1. Kremlin Company pays $2,900,000 for the common stock of Reticular Corporation. Reticular has assets on the balance sheet with a book value of $1,500,000 and a fair value of $2,500,000. What is goodwill in this purchase? a. $1,400,000 b. $1,000,000 c. $400,000 d. $0

2. What is the present value of receiving $4,800,000 at the end of six years assuming an interest rate of 5 percent? a. $3,581,834 b. $6,432,459 c. $5,040,000 d. $4,571,429

3. Which of the following concerning the research and development costs is true? a. According to U.S. GAAP, research and development costs must be expensed as incurred. b. Current U.S. GAAP reporting for research and development costs violates the matching principle. c. International Financial Reporting Standards allow some development costs to be capitalized.

d. U.S. GAAP reporting for research and development costs is superior to international reporting.

4. Krypton Corporation offers Earth Company $800,000 for a patent held by Earth Company. The patent is currently on Earth Companys books in the amount of $14,000, the legal costs of registering the patent in the first place. Krypton had appraisers examine the patent before making an offer to purchase it, and the experts determined that it could be worth anywhere from $459,000 to $1,090,000. If the purchase falls through, at what amount should Earth Company now report the patent? a. $80,000 b. $14,000 c. $459,000 d. $1,090,000

5. What is the present value of receiving $15,000 per year for the next six years at an interest rate of 7 percent, assuming payments are made at the beginning of the period (annuity due)? a. $76,503 b. $90,000 c. $59,971 d. $9,995