Multiple-Choice Questions on Recording Business
Combinations [AICPA Adapted]
Select the correct answer for each of the following questions.
1. Goodwill represents the excess of the sum of the consideration given over the:
2. In a business combination, costs of registering equity securities to be issued by the acquiring company are a(n):
3. Which of the following is the appropriate basis for valuing fixed assets acquired in a business combination carried out by exchanging cash for common stock?
4. In a business combination, the fair value of the identifiable net assets acquired exceeds the fair value of the consideration given. The excess should be reported as a:
5. A and B Companies have been operating separately for five years. Each company has a minimal amount of liabilities and a simple capital structure consisting solely of voting common stock. A Company, in exchange for 40 percent of its voting stock, acquires 80 percent of the common stock of B Company. This is a “tax-free” stock-for-stock (type B) exchange for tax purposes. B Company assets have a total net fair market value of $800,000 and a total net book value of $580,000. The fair market value of the A stock used in the exchange is $700,000 and the fair value of the no controlling interest is $175,000. The goodwill reported following the acquisition would be:
Journal Entries to Record a Business Combination
On January 1, 20X2,