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ACC 401 Week 3 Quiz,
ACC 401 Week 3 Quiz Strayer
Chapter 3
Consolidated Financial StatementsDate of Acquisition
Multiple Choice
1. A majority-owned subsidiary that is in legal reorganization should normally be accounted for using
a. consolidated financial statements.
b. the equity method.
c. the market value method.
d. the cost method.
2. Under the acquisition method, indirect costs relating to acquisitions should be
a. included in the investment cost.
b. expensed as incurred.
c. deducted from other contributed capital.
d. none of these.
3. Eliminating entries are made to cancel the effects of intercompany transactions and are made on
the
a. books of the parent company.
b. books of the subsidiary company.
c. workpaper only.
d. books of both the parent company and the subsidiary.
4. One reason a parent company may pay an amount less than the book value of the subsidiarys
stock acquired is
a. an undervaluation of the subsidiarys assets.
b. the existence of unrecorded goodwill.
c. an overvaluation of the subsidiarys liabilities.
d. none of these.
5. In a business combination accounted for as an acquisition, registration costs related to common
stock issued by the parent company are
a. expensed as incurred.
b. deducted from other contributed capital.
c. included in the investment cost.
d. deducted from the investment cost.
6. On the consolidated balance sheet, consolidated stockholders equity is
a. equal to the sum of the parent and subsidiary stockholders equity.
b. greater than the parents stockholders equity.
c. less than the parents stockholders equity.
equal to the parents stockholders equity.
7. Majority-owned subsidiaries should be excluded from the consolidated statements when
a. control does not rest with the majority owner.
b. the subsidiary operates under governmentally imposed uncertainty.
c. a foreign subsidiary is domiciled in a country with foreign exchange restrictions or controls.
d. any of these circumstances exist.
8. Under the economic entity concept, consolidated financial statements are intended primarily for the
benefit of the
a. stockholders of the parent company.
b. creditors of the parent company.
c. minority stockholders.
d. all of the above.
9. Reasons a parent company may pay more than book value for the subsidiary companys stock
include all of the following except
the fair value of one of the subsidiarys assets may exceed its recorded value because of
appreciation.
b. the existence of unrecorded goodwill.
b. $402,000.
c. $408,000.
d. $440,000.
22. Current liabilities should be
a. $150,000.
b. $138,000.
c. $120,000.
d. $90,000.
23. Noncurrent liabilities should be
a. $330,000.
b. $312,000.
c. $180,000.
d. $162,000.
24. On January 1, 2011, Primer Corporation acquired 80 percent of Sutter Corporations voting
common stock.
Sutterss buildings and equipment had a book value of $300,000 and a fair value of $350,000 at the
time of
acquisition. At what amount will Sutters buildings and equipment will be reported in the consolidated
statements ?
$350,000
$340,000
$280,000
$300,000