Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Question
Chapter 2, Problem 11P
To determine
Identify the appropriate answer for the given statement from the given choices.
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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.
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.
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.
Chapter 2 Solutions
Advanced Accounting
Ch. 2 - Prob. 1QCh. 2 - Describe the concept of a synergy. What are some...Ch. 2 - Prob. 3QCh. 2 - What does the term consolidated financial...Ch. 2 - Within the consolidation process, what is the...Ch. 2 - Prob. 6QCh. 2 - Prob. 7QCh. 2 - Prob. 8QCh. 2 - Prob. 9QCh. 2 - Prob. 10Q
Ch. 2 - Prob. 11QCh. 2 - Prob. 12QCh. 2 - Which of the following does not represent a...Ch. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - Prob. 6PCh. 2 - Prob. 7PCh. 2 - When does gain recognition accompany a business...Ch. 2 - Prob. 9PCh. 2 - Prob. 10PCh. 2 - Prob. 11PCh. 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. 14PCh. 2 - Prob. 15PCh. 2 - Prob. 16PCh. 2 - Prob. 17PCh. 2 - On its acquisition-date consolidated balance...Ch. 2 - On its acquisition-date consolidated balance...Ch. 2 - Prob. 20PCh. 2 - Prob. 21PCh. 2 - Prob. 22PCh. 2 - The following book and fair values were available...Ch. 2 - Prob. 24PCh. 2 - Prob. 25PCh. 2 - Prob. 26PCh. 2 - Prob. 27PCh. 2 - Prob. 28PCh. 2 - SafeData Corporation has the following account...Ch. 2 - Prob. 34PCh. 2 - Prob. 35PCh. 2 - Prob. 39APBCh. 2 - Prob. 40APB
Knowledge Booster
Similar questions
- A company should record an asset called "Goodwill" when it purchases another company for an amount that exceeds the fair value of the other company's identifiable net assets. Select one: True Falsearrow_forwardThe unamortized excess account is a. the excess purchase cost that is attributable to goodwill. b. the excess purchase cost that is attributable to a bargain purchase. c. the excess purchase cost over the subsidiary’s net assets’ book value d. the excess purchase cost over the subsidiary’s net assets’ fair value.arrow_forwardDuring 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 considerationarrow_forward
- Which of the following statements regarding IFRS accounting for goodwill is/are incorrect: (i) Negative goodwill is reported as a liability (ii) A goodwill impairment expense decreases the carrying amount of goodwill on the consolidated SoFP (iii) The calculation of goodwill at acquisition date must include the fair value of non-controlling interests in the acquireearrow_forwardWhich of the following statements regarding the accounting for business combinations is false? Review Later The acquirer in a business combination will anly recognize the labilities assumed if they meet the definition of liabilities and are part of the business combination transaction. Under the acquisition method, the identifiable assets acquired during a business combination are measured at their acquisition- date fair values. Goodwill is the difference between the consideration transferred by the acquirer to the acquiree and the fair value of identifiable assets acquired. The identifiable assets acquired, liabilities assumed, and noncontrolling interest in the acquiree are recognized separately from the goodwill arising out of a business combination.arrow_forwardDuring an acquisition, when should intangible assets NOT be recognized apart fromGoodwill?A. The assets have been identified but not accounted for by the subsidiary.B. The assets have been identified and accounted for by the subsidiary.C. The assets can be sold, licensed or exchanged.D. The assets have been accounted for by the subsidiary but have no Fair Value on thedate of acquisition.arrow_forward
- 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.arrow_forwardStatement I. Upon consolidation, the goodwill account should be debited in the elimination entry if the consideration transferred, previously held interest, and non-controlling interest are less than the fair value of net assets acquired.Statement II. In a net asset acquisition, the acquirer should recognize the goodwill as an asset in its separate financial statements. a. Both statements are true. b. Both statements are false. c. Statement I is true; Statement II is false. d. Statement I is false; Statement II is true.arrow_forwardWhich of the following is not an application of the acquisition method?a) Measuring the consideration transferred at fair value.b) Determining the acquisition date which is the date the acquirer obtains control over acquiree.c) Identifying the acquirer which is the entity that obtains control over another business in a business combination.d) Measuring the non-controlling interest at the NCI’s proportionate share in the acquiree’s net identifiable assets or fair value, whichever is higher.arrow_forward
- 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 considerationarrow_forwardGoodwill 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? No goodwill impairment loss is recognized unless the implied value for goodwill exceeds its carrying amount. A goodwill impairment loss is recognized if the carrying amount for goodwill exceeds its implied value. 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. The reporting unit reduces the values assigned to its long-term assets (including any unrecognized intangibles) to reflect its fair valuearrow_forwardThe existence of overvalued assets (when comparing book and market value) on the books of the entity acquired in an acquisition method business combination: Decrease the excess of cost over book value applicable to unrecorded goodwill. Has the same effect as overvalued liabilities on the excess of cost over book value applicable to unrecorded goodwill Means that there will never be goodwill recorded in the business combination. Increase the excess of cost over book value applicable to unrecorded goodwill.arrow_forward
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