Multiple choice

Tear Company, a newly established subsidiary of Stern Corporation, received assets with an original cost of $260,000, a fair value of $200,000, and a book value of $140,000 from the parent in exchange for 7,000 shares of Tear's $8 par value common stock. Tear should record Select one: a. Additional paid-in capital of $84,000 b. Additional paid-in capital of $204,000 C. Additional paid-in capital of So d. Additional paid-in capital of $144,000 On December 31, 20X3, Saxe Corporation was merged into Poe Corporation. In the business combination, Poe issued 200,000 shares of its $10 par common stock, with a market price of $18 a share, for all of Saxe's common stock. The stockholders' equity section of each company's balance sheet immediately before the combination was: Poe Saxe Common Stock Additional Paid-In Capital Retained Earnings $3,000,000 1,300,000 2,500,000 $6,800,000 $1,500,000 150,000 850,000 $2,500,000 In the December 31, 20X3, combined balance sheet, additional paid-in capital should be reported at Select one: a. $2,900.000 b. $1,300,000 c. $1,450,000 d. $950,000 In a business combination, costs of registering equity securities to be issued by the acquiring company are Select one: a. Addition to goodwill b. Expense of the combined company for the period in which the costs were incurred c. Reduction of the recorded value of the securities d. Direct addition to stockholders' equity of the combined company T will Company has a reporting unit with the fair value of its net identifiable assets of $500,000. The carrying value of the reporting unit's net assets on Twill's books is $575,000, which includes $90,000 of goodwill. The fair value of the reporting unit is $560,000. Twill should report impairment of goodwill of Select one: a. $0 b. $30,000 C. $60,000 d. $15,000 Which of the following is the appropriate basis for valuing fixed assets acquired in a business combination carried out by exchanging cash for common stock? Select one: a. Cost plus any excess of purchase price over book value of assets acquired b. Historical cost C. Book value d. Fair value A and B Companies have been operating separately for five years. Each company has a minimal amount of liabilities and a simple capital structure consisting solely of voting common stock. In exchange for 40 percent of its voting stock A Company, acquires 80 percent of the common stock of B Company. This is a "tax-free" stock-for-stock exchange for tax purposes. B Company's identifiable assets have a total net fair market value of $800,000 and a total net book value of $580,000. The fair market value of the A stock used in the exchange is $700,000, and the fair value of the noncontrolling interest is $175,000. The goodwill reported following the acquisition would be Select one: a. Zero b. 295,000 c. $60,000 d. $75,000 Topper Company established a subsidiary and transferred equipment with a fair value of $72,000 to the subsidiary. Topper had purchased the equipment with ten-year expected life of four years earlier for $100,000 and has used straight-line depreciation with no expected residual value. At the time of the transfer, the subsidiary should record Select one: a. Equipment at $100,000 and accumulated depreciation of $40,000 b. Equipment at $120,000 and accumulated depreciation of S48,000 c. Equipment at $60,000 and no accumulated depreciation d. Equipment at $72,000 and no accumulated depreciation Goodwill represents the excess of the sum of the fair value of the (1) consideration given, (2) shares already owned, and (3) the noncontrolling interest over the Select one: a. Sum of the fair values assigned to tangible assets acquired less liabilities assumed b. Book value of an acquired company. C. Sum of the fair values assigned to intangible assets acquired less liabilities assumed d. Sum of the fair values assigned to identifiable assets acquired less liabilities assumed. Lead Corporation established a new subsidiary and transferred to it assets with a cost of $90,000 and a book value of $75,000. The assets had a fair value of $100,000 at the time of transfer. The transfer will result in Select one: a. A reduction of net assets reported by Lead Corporation of $75,000 b. No change in the reported net assets of Lead Corporation C. A reduction of net assets reported by Lead Corporation of $90,000 d. An increase in the net assets reported by Lead Corporation of $25,000