Select the correct answer for each of the following questions. 1. Topper Company established a subsidiary and

Question:

Select the correct answer for each of the following questions.
1. Topper Company established a subsidiary and transferred equipment with a fair value of $72,000 to the subsidiary. Topper had purchased the equipment with ten-year expected life of four years earlier for $100,000 and has used straight-line depreciation with no expected residual value. At the time of the transfer, the subsidiary should record
a. Equipment at $72,000 and no accumulated depreciation.
b. Equipment at $60,000 and no accumulated depreciation.
c. Equipment at $100,000 and accumulated depreciation of $40,000.
d. Equipment at $120,000 and accumulated depreciation of $48,000.
2. Lead established a new subsidiary and transferred to it assets with a cost of $90,000 and a book value of $75,000. The assets had a fair value of $100,000 at the time of transfer. The transfer will result in
a. A reduction of net assets reported by Lead of $90,000.
b. A reduction of net assets reported by Lead of $75,000.
c. No change in the reported net assets of Lead An increase in the net assets reported by Lead of $25,000.
3. Tear Company, a newly established subsidiary of Stern received assets with an original cost of $260,000, a fair value of $200,000, and a book value of $140,000 from the parent in exchange for 7,000 shares of Tear’s $8 common stock. Tear should record
a. Additional paid-in capital of $0.
b. Additional paid-in capital of $84,000.
c. Additional paid-in capital of $144,000.
d. Additional paid-in capital of $204,000.
4. Grout Company reports assets with a carrying value of $420,000 (including with acarrying value of $35,000) assigned to an identifiable reporting unit purchased at he end of the prior year. The fair value of the net assets held by the reporting unit is currently $350,000, and the fair value of the reporting unit is $395,000. At the end of the current period, Grout should report of
a. $45,000.
b. $35,000.
c. $25,000.
d. $10,000.
5. Twill Company has a reporting unit with the fair value of its net identifiable assets of $500,000. The carrying value of the reporting unit’s net assets on Twill’s books is $575,000, which includes $90,000 of . The fair value of the reporting unit is $560,000. Twill should report impairment of of
a. $60,000.
b. $30,000.
c. $15,000.
d. $0.

Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...