ACC 455- EXAM 2 QUESTIONS & ANSWERS
The accounting method required under current GAAP for new business combinations is
the - Answers :acquisition method, unless specified criteria for the pooling method are
met
Total direct costs can include: - Answers :finders' fee and legal fees
An excess of fair value of identifiable net assets acquired in a business combination
over the price paid is reported as: - Answers :gain from bargain purchase
Goodwill impairment loss is the difference between - Answers :Goodwill and (FV of
division and FV net assets)
Obtain a controlling financial interest through: - Answers :-Direct ownership of greater
than 50% of common stock
-Indirect control of greater than 50% of common stock
-A variable interest entity for which parent is the primary beneficiary
Discounted operations require - Answers :intraperiod tax allocation
Under current GAAP, which method is required for inter period income tax allocation? -
Answers :The asset-liability method
Required disclosures for financial reporting of income taxes - Answers :The current and
deferred components of income tax expense or benefit attributable to continuing
operations
Required disclosures related to a business combination and/or consolidated financial
statements - Answers :The primary reasons for the business combination
Required disclosures related to a business combination and/or consolidated financial
statements - Answers :For a business combination, the amounts recognized as of the
acquisition date for each major class of assets acquired and liabilities assumed
When an investor has the ability to exercise significant influence over the financial and
operating policies of an investee, which method of accounting for the investment is
required? - Answers :Equity method.
Warren, Inc. purchased Best Foods Corporation's net assets and assigned $300,000 to
goodwill. Warrenconsiders Best Foods as a separate reporting unit. At the end of the
year, the fair value of Best Foods is $1,040,000 and the carrying value is $1,160,000.
The fair value of Best Foods' identifiable net assets at theend of the year is $980,000.
Using new rules, what amount of goodwill impairment loss should Warren recognize for
the year related to Best Foods? - Answers :$120,000
The accounting method required under current GAAP for new business combinations is
the - Answers :acquisition method, unless specified criteria for the pooling method are
met
Total direct costs can include: - Answers :finders' fee and legal fees
An excess of fair value of identifiable net assets acquired in a business combination
over the price paid is reported as: - Answers :gain from bargain purchase
Goodwill impairment loss is the difference between - Answers :Goodwill and (FV of
division and FV net assets)
Obtain a controlling financial interest through: - Answers :-Direct ownership of greater
than 50% of common stock
-Indirect control of greater than 50% of common stock
-A variable interest entity for which parent is the primary beneficiary
Discounted operations require - Answers :intraperiod tax allocation
Under current GAAP, which method is required for inter period income tax allocation? -
Answers :The asset-liability method
Required disclosures for financial reporting of income taxes - Answers :The current and
deferred components of income tax expense or benefit attributable to continuing
operations
Required disclosures related to a business combination and/or consolidated financial
statements - Answers :The primary reasons for the business combination
Required disclosures related to a business combination and/or consolidated financial
statements - Answers :For a business combination, the amounts recognized as of the
acquisition date for each major class of assets acquired and liabilities assumed
When an investor has the ability to exercise significant influence over the financial and
operating policies of an investee, which method of accounting for the investment is
required? - Answers :Equity method.
Warren, Inc. purchased Best Foods Corporation's net assets and assigned $300,000 to
goodwill. Warrenconsiders Best Foods as a separate reporting unit. At the end of the
year, the fair value of Best Foods is $1,040,000 and the carrying value is $1,160,000.
The fair value of Best Foods' identifiable net assets at theend of the year is $980,000.
Using new rules, what amount of goodwill impairment loss should Warren recognize for
the year related to Best Foods? - Answers :$120,000
