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E1-1 General questions 1. Penang Corporation acquired Minang Corporation and took over its assets and operations, at the same time dis- solving Minang Corporation. This type of business combination is considered as a a Consolidation bMerger c Pooling of interests d Subsidiary 2. Singh Corporation paid a certain sum in accounting and legal costs when it acquired Khumar Corporation. These costs should be: a Charged against other paid-in capital of the combined entity b Added to the parent/investor company's investment account c Deducted from parent/investor company's income in the period of combination d None of the above 3. Ahmad Corporation agrees to issue additional shares of stock to its acquired entity, Bahrun Corporation, on the condition that Bahrun Corporation meet a certain earnings goal in the future. This contingency is: a Classified as contingent liability Measured at its fair value on each reporting date until it resolved c Not remeasured d None of the above 4. In a business combination, the additional price paid over the fair value of net assets acquired is: a Recorded as a gain from a bargain purchase b Amortized according to its useful life c Subject to annual impairment tests d None of the above [Based on AICPA) General problems 1. Pop Corporation paid $100,000 cash for the net assets of Son Company, which consisted of the following: Book Value Fair Value Current assets $ 40,000 $ 56,000 Plant and equipment 160,000 220,000 Liabilities assumed (40,000) (36,000 $160,000 $240,000 Assume Son Company is dissolved. The plant and equipment acquired in this business combination should be recorded at: a $220,000 b $200,000