Advanced Accounting 9th Edition by Fischer - Test Bank
Vibe
Company purchased the net assets of Atlantic Company in a business combination
accounted for as a purchase. As a result, goodwill was recorded. For tax
purposes, this combination was considered to be a tax-free merger. Included in
the assets is a building with an appraised value of $210,000 on the date of the
business combination. This asset had a net book value of $70,000, based on the
use of accelerated depreciation for accounting purposes. The building had an
adjusted tax basis to Atlantic (and to Vibe as a result of the merger) of
$120,000. Assuming a 36% income tax rate, at what amount should Vibe record
this building on its books after the purchase?
$120,000
$134,400
$140,000
$210,000
ANS: D DIF: M OBJ: 4
Goodwill represents the excess cost of an
acquisition over the
sum of the fair values assigned to intangible
assets less liabilities assumed.
sum of the fair values assigned to tangible and
intangible assets acquired less liabilities assumed.
sum of the fair values assigned to intangibles
acquired less liabilities assumed.
book value of an acquired company.
ANS: B DIF: M OBJ: 5
When purchasing a company occurs, FASB recommends
disclosing all of the following EXCEPT:
goodwill related to each reporting segment.
contingent payment agreements, options, or
commitments included in the purchase agreement, including accounting methods to
be followed.
results of operations for the current period if
both companies had remained separate.
amount of in-process R&D purchased and
written-off during the period.
ANS: C DIF: M OBJ: 5
1-3
Chapter 1
Cozzi Company is being purchased and has the
following balance sheet as of the purchase date:
|
Current assets.......... |
$200,000 |
Liabilities.... |
$ 90,000 |
||
|
Fixed assets............ |
180,000 |
Equity......... |
290,000 |
||
|
.................Total |
$380,000 |
........Total |
$380,000 |
||
|
======== |
======== |
||||
The price paid for Cozzi's net assets (the
purchaser assumes the
liabilities) is $500,000. The fixed assets have a
fair value of
$220,000, and
the liabilities have a fair value of $110,000. The amount
of goodwill to be recorded in the purchase is
__________.
$0
$50,000
$70,000
$90,000
ANS: C DIF: M OBJ: 6
Separately identified intangible assets are
accounted for by amortizing:
exclusively by using impairment testing.
based upon a pattern that reflects the benefits
conveyed by the asset.
over the useful economic life less residual value
using only the straight-line method.
amortizing over a period not to exceed a maximum of
40 years.
ANS: B DIF: E OBJ: 6
Acme Co. is preparing a pro-forma set of financial
statements after an acquisition of Coyote Co. The purchase price is less than
the fair value of the assets acquired. However, the purchase price is greater
than net book value of the acquired company.
Acme's goodwill will decrease over time.
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