Select the correct answer THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 1 THROUGH 4. On, Dec., 20, 2013, A (the investee) was merged into B. B issued 80,000 shares of its $10 par and $22 FMV per share to A stockholders for all issued and outstanding shares. The direct costs $240,000. Prior to the merger A balande sheet was (6 POINTS) Lia & Stockholders Cost FMV Jequity Cost FMV Current assets 500000 $75,000 Long term liabilities 750000 750000 Plant assets 1.800,000 2.000.000 Common stocks. Si par 500,000 Paid in capital 350,000 Retained Earnings 700.000 1- The stock investment account will be debited by - in the books of B. A $2,000,000 C$1.040,000 B$1,760,000 D$2,200,000 Assets 2- The paid in capital account will increase by in the books of B. A $720,000 C 51,200,000 B $960,000 D $800,000 3- The amount of goodwill is------- A $2,000,000 C 3175,000 B $1,825,000 D $800,000 4-Company A- A Will be survived C Will be a subsidiary of B B Will go out from existence DA&B will go out from existence. RULLUMEREVEBUNALULELSE QUESTIONS 5 THROUGH 10 On October 30, 2013 Y corporation issued 100000 shares of its no par, no stated-value common stock (current fair value $12 a share) for 18800 shares of the 20000 outstanding shares $20 par common stock of X company, The S150000 out-of-pocket costs of the business combination paid by Y on October 30, 2013, were as follows, 590000 directly related to the business combination; and S60000 indirect costs. Prior to the business combination, separate balance sheets of the constituent companies were as follows: & StridesequiryY 0001 0000000000 Y X AR 1200000 15001000 Current fair values of X's identifiable net assets differed their carrying amounts as follows: Inventories $340000, Plant assets 1100000 Required: select the correct answer 5- The cash account of Y after business combination is - ACS Bon D. 6- The stock investment account in the balance sheet of Y is - 7- After business combination. The value of common stock in Y balance sheet is 8-business combination goodwill is ASIC 9-The minority interest is ASICS 14.00 10- The value of consolidated inventory is ACS 11-Occurs when a new corporation is formed to take over the assets and operations of two or more separate business entities and dissolves the previously separate entities Legal consolidation Legal merger Acquisition 12 - T Corporation acquired a 40% interest in K Corporation at book value several years ago. K declared $50,000 dividends in 2011 and reported its income for $300,000. T's Investment in K account for 2011 should increase by: $75.000$ 90,000 S 80.000 $100.000 13 - On March 31, 2010, P Corporation acquired for $1,000,000 cash all the outstanding common stocks of S company when S's balance sheet showed net assets of $1,100,000 at the FMV. Out-of-pocket cost of the business combination was $100,000 indirect costs and $200,000 direct costs. The goodwill is $300.000 negative poodwill -3300,000 positive goodwill $100.000 positive goodwill - $100,000 negative goodwill 14- The realized gains or losses that related to the stock investment- long term [18%] securities will be treated: le the retained carings - In the balance sheet. in the stockholders equity in the cash flows statement 15 - On Jan 1, 2011, X Company acquired 15% of the voting, common stocks of Z Company for $200000. The intent of X is to hold the shares for five years. Z Company achieved $100000 net income and announced $80000 cash dividends. On December 31, 2011. The account of "stock investment in Z" will be: $20,000 - $220.000 5200,00 -5212.000 16-B Co, acquires all of the voting stock of N Co. for $900,000 cash. The book values of N's assets are $850,000, but the fair value of N's net assets $820,000. Goodwill from the combination is computed as? 5800,000 - $20,000 $80,000 3000 17 - X acquires 80% of Y net assets. The carrying value of stock investment in Y voting common stocks is $1000,000 and the fair market value of Y net assets is S1,100,000. The goodwill is $100,000 - $120,000 so 4-5325,000 18 s Corporation owns 92% of the outstanding common stock of H company; the other 8% is owned by Z Corporation. In the consolidated financial statements of S Corporation and subsidiary, Z is considered: A An investor C An affiliate BAD Arity interest