Part A: Multiple Choice Questions

1. In a business combination resulting in a parent company-subsidiary relationship, the parent company's Investment in Subsidiary Common Stock ledger account balance is:

1. Allocated to individual asset and liability ledger accounts in a parent company journal entry
2. Displayed among noncurrent assets in the consolidated balance sheet
3. Used as a basis for adjusting the subsidiary's asset and liability account balances in the subsidiary's ledger to current fair values
4. Eliminated with a working paper elimination for the working paper for consolidated balance sheet

2. In a business combination, the appropriate accounting for an excess of current fair values the combinee's identifiable net assets over the combinor's cost is to:

1. Recognize as negative goodwill in the accounting records of the combinee
2. Recognize as additional paid-in capital in the accounting records of the combinor
3. Reduce proportionately current fair values assigned to the combinee's nonmonetary assets and recognize any remaining excess as a deferred credit
4. Take some other action

3. How is the minority interest in net assets of subsidiary displayed in a consolidated balance sheet under the economic unit concept of consolidated financial statements?

1. As a separate item in the stockholders' equity section
2. As a deduction from consolidated goodwill if any
3. By means of a note to the consolidated financial statements
4. As a separate item in the liabilities section

4. On the date of a business combination resulting in a parent-subsidiary relationship, the differences between current fair values and carrying amounts of the subsidiary's identifiable net assets are:

1. Recognized in the applicable asset and liability ledger accounts of the parent company
2. Recognized in the applicable asset and liability ledger accounts of the subsidiary
3. Included in a working paper elimination
4. Accounted for in some other manner