Here are all 30 multiple choice questions. I also attached the questions in file herewith. QUIZ ? Advanced Accounting 1. Which of the following situations best describes a business combination to be accounted for as a statutory merger? Both companies in a combination continue to operate as separate, but related, legal entities. Only one of the combining companies survives and the other loses its separate identity. Two companies combine to form a new third company, and the original two companies are dissolved. One company transfers assets to another company it has created. 2. The defense tactic that involves purchasing shares held by the would-be acquiring company at a price substantially in excess of their fair value is called poison pill. pac-man defense. greenmail. white knight. 3. The third period of business combinations started after World War II and is called horizontal integration. merger mania. operating integration. vertical integration. 4. The excess of the amount offered in an acquisition over the prior stock price of the acquired firm is the bonus. goodwill. implied offering price. takeover premium. 5. If the value implied by the purchase price of an acquired company exceeds the fair values of identifiable net assets, the excess should be allocated to reduce any previously recorded goodwill and classify any remainder as an ordinary gain. allocated to reduce current and long-lived assets. allocated to reduce long-lived assets. accounted for as goodwill. 6. In a business combination in which the total fair value of the identifiable assets acquired over liabilities assumed is greater than the consideration paid, the excess fair value is: classified as an extraordinary gain. allocated first to eliminate any previously recorded goodwill, and any remaining excess over the consideration paid is classified as an ordinary gain. allocated first to reduce proportionately non-current assets then to non-monetary current assets, and any remaining excess over cost is classified as a deferred credit. allocated first to reduce proportionately non-current, depreciable assets to zero, and any remaining excess over cost is classified as a deferred credit. 7. If an impairment loss is recorded on previously recognized goodwill due to the transitional goodwill impairment test, the loss should be treated as a(n): loss from a change in accounting principles. extraordinary loss loss from continuing operations. loss from discontinuing operations. 8. Under SFAS 141R, what value of the assets and liabilities are reflected in the financial statements on the acquisition date of a business combination? Carrying value Fair value Book value Average value 9. The fair value of net identifiable assets exclusive of goodwill of a reporting unit of X Company is $300,000. On X Company's books, the carrying value of this reporting unit's net assets is $350,000, including $60,000 goodwill. If the fair value of the reporting unit is $335,000, what amount of goodwill impairment will be recognized for this unit? $0 $10,000 $25,000 $35,000 10. Majority-owned subsidiaries should be excluded from the consolidated statements when control does not rest with the majority owner. the subsidiary operates under governmentally imposed uncertainty. a foreign subsidiary is domiciled in a country with foreign exchange restrictions or controls. any of these circumstances exist. 11. Under the economic entity concept, consolidated financial statements are intended primarily for the benefit of the stockholders of the parent company. creditors of the parent company. minority stockholders. all of the above. 12. A newly acquired subsidiary has pre-existing goodwill on its books. The parent company?s consolidated balance sheet will: treat the goodwill the same as other intangible assets of the acquired company. will always show the pre-existing goodwill of the subsidiary at its book value. not show any value for the subsidiary?s pre-existing goodwill. do an impairment test to see if any of it has been impaired. 13. The Difference between Implied and Book Value account is: an account necessary for the preparation of consolidated working papers. used in allocating the amounts paid for recorded balance sheet accounts that are different than their fair values. the excess implied value assigned to goodwill. the unamortized excess that cannot be assigned to any related balance sheet accounts 14. An investor adjusts the investment account for the amortization of any difference between cost and book value under the cost method. complete equity method. partial equity method. complete and partial equity methods. 15. Under the partial equity method, the entry to eliminate subsidiary income and dividends includes a debit to Dividend Income. Dividends Declared - S Company. Equity in Subsidiary Income. Retained Earnings - S Company. 16. On the consolidated statement of cash flows, the parent?s acquisition of additional shares of the subsidiary?s stock directly from the subsidiary is reported as an investing activity. a financing activity. an operating activity. none of these. 17. P Company purchased 80% of the outstanding common stock of S Company on May 1, 2011, for a cash payment of $1,272,000. S Company?s December 31, 2010 balance sheet reported common stock of $800,000 and retained earnings of $540,000. During the calendar year 2011, S Company earned $840,000 evenly throughout the year and declared a dividend of $300,000 on November 1. What is the amount needed to establish reciprocity under the cost method in the preparation of a consolidated workpaper on December 31, 2011? $208,000 $260,000 $248,000 $432,000 18. In the preparation of a consolidated statements workpaper, dividend income recognized by a parent company for dividends distributed by its subsidiary is included with parent company income from other sources to constitute consolidated net income. assigned as a component of the noncontrolling interest. allocated proportionately to consolidated net income and the noncontrolling interest. eliminated. 19. When the implied value exceeds the aggregate fair values of identifiable net assets, the residual difference is accounted for as excess of implied over fair value. a deferred credit. difference between implied and fair value. goodwill. 20. The SEC requires the use of push down accounting when the ownership change is greater than 50% 80% 90% 95% 21. Under push down accounting, the workpaper entry to eliminate the investment account includes a debit to Goodwill. debit to Revaluation Capital. credit to Revaluation Capital. debit to Revaluation Assets. 22. In preparing consolidated working papers, beginning retained earnings of the parent company will be adjusted in years subsequent to acquisition with an elimination entry whenever: a noncontrolling interest exists. it does not reflect the equity method. the cost method has been used only. the complete equity method is in use. 23. Failure to eliminate intercompany sales would result in an overstatement of consolidated net income. gross profit. cost of sales. all of these. 24. The workpaper entry in the year of sale to eliminate unrealized intercompany profit in ending inventory includes a credit to Ending Inventory (Cost of Sales). credit to Sales. debit to Ending Inventory (Cost of Sales). debit to Inventory - Balance Sheet. 25. P Corporation acquired a 60% interest in S Corporation on January 1, 2011, at book value equal to fair value. During 2011, P sold merchandise that cost $135,000 to S for $189,000. One-third of this merchandise remained in S?s inventory at December 31, 2011. S reported net income of $120,000 for 2011. P?s income from S for 2011 is: $36,000. $50,400. $54,000. $61,200. 26. Paige, Inc. owns 80% of Sigler, Inc. During 2011, Paige sold goods with a 40% gross profit to Sigler. Sigler sold all of these goods in 2011. For 2011 consolidated financial statements, how should the summation of Paige and Sigler income statement items be adjusted? Sales and cost of goods sold should be reduced by the intercompany sales. Sales and cost of goods sold should be reduced by 80% of the intercompany sales. Net income should be reduced by 80% of the gross profit on intercompany sales. No adjustment is necessary. 27. In years subsequent to the year a 90% owned subsidiary sells equipment to its parent company at a gain, the noncontrolling interest in consolidated income is computed by multiplying the noncontrolling interest percentage by the subsidiary?s reported net income minus the net amount of unrealized gain on the intercompany sale. plus the net amount of unrealized gain on the intercompany sale. minus intercompany gain considered realized in the current period. plus intercompany gain considered realized in the current period. 28. In years subsequent to the upstream intercompany sale of nondepreciable assets, the necessary consolidated workpaper entry under the cost method is to debit the Noncontrolling interest and Retained Earnings (Parent) accounts, and credit the nondepreciable asset. Retained Earnings (Parent) account and credit the nondepreciable asset. Nondepreciable asset, and credit the Noncontrolling interest and Investment in Subsidiary accounts. No entries are necessary. 29. In 2011, P Company sells land to its 80% owned subsidiary, S Company, at a gain of $50,000. What is the effect of this sale of land on consolidated net income assuming S Company still owns the land at the end of the year? consolidated net income will be the same as if the sale had not occurred. consolidated net income will be $50,000 less than it would had the sale not occurred. consolidated net income will be $40,000 less than it would had the sale not occurred. consolidated net income will be $50,000 greater than it would had the sale not occurred. 30. Several years ago, P Company bought land from S Company, its 80% owned subsidiary, at a gain of $50,000 to S Company. The land is still owned by P Company. The consolidated working papers for this year will require: no entry because the gain happened prior to this year. a credit to land for $50,000. a debit to P?s retained earnings for $50,000. a debit to Noncontrolling interest for $50,000.

QUIZ - Advanced Accounting 1. Which of the following situations best describes a business combination to be accounted for as a statutory merger? Both companies in a combination continue to operate as separate, but related, legal entities. Only one of the combining companies survives and the other loses its separate identity. Two companies combine to form a new third company, and the original two companies are dissolved. One company transfers assets to another company it has created. 2. The defense tactic that involves purchasing shares held by the would-be acquiring company at a price substantially in excess of their fair value is called poison pill. pac-man defense. greenmail. white knight. 3. The third period of business combinations started after World War II and is called horizontal integration. merger mania. operating integration. vertical integration. 4. The excess of the amount offered in an acquisition over the prior stock price of the acquired firm is the bonus. goodwill. implied offering price. takeover premium. 5. If the value implied by the purchase price of an acquired company exceeds the fair values of identifiable net assets, the excess should be allocated to reduce any previously recorded goodwill and classify any remainder as an ordinary gain. allocated to reduce current and long-lived assets. allocated to reduce long-lived assets. accounted for as goodwill. 6. In a business combination in which the total fair value of the identifiable assets acquired over liabilities assumed is greater than the consideration paid, the excess fair value is: classified as an extraordinary gain. allocated first to eliminate any previously recorded goodwill, and any remaining excess over the consideration paid is classified as an ordinary gain. allocated first to reduce proportionately non-current assets then to non-monetary current assets, and any remaining excess over cost is classified as a deferred credit. allocated first to reduce proportionately non-current, depreciable assets to zero, and any remaining excess over cost is classified as a deferred credit. 7. If an impairment loss is recorded on previously recognized goodwill due to the transitional goodwill impairment test, the loss should be treated as a(n): loss from a change in accounting principles. extraordinary loss loss from continuing operations. loss from discontinuing operations. 8. Under SFAS 141R, what value of the assets and liabilities are reflected in the financial statements on the acquisition date of a business combination? Carrying value Fair value Book value Average value 9. The fair value of net identifiable assets exclusive of goodwill of a reporting unit of X Company is $300,000. On X Company's books, the carrying value of this reporting unit's net assets is $350,000, including $60,000 goodwill. If the fair value of the reporting unit is $335,000, what amount of goodwill impairment will be recognized for this unit? $0 $10,000 $25,000 $35,000 10. Majority-owned subsidiaries should be excluded from the consolidated statements when control does not rest with the majority owner. the subsidiary operates under governmentally imposed uncertainty. a foreign subsidiary is domiciled in a country with foreign exchange restrictions or controls. any of these circumstances exist. 11. Under the economic entity concept, consolidated financial statements are intended primarily for the benefit of the stockholders of the parent company. creditors of the parent company. minority stockholders. all of the above. 12. A newly acquired subsidiary has pre-existing goodwill on its books. The parent company's consolidated balance sheet will: treat the goodwill the same as other intangible assets of the acquired company. will always show the pre-existing goodwill of the subsidiary at its book value. not show any value for the subsidiary's pre-existing goodwill. do an impairment test to see if any of it has been impaired. 13. The Difference between Implied and Book Value account is: an account necessary for the preparation of consolidated working papers. used in allocating the amounts paid for recorded balance sheet accounts that are different than their fair values. the excess implied value assigned to goodwill. the unamortized excess that cannot be assigned to any related balance sheet accounts 14. An investor adjusts the investment account for the amortization of any difference between cost and book value under the cost method. complete equity method. partial equity method. complete and partial equity methods. 15. Under the partial equity method, the entry to eliminate subsidiary income and dividends includes a debit to Dividend Income. Dividends Declared - S Company. Equity in Subsidiary Income. Retained Earnings - S Company. 16. On the consolidated statement of cash flows, the parent's acquisition of additional shares of the subsidiary's stock directly from the subsidiary is reported as an investing activity. a financing activity. an operating activity. none of these. 17. P Company purchased 80% of the outstanding common stock of S Company on May 1, 2011, for a cash payment of $1,272,000. S Company's December 31, 2010 balance sheet reported common stock of $800,000 and retained earnings of $540,000. During the calendar year 2011, S Company earned $840,000 evenly throughout the year and declared a dividend of $300,000 on November 1. What is the amount needed to establish reciprocity under the cost method in the preparation of a consolidated workpaper on December 31, 2011? $208,000 $260,000 $248,000 $432,000 18. In the preparation of a consolidated statements workpaper, dividend income recognized by a parent company for dividends distributed by its subsidiary is included with parent company income from other sources to constitute consolidated net income. assigned as a component of the noncontrolling interest. allocated proportionately to consolidated net income and the noncontrolling interest. eliminated. 19. When the implied value exceeds the aggregate fair values of identifiable net assets, the residual difference is accounted for as excess of implied over fair value. a deferred credit. difference between implied and fair value. goodwill. 20. The SEC requires the use of push down accounting when the ownership change is greater than 50% 80% 90% 95% 21. Under push down accounting, the workpaper entry to eliminate the investment account includes a debit to Goodwill. debit to Revaluation Capital. credit to Revaluation Capital. debit to Revaluation Assets. 22. In preparing consolidated working papers, beginning retained earnings of the parent company will be adjusted in years subsequent to acquisition with an elimination entry whenever: a noncontrolling interest exists. it does not reflect the equity method. the cost method has been used only. the complete equity method is in use. 23. Failure to eliminate intercompany sales would result in an overstatement of consolidated net income. gross profit. cost of sales. all of these. 24. The workpaper entry in the year of sale to eliminate unrealized intercompany profit in ending inventory includes a credit to Ending Inventory (Cost of Sales). credit to Sales. debit to Ending Inventory (Cost of Sales). debit to Inventory - Balance Sheet. 25. P Corporation acquired a 60% interest in S Corporation on January 1, 2011, at book value equal to fair value. During 2011, P sold merchandise that cost $135,000 to S for $189,000. One-third of this merchandise remained in S's inventory at December 31, 2011. S reported net income of $120,000 for 2011. P's income from S for 2011 is: $36,000. $50,400. $54,000. $61,200. 26. Paige, Inc. owns 80% of Sigler, Inc. During 2011, Paige sold goods with a 40% gross profit to Sigler. Sigler sold all of these goods in 2011. For 2011 consolidated financial statements, how should the summation of Paige and Sigler income statement items be adjusted? Sales and cost of goods sold should be reduced by the intercompany sales. Sales and cost of goods sold should be reduced by 80% of the intercompany sales. Net income should be reduced by 80% of the gross profit on intercompany sales. No adjustment is necessary. 27. In years subsequent to the year a 90% owned subsidiary sells equipment to its parent company at a gain, the noncontrolling interest in consolidated income is computed by multiplying the noncontrolling interest percentage by the subsidiary's reported net income minus the net amount of unrealized gain on the intercompany sale. plus the net amount of unrealized gain on the intercompany sale. minus intercompany gain considered realized in the current period. plus intercompany gain considered realized in the current period. 28. In years subsequent to the upstream intercompany sale of nondepreciable assets, the necessary consolidated workpaper entry under the cost method is to debit the Noncontrolling interest and Retained Earnings (Parent) accounts, and credit the nondepreciable asset. Retained Earnings (Parent) account and credit the nondepreciable asset. Nondepreciable asset, and credit the Noncontrolling interest and Investment in Subsidiary accounts. No entries are necessary. 29. In 2011, P Company sells land to its 80% owned subsidiary, S Company, at a gain of $50,000. What is the effect of this sale of land on consolidated net income assuming S Company still owns the land at the end of the year? consolidated net income will be the same as if the sale had not occurred. consolidated net income will be $50,000 less than it would had the sale not occurred. consolidated net income will be $40,000 less than it would had the sale not occurred. consolidated net income will be $50,000 greater than it would had the sale not occurred. 30. Several years ago, P Company bought land from S Company, its 80% owned subsidiary, at a gain of $50,000 to S Company. The land is still owned by P Company. The consolidated working papers for this year will require: no entry because the gain happened prior to this year. a credit to land for $50,000. a debit to P's retained earnings for $50,000. a debit to Noncontrolling interest for $50,000