Entity A obtained control of Entity B in a business combination. When computing for goodwill, Entity A would least likely account for which of the following? A. Entity B’s research and development projects that were already charged as expenses, but have a fair value as at the acquisition date. B. Entity B’s unrecorded identifiable intangible assets C. Operating lease between Entity A and Entity B, wherein Entity B is the lessee. D. Entity A’s expected costs of exiting or terminating some or all of Entity B’s activities after the combination.

Entity A obtained control of Entity B in a business combination. When computing for goodwill, Entity A would least likely account for which of the following? A. Entity B’s research and development projects that were already charged as expenses, but have a fair value as at the acquisition date. B. Entity B’s unrecorded identifiable intangible assets C. Operating lease between Entity A and Entity B, wherein Entity B is the lessee. D. Entity A’s expected costs of exiting or terminating some or all of Entity B’s activities after the combination.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter6: Audit Evidence

Section: Chapter Questions

Problem 15CYBK

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Which of the following is/are true regarding goodwill achieved through acquisition as part of business combination? Where the acquirer was able to purchase the business at a discount, the excess of the market capitalization over the consideration transferred will be recognized in profit or loss. The acquirer shall recognize goodwill as of the acquisition date measured as the excess of the aggregate of the consideration transferred over the net of the fair values of all the assets acquired and the liabilities assumed Group of answer choices Both statements are true. None of these statements are true. 2 only. 1 only.
During the measurement period, which of the following may affect the amount ofgoodwill from business combination? A.New information regarding estimates in the contingent consideration that are not existing atthe date of acquisitionB.Nothing can affect the amount of goodwill.C.New information regarding estimates in the contingent consideration that are existing at thedate of acquisition.D.New information regarding estimates in the contingent consideration
if the value implied by the purchase price of an acquired company exceeds the fair values of the identifiable net assets, the excess should be a. allocated to reduce any previously recorded goodwill and classify any remainder as an ordinary gain b. allocated to reduce current and longlived assets c. allocated to gain on acquisition d. allocated to goodwill
Choose the correct. An acquired firm’s financial records sometimes show goodwill from previous business combinations. How does a parent company account for the preexisting goodwill of its newly acquired subsidiary?a. The parent tests the preexisting goodwill for impairment before recording the goodwill as part of the acquisition.b. The parent includes the preexisting goodwill as an identified intangible asset acquired.c. The parent ignores preexisting subsidiary goodwill and allocates the subsidiary’s fair value among the separately identifiable assets acquired and liabilities assumed.d. Preexisting goodwill is excluded from the identifiable assets acquired unless the subsidiary can demonstrate its continuing value.
The cost of intangible asset acquired in business combination is recognized by entity in its book at: a. Cost of acquisition date b. Either at cost or fair value at acquisition date c. Fair value at acquisition date d. Fair value at end of the reporting period
An acquired firm’s financial records sometimes show goodwill from previous business combinations. How does a parent company account for the preexisting goodwill of its newly acquired subsidiary?a. The parent tests the preexisting goodwill for impairment before recording the goodwill as part of the acquisition.b. The parent includes the preexisting goodwill as an identified intangible asset acquired.c. The parent ignores preexisting subsidiary goodwill and allocates the subsidiary’s fair value among the separately identifiable assets acquired and liabilities assumed.d. Preexisting goodwill is excluded from the identifiable assets acquired unless the subsidiary can demonstrate its continuing value.
During the measurement period, which of the following may affect the amount of goodwill from business combination? New information regarding estimates in the contingent consideration that are not existing at the date of acquisition Nothing can affect the amount of goodwill. New information regarding estimates in the contingent consideration that are existing at the date of acquisition. New information regarding estimates in the contingent consideration
If an intangible asset is acquired as a part of the business combination it's recognised at: a. Fair value b. Cost c. Carring amount d. None of the given options
All of the following statements are true, except: When property is acquired in exchange for another, its cost is usually determined by reference to the fair value of the asset surrendered When a group of assets is acquired for a lump sum price, the lump sum price should be allocated to the individual assets based on their carrying values. Donation of PPE should be recorded at the fair value of the donated asset Property acquired in exchange for shares or other securities of the enterprise should be recorded at its fair value or the fair value of the securities, whichever is more clearly evident
If the value implied by the purchase price of an acquired company exceeds the fair values of identifiable net assets, the excess should be A. Allocated to reduce current and long-lived assetsB. Allocated to reduce long-lived assetsC. Allocated to reduce any previously recorded goodwill and classify any remainder as an ordinary gain.D. Allocated goodwill
All of the following statements are true, except: * a. When property is acquired in exchange for another, its cost is usually determined by reference to the fair value of the asset surrendered b. Property acquired in exchange for shares or other securities of the enterprise should be recorded at its fair value or the fair value of the securities, whichever is more clearly evident c. Donation of PPE should be recorded at the fair value of the donated asset d. When a group of assets is acquired for a lump sum price, the lump sum price should be allocated to the individual assets based on their carrying values.
If the entity uses the fair value model for investment property, which statement is true? a. The entity should value the property at cost less accumulated depreciation and impairment. b. The entity does not record depreciation on the investment property. c. The entity depreciates the equipment using normal depreciation method d. The entity should report the increase in fair value in other comprehensive income for the period.