Test Bank for Fundamentals of Advanced Accounting 5th Edition Hoyle, Schaefer, Doupnik

Test Bank for Fundamentals of Advanced
Accounting 5th Edition Hoyle, Schaefer, Doupnik

Chapter 02

Consolidation of Financial Information


Multiple Choice Questions


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, long-term
assets and liabilities at fair value.
E. consolidates the subsidiary's assets at book value and the liabilities
at fair value.

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2. In an acquisition where control is achieved, how would the land
accounts of the parent and the land accounts of the subsidiary be
combined?




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


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.

, Test Bank for Fundamentals of Advanced
Accounting 5th Edition Hoyle, Schaefer, Doupnik
4. Using the acquisition method for a business combination, goodwill is
generally defined as:


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. is no longer allowed under
federal law.

5. Direct combination costs and stock issuance costs are often incurred in
the process of making a controlling investment in another company.
How should those costs be accounted for in a pre-2009 purchase
transaction?




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

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Doupnik

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




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

7. What is the primary accounting difference between accounting for
when the subsidiary is dissolved and 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.