Book: Advanced Accounting Chapter 3

Joe Ben Hoyle

7) Benns adopts the equity method for its 100 percent investment in Waters. At the end of six years, Benns reports an investment in Waters of $920,000. What figures constitute this balance?

8) One company acquired another in a transaction in which $100,000 of the acquisition price is assigned to goodwill. Several years later, a worksheet is being produced to consolidate these two companies. How is the reported value of the goodwill determined at this date?

9) When should a parent consider recognizing an impairment loss for goodwill associated with a subsidiary? How should the loss be reported in the financial statements?

10) Reimers Company acquires Rollins Corporation on January 1, 2020. As part of the agreement, the parent states that an additional $100,000 cash payment to the former owners of Rollins will be made in 2021, if Rollins achieves certain income thresholds during the first two years following the acquisition. How should Reimers account for this contingency in its 2020 consolidated financial statements?

11) Define the term business combination and differentiate across various forms of business combinations.