questions 31 33 are based on the following set of facts on january 1 2014perez compa 4314386

questions 31 33 are based on the following set of facts on january 1 2014perez compa 4314386

Questions 31-33 are based on the following set of facts.

On January 1, 2014Perez Company purchased 100% of the common stock Hinske Enterprises for $280,000.  On that date, Hinske had common stock of $50,000 and retained earnings of $190,000.  Equipment and land were both undervalued by $10,000 on Hinske's books. There was a $5,000 overvaluation of Bonds Payable, as well a $15,000 undervaluation of inventory.

Topic: Acquisition-Date Consolidation when Purchase Price Exceeds Book Value

LO: 3

31.What is the amount of goodwill recorded in connection with this combination?

a.  $0

b.  $40,000

c.  $10,000

d.  $5,000

Topic: Acquisition-Date Consolidation when Purchase Price Exceeds Book Value

LO: 3

32. The consolidation entries necessary for a date of acquisition balance sheet include all of the following except:

a.  Land debit, $10,000

b.  Inventory debit, $15,000

c.  Bonds Payable credit, $5,000

d.  Equipment debit, $10,000

Topic: Acquisition-Date Consolidation when Purchase Price Exceeds Book Value

LO: 3

33.  The combined consolidation entries necessary for a date of acquisition balance sheet include all of the following except:

a.  Common Stock debit, $50,000

b.  Retained Earnings credit, $190,000

c.  Equity Investment credit, $280,000

d.  No debits or credits to goodwill

Topic: Acquisition-Date Consolidation when Purchase Price Exceeds Book Value

LO: 3

34.Maddon Company acquired 100% of Stonebraker by issuing 100,000 shares of its $1 par value stock.  The market value of the stock is $10 per share.  Maddon also paid $10,000 in consulting fees related to the acquisition.  Maddon's journal entry to record the acquisition would include:

a.  A credit to additional paid-in-capital, $900,000

b.  A credit to common stock, $1,000,000

c.  A credit to cash, $1,010,000

d.  A debit to Equity Investment, $1,010,000

Topic: Acquisition-Date Consolidation when Purchase Price Exceeds Book Value

LO: 3

35. On July 1, 2013, Watson Co. paid $215,000 for all of the stock of Squire, Inc.  On that date, book values of Squire's assets and liabilities were $200,000 and $45,000, respectively.  The fair values of the assets and liabilities were $210,000 and $35,000, respectively.  What is the amount of goodwill at date of acquisition?

a.  $60,000

b.  $50,000

c.  $40,000

d.  $-0-

Topic: Acquisition-Date Consolidation when Purchase Price Exceeds Book Value

LO: 3

36.  On December 30, 2012, Whatley Co. acquired 100% of MansterCorporation for $200,000 cash.  The post-combination balance sheets of the two firms showed total assets of $612,500 for the parent and $157,500 for the subsidiary.  Total assets on the consolidated balance sheet would be:

a.  $770,000

b. $570,000

c.  $970,000

d.  $612,500

Topic: Acquisition-Date Consolidation

LO: 2

37. Krista Company had common stock of $70,000 and retained earnings of $98,000. Storey, Inc. had common stock of $140,000 and retained earnings of $196,000. On January 1, 2013, Storey issued 34,000 shares of common stock with a $5 par value and a $18 fair value for all of Krista Company's outstanding common stock.  Immediately after the combination, what were the consolidated net assets?

a.  $504,000

b.  $336,000

c.  $1,116,000

d. $948,000

Questions 38-40 are based upon the following set of facts.

HairingtonCorporation issues 20,000 shares of its common stock for all of the outstanding shares of Alton, Inc.  Hairington’shares have a par value of $10 and a market value of $18 per share.

Topic: Acquisition-Date Consolidation

LO: 2

38.What is the increase in consolidated additional paid-in capital resulting from the combination?

a.  $360,000

b.  $200,000

c.  $160,000

d. $-0-

Topic: Acquisition-Date Consolidation when Purchase Price Exceeds Book Value

LO: 3

39. If Alton's net assets have book values and fair values of $240,000 and $300,000,respectively, what is the resulting amount of goodwill?

a.  $360,000

b.  $60,000

c.  $120,000

d. $-0-

Topic: Acquisition-Date Consolidation when Purchase Price Exceeds Book Value

LO: 3

40. If Alton's net assets have book values and fair value of $340,000 and $400,000, respectively, what is the resulting amount of goodwill?

a.  $360,000

b.  $20,000

c.  $40,000

d. $-0-

 

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