Free test bank for advanced accounting 11th edition

The acquisition price exceeds the fair value of the net assets acquired.. Assume that the carrying value of the identifiable assets are a reasonable approximation of their fair values..

Free Test Bank for Advanced Accounting 11th Edition

by Fischer

Multiple Choice Questions

Company B acquired the net assets of Company S in exchange for cash The acquisition price exceeds the fair value of the net assets acquired How should Company B determine the amounts

to be reported for the plant and equipment, and for long-term debt

of the acquired Company S? Plant and Equipment Long-Term Debt

1 Fair value S's carrying amount

2 Fair value Fair value

3 S's carrying amount Fair value

4 S's carrying amount S's carrying amount

Which of the following income factors should not be considered in expected future income when estimating the value of goodwill?

1 sales for the period

2 income tax expense

3 extraordinary items

4 cost of goods sold

Some advantages of obtaining control by acquiring a controlling interest in stock include all but:

1 Negotiations are made directly with the acquiree’s management.

2 The legal liability of each corporation is limited to its own assets.

3 The cost may be lower since only a controlling interest in the assets, not the total assets, is acquired.

4 Tax advantages may result from preservation of the legal entities.

Cozzi Company is being purchased and has the following balance sheet as of the purchase date: Current assets $200,000 Liabilities

$ 90,000; Fixed assets 180,000 Equity 290,000; Total $380,000 Total $380,000; The price paid for Cozzi's net assets is $500,000 The fixed assets have a fair value of $220,000, and the liabilities have a fair value of $110,000; The amount of goodwill to be

recorded in the purchase is:

1 $0

4 $190,000

A(n) occurs when the management of the target company purchases a controlling interest in that company and the company incurs a significant amount of debt as a result

2 statutory merger

3 poison pill

4 leveraged buyout

Orbit Inc purchased Planet Co on January 1, 20X3 At that time

an existing patent having a 5-year estimated life was assigned a provisional value of $10,000 and goodwill was assigned a value

of $100,000 By the end of fiscal year 20X3, better information was available that indicated the fair value of the patent was

$20,000 How should intangible assets be reported at the

beginning of fiscal year 20X4?

1 Goodwill $100,000 Patent $10,000

2 Goodwill $90,000 Patent $16,000

3 Goodwill $84,000 Patent $16,000

4 Goodwill $90,000 Patent $20,000

Orbit Inc purchased Planet Co on January 1, 20X3 At that time

an existing patent having a 5-year life was not recorded as a separately identified intangible asset At the end of fiscal year 20X4, it is determined the patent is valued at $20,000, and

goodwill has a book value of $100,000 How should intangible assets be reported at the beginning of fiscal year 20X5?

1 Goodwill $100,000 Patent $0

2 Goodwill $100,000 Patent $20,000

3 Goodwill $80,000 Patent $20,000

4 Goodwill $80,000 Patent $16,000

One large Midwestern bank’s acquisition of another midwestern bank would be an example of a:

1 market extension merger.

2 conglomerate merger.

3 product extension merger.

4 horizontal merger.

An economic advantage of a business combination includes

1 Utilizing duplicative assets.

2 Creating separate management teams.

3 Shared fixed costs.

4 Horizontally combining levels within the marketing chain.

In performing the impairment test for goodwill, the company had the following 20X6 and 20X7 information available 20X6 20X7 Fair value of the reporting unit $350,000 $400,000; Net book

value (including $50,000 goodwill) $360,000 $380,000 Assume that the carrying value of the identifiable assets are a reasonable approximation of their fair values Based upon this information what are the 20X6 and 20X7 adjustment to goodwill, if any? 20X6

;20X7

1 no adjustment $20,000 decrease

2 $10,000 increase $20,000 decrease

3 $10,000 decrease $20,000 decrease

4 $10,000 decrease no adjustment

Jones company acquired Jackson Company for $2,000,000 cash

At that time, the fair value of recorded assets and liabilities was

$1,500,000 and $250,000, respectively Jackson also had

unrecorded copyrights valued at $150,000 and its direct costs related to the acquisition were $50,000 What was the amount of the goodwill related to the acquisition?

1 $600,000

Crystal Co purchased all of the common stock of Sill Corp on January 1 of the current year Five years prior to the acquisition, Sill Corp had issued 30-year bonds bearing an interest rate of 8% At the time of the acquisition, the prevailing interest rate for similar bonds was 5% These bonds should be included in the consolidated balance sheet at

1 face value.

2 at a value higher than Sill’s recorded value due to the change in interest rates.

3 at a value lower than Sill’s recorded value due to the change in interest rates.

4 at Sill’s recorded value.

Polk issues common stock to acquire all the assets of the Sam Company on January 1, 20X5 There is a contingent share

agreement, which states that if the income of the Sam Division exceeds a certain level during 20X5 and 20X6, additional shares

will be issued on January 1, 20X7 The impact of issuing the

additional shares is to

1 increase the price assigned to fixed assets.

2 have no effect on asset values, but to reassign the amounts assigned to equity accounts.

3 reduce retained earnings.

4 record additional goodwill.

A tax advantage of business combination can occur when the existing owner of a company sells out and receives:

1 cash to defer the taxable gain as a "tax-free reorganization."

2 stock to defer the taxable gain as a "tax-free reorganization."

3 cash to create a taxable gain.

4 stock to create a taxable gain.

ACME Co paid $110,000 for the net assets of Comb Corp At the time of the acquisition the following information was available related to Comb's balance sheet: Book Value Fair Value; Current Assets $50,000 $ 50,000; Building 80,000 100,000; Equipment 40,000 50,000; Liabilities 30,000 30,000 What is the amount of gain or loss on disposal of business should Comb Corp

recognize?

1 Gain of $60,000

2 Gain of $60,000

3 Loss of $30,000

4 Loss of $60,000

A contingent liability of an acquiree

1 refers to future consideration due that is part of the acquisition agreement.

2 is recorded when it is probable that future events will confirm its existence.

3 may be recorded beyond the measurement period under certain

circumstances.

4 should be recorded even if the amount cannot be reasonably estimated.

A large nation-wide bank’s acquisition of a major investment

advisory firm would be an example of a:

1 market extension merger.

2 conglomerate merger.

3 product extension merger.

4 horizontal merger.

While performing a goodwill impairment test, the company had the following information: Estimated implied fair value of reporting unit $420,000; Fair value of net assets on date of measurement

(without goodwill) $400,000; Existing net book value of reporting unit (without goodwill) $380,000; Book value of goodwill $ 60,000 Based upon this information the proper conclusion is:

1 The company should recognize a goodwill impairment loss of $20,000.

2 Goodwill is not impaired.

3 The company should recognize a goodwill impairment loss of $40,000.

4 The company should recognize a goodwill impairment loss of $60,000.

Jones company acquired Jackson Company for $2,000,000 cash

At that time, the fair value of recorded assets and liabilities was

$1,500,000 and $250,000, respectively If Jackson meets

specified sales targets, Jones is required to pay an additional

$200,000 in cash per the acquisition agreement Jones estimates the probability of this to be 50% The direct costs related to the acquisition were $50,000 What was the amount of the goodwill related to the acquisition?

3 $850,000

Which of the following costs of a business combination can be deducted from the value assigned to paid-in capital in excess of par?

1 Direct and indirect acquisition costs.

2 Direct acquisition costs.

3 Direct acquisition costs and stock issue costs if stock is issued as

consideration.

4 Stock issue costs if stock is issued as consideration.

Acquisition costs such as the fees of accountants and lawyers that were necessary to negotiate and consummate the purchase are

1 recorded as a deferred asset and amortized over a period not to exceed 15 years

2 expensed if immaterial but capitalized and amortized if over 2% of the acquisition price

3 expensed in the period of the purchase

4 included as part of the price paid for the company purchased

Jones company acquired Jackson Company for $2,000,000 cash

At that time, the fair value of recorded assets and liabilities was

$1,500,000 and $250,000, respectively Jackson also had

in-process research and development projects valued at $150,000 and its pension plan’s projected benefit obligation exceeded the plan assets by $50,000 What was the amount of the goodwill related to the acquisition?

4 $650,000

Goodwill results when:

1 a controlling interest is acquired.

2 the price of the acquisition exceeds the sum of the fair values of the net identifiable assets acquired.

3 the fair value of net assets acquired exceeds the acquisition price.

4 the price of the acquisition exceeds the book value of an acquired

company.

ACME Co paid $110,000 for the net assets of Comb Corp At the time of the acquisition the following information was available related to Comb's balance sheet: Book Value Fair Value: Current Assets $50,000 $ 50,000; Building 80,000 100,000; Equipment 40,000 50,000; Liabilities 30,000 30,000 What is the amount of goodwill or gain related to the acquisition?

1 Goodwill of $70,000

2 Goodwill of $30,000

3 A gain of $30,000

4 A gain of $70,000

When an acquisition of another company occurs, FASB requires disclosing all of the following except:

1 amounts recorded for each major class of assets and liabilities.

2 information concerning contingent consideration including a description of the arrangements and the range of outcomes.

3 results of operations for the current period if both companies had remained separate.

4 A qualitative description of factors that make up the goodwill recognized.

A building materials company’s acquisition of a television station would be an example of a:

1 market extension merger.

2 conglomerate merger.

3 product extension merger.

4 horizontal merger.

A controlling interest in a company implies that the parent

company

1 owns all of the subsidiary's stock.

2 has acquired a majority of the subsidiary's common stock.

3 has paid cash for a majority of the subsidiary's stock.

4 has transferred common stock for a majority of the subsidiary's outstanding bonds and debentures.

ACME Co paid $110,000 for the net assets of Comb Corp At the time of the acquisition the following information was available related to Comb's balance sheet: Book Value Fair Value: Current Assets $50,000 $ 50,000; Building 80,000 100,000; Equipment 40,000 50,000; Liabilities 30,000 30,000; What is the amount recorded by ACME for the Building?

4 $100,000

When determining the fair values of assets acquired in an

acquisition, the highest level of measurement per GAAP is

1 adjusted market value based on prices of similar assets.

2 unadjusted market values in an actively traded market.

3 based on discounted cash flows.

4 the entity’s best estimate of an exit or sale value.

Total Points: 0 correct out of 2

46 Test Bank for Fraud Examination 4th Edition

by Albrecht

Multiple Choice Questions

Which of the following is the most common type of occupational fraud?

1 Financial statement fraud

2 Mail fraud

3 Investment fraud

4 Employee embezzlement

Which of the following statements is true?

1 Fraud usually results from unintentional errors.

2 Fraud is more violent and traumatic than robbery.

3 Fraud always involves deception, confidence and trickery.

4 Losses from fraud are less than losses from robbery.

Which of the following is NOT one of the major types of fraud

classification schemes?

2 Government fraud

4 Customer fraud

The most common fraud committed on behalf of an organization is:

1 Vendor fraud

3 Fraudulent financial reporting

4 Customer fraud

Which among the following frauds is most likely to be a civil

charge?

1 Racketeering

2 Mail fraud

3 Defamation

4 Perjury

Employee embezzlement can be direct or indirect Indirect fraud occurs when:

1 an employee uses company assets to run his/her private business.

2 employees establish dummy companies and have their employers pay for goods that are not actually delivered.

3 an employee receives a kickback from a vendor.

4 an employee steals company cash, inventory, tools, or other assets.

Which of the following is NOT a primary reason for increased size and number of frauds?

1 The advent of computers

3 Increased centralization of businesses

4 The Internet

Which of the following statements about criminal and civil cases is correct?

1 The purpose of a criminal case is "to right a wrong", the purpose of civil case is to obtain a remedy.

2 Jury must have 12 people in civil cases but in criminal cases may consist of fewer than 12 persons.

3 Both criminal cases and civil cases require a fraud perpetrator to go to jail.

4 Only one claim at a time in civil cases however in criminal cases, various claims may be joined in one action.

The elements of fraud include all of the following EXCEPT:

1 a material point is misrepresented.

2 the misrepresentation is intentional.

3 the misrepresentation is known to the victim.

4 the victim must sustain damages.

Government agencies such as the FBI, FDIC, IRS, or various health agencies publish fraud statistics from time to time Which

of the following observations concerning such statistics is true?

1 Generally, their statistics are complete.

2 Such information is rarely used.

3 They provide only those statistics related to their jurisdiction.

4 They usually provide a total picture in the areas for which they have

responsibility.

Fraud in companies such as WorldCom, Enron, Waste

Management, Sunbeam, Rite-Aid, Phar-Mor, Parmalat, and

ZZZZBest are examples of:

1 Customer fraud.

3 Vendor fraud.

4 Management fraud.

Fraud statistics come from all of the following sources EXCEPT:

4 Victims

5 Fraud perpetrator

What is required to prove fraud, as opposed to negligence?

1 Gross error

2 Intent

3 Preponderance of the evidence

4 Confession from the perpetrator

Generally applicants for CFE certification should have a minimum

of a bachelor’s degree or equivalent from an institution of higher

learning Alternatively if applicants do not have a bachelor’s

degree, they may substitute months of fraud-related

professional experience for each year of academic study

1 24

2 18

3 15

4 12

5 9

The burden of proof in a criminal case must:

1 be beyond a reasonable doubt.

2 be the preponderance of knowledge and power.

3 be preponderance of evidence.

4 lie with the defendant.

A company is a victim of a $414 million fraud At that time its profit margin is 10% How much additional revenue should the

company generate in order to recover the effect on net income?

1 $41.4 million

2 $414 million

3 $4.14 billion

4 $41.4 billion

Which of the following observations concerning occupational

fraud is NOT true?

1 It is clandestine.

2 It is committed for the purpose of direct or indirect financial benefit to the employee.

3 It always involves two or more employees.

4 It costs the employing organization assets, revenues, or reserves.

Scammers often use their victim’s ethnic identity to gain their trust and then steal their life savings This is an example of:

1 vendor fraud.

2 affinity fraud.

4 occupational fraud.

The following are all elements of Title 26, U.S Code Section 7201 EXCEPT:

1 not reporting bribe income may be grounds for being charged with tax evasion.

2 filing income tax that excludes income from fraud may be considered an improper tax filing.