1. What is the method of presentation required by SFAS 160 of " non-controlling interest" on a consolidated balance sheet?

	a.	As a separate item between liabilities and stockholders' equity.
	b.	As a part of stockholders' equity.
	c.	As a deduction from goodwill from consolidation.
	d.	As a separate item within the long-term liabilities section.

2. P Company purchased the net assets of S Company for $225,000. On the date of P's purchase, S Company had no investments in marketable securities and $30,000 (book and fair value) of liabilities. The fair values of S Company's assets, when acquired, were

Currentassets $120,000

Noncurrentassets 180,000

Total $300,000

How should the $45,000 difference between the fair value of the net assets acquired ($270,000) and the consideration paid ($225,000) be accounted for by P Company?

a.

An ordinary gain of $45,000 should be recorded.

b.

The $45,000 difference should be credited to retained earnings.

c.

The current assets should be recorded at $102,000, and the noncurrent assets should be recorded at $153,000.

d.

The noncurrent assets should be recorded at $ 135,000.

Question 3

A business combination in which the boards of directors of the potential combining companies negotiate mutually agreeable terms is a(n)

	a.	unfriendly combination.
	b.	hostile combination.
	c.	friendly combination.
	d.	agreeable combination.

4. Assume that on January 1, 2010, P Company acquired 80% (8,000 shares) of the stock of S Company for $180,000. What is the implied book value of the company?

	a.	180,000
	b.	144,000
	c.	225,000
	d.	118,400

5. which of the following statements would not be a valid or logical reason for entering a business combination?

a. to increase market share.

b. to avoid becoming a takeover target.

c. to reduce risk by acquiring established product lines.

d. the operating costs of the combined entity would be more than the sum of the separate entities.