Question 27 In reference to the FASB disclosure requirements about a business combination in the period in which the combination occurs, which of the following is correct? Answers:A. Firms are not required to disclose the business purpose for a combination. B. Firms are not required to disclose the name of the acquired company. C. Firms are required to disclose the nature, terms and fair value of consideration transferred in a business combination. D. Firms are not required to disclose the details about step acquisitions. Question 28 Which one of the following statements is correct for an investor company? Answers:A. Under the equity method, the balance in the Investment in Osprey Co. account can be negative if the investee corporation operates at a loss. B. Under the equity method, the balance in the Investment in Osprey Co. account will increase when cash dividends are received. C. Once the balance in the Investment in Osprey Co. is reduced to zero, it will not be reduced any further. D. The balance in the Investment in Osprey Co. account can be reduced to represent a decline in the fair market value of the investment, but will not be adjusted if the fair market value increases. Question 29 Bird Corporation has several subsidiaries that are included in its consolidated financial statements and several other investments in corporations that are not consolidated. In its year-end trial balance, the following intercompany balances appear. Ostrich Corporation is the unconsolidated company; the rest are consolidated. Due from Pheasant Corporation $25,000Due from Turkey Corporation 5,000Cash advance to Skylark Company 8,000Cash advance to Starling 15,000Current receivable from Ostrich 10,000 What amount should Bird report as intercompany receivables on its consolidated balance sheet? Answers:A. $63,000 B. $10,000 C. $30,000 D. $0 Question 30 A subsidiary can be excluded from consolidation if Answers:A. control rests with the majority owner. B. acquisition of a not-for-profit entity by a for-profit business. C. formation of joint ventures. D. the acquisition of an asset or group of assets constitutes a business. Question 31 Use the following information to answer the following 6 questions. On January 1, 2014, Punch Corporation purchased 80% of the common stock of Soopy Co. Separate balance sheet data for the companies at the acquisition date (after the acquisition) are given below: Punch SoopyCash $34,000 $206,000Accounts Receivable 144,000 26,000Inventory 132,000 38,000Land 68,000 32,000Plant assets 700,000 300,000Accum. Depreciation (240,000) (60,000)Investment in Soopy 392,000 Total assets $ 1,230,000 $ 542,000 Accounts payable $206,000 $142,000Capital stock 800,000 300,000Retained earnings 224,000 100,000Total liabilities & equities $ 1,230,000 $ 542,000 At the date of the acquisition, the book values of Soopy's net assets were equal to the fair value except for Soopy's inventory, which had a fair value of $60,000. Determine below what the consolidated balance would be for each of the requested accounts. What amount of Inventory will be reported? Answers:A. $169,000 B. $186,500 C. $170,000 D. $192,000

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Question 27   In reference to the FASB disclosure requirements about a business combination in the period in which the combination occurs, which of the following is correct?   Answers:A. Firms are not required to disclose the business purpose for a combination. B. Firms are not required to disclose the name of the acquired company. C. Firms are required to disclose the nature, terms and fair value of consideration transferred in a business combination. D. Firms are not required to disclose the details about step acquisitions.   Question 28   Which one of the following statements is correct for an investor company?   Answers:A. Under the equity method, the balance in the Investment in Osprey Co. account can be negative if the investee corporation operates at a loss. B. Under the equity method, the balance in the Investment in Osprey Co. account will increase when cash dividends are received. C. Once the balance in the Investment in Osprey Co. is reduced to zero, it will not be reduced any further. D. The balance in the Investment in Osprey Co. account can be reduced to represent a decline in the fair market value of the investment, but will not be adjusted if the fair market value increases.   Question 29   Bird Corporation has several subsidiaries that are included in its consolidated financial statements and several other investments in corporations that are not consolidated. In its year-end trial balance, the following intercompany balances appear. Ostrich Corporation is the unconsolidated company; the rest are consolidated. Due from Pheasant Corporation                                    $25,000Due from Turkey Corporation                                             5,000Cash advance to Skylark Company                                   8,000Cash advance to Starling                                                    15,000Current receivable from Ostrich                                       10,000 What amount should Bird report as intercompany receivables on its consolidated balance sheet?   Answers:A. $63,000 B. $10,000 C. $30,000 D. $0   Question 30   A subsidiary can be excluded from consolidation if   Answers:A. control rests with the majority owner. B. acquisition of a not-for-profit entity by a for-profit business. C. formation of joint ventures. D. the acquisition of an asset or group of assets constitutes a business.   Question 31   Use the following information to answer the following 6 questions. On January 1, 2014, Punch Corporation purchased 80% of the common stock of Soopy Co. Separate balance sheet data for the companies at the acquisition date (after the acquisition) are given below:                                                                                    Punch                    SoopyCash                                                                       $34,000              $206,000Accounts Receivable                                            144,000                   26,000Inventory                                                              132,000                   38,000Land                                                                         68,000                   32,000Plant assets                                                          700,000                 300,000Accum. Depreciation                                      (240,000)                 (60,000)Investment in Soopy                                         392,000                              Total assets                                                  $  1,230,000              $ 542,000 Accounts payable                                            $206,000               $142,000Capital stock                                                       800,000                 300,000Retained earnings                                             224,000                 100,000Total liabilities & equities                              $ 1,230,000              $ 542,000 At the date of the acquisition, the book values of Soopy's net assets were equal to the fair value except for Soopy's inventory, which had a fair value of $60,000. Determine below what the consolidated balance would be for each of the requested accounts. What amount of Inventory will be reported?   Answers:A. $169,000 B. $186,500 C. $170,000 D. $192,000

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