i. The X Company recently acquired 100% of the shares of the Y Company. X Company paid lawyers and appraisers for assistance in negotiating and finalizing this transaction. How should X account for these costs on the separate entity financial statements?

a. Deferred Charges

b. Profession fees expense

c. Additional cost of the investment in Y

d. Goodwill

B

ii. Which of the following statements best describes a joint venture?

a. Two previously established businesses come together as if they had always been together

b. Must be enacted through an exchange of shares

c. Earnings are distributed based on share earnings

d. Must be established through a cash transaction or the contribution of other assets.

D

iii. X Ltd. owns 80% of the common shares of Y Inc. The investment account under the equity method is made up of the following:-

80% of Ys shareholders equity$560,000

Unamortized fair value excess. 140,000

Goodwill..200,000

900,000

X sells of its investments in Y for $300,000. What is the amount of the gain or loss related to this sale that X would report ?

a. Zero

b. $18,750

c. $75,000

d. $160,000.

iv. On January 1^st.2019, X Company invested $100,000 for 15% of the common shares of the Y Company. X accounted for its long-term investment using the cost method. Y reported net income of $80,000 and declared a dividend of $90,000 during 2019. At the end of 2019 the market value of the common shares of Y had declined and Xs holding of common shares was worth $95,000 at this date.

What would be the balance in the investment in Y that X would report on its 2019 Balance Sheet?

a. $85,000

b. $100,000

c. $112,000

d. $87,000

D

v. X purchased 100% of the common shares of the Y Company on December 31^st.2019 by issuing 100,000 of its common shares. On the date of acquisition, data relating to the equipment was as follows:-

X..Y

Building, at cost.$500,000..$300,000

Accumulated depreciation....$200,000$100,000

Fair Value.$700,000..$400,000

Assume the business combination is to be accounted for using the acquisition method of consolidation, what would be the consolidated balance of the equipment shown on the consolidated balance sheet of the X Company?

a. $500,000

b. $1,100,000

c. $1,000,000

d. $800,000

Use the information below to answer questions vi and vii below:-

On January 1^st.2019, X Company acquired 25% of the common shares of Y Company, giving it significant influence. At that time Y Companys financial statements included common shares of $250,000 and retained earnings of $1,350,000, and the goodwill associated with the share acquisition was $150,000. There was no difference between the book value and fair value of Ys identifiable assets and liabilities.

vi. During 2019, Y had net income of $100,000 and paid dividends of $40,000. An evaluation of goodwill at the end of 2019 indicated no goodwill impairment since the date of acquisition. Xs investment in shares of Y would have which of the following account balances at December 31,2019?

a. $40,000

b. $50,000

c. $565,000

d. $610,000.

vii. During 2020, Y had net income of $200,000 and paid dividends of $60,000. An asset valuation test at the end of 2020 indicated that Ys goodwill had become impaired by 20%. Which of the following best represents Xs investment incomefrom the investment in Y for 2020?

a. $ 5,000

b. $10,000

c. $20,000

d. $35,000

viii. Which of the following statements is true regarding the goodwill impairment test?

a. The test for goodwill impairment must be done annually

b.. The goodwill impairment test may be required to be done more frequently than annually if circumstances indicate that the asset may be impaired

c. Where there is an impairment in value, it is recorded as an expense, not as a loss

d. Goodwill impairment would normally be recorded as a charge to other comprehensive income.

Before consolidated financial statements can be prepared there are conditions which must be met, otherwise any intercorporate purchases must be accounted for using the equity method.

ix. Which of the following conditions is not true?

a. There must be an identifiable acquirer

b. An acquisition date must be announced

c. The acquirer must be able to identify the book value of the acquire company

d. The acquirer must be able to calculate a goodwill for the purchase

x. Which of the following consolidated methods does not require reporting of non-controlling interests?

a. Proportionate method of consolidation

b. Identifiable Net Asset Method

c. The Parent Company Method

d. The Acquisition Method.