FUNDAMENTALS OF ADVANCED ACCOUNTING >I
6th Edition
ISBN: 9781307007350
Author: Hoyle
Publisher: MCG/CREATE
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Chapter 2, Problem 4P
To determine
Identify the appropriate answer for the given statement from the given choices.
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FASB ASC 805, “Business Combinations,” provides principles for allocating the fair value of an acquired business. When the collective fair values of the separately identified assets acquired and liabilities assumed exceed the fair value of the consideration transferred, the difference should be:a. Recognized as an ordinary gain from a bargain purchase.b. Treated as negative goodwill to be amortized over the period benefited, not to exceed 40 years.c. Treated as goodwill and tested for impairment on an annual basis.d. Applied pro rata to reduce, but not below zero, the amounts initially assigned to specific noncurrent assets of the acquired firm.
Choose the correct. FASB ASC 805, “Business Combinations,” provides principles for allocating the fair value of an acquired business. When the collective fair values of the separately identified assets acquired and liabilities assumed exceed the fair value of the consideration transferred, the difference should be:a. Recognized as an ordinary gain from a bargain purchase.b. Treated as negative goodwill to be amortized over the period benefited, not to exceed 40 years.c. Treated as goodwill and tested for impairment on an annual basis.d. Applied pro rata to reduce, but not below zero, the amounts initially assigned to specific non-current assets of the acquired firm.
Choose the correct.Goodwill recognized in a business combination must be allocated among a firm’s identified reporting units. If the fair value of a particular reporting unit with recognized goodwill falls below its carrying amount, which of the following is true?a. No goodwill impairment loss is recognized unless the implied value for goodwill exceeds its carrying amount.b. A goodwill impairment loss is recognized if the carrying amount for goodwill exceeds its implied value.c. A goodwill impairment loss is recognized for the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill.d. The reporting unit reduces the values assigned to its long-term assets (including any unrecognized intangibles) to reflect its fair value.
Chapter 2 Solutions
FUNDAMENTALS OF ADVANCED ACCOUNTING >I
Ch. 2 - Prob. 1QCh. 2 - Prob. 2QCh. 2 - What does the term consolidated financial...Ch. 2 - Within the consolidation process, what is the...Ch. 2 - Prob. 5QCh. 2 - Prob. 6QCh. 2 - Prob. 7QCh. 2 - Prob. 8QCh. 2 - Prob. 9QCh. 2 - Prob. 10Q
Ch. 2 - Prob. 11QCh. 2 - Which of the following does not represent a...Ch. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - An acquired entity has a long-term operating lease...Ch. 2 - When does gain recognition accompany a business...Ch. 2 - Prob. 8PCh. 2 - Prob. 9PCh. 2 - Prob. 10PCh. 2 - On June 1, Cline Co. paid 800,000 cash for all of...Ch. 2 - On May 1, Donovan Company reported the following...Ch. 2 - Prob. 13PCh. 2 - Prob. 14PCh. 2 - Prob. 15PCh. 2 - Prob. 16PCh. 2 - On its acquisition-date consolidated balance...Ch. 2 - On its acquisition-date consolidated balance...Ch. 2 - Prob. 19PCh. 2 - The following book and fair values were available...Ch. 2 - Prob. 21PCh. 2 - Prob. 22PCh. 2 - Prob. 23PCh. 2 - Prob. 24PCh. 2 - Prob. 25PCh. 2 - Prob. 26PCh. 2 - Prob. 27PCh. 2 - Prob. 28PCh. 2 - Prob. 29PCh. 2 - SafeData Corporation has the following account...Ch. 2 - Prob. 31PCh. 2 - Prob. 32PCh. 2 - Prob. 33APCh. 2 - On February 1, Piscina Corporation completed a...Ch. 2 - Prob. 1DYSCh. 2 - Prob. 2DYSCh. 2 - Prob. 3DYS
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- In paragraph 44 of Statement of Financial Accounting Standards No. 141, “Business Combinations,” the Financial Accounting Standards Board directed that if the sum of the fair values of assets acquired and liabilities assumed in a business combination exceeds the cost of the acquired enterprise, such excess should be allocated as a pro rata reduction of amounts that otherwise would have been assigned to noncurrent assets other than specified exceptions.Instructions What support, if any, do you find for the action of the FASB? Explain.arrow_forwardWhich 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.arrow_forwardWhen should a consolidated entity recognize a goodwill impairment loss? If both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying amounts. Whenever the entity’s fair value declines significantly. If the fair value of a reporting unit with goodwill fall below its carrying amount. Annually on a systematic and rational basis.arrow_forward
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