Originally Posted by Jan Caldwell
1) In purchase where control is achieved, how would the land accounts of the parent and the land accounts of the subsidiary by combined?
Parent Subsidiary
A)Book Value Book Value
B)Book Value Fair Market Value
C)Fair Market Value Fair Market Value
D)Fair Market Value Book Value
E)Cost Cost
Answer: C
2) Direct combination costs and stock issuance costs are often incurred in the process of making a controlling investment in another company. How should those costs be accounted for in a Purchase transaction?
Direct Combination Costs Stock Issurance Costs
A)Increase Investment Decrease Investment
B)Increase Investment Decrease Paid-In Capital
C)Increase Investment Increase Expenses
D)Decrease Paid-In Capital Increase Investment
E)Increase Expense Decrease Investment
Answer: A
3) Which one of the following accounts would not appear on the consolidated financial
statements at the end of the first fiscal period of the combination?
A)Goodwill
B)Equipment
C)Investment in Subsidiary
D)Common Stock
E)Additional Paid-In Capital
Answer: A
Push-down accounting
1) Push-down accounting is concerned with the
A)impact of the purchase on the subsidiary's financial statements.
B)recognition of goodwill by the parent
C)correct consolidation of the financial statements.
D)impact of the purchase on the separate financial statements of the parent.
E) recognition of dividends received from the subsidiary.
Answer: A
2) Under the equity method,
A)The investment account remains at initial cost
B)Dividends received are recorded as revenue
C)Goodwill is amortized over 20 years
D)Income reported by the subsidiary increases the investment account
E) Dividends received increase the investment account
Amswer: D
3) Under the partial equity method,
A)The investment account remains at initial cost
B) Dividends received are recorded as revenue
C) Amortization of the excess of cost over book value of net assets is applied
over their useful lives to reduce the investment account
D) Amortization of the excess of cost over book value is ignored in regard to the
investment account.
E) Dividends received increase the investment account.
