ADVANCED ACCOUNTING UPDATED
ACTUAL QUESTIONS AND CORRECT
ANSWERS COMPLETE STUDY GUIDE
●● Parks, Inc. paid $10 per share for 80,000 of the 100,000 shares of
KO, Inc, when KO's net assets had a total fair value of $950,000. During
the weeks before and after this acquisition, the shares of KO, Inc. have
traded for $9 per share. How much goodwill should Parks report in its
post-combination consolidated balance sheet?
Answer: $30,000
●● A basic premise of the acquisition method is that the
Answer: subsidiary's individual accounts cannot be divided along
ownership lines.
●● On January 1 in the year of acquisition, Cobb Enterprises purchased
80% of Bob's Bricks Inc.'s outstanding common shares. In acquiring this
interest, Cobb paid a total of $1,500,000. Bob's Bricks' net assets had a
book value of $1,300,000 at the time. A building with a ten-year life and
a book value of $100,000 was worth $175,000. Any other excess amount
was attributed to goodwill. Cobb reports net income for the first year of
$350,000 (without regard for its ownership in Bob's Bricks), while Bob's
Bricks has $175,000 in earnings.
Using the acquisition method, what is the amount of goodwill?
Answer: $500,000
, ●● On January 1 in the year of acquisition, Cobb Enterprises purchased
80% of Bob's Bricks Inc.'s outstanding common shares. In acquiring this
interest, Cobb paid a total of $1,500,000. Bob's Bricks' net assets had a
book value of $1,300,000 at the time. A building with a ten-year life and
a book value of $100,000 was worth $175,000. Any other excess amount
was attributed to goodwill. Cobb reports net income for the first year of
$350,000 (without regard for its ownership in Bob's Bricks), while Bob's
Bricks has $175,000 in earnings.
What is the amount of consolidated net income?
Answer: $517,500
●● On January 1 in the year of acquisition, Cobb Enterprises purchased
80% of Bob's Bricks Inc.'s outstanding common shares. In acquiring this
interest, Cobb paid a total of $1,500,000. Bob's Bricks' net assets had a
book value of $1,300,000 at the time. A building with a ten-year life and
a book value of $100,000 was worth $175,000. Any other excess amount
was attributed to goodwill. Cobb reports net income for the first year of
$350,000 (without regard for its ownership in Bob's Bricks), while Bob's
Bricks has $175,000 in earnings.
What value should be attributed to the building in a consolidated balance
sheet at the date of the business combination?
Answer: $175,000
●● On January 1 of the year of acquisition, Ashley Inc. pays $300,000
for 60% of Marea Co.'s outstanding common stock in a purchase
transaction. Marea reported common stock on that date of $250,000 with
ACTUAL QUESTIONS AND CORRECT
ANSWERS COMPLETE STUDY GUIDE
●● Parks, Inc. paid $10 per share for 80,000 of the 100,000 shares of
KO, Inc, when KO's net assets had a total fair value of $950,000. During
the weeks before and after this acquisition, the shares of KO, Inc. have
traded for $9 per share. How much goodwill should Parks report in its
post-combination consolidated balance sheet?
Answer: $30,000
●● A basic premise of the acquisition method is that the
Answer: subsidiary's individual accounts cannot be divided along
ownership lines.
●● On January 1 in the year of acquisition, Cobb Enterprises purchased
80% of Bob's Bricks Inc.'s outstanding common shares. In acquiring this
interest, Cobb paid a total of $1,500,000. Bob's Bricks' net assets had a
book value of $1,300,000 at the time. A building with a ten-year life and
a book value of $100,000 was worth $175,000. Any other excess amount
was attributed to goodwill. Cobb reports net income for the first year of
$350,000 (without regard for its ownership in Bob's Bricks), while Bob's
Bricks has $175,000 in earnings.
Using the acquisition method, what is the amount of goodwill?
Answer: $500,000
, ●● On January 1 in the year of acquisition, Cobb Enterprises purchased
80% of Bob's Bricks Inc.'s outstanding common shares. In acquiring this
interest, Cobb paid a total of $1,500,000. Bob's Bricks' net assets had a
book value of $1,300,000 at the time. A building with a ten-year life and
a book value of $100,000 was worth $175,000. Any other excess amount
was attributed to goodwill. Cobb reports net income for the first year of
$350,000 (without regard for its ownership in Bob's Bricks), while Bob's
Bricks has $175,000 in earnings.
What is the amount of consolidated net income?
Answer: $517,500
●● On January 1 in the year of acquisition, Cobb Enterprises purchased
80% of Bob's Bricks Inc.'s outstanding common shares. In acquiring this
interest, Cobb paid a total of $1,500,000. Bob's Bricks' net assets had a
book value of $1,300,000 at the time. A building with a ten-year life and
a book value of $100,000 was worth $175,000. Any other excess amount
was attributed to goodwill. Cobb reports net income for the first year of
$350,000 (without regard for its ownership in Bob's Bricks), while Bob's
Bricks has $175,000 in earnings.
What value should be attributed to the building in a consolidated balance
sheet at the date of the business combination?
Answer: $175,000
●● On January 1 of the year of acquisition, Ashley Inc. pays $300,000
for 60% of Marea Co.'s outstanding common stock in a purchase
transaction. Marea reported common stock on that date of $250,000 with
