Parent Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Book Value $250,000 $30,000 $150,000 $100,000 $600,000 -$150,000 $980,000 $20,000 $100,000 $560,000 $300,000 $980,000 Sub Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Goodwill Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Book Value Fair Value $40,000 $10,000 $200,000 $100,000 $300,000 $40,000 $15,000 $105,000 $60,000 $400,000 -$150,000 $10,000 $480,000 $650,000 $50,000 $50,000 $100,000 $60,000 $270,000 $480,000 Question 1: a) b) c) d) Answer: Explanation of answer is written below A 100% asset acquisition of Sub Company by Parent Company (using cash and a bond issue) would most likely require which of the following? Minority Interest CR - Inventory $105,000 CR - Common Stock $100,000 None of the above planation of answer is written below Parent Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Book Value $250,000 $30,000 $150,000 $100,000 $600,000 -$150,000 $980,000 $20,000 $100,000 $560,000 $300,000 $980,000 Sub Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Goodwill Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Book Value $40,000 $15,000 $105,000 $60,000 $400,000 -$150,000 $10,000 $480,000 $50,000 $100,000 $60,000 $270,000 $480,000 Fair Value $40,000 $10,000 $200,000 $100,000 $300,000 $650,000 $50,000 Question 3: a) b) c) d) Answer: Explanation of answer is written below A 100% stock acquisition of Sub Company by Parent Company (via Parent Stock Issues) would require which of the following? DR - Investment in Sub Company CR - Investment in Sub Company DR - Common Stock None of the above planation of answer is written below Parent Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Book Value $250,000 $30,000 $150,000 $100,000 $600,000 -$150,000 $980,000 $20,000 $100,000 $560,000 $300,000 $980,000 Sub Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Goodwill Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Book Value $40,000 $15,000 $105,000 $60,000 $400,000 -$150,000 $10,000 $480,000 $50,000 $100,000 $60,000 $270,000 $480,000 Fair Value $40,000 $10,000 $200,000 $100,000 $300,000 $650,000 $50,000 Question 3: a) b) c) d) Answer: Explanation of answer is written below If the 100% stock acquisition of Sub Company by Parent Company was a bargain purchase, what was the purchase price of Sub Company? $650,000 $600,000 $550,000 None of the above planation of answer is written below Parent Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Book Value $250,000 $30,000 $150,000 $100,000 $600,000 -$150,000 $980,000 $20,000 $100,000 $560,000 $300,000 $980,000 Sub Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Goodwill Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Book Value $40,000 $15,000 $105,000 $60,000 $400,000 -$150,000 $10,000 $480,000 $50,000 $100,000 $60,000 $270,000 $480,000 Fair Value $40,000 $10,000 $200,000 $100,000 $300,000 $650,000 $50,000 Question 4: a) b) c) d) Answer: Explanation of answer is written below If the 100% stock acquisition of Sub Company by Parent Company was a bargain purchase, which of the following accounts are most likely to appear in a related journal entry? Goodwill Gain Bargain Purchase None of the above planation of answer is written below Parent Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Book Value $250,000 $30,000 $150,000 $100,000 $600,000 -$150,000 $980,000 $20,000 $100,000 $560,000 $300,000 $980,000 Sub Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Goodwill Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Question 5: Book Value $40,000 $15,000 $105,000 $60,000 $400,000 -$150,000 $10,000 $480,000 $50,000 $100,000 $60,000 $270,000 $480,000 Fair Value $40,000 $10,000 $200,000 $100,000 $300,000 $650,000 $50,000 a) b) c) d) Answer: Explanation of answer is writte If the 100% stock acquisition of Sub Company by Parent Company resulted in the appearance of Goodwill on the Parent balance sheet, what is the amount amount most likely paid by Parent to acquire Sub Company? $750,000 $600,000 $550,000 None of the above planation of answer is written below Parent Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Book Value $250,000 $30,000 $150,000 $100,000 $600,000 -$150,000 $980,000 $20,000 $100,000 $560,000 $300,000 $980,000 Sub Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Goodwill Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Question 6: Book Value $40,000 $15,000 $105,000 $60,000 $400,000 -$150,000 $10,000 $480,000 $50,000 $100,000 $60,000 $270,000 $480,000 Fair Value $40,000 $10,000 $200,000 $100,000 $300,000 $650,000 $50,000 a) b) c) d) Answer: Explanation of answer is writte What type of business combination would result from Parent Company acquiring Sub Company to form Super-Parent Company? Statutory Merger Statutory Consolidation Stock Acquisition None of the above planation of answer is written below Parent Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Book Value $250,000 $30,000 $150,000 $100,000 $600,000 -$150,000 $980,000 $20,000 $100,000 $560,000 $300,000 $980,000 Sub Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Goodwill Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Question 7: Book Value $40,000 $15,000 $105,000 $60,000 $400,000 -$150,000 $10,000 $480,000 $50,000 $100,000 $60,000 $270,000 $480,000 Fair Value $40,000 $10,000 $200,000 $100,000 $300,000 $650,000 $50,000 a) b) c) d) Answer: Explanation of answer is writte Sub Company was a former business activity segment of Parent Company. Parent Company shares were exchanged for Sub Company shares. This can best be described as which of the following? External Expansion Internal Expansion Statutory Merger None of the above planation of answer is written below Parent Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Book Value $250,000 $30,000 $150,000 $100,000 $600,000 -$150,000 $980,000 $20,000 $100,000 $560,000 $300,000 $980,000 Sub Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Goodwill Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Question 8: Book Value $40,000 $15,000 $105,000 $60,000 $400,000 -$150,000 $10,000 $480,000 $50,000 $100,000 $60,000 $270,000 $480,000 Fair Value $40,000 $10,000 $200,000 $100,000 $300,000 $650,000 $50,000 a) b) c) d) Answer: Explanation of answer is writte Sub Company was a former business activity segment of Parent Company. Sub Company shares were issued to Parent Company shareholders. This can best be described as which of the following? External Expansion Internal Expansion Statutory Merger None of the above planation of answer is written below Parent Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Book Value $250,000 $30,000 $150,000 $100,000 $600,000 -$150,000 $980,000 $20,000 $100,000 $560,000 $300,000 $980,000 Sub Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Goodwill Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Question 9: Book Value $40,000 $15,000 $105,000 $60,000 $400,000 -$150,000 $10,000 $480,000 $50,000 $100,000 $60,000 $270,000 $480,000 Fair Value $40,000 $10,000 $200,000 $100,000 $300,000 $650,000 $50,000 a) b) c) d) Answer: Explanation of answer is writte Parent Company acquired 10% interest in Sub Company. Which of the following describes the ownership interest of Parent Companyover Sub Company? Control Significant Influence Insignificant Interest None of the above planation of answer is written below Parent Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Book Value $250,000 $30,000 $150,000 $100,000 $600,000 -$150,000 $980,000 $20,000 $100,000 $560,000 $300,000 $980,000 Sub Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land Plant and Equipment Less: Accumulated Depreciation Goodwill Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Question 10: Book Value $40,000 $15,000 $105,000 $60,000 $400,000 -$150,000 $10,000 $480,000 $50,000 $100,000 $60,000 $270,000 $480,000 Fair Value $40,000 $10,000 $200,000 $100,000 $300,000 $650,000 $50,000 a) b) c) d) Answer: Explanation of answer is writte Parent Company acquired 30% interest in Sub Company. Which of the following describes the ownership interest of Parent Companyover Sub Company? Control Significant Influence Insignificant Interest None of the above planation of answer is written below
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