Consolidated Stmts. Ch. 2
a. quick entry for new and existing products into markets
b. combinations as a vehicle for achieving rapid growth and competitiveness
c. larger firms being less likely to fail
d. cost savings through elimination of duplicate facilities and staff
a. In form the companies are separate; in substance they are one entity.
b. In form and substance the companies are separate.
c. In form and substance the companies are one entity.
d. In form the companies are one entity; in substance they are separate.
a. Applied pro rata to reduce, but not below zero, the amounts initially assigned to specific noncurrent assets of the acquired firm.
b. Treated as negative goodwill to be amortized over the period benefited, not to exceed 40 years.
c. Treated as goodwill and tested for impairment on an annual basis.
d. Recognized as an ordinary gain from a bargain purchase.
a. In a combination created in the middle of a fiscal year.
b. When a bargain purchase occurs.
c. When the amount of a bargain purchase exceeds the value of the applicable noncurrent assets (other than certain exceptions) held by the acquired company.
d. In an acquisition when the value of all assets and liabilities cannot be determined.
a. Capitalized as part of the overall fair value acquired in the merger.
b. Included in recognized goodwill.
c. Written off over a five-year maximum useful life.
d. Recorded as an expense in the period the merger takes place.
a. The fair value of the contingent consideration is expensed immediately at acquisition date.
b. The fair value of the contingent consideration is included in the overall fair value of the consideration transferred, and a liability or additional owners’ equity is recognized.
c. The amount ultimately paid under the contingent consideration agreement is added to goodwill when and if the performance metrics are met.
d. The fair value of the contingent consideration is recorded as a reduction of the otherwise determinable fair value of the acquired firm.
a. The parent tests the preexisting goodwill for impairment before recording the goodwill as part of the acquisition.
b. The parent includes the preexisting goodwill as an identified intangible asset acquired.
c. Preexisting goodwill is excluded from the identifiable assets acquired unless the subsidiary can demonstrate its continuing value.
d. The parent ignores preexisting subsidiary goodwill and allocates the subsidiary’s fair value among the separately identifiable assets acquired and liabilities assumed.
a. Less than 50% owned subsidiaries.
b. Foreign Subsidiaries.
c. Permanently Impaired Subsidiaries.
d. Variable Interest Entities.
e. Entities financed with subordinated debt.
a. Always expense these costs at the acquisition date
b. Expense these costs unless such costs represent assets with alternative future use
c. Recognize these costs as an intangible asset and amortize the cost over a reasonable life
d. Recognize these costs as an intangible asset and test for impairment
e. These costs have no impact on the purchase.
a. fair value of the assets only.
b. book value as shown on the books of the subsidiary.
c. book value plus any excess of purchase price over book value of the acquired assets and liabilities.
d. historical cost as shown on the books of the subsidiary.
e. current carrying value.
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