Learning Objective: 01-02 Understand the development of standards related to acquisition
accounting over time.; 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: FN Measurement
Pursuing an inorganic growth strategy, Wilson Company acquired Venus Company's net assets
and assigned them to four separate reporting divisions. Wilson assigned total goodwill of $134,000
to the four reporting divisions as given below:
Alpha Beta Gamma Delta
Carrying value $ 200,000 $ 320,000 $ 370,000 $ 300,000
Goodwill included in carrying
20,000 34,000 50,000 30,000
value
Fair value of net identifiable
150,000 300,000 390,000 280,000
assets at year-end
Fair value of reporting unit at
year-end 180,000 350,000 360,000 295,000
40) Based on the preceding information, what amount of goodwill will be reported for Alpha at
year-end?
A) $0
B) $20,000
C) $30,000
D) $10,000
Answer: A
Difficulty: 3 Hard
Topic: Goodwill Impairment
Learning Objective: 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: FN Measurement
41) Based on the preceding information, what amount of goodwill will be reported for Beta at
year-end?
A) $0
B) $14,000
C) $34,000
D) $50,000
Answer: C
Difficulty: 3 Hard
Nursedocs@2023
, Topic: Goodwill Impairment
Learning Objective: 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: FN Measurement
42) Based on the preceding information, for Gamma
A) no goodwill should be reported at year-end.
B) goodwill impairment of $30,000 should be recognized at year-end.
C) goodwill impairment of $20,000 should be recognized at year-end.
D) goodwill of $40,000 should be reported at year-end.
Answer: D
Difficulty: 3 Hard
Topic: Goodwill Impairment
Learning Objective: 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: FN Measurement
43) Based on the preceding information, for Delta
A) no goodwill should be reported at year-end.
B) goodwill impairment of $5,000 should be recognized at year-end.
C) goodwill impairment of $20,000 should be recognized at year-end.
D) goodwill of $30,000 should be reported at year-end.
Answer: B
Difficulty: 3 Hard
Topic: Goodwill Impairment
Learning Objective: 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: FN Measurement
44) Based on the preceding information, what would be the total amount of goodwill that Wilson
should report at year-end?
A) $0
B) $99,000
C) $79,000
D) $94,000
Answer: B
Difficulty: 3 Hard
Topic: Goodwill Impairment
Learning Objective: 01-05 Make calculations and business combination journal entries in the
Nursedocs@2023
, presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: FN Measurement
45) Which of the following observations is(are) consistent with the acquisition method of
accounting for business combinations?
I. Expenses related to the business combination are expensed.
II. Stock issue costs are treated as a reduction in the issue price.
III. All merger and stock issue costs are expensed.
IV. No goodwill is ever recorded.
A) III
B) IV
C) I and II
D) I, II, and IV
Answer: C
Difficulty: 1 Easy
Topic: Applying the Acquisition Method
Learning Objective: 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: FN Reporting
46) Which of the following observations refers to the term differential?
A) Excess of consideration exchanged over fair value of net identifiable assets.
B) Excess of fair value over book value of net identifiable assets.
C) Excess of consideration exchanged over book value of net identifiable assets.
D) Excess of fair value over historical cost of net identifiable assets.
Answer: C
Difficulty: 1 Easy
Topic: Applying the Acquisition Method
Learning Objective: 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: FN Reporting
Nursedocs@2023
, 47) Which of the following observations concerning "goodwill" is NOT correct?
A) Once written down, it may be written up for recoveries.
B) It must be tested for impairment at least annually.
C) A goodwill impairment loss must be reported as a separate line item within income from
continuing operations unless it relates to discontinued operations.
D) It must be reported as a separate line item in the balance sheet.
Answer: A
Difficulty: 1 Easy
Topic: Goodwill
Learning Objective: 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: FN Reporting
48) Big Company acquired the following assets and liabilities of Little Company (fair values listed
below) for $470,000 cash.
Inventory $ 70,000
Land 100,000
Buildings and Equipment 320,000
Current Liabilities 50,000
Assuming these items are all recorded at their acquisition date fair values, what additional item
needs to be recorded and how will it be accounted for in the future?
A) $30,000 Goodwill, capitalized and tested for impairment
B) $30,000 Bargain purchase, recognized in current earnings
C) $30,000 Bargain purchase, capitalized and recognized over time
D) $30,000 Goodwill, capitalized and amortized over time
Answer: A
Difficulty: 2 Medium
Topic: Goodwill; Bargain Purchase
Learning Objective: 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Understand
AACSB: Analytical Thinking
AICPA: FN Measurement
Nursedocs@2023
accounting over time.; 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: FN Measurement
Pursuing an inorganic growth strategy, Wilson Company acquired Venus Company's net assets
and assigned them to four separate reporting divisions. Wilson assigned total goodwill of $134,000
to the four reporting divisions as given below:
Alpha Beta Gamma Delta
Carrying value $ 200,000 $ 320,000 $ 370,000 $ 300,000
Goodwill included in carrying
20,000 34,000 50,000 30,000
value
Fair value of net identifiable
150,000 300,000 390,000 280,000
assets at year-end
Fair value of reporting unit at
year-end 180,000 350,000 360,000 295,000
40) Based on the preceding information, what amount of goodwill will be reported for Alpha at
year-end?
A) $0
B) $20,000
C) $30,000
D) $10,000
Answer: A
Difficulty: 3 Hard
Topic: Goodwill Impairment
Learning Objective: 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: FN Measurement
41) Based on the preceding information, what amount of goodwill will be reported for Beta at
year-end?
A) $0
B) $14,000
C) $34,000
D) $50,000
Answer: C
Difficulty: 3 Hard
Nursedocs@2023
, Topic: Goodwill Impairment
Learning Objective: 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: FN Measurement
42) Based on the preceding information, for Gamma
A) no goodwill should be reported at year-end.
B) goodwill impairment of $30,000 should be recognized at year-end.
C) goodwill impairment of $20,000 should be recognized at year-end.
D) goodwill of $40,000 should be reported at year-end.
Answer: D
Difficulty: 3 Hard
Topic: Goodwill Impairment
Learning Objective: 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: FN Measurement
43) Based on the preceding information, for Delta
A) no goodwill should be reported at year-end.
B) goodwill impairment of $5,000 should be recognized at year-end.
C) goodwill impairment of $20,000 should be recognized at year-end.
D) goodwill of $30,000 should be reported at year-end.
Answer: B
Difficulty: 3 Hard
Topic: Goodwill Impairment
Learning Objective: 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: FN Measurement
44) Based on the preceding information, what would be the total amount of goodwill that Wilson
should report at year-end?
A) $0
B) $99,000
C) $79,000
D) $94,000
Answer: B
Difficulty: 3 Hard
Topic: Goodwill Impairment
Learning Objective: 01-05 Make calculations and business combination journal entries in the
Nursedocs@2023
, presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: FN Measurement
45) Which of the following observations is(are) consistent with the acquisition method of
accounting for business combinations?
I. Expenses related to the business combination are expensed.
II. Stock issue costs are treated as a reduction in the issue price.
III. All merger and stock issue costs are expensed.
IV. No goodwill is ever recorded.
A) III
B) IV
C) I and II
D) I, II, and IV
Answer: C
Difficulty: 1 Easy
Topic: Applying the Acquisition Method
Learning Objective: 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: FN Reporting
46) Which of the following observations refers to the term differential?
A) Excess of consideration exchanged over fair value of net identifiable assets.
B) Excess of fair value over book value of net identifiable assets.
C) Excess of consideration exchanged over book value of net identifiable assets.
D) Excess of fair value over historical cost of net identifiable assets.
Answer: C
Difficulty: 1 Easy
Topic: Applying the Acquisition Method
Learning Objective: 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: FN Reporting
Nursedocs@2023
, 47) Which of the following observations concerning "goodwill" is NOT correct?
A) Once written down, it may be written up for recoveries.
B) It must be tested for impairment at least annually.
C) A goodwill impairment loss must be reported as a separate line item within income from
continuing operations unless it relates to discontinued operations.
D) It must be reported as a separate line item in the balance sheet.
Answer: A
Difficulty: 1 Easy
Topic: Goodwill
Learning Objective: 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: FN Reporting
48) Big Company acquired the following assets and liabilities of Little Company (fair values listed
below) for $470,000 cash.
Inventory $ 70,000
Land 100,000
Buildings and Equipment 320,000
Current Liabilities 50,000
Assuming these items are all recorded at their acquisition date fair values, what additional item
needs to be recorded and how will it be accounted for in the future?
A) $30,000 Goodwill, capitalized and tested for impairment
B) $30,000 Bargain purchase, recognized in current earnings
C) $30,000 Bargain purchase, capitalized and recognized over time
D) $30,000 Goodwill, capitalized and amortized over time
Answer: A
Difficulty: 2 Medium
Topic: Goodwill; Bargain Purchase
Learning Objective: 01-05 Make calculations and business combination journal entries in the
presence of a differential, goodwill, or a bargain purchase element.
Bloom's: Understand
AACSB: Analytical Thinking
AICPA: FN Measurement
Nursedocs@2023
