, 2020. Boxwood issued 50 shares of its common stock with a fair value of $35 per
share for all of the outstanding common shares of Tranz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this acquisition transaction.
To settle a difference of opinion regarding Tranz’s fair value, Boxwood promises to pay an
additional $5.2 (in thousands) to the former owners if Tranz’s earnings exceed a certain sum
during the next year. Given the probability of the required contingency payment and utilizing a
4% discount rate, the expected present value of the contingency is $5 (in thousands).Compute
consolidated buildings (net) immediately following the acquisition.

A) $2,450.
B) $2,340.
C) $1,800.
D) $650.
E) $1,690.

74) Presented below are the financial balances for the Boxwood Company and the Tranz
Company as of December 31, 2020, immediately before Boxwood acquired Tranz. Also included
are the fair values for Tranz Company's net assets at that date (all amounts in thousands).

Boxwood Tranz Co. Tranz Co.

Version 1 68
 Book Value Book Value Fair Value
12/31/20 12/31/20 12/31/20

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings (1,170 ) (480 )

Revenues (2,880 ) (660 )

Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume a business combination took place at

December 31, 2020. Boxwood issued 50 shares of its common stock with a fair value of $35 per
share for all of the outstanding common shares of Tranz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this acquisition transaction.
To settle a difference of opinion regarding Tranz’s fair value, Boxwood promises to pay an
additional $5.2 (in thousands) to the former owners if Tranz’s earnings exceed a certain sum
during the next year. Given the probability of the required contingency payment and utilizing a
4% discount rate, the expected present value of the contingency is $5 (in thousands).Compute
consolidated goodwill immediately following the acquisition.

Version 1 69
 A) $440.
B) $442.
C) $450.
D) $455.
E) $452.

75) Presented below are the financial balances for the Boxwood Company and the Tranz
Company as of December 31, 2020, immediately before Boxwood acquired Tranz. Also included
are the fair values for Tranz Company's net assets at that date (all amounts in thousands).

Boxwood Tranz Co. Tranz Co.

Book Value Book Value Fair Value
12/31/20 12/31/20 12/31/20

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings (1,170 ) (480 )

Revenues (2,880 ) (660 )

Version 1 70
 Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume a business combination took place at

December 31, 2020. Boxwood issued 50 shares of its common stock with a fair value of $35 per
share for all of the outstanding common shares of Tranz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this acquisition transaction.
To settle a difference of opinion regarding Tranz’s fair value, Boxwood promises to pay an
additional $5.2 (in thousands) to the former owners if Tranz’s earnings exceed a certain sum
during the next year. Given the probability of the required contingency payment and utilizing a
4% discount rate, the expected present value of the contingency is $5 (in thousands).Compute
consolidated equipment immediately following the acquisition.

A) $400.
B) $660.
C) $1,060.
D) $1,040.
E) $1,050.

76) Presented below are the financial balances for the Boxwood Company and the Tranz
Company as of December 31, 2020, immediately before Boxwood acquired Tranz. Also included
are the fair values for Tranz Company's net assets at that date (all amounts in thousands).

Boxwood Tranz Co. Tranz Co.

Book Value Book Value Fair Value
12/31/20 12/31/20 12/31/20

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Version 1 71
 Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings (1,170 ) (480 )

Revenues (2,880 ) (660 )

Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume a business combination took place at

December 31, 2020. Boxwood issued 50 shares of its common stock with a fair value of $35 per
share for all of the outstanding common shares of Tranz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this acquisition transaction.
To settle a difference of opinion regarding Tranz’s fair value, Boxwood promises to pay an
additional $5.2 (in thousands) to the former owners if Tranz’s earnings exceed a certain sum
during the next year. Given the probability of the required contingency payment and utilizing a
4% discount rate, the expected present value of the contingency is $5 (in thousands).Compute
consolidated retained earnings as a result of this acquisition.

A) $1,160.
B) $1,170.
C) $1,265.
D) $1,280.
E) $1,650.

77) Presented below are the financial balances for the Boxwood Company and the Tranz
Company as of December 31, 2020, immediately before Boxwood acquired Tranz. Also included
are the fair values for Tranz Company's net assets at that date (all amounts in thousands).

Boxwood Tranz Co. Tranz Co.

Version 1 72
 Book Value Book Value Fair Value
12/31/20 12/31/20 12/31/20

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings (1,170 ) (480 )

Revenues (2,880 ) (660 )

Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume a business combination took place at

December 31, 2020. Boxwood issued 50 shares of its common stock with a fair value of $35 per
share for all of the outstanding common shares of Tranz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this acquisition transaction.
To settle a difference of opinion regarding Tranz’s fair value, Boxwood promises to pay an
additional $5.2 (in thousands) to the former owners if Tranz’s earnings exceed a certain sum
during the next year. Given the probability of the required contingency payment and utilizing a
4% discount rate, the expected present value of the contingency is $5 (in thousands).Compute
consolidated revenues immediately following the acquisition.

Version 1 73
 A) $3,540.
B) $2,880.
C) $1,170.
D) $1,650.
E) $4,050.

78) Presented below are the financial balances for the Boxwood Company and the Tranz
Company as of December 31, 2020, immediately before Boxwood acquired Tranz. Also included
are the fair values for Tranz Company's net assets at that date (all amounts in thousands).

Boxwood Tranz Co. Tranz Co.

Book Value Book Value Fair Value
12/31/20 12/31/20 12/31/20

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings (1,170 ) (480 )

Revenues (2,880 ) (660 )

Version 1 74
 Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume a business combination took place at

December 31, 2020. Boxwood issued 50 shares of its common stock with a fair value of $35 per
share for all of the outstanding common shares of Tranz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this acquisition transaction.
To settle a difference of opinion regarding Tranz’s fair value, Boxwood promises to pay an
additional $5.2 (in thousands) to the former owners if Tranz’s earnings exceed a certain sum
during the next year. Given the probability of the required contingency payment and utilizing a
4% discount rate, the expected present value of the contingency is $5 (in thousands).Compute
consolidated expenses immediately following the acquisition.

A) $2,735.
B) $2,760.
C) $2,770.
D) $2,785.
E) $3,380.

79) Presented below are the financial balances for the Boxwood Company and the Tranz
Company as of December 31, 2020, immediately before Boxwood acquired Tranz. Also included
are the fair values for Tranz Company's net assets at that date (all amounts in thousands).

Boxwood Tranz Co. Tranz Co.

Book Value Book Value Fair Value
12/31/20 12/31/20 12/31/20

Cash $ 870 $ 240 $ 240

Receivables 660 600 600

Inventory 1,230 420 580

Land 1,800 260 250

Buildings (net) 1,800 540 650

Equipment (net) 660 380 400

Version 1 75
 Accounts payable (570 ) (240 ) (240 )

Accrued expenses (270 ) (60 ) (60 )

Long-term liabilities (2,700 ) (1,020 ) (1,120 )

Common stock ($20 par) (1,980 )

Common stock ($5 par) (420 )

Additional paid-in capital (210 ) (180 )

Retained earnings (1,170 ) (480 )

Revenues (2,880 ) (660 )

Expenses 2,760 620

Note: Parenthesis indicate a credit balanceAssume a business combination took place at

December 31, 2020. Boxwood issued 50 shares of its common stock with a fair value of $35 per
share for all of the outstanding common shares of Tranz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this acquisition transaction.
To settle a difference of opinion regarding Tranz’s fair value, Boxwood promises to pay an
additional $5.2 (in thousands) to the former owners if Tranz’s earnings exceed a certain sum
during the next year. Given the probability of the required contingency payment and utilizing a
4% discount rate, the expected present value of the contingency is $5 (in thousands).Compute the
consolidated cash upon completion of the acquisition.

A) $1,350.
B) $1,110.
C) $1,080.
D) $1,085.
E) $635.

Version 1 76
80) Flynn acquires 100 percent of the outstanding voting shares of Macek Company on
January 1, 2021. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000
shares of $20 par value common stock on this date. Flynn's stock had a fair value of $36 per
share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the
acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance [Link] book
values for both Flynn and Macek immediately preceding the acquisition follow. The fair value of
each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized
trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any
related question also is in thousands.

Flynn, Macek Company

Inc
Book Fair
Value Value
Cash $ 900 $ 80 $ 80

Receivables 480 180 160

Inventory 660 260 300

Land 300 120 130

Buildings (net) 1,200 220 280

Equipment 360 100 75

Accounts payable 480 60 60

Long-term liabilities 1,140 340 300

Common stock 1,000 80

Additional paid-in capital 200 0

Retained earnings 1,080 480

By how much will Flynn’s additional paid-in capital increase as a result of this acquisition?

Version 1 77
 A) $150,000.
B) $160,000.
C) $230,000.
D) $350,000.
E) $360,000.

81) Flynn acquires 100 percent of the outstanding voting shares of Macek Company on
January 1, 2021. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000
shares of $20 par value common stock on this date. Flynn's stock had a fair value of $36 per
share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the
acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance [Link] book
values for both Flynn and Macek immediately preceding the acquisition follow. The fair value of
each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized
trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any
related question also is in thousands.

Flynn, Macek Company

Inc
Book Fair
Value Value
Cash $ 900 $ 80 $ 80

Receivables 480 180 160

Inventory 660 260 300

Land 300 120 130

Buildings (net) 1,200 220 280

Equipment 360 100 75

Accounts payable 480 60 60

Long-term liabilities 1,140 340 300

Common stock 1,000 80

Additional paid-in capital 200 0

Retained earnings 1,080 480

Version 1 78
What amount will be reported for goodwill as a result of this acquisition?

A) $30,000.
B) $55,000.
C) $65,000.
D) $175,000.
E) $200,000.

82) Flynn acquires 100 percent of the outstanding voting shares of Macek Company on
January 1, 2021. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000
shares of $20 par value common stock on this date. Flynn's stock had a fair value of $36 per
share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the
acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance [Link] book
values for both Flynn and Macek immediately preceding the acquisition follow. The fair value of
each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized
trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any
related question also is in thousands.

Flynn, Macek Company

Inc
Book Fair
Value Value
Cash $ 900 $ 80 $ 80

Receivables 480 180 160

Inventory 660 260 300

Land 300 120 130

Buildings (net) 1,200 220 280

Equipment 360 100 75

Accounts payable 480 60 60

Long-term liabilities 1,140 340 300

Common stock 1,000 80

Version 1 79
 Additional paid-in capital 200 0

Retained earnings 1,080 480

What amount will be reported for consolidated receivables?

A) $660,000.
B) $640,000.
C) $500,000.
D) $460,000.
E) $480,000.

83) Flynn acquires 100 percent of the outstanding voting shares of Macek Company on
January 1, 2021. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000
shares of $20 par value common stock on this date. Flynn's stock had a fair value of $36 per
share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the
acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance [Link] book
values for both Flynn and Macek immediately preceding the acquisition follow. The fair value of
each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized
trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any
related question also is in thousands.

Flynn, Macek Company

Inc
Book Fair
Value Value
Cash $ 900 $ 80 $ 80

Receivables 480 180 160

Inventory 660 260 300

Land 300 120 130

Buildings (net) 1,200 220 280

Equipment 360 100 75

Accounts payable 480 60 60

Version 1 80
 Long-term liabilities 1,140 340 300

Common stock 1,000 80

Additional paid-in capital 200 0

Retained earnings 1,080 480

What amount will be reported for consolidated inventory?

A) $1,000,000.
B) $960,000.
C) $920,000.
D) $660,000.
E) $620,000.

84) Flynn acquires 100 percent of the outstanding voting shares of Macek Company on
January 1, 2021. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000
shares of $20 par value common stock on this date. Flynn's stock had a fair value of $36 per
share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the
acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance [Link] book
values for both Flynn and Macek immediately preceding the acquisition follow. The fair value of
each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized
trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any
related question also is in thousands.

Flynn, Macek Company

Inc
Book Fair
Value Value
Cash $ 900 $ 80 $ 80

Receivables 480 180 160

Inventory 660 260 300

Land 300 120 130

Buildings (net) 1,200 220 280

Version 1 81
 Equipment 360 100 75

Accounts payable 480 60 60

Long-term liabilities 1,140 340 300

Common stock 1,000 80

Additional paid-in capital 200 0

Retained earnings 1,080 480

What amount will be reported for consolidated buildings (net)?

A) $1,420,000.
B) $1,260,000.
C) $1,140,000.
D) $1,480,000.
E) $1,200,000.

85) Flynn acquires 100 percent of the outstanding voting shares of Macek Company on
January 1, 2021. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000
shares of $20 par value common stock on this date. Flynn's stock had a fair value of $36 per
share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the
acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance [Link] book
values for both Flynn and Macek immediately preceding the acquisition follow. The fair value of
each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized
trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any
related question also is in thousands.

Flynn, Macek Company

Inc
Book Fair
Value Value
Cash $ 900 $ 80 $ 80

Receivables 480 180 160

Inventory 660 260 300

Version 1 82
 Land 300 120 130

Buildings (net) 1,200 220 280

Equipment 360 100 75

Accounts payable 480 60 60

Long-term liabilities 1,140 340 300

Common stock 1,000 80

Additional paid-in capital 200 0

Retained earnings 1,080 480

What amount will be reported for consolidated equipment (net)?

A) $385,000.
B) $335,000.
C) $435,000.
D) $460,000.
E) $360,000.

86) Flynn acquires 100 percent of the outstanding voting shares of Macek Company on
January 1, 2021. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000
shares of $20 par value common stock on this date. Flynn's stock had a fair value of $36 per
share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the
acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance [Link] book
values for both Flynn and Macek immediately preceding the acquisition follow. The fair value of
each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized
trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any
related question also is in thousands.

Flynn, Macek Company

Inc
Book Fair
Value Value
Cash $ 900 $ 80 $ 80

Version 1 83
 Receivables 480 180 160

Inventory 660 260 300

Land 300 120 130

Buildings (net) 1,200 220 280

Equipment 360 100 75

Accounts payable 480 60 60

Long-term liabilities 1,140 340 300

Common stock 1,000 80

Additional paid-in capital 200 0

Retained earnings 1,080 480

What amount will be reported for consolidated long-term liabilities?

A) $1,520,000.
B) $1,480,000.
C) $1,440,000.
D) $1,180,000.
E) $1,100,000.

87) Flynn acquires 100 percent of the outstanding voting shares of Macek Company on
January 1, 2021. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000
shares of $20 par value common stock on this date. Flynn's stock had a fair value of $36 per
share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the
acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance [Link] book
values for both Flynn and Macek immediately preceding the acquisition follow. The fair value of
each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized
trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any
related question also is in thousands.

Flynn, Macek Company

Version 1 84
 Inc Book Fair
Value Value
Cash $ 900 $ 80 $ 80

Receivables 480 180 160

Inventory 660 260 300

Land 300 120 130

Buildings (net) 1,200 220 280

Equipment 360 100 75

Accounts payable 480 60 60

Long-term liabilities 1,140 340 300

Common stock 1,000 80

Additional paid-in capital 200 0

Retained earnings 1,080 480

What amount will be reported for consolidated common stock?

A) $1,000,000.
B) $1,080,000.
C) $1,200,000.
D) $1,280,000.
E) $1,360,000.

Version 1 85
88) Flynn acquires 100 percent of the outstanding voting shares of Macek Company on
January 1, 2021. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000
shares of $20 par value common stock on this date. Flynn's stock had a fair value of $36 per
share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the
acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance [Link] book
values for both Flynn and Macek immediately preceding the acquisition follow. The fair value of
each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized
trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any
related question also is in thousands.

Flynn, Macek Company

Inc
Book Fair
Value Value
Cash $ 900 $ 80 $ 80

Receivables 480 180 160

Inventory 660 260 300

Land 300 120 130

Buildings (net) 1,200 220 280

Equipment 360 100 75

Accounts payable 480 60 60

Long-term liabilities 1,140 340 300

Common stock 1,000 80

Additional paid-in capital 200 0

Retained earnings 1,080 480

Assuming the combination occurred prior to 2009 and was accounted for under the purchase
method, what amount will be reported for consolidated retained earnings?

Version 1 86
 A) $1,830,000.
B) $1,350,000.
C) $1,080,000.
D) $1,560,000.
E) $1,535,000.

89) Flynn acquires 100 percent of the outstanding voting shares of Macek Company on
January 1, 2021. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000
shares of $20 par value common stock on this date. Flynn's stock had a fair value of $36 per
share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the
acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance [Link] book
values for both Flynn and Macek immediately preceding the acquisition follow. The fair value of
each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized
trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any
related question also is in thousands.

Flynn, Macek Company

Inc
Book Fair
Value Value
Cash $ 900 $ 80 $ 80

Receivables 480 180 160

Inventory 660 260 300

Land 300 120 130

Buildings (net) 1,200 220 280

Equipment 360 100 75

Accounts payable 480 60 60

Long-term liabilities 1,140 340 300

Common stock 1,000 80

Additional paid-in capital 200 0

Retained earnings 1,080 480

Version 1 87
Under the acquisition method, what amount will be reported for consolidated retained earnings?

A) $1,065,000.
B) $1,080,000.
C) $1,525,000.
D) $1,535,000.
E) $1,560,000.

90) Flynn acquires 100 percent of the outstanding voting shares of Macek Company on
January 1, 2021. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000
shares of $20 par value common stock on this date. Flynn's stock had a fair value of $36 per
share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the
acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance [Link] book
values for both Flynn and Macek immediately preceding the acquisition follow. The fair value of
each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized
trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any
related question also is in thousands.

Flynn, Macek Company

Inc
Book Fair
Value Value
Cash $ 900 $ 80 $ 80

Receivables 480 180 160

Inventory 660 260 300

Land 300 120 130

Buildings (net) 1,200 220 280

Equipment 360 100 75

Accounts payable 480 60 60

Long-term liabilities 1,140 340 300

Common stock 1,000 80

Version 1 88
 Additional paid-in capital 200 0

Retained earnings 1,080 480

What amount will be reported for consolidated additional paid-in capital?

A) $365,000.
B) $350,000.
C) $360,000.
D) $375,000.
E) $345,000.

91) Flynn acquires 100 percent of the outstanding voting shares of Macek Company on
January 1, 2021. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000
shares of $20 par value common stock on this date. Flynn's stock had a fair value of $36 per
share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the
acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance [Link] book
values for both Flynn and Macek immediately preceding the acquisition follow. The fair value of
each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized
trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any
related question also is in thousands.

Flynn, Macek Company

Inc
Book Fair
Value Value
Cash $ 900 $ 80 $ 80

Receivables 480 180 160

Inventory 660 260 300

Land 300 120 130

Buildings (net) 1,200 220 280

Equipment 360 100 75

Accounts payable 480 60 60

Version 1 89
 Long-term liabilities 1,140 340 300

Common stock 1,000 80

Additional paid-in capital 200 0

Retained earnings 1,080 480

What amount will be reported for consolidated cash after the acquisition is completed?

A) $475,000.
B) $500,000.
C) $555,000.
D) $580,000.
E) $875,000.

92) Flynn acquires 100 percent of the outstanding voting shares of Macek Company on
January 1, 2021. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000
shares of $20 par value common stock on this date. Flynn's stock had a fair value of $36 per
share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the
acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance [Link] book
values for both Flynn and Macek immediately preceding the acquisition follow. The fair value of
each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized
trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any
related question also is in thousands.

Flynn, Macek Company

Inc
Book Fair
Value Value
Cash $ 900 $ 80 $ 80

Receivables 480 180 160

Inventory 660 260 300

Land 300 120 130

Buildings (net) 1,200 220 280

Version 1 90
 Equipment 360 100 75

Accounts payable 480 60 60

Long-term liabilities 1,140 340 300

Common stock 1,000 80

Additional paid-in capital 200 0

Retained earnings 1,080 480

Which of the following is true regarding the FASB Accounting Standards Update No. 2014-17,
Business Combinations: Pushdown Accounting?

A) It requires the use of pushdown accounting in all business combinations.

B) It prohibits the use of pushdown accounting in business combinations.
C) It provides an option to use pushdown accounting in a business combination.
D) It requires the use of pushdown accounting in a business combination only when the
parent acquires 100% of a subsidiary’s outstanding stock.
E) It prohibits the use of pushdown accounting in a business combination only when
the parent acquires 100% of a subsidiary’s outstanding stock.

SHORT ANSWER. Write the word or phrase that best completes each statement or
answers the question.
93) Bale Co. acquired Silo Inc. on December 31, 2021, in an acquisition business
combination transaction. Bale's net income for the year was $1,400,000, while Silo had net
income of $400,000 earned evenly during the year. Bale paid $100,000 in direct combination
costs, $50,000 in indirect costs, and $30,000 in stock issuance costs to effect the
[Link]:What is consolidated net income for 2021?

Version 1 91
94) Fine Co. issued its common stock in exchange for the common stock of Dandy Corp. in
an acquisition. At the date of the combination, Fine had land with a book value of $480,000 and
a fair value of $620,000. Dandy had land with a book value of $170,000 and a fair value of
$190,[Link]:What was the consolidated balance for Land in a consolidated balance sheet
prepared at the date of the acquisition combination?

95) Jernigan Corp. had the following account balances at 12/1/20:

Receivables $ 96,000
Inventory 240,000

Land 720,000

Buildings 600,000

Liabilities 480,000

Common stock 120,000

Additional paid-in capital 120,000

Retained earnings, 12/1/20 840,000

Revenues 360,000

Expenses 264,000

Several of Jernigan's accounts have fair values that differ from book value. The fair values are:
Land — $480,000; Building — $720,000; Inventory — $336,000; and Liabilities — $396,000.
Inglewood Inc. acquired all of the outstanding common shares of Jernigan by issuing 20,000
shares of common stock having a $6 par value per share, but a $66 fair value per share. Stock
issuance costs amounted to $12,[Link]:Prepare a fair value allocation and goodwill
schedule at the date of the acquisition.

Version 1 92
96) Salem Co. had the following account balances as of December 1, 2020:

Inventory $ 720,000

Land 600,000

Buildings—net (valued at $1,200,000) 1,080,000

Common stock ($10 par value) 960,000

Retained earnings, December 1, 2020 1,320,000

Revenues 720,000

Expenses 600,000

Bellington Inc. transferred $1.7 million in cash and 12,000 shares of its newly issued $30 par
value common stock (valued at $90 per share) to acquire all of Salem's outstanding common
stock. Determine the balance for Goodwill that would be included in a December 1, 2020,
consolidation as a result of the acquisition.

97) Salem Co. had the following account balances as of December 1, 2020:

Inventory $ 720,000

Land 600,000

Buildings—net (valued at $1,200,000) 1,080,000

Version 1 93
 Common stock ($10 par value) 960,000

Retained earnings, December 1, 2020 1,320,000

Revenues 720,000

Expenses 600,000

Assume that Bellington paid cash of $2.8 million and no stock is issued. Also assume that
$50,000 is paid in direct combination [Link]:For Goodwill, determine what balance
would be included in a December 1, 2020 consolidation as a result of the acquisition.

98) On January 1, 2021, Chester Inc. acquired 100% of Festus Corp.'s outstanding common
stock by exchanging 37,500 shares of Chester's $2 par value common voting stock. On January 1,
2021, Chester's voting common stock had a fair value of $40 per share. Festus' voting common
shares were selling for $6.50 per share. Festus' balances on the acquisition date, just prior to
acquisition are listed below.

Book Value Fair Value

Cash $ 30,000 $ 30,000

Accounts Receivable 120,000 $ 120,000

Inventory 200,000 230,000

Land 230,000 290,000

Building (net) 450,000 600,000

Equipment (net) 175,000 160,000

Accounts Payable (80,000 ) (80,000 )

Common Stock, $1 par (500,000 )

Paid-in Capital (350,000 )

Version 1 94
 Retained Earnings, 1/1/21 (275,000 )

Required: Compute the value of Goodwill resulting from the acquisition.

99) The financial statements for Jode Inc. and Lakely Corp., just prior to their combination,
for the year ending December 31, 2020, follow. Lakely's buildings were undervalued on its
financial records by $60,000.

Jode Inc. Lakely Corp.

Revenues $ 1,300,000 $ 500,000

Expenses (1,180,000 ) (290,000 )

Net income $ 120,000 $ 210,000

Retained earnings, January 1, 2020 $ 700,000 $ 500,000

Net income (from above) 120,000 210,000

Dividends declared (110,000 ) (110,000 )

Retained earnings, December 31, 2020 $ 710,000 $ 600,000

Cash $ 160,000 $ 120,000

Receivables and inventory 240,000 240,000

Buildings (net) 700,000 350,000

Equipment (net) 700,000 600,000

Total assets $ 1,800,000 $ 1,310,000

Liabilities $ 250,000 $ 195,000

Common stock 750,000 430,000

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 Additional paid-in capital 90,000 85,000

Retained earnings, 12/31/20 710,000 600,000

Total liabilities and stockholders’ $ 1,800,000 $ 1,310,000

equity

On December 31, 2020, Jode issued 54,000 new shares of its $10 par value stock in exchange for
all the outstanding shares of Lakely. Jode's shares had a fair value on that date of $35 per share.
Jode paid $34,000 to an investment bank for assisting in the arrangements. Jode also paid
$24,000 in stock issuance costs to effect the acquisition of Lakely. Lakely will retain its
[Link] the journal entries to record: (1) the issuance of stock by Jode; and (2) the
payment of the combination costs.

100) The financial statements for Jode Inc. and Lakely Corp., just prior to their combination,
for the year ending December 31, 2020, follow. Lakely's buildings were undervalued on its
financial records by $60,000.

Jode Inc. Lakely Corp.

Revenues $ 1,300,000 $ 500,000

Expenses (1,180,000 ) (290,000 )

Net income $ 120,000 $ 210,000

Retained earnings, January 1, 2020 $ 700,000 $ 500,000

Net income (from above) 120,000 210,000

Dividends declared (110,000 ) (110,000 )

Retained earnings, December 31, 2020 $ 710,000 $ 600,000

Cash $ 160,000 $ 120,000

Receivables and inventory 240,000 240,000

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 Buildings (net) 700,000 350,000

Equipment (net) 700,000 600,000

Total assets $ 1,800,000 $ 1,310,000

Liabilities $ 250,000 $ 195,000

Common stock 750,000 430,000

Additional paid-in capital 90,000 85,000

Retained earnings, 12/31/20 710,000 600,000

Total liabilities and stockholders’ $ 1,800,000 $ 1,310,000

equity

On December 31, 2020, Jode issued 54,000 new shares of its $10 par value stock in exchange for
all the outstanding shares of Lakely. Jode's shares had a fair value on that date of $35 per share.
Jode paid $34,000 to an investment bank for assisting in the arrangements. Jode also paid
$24,000 in stock issuance costs to effect the acquisition of Lakely. Lakely will retain its
[Link]: Determine consolidated net income for the year ended December 31,
2020.

101) The financial statements for Jode Inc. and Lakely Corp., just prior to their combination,
for the year ending December 31, 2020, follow. Lakely's buildings were undervalued on its
financial records by $60,000.

Jode Inc. Lakely Corp.

Revenues $ 1,300,000 $ 500,000

Expenses (1,180,000 ) (290,000 )

Net income $ 120,000 $ 210,000

Retained earnings, January 1, 2020 $ 700,000 $ 500,000

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 Net income (from above) 120,000 210,000

Dividends declared (110,000 ) (110,000 )

Retained earnings, December 31, 2020 $ 710,000 $ 600,000

Cash $ 160,000 $ 120,000

Receivables and inventory 240,000 240,000

Buildings (net) 700,000 350,000

Equipment (net) 700,000 600,000

Total assets $ 1,800,000 $ 1,310,000

Liabilities $ 250,000 $ 195,000

Common stock 750,000 430,000

Additional paid-in capital 90,000 85,000

Retained earnings, 12/31/20 710,000 600,000

Total liabilities and stockholders’ $ 1,800,000 $ 1,310,000

equity

On December 31, 2020, Jode issued 54,000 new shares of its $10 par value stock in exchange for
all the outstanding shares of Lakely. Jode's shares had a fair value on that date of $35 per share.
Jode paid $34,000 to an investment bank for assisting in the arrangements. Jode also paid
$24,000 in stock issuance costs to effect the acquisition of Lakely. Lakely will retain its
[Link] consolidated Additional Paid-In Capital at December 31, 2020.

102) The following are preliminary financial statements for Black Co. and Blue Co. for the
year ending December 31, 2021, prior to Black’s acquisition of Blue Co.

Black Co. Blue Co.

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 Sales $ 360,000 $ 228,000

Expenses (240,000 ) (132,000 )

Net income $ 120,000 $ 96,000

Retained earnings, January 1, 2021 $ 480,000 $ 252,000

Net income (from above) 120,000 96,000

Dividends paid (36,000 ) 0

Retained earnings, December 31, 2021 $ 564,000 $ 348,000

Current assets $ 360,000 $ 120,000

Land 120,000 108,000

Building (net) 480,000 336,000

Total assets $ 960,000 $ 564,000

Liabilities $ 108,000 $ 132,000

Common stock 192,000 72,000

Additional paid-in capital 96,000 12,000

Retained earnings, December 31, 2021 564,000 348,000

Total liabilities and stockholders’ $ 960,000 $ 564,000

equity

On December 31, 2021 (subsequent to the preceding statements), Black exchanged 10,000 shares
of its $10 par value common stock for all of the outstanding shares of Blue. Black's stock on that
date has a fair value of $50 per share. Black was willing to issue 10,000 shares of stock because
Blue's land was appraised at $204,000. Black also paid $14,000 to attorneys and accountants
who assisted in creating this [Link]: Assuming that these two companies
retained their separate legal identities, prepare a consolidation worksheet as of December 31,
2021.

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103) The following are preliminary financial statements for Green Co. and Gold Co. for the
year ending December 31, 2021 prior to Green’s acquisition of Gold.

Green Co. Gold Co.

Sales $ 360,000 $ 228,000

Expenses (240,000 ) (132,000 )

Net income $ 120,000 $ 96,000

Retained earnings, January 1, 2021 $ 480,000 $ 252,000

Net income (from above) 120,000 96,000

Dividends declared (36,000 ) 0

Retained earnings, December 31, 2021 $ 564,000 $ 348,000

Current assets $ 360,000 $ 120,000

Land 120,000 108,000

Building (net) 480,000 336,000

Total assets $ 960,000 $ 564,000

Liabilities $ 108,000 $ 132,000

Common stock 192,000 72,000

Additional paid-in capital 96,000 12,000

Retained earnings, December 31, 2021 564,000 348,000

Total liabilities and stockholders’ equity $ 960,000 $ 564,000

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On December 31, 2021 (subsequent to the preceding statements), Green exchanged 10,000
shares of its $10 par value common stock for all of the outstanding shares of Gold. Green's stock
on that date has a fair value of $60 per share. Green was willing to issue 10,000 shares of stock
because Gold's land was appraised at $204,000. Green also paid $14,000 to attorneys and
accountants who assisted in creating this [Link]:Assuming that these two
companies retained their separate legal identities, prepare a consolidation worksheet as of
December 31, 2021 after the acquisition transaction is completed.

104) For each of the following situations, select the best letter answer to reflect the effect of
the numbered item on the acquirer’s accounting entry at the date of combination when separate
incorporation will be maintained. Item (4) requires two selections.(A) Increase Investment
account.(B) Decrease Investment account.(C) Increase Liabilities.(D) Increase Common stock.(E)
Decrease common stock.(F) Increase Additional paid-in capital.(G) Decrease Additional paid-in
capital.(H) Increase Retained earnings.(I) Decrease Retained [Link] [Link]
[Link] issue [Link] [Link] purchase.

ESSAY. Write your answer in the space provided or on a separate sheet of paper.
105) What term is used to refer to a business combination in which only one of the original
companies continues to exist?

106) How are stock issuance costs accounted for in an acquisition business combination?

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107) What is the primary difference between recording an acquisition when the subsidiary is
dissolved and when separate incorporation is maintained?

108) How are direct combination costs accounted for in an acquisition transaction?

109) Peterman Co. owns 55% of Samson Co. Under what circumstances would Peterman not
be required to prepare consolidated financial statements?

110) How would you account for in-process research and development acquired in a business
combination accounted for as an acquisition?

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111) Elon Corp. obtained all of the common stock of Finley Co., paying slightly less than the
fair value of Finley's net assets acquired. How should the difference between the consideration
transferred and the fair value of the net assets be treated if the transaction is accounted for as an
acquisition?

112) For acquisition accounting, why are assets and liabilities of the subsidiary consolidated at
fair value?

113) Goodwill is often acquired as part of a business combination. Why, when separate
incorporation is maintained, does Goodwill not appear on the Parent company's trial balance as a
separate account?

114) How are direct combination costs, contingent consideration, and a bargain purchase
reflected in recording an acquisition transaction?

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115) How is contingent consideration accounted for in an acquisition business combination
transaction?

116) How are bargain purchases accounted for in an acquisition business transaction?

117) Describe the accounting for direct costs, indirect costs, and issuance costs under the
acquisition method of accounting for a business combination.

118) What is the difference in consolidated results between a business combination whereby
the acquired company is dissolved, and a business combination whereby separate incorporation
is maintained?

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119) What are some reasons that a business combination may take place?

120) What are the benefits of using pushdown accounting?

121) What are the two specific criteria essential to determining whether to recognize an
intangible asset in a business combination?

122) What is the purpose of Consolidation Entry S in a consolidation worksheet?

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123) What is the purpose of Consolidation Entry A in a consolidation worksheet?

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Answer Key

Test name: Chapter 02

1) C
2) B
3) A
4) D
5) B
6) A
7) E
8) C
9) C
10) D
11) B
12) C
13) A
14) C
15) B
16) D
17) D
18) B
19) C
20) C
21) B
22) D
23) E
24) C
25) A
26) A

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27) C
28) A
29) C
30) D
31) A
32) D
33) D
34) B
35) C
36) B
37) E
38) D
39) D
40) C
41) D
42) D
43) A
44) C
45) D
46) D
47) B
48) A
49) B
50) A
51) D
52) B
53) D
54) B
55) C
56) C

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57) A
58) B
59) B
60) D
61) A
62) E
63) B
64) C
65) A
66) C
67) B
68) B
69) B
70) B
71) B
72) D
73) A
74) D
75) C
76) D
77) B
78) C
79) D
80) A
81) B
82) B
83) B
84) D
85) C
86) C

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87) C
88) C
89) A
90) B
91) C
92) C
93)

Bale’s net income for 2021 $ 1,400,000

Less: direct combination costs 100,000

Less: indirect combination costs 50,000

Consolidated net income for 2021 1,250,000

Note: Silo’s net income does not affect consolidated net income until
after the date of acquisition. The combination costs belong to Bale only.
94)

Book value of Fine Co.’s land $ 480,000

Fair value of Dandy Corp.’s land 190,000

Consolidated balance for land $ 670,000

95)

Fair value consideration transferred $ 1,320,000

by Inglewood (20,000 shares × $66)
Fair value of Jernigan assets acquired $ (1,236,000 )
and liabilities assumed

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 Excess of consideration transferred $ 84,000
over net fair value of assets and
liabilities—Goodwill
Receivables $ 96,000

Inventory 336,000

Land 480,000

Building 720,000

Liabilities (396,000 )

Fair value of Jernigan net assets $ 1,236,000

acquired

96)

Fair value of consideration

transferred:
Cash $ 1,700,000

Stock issued 1,080,000

Total consideration transferred: $ 2,780,000

Fair value of assets acquired:

Inventory $ 720,000

Land 600,000

Buildings 1,200,000

Total of Assets (2,520,000 )

Excess of consideration transferred $ 260,000

over fair value of assets transferred—
Goodwill:

97)

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 Fair value of consideration
transferred:
Cash $ 2,800,000

Total consideration transferred: $ 2,800,000

Fair value of assets acquired:

Inventory $ 720,000

Land 600,000

Buildings 1,200,000

Total of Assets $ (2,520,000 )

Excess of consideration transferred $ 280,000

over fair value of assets transferred
— Goodwill:

98)

Stock $ 1,500,000

Total consideration transferred: $ 1,500,000

Fair value of assets acquired:

Cash $ 30,000

Accounts Receivable 120,000

Inventory 230,000

Land 290,000

Buildings 600,000

Equipment 160,000

Total fair value of assets acquired $ 1,430,000

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 Fair value of liabilities assumed:

Accounts Payable (80,000 )

Net fair value of assets acquired and $ 1,350,000

liabilities assumed
Excess of consideration transferred over $ 150,000
fair value of assets transferred—Goodwill:

99) Entry One – To record the issuance of common stock by Jode to

execute the purchase.

Investment in Lakely Corp. 1,890,000

Common Stock (par value) 540,000

Paid-in Capital 1,350,000

Entry Two – To record the combination costs.

Professional fee expense 34,000

Paid-in capital 24,000

Cash 58,000

100)
Consolidated Net Income

Jode’s Revenues $ 1,300,000

Jode’s Expenses (1,214,000 )

Consolidated net income $ 86,000

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Note: The subsidiary’s revenues and expenses prior to the date of
acquisition are not [Link]’s Expenses = $1,180,000 +
$34,000 direct costs = $1,214,000
101)
Consolidated Additional Paid-In Capital

Jode’s Additional Paid-In Capital 90,000

Additional Paid-In Capital arising from the $ 1,350,000

acquisition (54,000 shares issued × $25 per share in
excess of par value)
Less: Stock issuance costs (24,000 )

Consolidated Additional Paid-In Capital $ 1,416,000

102) Bargain Purchase Acquisition Consolidation Worksheet

For the Year Black Blue Consolidation Consolidate
Ended Company Company Entries d
12/31/2021 Dr. Cr. Balance
Accounts
Income
Statement
Sales $ (360,000 ) (360,000 )

Expenses 254,000 254,000

Bargain- (28,000 ) (28,000 )

Purchase—
Gain
Net Income (134,000 ) (134,000 )

Statement
of Retained
Earnings
R/E, 1/1/21 (480,000 ) (480,000 )

Net Income (134,000 ) (134,000 )

Dividends 36,000 36,000

declared

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 R/E, $ (578,000 ) $ (578,000 )
12/31/21
Balance
Sheet
Current 346,000 120,000 466,000
assets
Investment 528,000 (S 432,00 0
in Blue Co. ) 0
Land 120,000 108,000 (A 96,000 (A 96,000 324,000
) )
Buildings 480,000 336,000 816,000
(net)
Total $ 1,474,000 $ 564,000 $ 1,606,000
Assets
Liabilities (108,000 ) (132,00 ) (240,000 )
0
Common (292,000 ) (72,000 ) (S 72,000 (292,000 )
stock )
Additional (496,000 ) (12,000 ) (S 12,000 (496,000 )
paid-in )
capital
R/E, (578,000 ) (348,00 ) (S 348,00 (578,000 )
12/31/21 0 ) 0
Total $ (1,474,00 ) $ (564,00 ) $ 528,00 $ 528,00 $ (1,606,00 )
Liabilities 0 0 0 0 0
&
Stockholder
s' Equity

Calculation for Potential Goodwill:

Consideration transferred by Black Co. 500,000

Book value of Blue Co. (432,000 ) (Entry S)

Excess of Cost over Book Value 68,000 (Entry A)

Allocations:

Land (204,000 − 108,000) (96,000 ) (Entry A)

– Bargain Purchase (28,000 ) (Entry A)

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Entry to record the acquisition on Black Co's books

Professional fee expense 14,000

Investment in Blue Co. 528,000

Common Stock − Black (10,000 × $10 Par) 100,000

Add'l Paid-in Capital − Black (10,000 × $40) 400,000

Cash (paid for direct acquisition costs) 14,000

Gain on Bargain Purchase 28,000

Entry S:

Common Stock 72,000

Additional Paid-in Capital 12,000

Retained Earnings - 12/31/21 348,000

Investment in Blue Co. 432,000

To eliminate Blue Co's stockholders' equity accounts and the book value
of Blue Co's net assets from Black Co's investment account
Entry A:

Land 96,000

Investment in Blue Co. 96,000

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To eliminate Black Co's excess payment over book value from its
investment account and reassign the excess to specific assets from the
bargain purchase
103) Acquisition Consolidation Worksheet
For the Year Green Gold Consolidation Consolidate
Ended Company Company Entries d
12/31/2021 Dr. Cr. Balance
Accounts
Income
Statement
Sales $ (360,000 ) (360,000 )

Expenses 254,000 254,000

Net Income (106,000 ) (106,000 )

Statement
of Retained
Earnings
R/E, 1/1/21 (480,000 ) (480,000 )

Net Income (106,000 ) (106,000 )

Dividends 36,000 36,000

declared
R/E, $ (550,000 ) $ (550,000 )
12/31/21
Balance
Sheet
Current 346,000 120,000 466,000
assets
Investment 600,000 (S 432,00 0
in Gold Co. ) 0
Land 120,000 108,000 (A 96,000 (A 168,00 324,000
) ) 0
Buildings 480,000 336,000 816,000
(net)
Goodwill (A 72,000 72,000
)
Total $ 1,546,000 $ 564,000 $ 1,678,000
Assets

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 Liabilities (108,000 ) (132,00 ) (240,000 )
0
Common (292,000 ) (72,000 ) (S 72,000 (292,000 )
stock )
Additional (596,000 ) (12,000 ) (S 12,000 (596,000 )
paid-in )
capital
R/E, (550,000 ) (348,00 ) (S 348,00 (550,000 )
12/31/21 0 ) 0
Total $ (1,546,00 ) $ (564,00 ) $ 600,00 $ 600,00 $ (1,678,00 )
Liabilities 0 0 0 0 0
&
Stockholder
s' Equity

Calculation of Goodwill:

Consideration transferred by Green Co. 600,000

Book value of Gold Co. (432,000 ) (Entry S)

Excess of consideration transferred over 168,000 (Entry A)
Book Value
Allocations:

Land (204,000 - 108,000) (96,000 ) (Entry A)

Excess cost not identified - Goodwill 72,000 (Entry A)

Green Co.'s entry to record acquisition:

Professional fee expense 14,000

Investment in Gold Co. 600,000

Common Stock - Green (10,000 × $10 Par) 100,000

Add'l Paid-in Capital - Green (10,000 × $50) 500,000

Cash (paid for direct acquisition costs) 14,000

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Entry S:

Common Stock 72,000

Additional Paid-in Capital 12,000

Retained Earnings - 12/31/21 348,000

Investment in Gold Co. 432,000

To eliminate Gold Co.'s stockholders' equity accounts and the book

value of Gold Co.'s net assets from Green Co.'s investment account
Entry A:

Land 96,000

Goodwill 72,000

Investment in Gold Co. 168,000

To eliminate Green Co.'s excess payment over book value from its
investment account and reassign the excess to specific assets and
goodwill
104) (1) I; (2) I; (3) G; (4) A, C; (5) H
105) The appropriate term is statutory merger.
106) Stock issuance costs reduce the balance in the acquirer’s Additional
Paid-In Capital in an acquisition business combination.
107) When the subsidiary is dissolved, the acquirer records in its books
the fair value of individual assets and liabilities acquired as well as the
resulting goodwill from the acquisition. However, when separate
incorporation is maintained, the acquirer only records the total fair value
of consideration transferred as an investment.

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108) In an acquisition, direct combination costs are expensed in the
period of the acquisition.
109) Peterman would not be required to prepare consolidated financial
statements if control of Samson is temporary or if, despite majority
ownership, Peterman does not have control over Samson. A lack of
control might exist if Samson is in a country that imposes restrictions on
Peterman's actions.
110) In-Process Research and Development is capitalized as an asset of
the combination and reported as intangible assets with indefinite lives
subject to impairment reviews.
111) The difference between the consideration transferred and the fair
value of the net assets acquired is recognized as a gain on bargain
purchase.
112) The acquisition transaction is assumed to occur through an orderly
transaction between market participants at the measurement date of the
acquisition. Thus identified assets and liabilities acquired have been
assigned fair value for the transfer to the acquirer and this is a relevant
and faithful representation for consolidation.
113) While the Goodwill does not appear on the Parent company's books,
it is implied as part of the account called Investment in Subsidiary.
During the consolidation process, the Investment account is broken
down into its component parts. Goodwill, along with other items such as
subsidiary fair value adjustments, is then shown separately as part of the
consolidated financial statement balances.

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114) The acquisition method embraces a fair value concept as measured
by the fair value of consideration transferred. (1) Direct combination
costs are expensed as incurred; (2) Contingent consideration obligations
are recognized at their present value of the potential obligation as part of
the acquisition consideration transferred; (3) When a bargain purchase
occurs, the acquirer measures and recognizes the fair values of each of
the assets acquired and liabilities assumed at the date of the combination,
and as a result a gain on the bargain purchase is recognized at the
acquisition date.
115) The fair value approach of the acquisition method views contingent
payments as part of the consideration transferred. Under this view,
contingencies have a value to those who receive the consideration and
represent measurable obligations of the acquirer. The amount of the
contingent consideration is measured as the expected present value of a
potential payment and increases the investment value recorded.
116) A bargain purchase results when the collective fair values of the net
identified assets acquired and liabilities assumed exceed the fair value of
consideration transferred. The assets and liabilities acquired are recorded
at their fair values and the bargain purchase is recorded as a Gain on
Bargain Purchase.
117) Direct and indirect combination costs are expensed as incurred and
issuance costs reduce the otherwise fair value of the securities issued
(typically a debit to additional paid-in capital) under the acquisition
method of accounting for business combinations.
118) There is no difference in consolidated results.

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119) There are many reasons that a business combination may take place
including a desire for:Vertical integration of one firm’s output and
another firm’s distribution or further [Link] savings through
elimination of duplicate facilities and [Link] entry for new or
existing products into domestic and foreign [Link] of scale
allowing greater efficiency and negotiating [Link] ability to access
financing at more attractive rates. As firm size increases, negotiating
power with financial institutions can increase [Link] of
business [Link] expansion of an organization.
120) Pushdown accounting provides a newly acquired subsidiary the
option to revalue its assets and liabilities to acquisition-date fair values
in its separately reported financial statements. This valuation option may
be useful when the parent expects to offer the subsidiary shares to the
public following a period of planned improvements. Other benefits from
pushdown accounting may arise when the subsidiary plans to issue debt
and needs its separate financial statements to incorporate acquisition-
date fair values and previously unrecognized intangibles in their
standalone financial reports.
121) Does the intangible asset arise from contractual or other legal
rights?Is the intangible asset capable of being sold or otherwise
separated from the acquired enterprise?

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122) Consolidation Entry S is a worksheet entry that eliminates the
beginning stockholders’ equity of the subsidiary. The stockholders’
equity subsidiary balances (in accounts such as Common Stock,
Additional Paid-In Capital, and Retained Earnings) represent ownership
interests that are now held by the parent and are not represented as
equity in the parent’s consolidated balance sheet. Also, removing these
account balances on the worksheet leaves on the subsidiary’s assets and
liabilities to be combined with the parent company figures.
Consolidation Entry S also removes from the parent’s Investment
account balance the amount that equates to the book value of the
subsidiary’s net assets.
123) Consolidation Entry A is a worksheet entry that removes the excess
payment from the parent’s Investment account and assigns that excess
payment to the specific accounts indicated by the fair-value allocation. It
also assists in eliminating the parent’s Investment account balance on
the consolidation worksheet.

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