Accounting for Mergers and Acquisitions
Chapter Exam Questions
Course Introduction
Accounting for Mergers and Acquisitions explores the specialized accounting principles and practices involved in the consolidation of companies through mergers, acquisitions, and related transactions. The course covers key topics such as purchase method accounting, goodwill and intangible asset valuation, non-controlling interests, contingent consideration, and post-acquisition financial reporting. Students will analyze regulatory requirements, compliance with IFRS and GAAP, disclosure issues, and the impact of mergers and acquisitions on financial statements. Through case studies and real-world examples, the course provides practical insights into the strategic financial decisions and reporting complexities that organizations face during business combinations.
Recommended Textbook
Advanced Financial Accounting 8th Edition by Richard Baker
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Chapter 1: Intercorporate Acquisitions and Investments in Other Entities
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Q1) Based on the preceding information,what amount of amount of goodwill impairment will be recognized for this division if its fair value is determined to be $245,000?
A)$0
B)$30,000
C)$60,000
D)$55,000
Answer: A
Q2) Based on the information provided,what amount will be reported immediately following the business combination for Retained Earnings in the combined company's balance sheet?
A)$170,000
B)$225,000
C)$115,000
D)$210,000
Answer: A
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Chapter 2: Reporting Intercorporate Interests
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Q1) A change from the cost method to the equity method of accounting for an investment in common stock resulting from an increase in the number of shares held by the investor requires:
A)only a footnote disclosure.
B)that the cumulative amount of the change be shown as a line item on the income statement,net of tax.
C)that the change be accounted for as an unrealized gain included in other comprehensive income.
D)retroactive restatement as if the investor always had used the equity method.
Answer: D
Q2) Based on the preceding information,what amount will be reported by Yang as balance in investment in Spiel on December 31,2008,if it used the fair value method of accounting?
A)$105,000
B)$118,750
C)$100,000
D)$122,500
Answer: A
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Chapter 3: The Reporting Entity and Consolidated Financial Statements
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Q1) Rohan Corporation holds assets with a fair value of $150,000 and a book value of $125,000 and liabilities with a book value and fair value of $50,000.What balance will be assigned to the noncontrolling interest in the consolidated balance sheet if Helms Company pays $90,000 to acquire 75 percent ownership in Rohan and goodwill of $20,000 is reported?
A)$50,000
B)$30,000
C)$40,000
D)$20,000
Answer: B
Q2) Based on the preceding information,what amount of stockholders' equity was reported in the consolidated balance sheet immediately after acquisition?
A)$220,000
B)$150,000
C)$370,000
D)$350,000
Answer: A
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Chapter 4: Consolidation of Wholly Owned Subsidiaries
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Q1) Based on the preceding information,what amount of differential will arise in the consolidation process?
A)$0
B)$5,000
C)$15,000
D)$65,000
Q2) Based on the preceding information,what amount of total stockholder's equity will be reported in the consolidated balance sheet prepared immediately after the business combination?
A)$300,000
B)$479,000
C)$315,000
D)$350,000
Q3) Based on the information provided,the beginning differential assigned to buildings and equipment is:
A)$50,000.
B)$40,000.
C)$10,000.
D)$36,000.
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Chapter 5: Consolidation of Less-Than-Wholly Owned Subsidiaries
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Q1) Based on the information provided,what amount of retained earnings will be reported in the consolidated balance sheet prepared on December 31,2004?
A)$235,000
B)$210,000
C)$310,000
D)$225,000
Q2) Based on the preceding information,what is the elimination entry made to assign income to noncontrolling interest in the workpaper to prepare a full set of consolidated financial statements for the year 2009?
A)Option A
B)Option B
C)Option C
D)Option D
Q3) Based on the preceding information,the amount of goodwill reported is:
A)$0.
B)$10,000.
C)$15,000.
D)$20,000.
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Chapter 6: Intercompany Transfers of Services and
Noncurrent Assets
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Q1) Based on the preceding information,what should be the amount of income assigned to the controlling shareholders in the consolidated income statement for 2008?
A)$369,400
B)$405,000
C)$465,000
D)$60,000
Q2) Based on the preceding information,the gain on sale of equipment recorded by Mortar for 2008 is:
A)$70,000.
B)$65,000.
C)$50,000.
D)$40,000.
Q3) Based on the preceding information,in the preparation of the 2009 consolidated income statement,depreciation expense will be:
A)Debited for $1,000 in the eliminating entries.
B)Credited for $1,000 in the eliminating entries.
C)Debited for $15,000 in the eliminating entries.
D)Credited for $15,000 in the eliminating entries.
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Chapter 7: Intercompany Inventory Transactions
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Q1) Based on the information given above,what amount of cost of goods sold must be eliminated from the consolidated income statement for 2008?
A)$2,765,000
B)$1,620,000
C)$1,422,000
D)$2,963,000
Q2) Based on the information given above,what will be the income to noncontrolling interest for 2008?
A)$39,750
B)$37,875
C)$71,275
D)$70,875
Q3) Based on the information given above,by what amount should Graceland write down inventory in its books?
A)$14,000
B)$15,000
C)$13,000
D)$16,000
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Chapter 8: Intercompany Indebtedness
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Q1) Based on the information given above,what amount of premium on bonds payable will be eliminated in the preparation of the 2008 consolidated financial statements?
A)$3,500
B)$2,800
C)$5,000
D)$2,500
Q2) Based on the information given above,what amount of interest receivable will be recorded by Light Corporation on December 31,2008,in its separate financial statements?
A)$5,000
B)$6,500
C)$10,000
D)$6,000
Q3) Which of the following eliminating entries might be found on a consolidation workpaper to eliminate the effects of intercompany debt?
A)I
B)II
C)Either I or II
D)Neither I nor II
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Chapter 9: Consolidation Ownership Issues
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Q1) Based on the information provided,what amount will be reported as the noncontrolling interest in the consolidated balance sheet on January 1,2009?
A)$70,000
B)$130,000
C)$118,000
D)$142,000
Q2) Based on the information provided,what is the book value of the common stock on January 1,2009?
A)$410,000
B)$360,000
C)$390,000
D)$350,000
Q3) Based on the preceding information,in the journal entry recorded by Vision for sale of shares,Additional Paid-in Capital will be credited for:
A)$0.
B)$15,000.
C)$9,000.
D)$45,000.
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Chapter 10: Additional Consolidation Reporting Issues
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Q1) Assume that New Life uses the direct method of computing cash flows from operating activities.Based on the preceding information,what amount will be reported by the company as cash payments to suppliers for 2009?
A)$350,000
B)$348,000
C)$312,000
D)$352,000
Q2) Based on the information provided,what is the consolidated net income reported for the year 2008?
A)$120,000
B)$138,000
C)$140,000
D)$192,000
Q3) Based on the preceding information,what amount will be reported by the company as cash flows from operating activities for 2008?
A)$175,000
B)$133,000
C)$167,000
D)$207,000
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Chapter 11: Multinational Accounting: Foreign Currency
Transactions and Financial Instruments
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Q1) Based on the information given above,the indirect exchange rates for the Singapore dollar and the Cyprus Pound are:
A)1.7655 Singapore dollars and 1.4235 Cyprus pounds respectively.
B)0.2975 Singapore dollars and 1.5132 Cyprus pounds respectively.
C)2.1622 Singapore dollars and 0.4625 Cyprus pounds respectively.
D)1.4235 Singapore dollars and 0.3979 Cyprus pounds respectively.
Q2) On September 3,2008,Jackson Corporation purchases goods for a U.S.dollar equivalent of $17,000 from a Swiss company.The transaction is denominated in Swiss francs (SFr).The payment is made on October 10.The exchange rates were: What entry is required to revalue foreign currency payable to U.S.dollar equivalent value on October 10?
A)Option A
B)Option B
C)Option C
D)Option D
Q3) Based on the preceding information,the entries on January 30,2009,include a:
A)Debit to Dollars Payable to Exchange Broker,$184,000.
B)Credit to Foreign Currency Transaction Gain,$4,000.
C)Credit to Foreign Currency Receivable from Exchange Broker,$180,000.
D)Debit to Foreign Currency Units (SFr),$184,000.
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Chapter 12: Multinational Accounting: Issues in Financial
Reporting and Translation of Foreign Entity Statements
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Q1) Based on the preceding information,what amount of translation adjustment is required for increase in differential?
A)$3,000
B)$5,500
C)$4,500
D)$5,000
Q2) Which combination of accounts and exchange rates is correct for the translation of a foreign entity's financial statements from the functional currency to U.S.dollars?
A)Option A
B)Option B
C)Option C
D)Option D
Q3) Dividends of a foreign subsidiary are translated at:
A)the average exchange rate for the year.
B)the exchange rate on the date of declaration.
C)the current exchange rate on the date of preparation of the financial statement.
D)the exchange rate on the record date.
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Chapter 13: Segment and Interim Reporting
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Q1) Missoula Corporation disposed of one of its segments in the second quarter and incurred a gain from disposal of discontinued segment of $600,000,net of taxes.What is the effect of this gain from disposal of discontinued segment?
A)Increase net income from operations for the year by $600,000.
B)Increase second quarter net income by $600,000.
C)Increase each quarter's net income by $150,000.
D)Increase each of the last three quarters' net income by $200,000.
Q2) Trimester Corporation's revenue for the year ended December 31,2008,was as follows: Trimester has a reportable operating segment if that segment's revenue exceeds:
A)$65,500
B)$60,000
C)$64,500
D)$61,000
Q3) Based on the preceding information,the cost of goods sold for the first quarter is:
A)$636,000
B)$564,000
C)$546,000
D)$624,000
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Chapter 14: Sec Reporting
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Q1) Which of the following observations is true of the shelf registration rule?
A)It is an option available to all listed companies.
B)Shelf registration is limited to 25 percent of the company's currently outstanding stock.
C)It allows private placements of an unlimited amount of securities.
D)It allows large companies to select the optimal time to sell their stock.
Q2) Which of the following statements concerning the management discussion and analysis (MD&A)of a company's financial condition is true? I.It should cover the financial statements and other statistical data for the most recent three-year time span.
II)It should make year-to-year comparisons of material changes in the line items.
III)Management need not explain the cause(s)of the material changes.
IV)Disclosure of material off-balance sheet transactions,arrangements,and obligations is required in each annual and each quarterly report.
A)I,II,and IV
B)II and III
C)I,III,and IV
D)I,II,III,and IV
Q3) Form 10-Q
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Chapter 15: Partnerships: Formation,operation,and
Changes in Membership
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Q1) Refer to the above information.Tiffany is paid $60,000,and no goodwill is recorded.In the journal entry to record Tiffany's withdrawal:
A)Tiffany,Capital will be credited for $60,000.
B)Ron,Capital will be debited for $5,000.
C)Stella,Capital will be debited for $4,000.
D)Cash will be debited for $60,000.
Q2) The partnership of X and Y shares profits and losses in the ratio of 60 percent to X and 40 percent to Y.For the year 2008,partnership net income was double X's withdrawals.Assume X's beginning capital balance was $80,000,and ending capital balance (after closing)was $140,000.Partnership net income for the year was:
A)$120,000.
B)$300,000.
C)$500,000.
D)$600,000.
Q3) Apple and Betty are planning on beginning a new business.They plan on forming a partnership.Apple will contribute $300,000 and will not be working.Betty will be working full time.They plan on splitting profits equally.They approach you,as an accounting major,to confirm their thoughts.What do you recommend?
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Chapter 16: Partnerships: Liquidation
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Q1) (p.Appendix: A)On a partner's personal statement of changes in net worth,what type(s)of income is (are)recognized? I.Realized
II)Unrealized
A)I only
B)II only
C)Both I and II
D)Neither I nor II
Q2) When is a partnership considered to be insolvent? I.When the total of all partners' capital accounts results in a debit balance.
II)When at least one of the partners is personally insolvent.
A)I only
B)II only
C)Both I and II
D)Neither I nor II
Q3) Listen and Hear are thinking of dissolving their partnership.Listen has a friend who told him to complete a "lump-sum" liquidation.Hear wants to complete an "installment" liquidation.They have come to you for advice.What do you recommend and Why?
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Chapter 17: Governmental Entities: Introduction and General Fund Accounting
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Q1) Which of the following observations concerning interfund transfers is true?
A)They are expected to be repaid.
B)They are classified as fund revenues or expenditures.
C)The receiving fund recognizes these transfers as revenue.
D)These transfers are classified under "Other Financing Sources or Uses."
Q2) The general fund of Loveland ordered a new fire truck on November 12,2008,for $150,000.The order was appropriately encumbered on this date.Loveland received the fire truck on January 15,2009,and issued a voucher to the manufacturer for $148,600.Loveland uses the calendar year for reporting,and outstanding encumbrances at December 31,2008,are lapsing.On January 15,2009,the general fund of Loveland should debit:
A)Fund Balance-Reserved for Encumbrances for $148,600.
B)Expenditures for $148,600.
C)Expenditures-2008 for $148,600.
D)Encumbrances for $148,600.
Q3) Briefly discuss the various types of governmental funds and proprietary funds.
Q4) Discuss major differences between a governmental entity's uses of the modified accrual method and a for-profit corporation's use of the accrual method.
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Chapter 18: Governmental Entities: Special Funds and
Government-Wide Financial Statements
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Q1) On the statement of cash flows prepared for an internal service fund,cash received from customers and cash paid for operating expenses should be reported as
A)investing activities.
B)operating activities.
C)noncapital financing activities.
D)capital and related financing activities.
Q2) The capital projects fund of Hood River completed construction of an addition to its city hall at a cost of $4,000,000.The city council approved payment of the amount due the general contractor,less a 10 percent retainage.How should the capital projects fund account for the 10 percent retainage? I.As a credit of $400,000 to Deferred Revenue-Retained Percentage
II)As a credit for $400,000 to Contracts Payable-Retained Percentage.
A)I only
B)II only
C)Either I or II
D)Neither I nor II
Q3) GASB 34 requires a Reconciliation schedule for the Statement of Net Assets.What does this schedule document?
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Chapter 19: Not-For-Profit Entities
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Q1) Based on the information provided,in Golden Path's statement of activities for the year ended December 31,2008,what amount should be reported under the classification of program services?
A)$720,000
B)$910,000
C)$440,000
D)$760,000
Q2) A private,not-for-profit hospital uses a fund structure which includes a general fund and donor restricted funds.The hospital's revenues from nursing programs and gift shops should be accounted for in the:
A)specific purpose fund.
B)restricted current fund.
C)general fund.
D)time-restricted fund.
Q3) "Classification of contributions restricted by purpose" describes which term listed above?
Q4) "Net asset classifications per FAC 6" describes which term listed above?
Q5) "Basis for measuring contributions" describes which term listed above?
Q6) The governing board designated assets for plant expansion.
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Chapter 20: Corporations in Financial Difficulty
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Q1) Creditors may file which type of petition when seeking remedy under the Bankruptcy Code? I.Voluntary
II)Involuntary
A)I only
B)II only
C)Either I or II
D)Neither I nor II
Q2) Based on the preceding information,what is the estimated dividend percentage?
A)23 percent
B)93 percent
C)77 percent
D)68 percent
Q3) In a statement of realization and liquidation,unusual revenue items are reported under:
A)assets.
B)extraordinary items.
C)supplementary items.
D)These are never reported.
Q4) Briefly explain the three classes of creditors specified in the Bankruptcy Code.
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