02 Jan Initial value, lower

Question 1

4 / 4 pts

(TCO 2) Which of the following internal record-keeping methods can a parent choose to account for a subsidiary acquired in a business combination?

Initial value or book value

Initial value, lower of cost or market value, or equity

Initial value, equity, or partial equity

Initial value, equity, or book value

Initial value, lower of cost or market value, or partial equity

Question 2

0 / 4 pts

(TCO 3) One company acquires another company in a combination that is accounted for as an acquisition. The acquiring company decides to apply the initial value method in accounting for the combination. Which is one reason the acquiring company might have made this decision?

It is the only method allowed by the SEC.

It is relatively easy to apply.

It is the only internal reporting method allowed by generally accepted accounting principles.

Operating results on the parent’s financial records reflect consolidated totals.

When the initial method is used, no worksheet entries are required in the consolidation process.

Question 3

4 / 4 pts

(TCO 3) Which of the following accounts would not appear on the consolidated financial statements at the end of the first fiscal period of the combination?

Goodwill

Equipment

Investment in subsidiary

Common stock

Additional paid-in capital

Question 4

0 / 4 pts

(TCO 3) Parent Corp. bought 100% of Jack Inc. on January 1, 20×1, at a price in excess of the subsidiary’s fair value. On that date, Parent’s equipment (10-year life) had a book value of $360,000 but a fair value of $480,000. Jack had equipment (10-year life) with a book value of $240,000 and a fair value of $350,000. Parent used the partial equity method to record its investment in Jack. On December 31, 20×3, Parent had equipment with a book value of $250,000 and a fair value of $400,000. Jack had equipment with a book value of $170,000 and a fair value of $320,000. Which is the consolidated balance for the equipment account as of December 31, 20×3?

$710,000

$580,000

$474,000

$497,000

$565,000

Question 5

0 / 4 pts

(TCO 3) On September 1, 20×1, Peter Inc. issued common stock in exchange for 20% of Sal Inc.’s outstanding common stock. In July of 20×3, Peter issued common stock for an additional 75% of Sal’s outstanding common stock. Sal continues in existence as Peter’s subsidiary. How much of Sal’s 20×3 net income should be reported as accruing to Peter?

20% of Sal’s net income to June 30 and all of Sal’s net income from July 1 to December 31

20% of Sal’s net income to June 30 and 95% of Sal’s net income from July 1 to December 31

95% of Sal’s net income

All of Sal’s net income