MAT Company Purchased 100% of the Stock of the LOWA Company. MAT Company will record the LOWA Assets and Liabilities at Fair value of the consideration given up by MAT Company The Fair value of the shares obtained from the owners of MAT Company It depend if we use the purchase or acquisition method None of the above is correct MICKKEY Company buys all of the outstanding stock of Small Company on November 1, Year One for $500,000 and is now preparing consolidated financial statements at the end of Year One. Small company Earned Revenues of $10,000 per month during Year One along with expenses of $8,000 per month. On November 1, Year One, Small company had only one asset a piece of land with a cost of $300,000 and a Fair value of $450,000and no Liabilities. The land continues to appreciate in value and is worth $470,000 at the end of Year One. Which of the following statements is true about the consolidated financial statements at the end of Year One? Consolidated net income will include $120,000 minus $96,000 earned by Small Goodwill at the end of Year One is reported as 0 under the acquisition method The gain on the land owned by Small is reported as a $30,000 gain All above are wrong FASB is the primary source for Accounting for Investments? FAS 123 FAS 115 SAS 112 None are source for application of investment accounting. SELECT FINANCING ACTIVITY Gain on the sale of common stock Selling short term investments Buying equipment None SELECT TRUE FOR CASH FLOW STATEMENT The operations section (using the direct method) starts with net income An increase in accounts receivable adds back cash using the indirect method The financing section is the same under either the direct or indirect method None of the above is a true statement Held to maturity securities includes Short term trading securities Preferred stock in an investee A 10 year bond held as investment None of the above are held to maturity securities OF THE FOLLOWING which is TRUE STATEMENT Amortization of a premium causes the effective rate to be higher than the face rate on held to maturity investments Amortization of a premium causes the effective rate to be lower than the face rate on held to maturity investments. Since it is an investment there is no need to test for impairment None are True SELECT TRUE STATEMENT Regarding Trading Securities Adjustments to FMV is a part of comprehensive income Adjustments to FMV flows though the income statement Amortization of a discount decreases the carrying value None OF THE FOLLOWING Cost of available- for -sale Securities include Purchase price plus consulting fees Purchase price plus brokerage fees Gains on sale of securities used to purchase the new securities None SELECT TRUE STATE Regarding available for sale securities? If FMV is greater than cost write up to market and recognizes gain as part of operations in the income statement Test available for sale securities for impairment Subsequent increases in value (after adjusting down for impairment) are allowed None