Advanced Accounting Concepts And Practice 9th Edition Arnold J. Pahler - Solutions

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2. On April 1, Pam Company paid $1,600,000 for all the issued and outstanding common stock of Sun Corporation in a transaction properly accounted for as an acquisition. Sun Corporation is dissolved. The recorded assets and liabilities of Sun Corporation on April 1 follow:Cash $160,000 Inventory
1. Pop Corporation paid $100,000 cash for the net assets of Son Company, which consisted of the following:Book Value Fair Value Current assets $ 40,000 $ 56,000 Plant and equipment 160,000 220,000 Liabilities assumed (40,000) (36,000)$160,000 $240,000 Assume Son Company is dissolved. The plant and
4. In a business combination, the additional price paid over the fair value of net assets acquired is:a Recorded as a gain from a bargain purchase b Amortized according to its useful life c Subject to annual impairment tests d None of the above
3. Ahmad Corporation agrees to issue additional shares of stock to its acquired entity, Bahrun Corporation, on the condition that Bahrun Corporation meet a certain earnings goal in the future. This contingency is:a Classified as contingent liability b Measured at its fair value on each reporting
2. Singh Corporation paid a certain sum in accounting and legal costs when it acquired Khumar Corporation. These costs should be:a Charged against other paid-in capital of the combined entity b Added to the parent/investor company’s investment account c Deducted from parent/investor company’s
1. Penang Corporation acquired Minang Corporation and took over its assets and operations, at the same time dissolving Minang Corporation. This type of business combination is considered as a:a Consolidation b Merger c Pooling of interests d Subsidiary
5. What is goodwill? How is goodwill treated under current GAAP/IFRS?
4. Why is the pooling of interest method eliminated while accounting for a business combination?
3. What are the legal distinctions between a business combination, a merger, and a consolidation?
2. Is dissolution of all but one of the separate legal entities necessary in order to have a business combination?Explain.
1. What are the characteristics of a business entity under IFRS 3?
What are the three major conceptual elements into which the cost of an investment could pos¬sibly be separated?
Describe historical trends in types of business combinations. LO6
Identify the major reasons firms combine. LO6
Identify the factors that managers should consider in exercising due diligence in business combinations. LO6
Identify defensive tactics used to attempt to block business combinations. LO6
Distinguish between an asset and a stock acquisition. LO6
Indicate the factors used to determine the price and the method of payment for a business combination. LO6
Calculate an estimate of the value of goodwill to be included in an offering price by discounting expected future excess earnings over some period of years. LO6
Describe two alternative concepts of consolidated financial statements (other than purchase and pooling). LO6
Distinguish between internal and external expansion of a firm. LO6
List four advantages of a business combination as compared to internal expansion. LO6
What is the primary legal constraint on business combinations? Why does such a constraint exist? LO6
Distinguish among a statutory merger, a statutory consolidation, and a stock acquisition. LO6
Define a tender offer and describe its use. LO6
When stock is exchanged for stock in a business combination, how is the stock exchange ratio generally expressed? LO6
Define some defensive measures used by target firms to avoid a takeover. Are these measures beneficial for shareholders? LO6
Explain the potential advantages of a stock acquisition over an asset acquisition. LO6
Explain the difference between an accretive and a dilutive acquisition. LO6
Describe the difference between the economic unit concept and the parent company concept approaches to the reporting of subsidiary assets and liabilities in the consolidated financial statements on the date of the acquisition.29 LO6
Contrast the consolidated effects of the parent company concept and the economic unit concept in terms of: LO6(a) The treatment of noncontrolling interests.(b) The elimination of intercompany profits.(c) The valuation of subsidiary net assets in the consolidated financial statements.(d) The
Under the economic unit concept, the net assets of the subsidiary are included in the consolidated financial statements at the total fair value that is implied by the price paid by the parent company for its controlling interest. What practical or conceptual problems do you see in this approach to
Estimating Goodwill and Potential Offering Price Plantation Homes Company is considering the acquisition of Condominiums, Inc. early in 2004. To assess the amount it might be willing to pay, Plantation Homes makes the following computations and assumptions. LO6 A. Condominiums, Inc. has
Alpha Company is considering the purchase of Beta Company. Alpha has collected the following data about Beta: LO6 Beta Company Estimated Book Values Market Values Total Identifiable Assets $585,000 $750,000 Total Liabilities 320,000 320,000 Owners’ Equity $265,000 —Cumulative total net cash
Estimated and Actual Goodwill Passion Company is trying to decide whether to acquire Desiree Inc. The following balance sheet for Desiree Inc. provides information about book values. Estimated market values are also listed, based upon Passion Company’s appraisals. LO6 Desiree Inc. Desiree
Understand the need for disaggregated financial data. LO4
Describe the basic requirements of public companies in reporting segmental data. LO4
Determine an operating segment. LO4
Define a reportable segment. LO4
Describe how common costs are handled in segmental reporting. LO4
Identify the information to be presented for each reportable segment. LO4
Explain when and what types of geographic data must be reported. LO4
Explain when information about major customers must be reported. LO4
BoOOPCNOPeOD.m D oC o mpare the international accounting standards for segmental reporting with the U.S. requirements. LO4
Describe current requirements for companies to report interim information. LO4
Indicate some problems with interim reporting and the authoritative position on the issue. LO4
For what types of companies would segmented financial reports have the most significance? Why? LO4
Why do financial statement users (financial analysts, for example) need information about segments of a firm? LO4
Define the following: (a) Operating segment. (b) Reportable segment. LO4
Describe the guidelines to be used in determining (a) what constitutes an operating segment, and (b) whether a specific operating segment is a significant segment. LO4
List the three major types of enterprisewide informa- tion disclosures required by SFAS No. 131, and explain how the firm's designation of reportable segments affects these disclosures. LO4
What segmental disclosures are required, if any, for interim reports? LO4
What type of disclosure is required of a firm when the major portion of its operations takes place within a single reportable segment? LO4
List the types of information that must be presented for each reportable segment of a company under the rules of SFAS No. LO4
Describe the methods that might be used to disclose reportable segment information. LO4
What types of information must be disclosed about foreign operations under SFAS No. 131 LO4
How are foreign operations defined under SFAS No. 131? LO4
If the operations of a firm in some foreign countries are grouped into geographic areas, what factors should be considered in forming the groups? LO4
When must a firm present segmental disclosures for major customers? What is the reason for this require- ment? LO4
How are common costs distinguished from general corporate expenses for segmental purposes? LO4
What is the purpose of interim financial reporting? LO4
Describe the basic procedure for computing income tax provisions for interim financial statements. LO4
Describe how changes in estimates should be treated in interim financial statements. LO4
What are the minimum disclosure requirements established by the APB for interim financial reports? LO4
What is the general rule regarding the treatment of costs and expenses associated directly with rev- enues for interim reporting purposes? LO4
Distinguish between a Chapter 7 and a Chapter 11 bankruptcy. LO4
Describe the five priority categories of unsecured claims and list the order in which they are settled. LO4
Distinguish between a voluntary and involuntary bankruptcy petition. LO4
Distinguish among fully secured, partially secured, and unsecured claims of creditors. LO4
Describe contractual agreements that the debtor and its creditors may enter into outside of formal bankruptcy proceedings to resolve the debtor’s insolvent position. LO4
List the primary types of contractual agreements between a debtor company and its creditors and briefly explain what is involved in each of them. LO4
Five priority categories of unsecured claims must be paid before general unsecured creditors are paid. Briefly describe what makes up each category. LO4
What are "dividends" in a bankruptcy proceeding? LO4
What is the purpose of a Statement of Affairs? LO4
One of the officers of a corporation that had just received a discharge in bankruptcy said, "Good, now we don't owe anyone." Is he correct? LO4
What are the duties of a trustee in a liquidation proceeding? LO4
What is the purpose of a combining workpaper pre- pared by a trustee? LO4
What is the purpose of a realization and liquidation account? LO4
Distinguish between the current exchange rate and the historical exchange rate. LO9
Understand the objectives of financial statement translation. LO9
Identify the functional currency of a foreign entity. LO9
Compare the two methods used to convert the financial statements of a foreign entity into U.S. dollars. LO9
Distinguish between the circumstances under which each of the two methods is appropriate under current GAAP. LO9
Explain the factors involved in translating the statements of a foreign entity operating in a highly inflationary economy. LO9
Translate the statements of a foreign entity when the functional currency is the local currency. LO9
Translate the statements of a foreign entity when the functional currency is the U.S. dollar. LO9
Understand the concept of comprehensive income in the context of foreign currency translation. LO9
Identify the disclosure requirements for firms with foreign entities. LO9
What requirements must be satisfied if a foreign subsidiary is to be consolidated? LO9
What is meant by an entity’s functional currency and what are the economic indicators identified by the FASB to provide guidance in selecting the functional currency? LO9
Which method of translation is used to convert the financial statements when a foreign subsidiary operates in a highly inflationary economy? LO9
Define remeasurement. LO9
Under the current rate method, how are assets and liabilities that are stated in a foreign currency translated? LO9
How does the method of accounting for a business combination (purchase or pooling of interests)affect the translation of a foreign affiliate’s financial statements when the current rate method is used to translate the accounts? LO9
What is the objective of the temporal method of translation? LO9
Assuming that the temporal method is used, how are revenue and expense items in foreign currency financial statements converted? LO9
What is the U.S. dollar unit of measure approach} Summarize it.
What translation methods achieve a U.S. dollar unit of measure approach}
What is the theory underlying the temporal method}
What is the financial focus of the U.S. dollar unit of measure approach}

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Advanced Accounting Concepts And Practice 9th Edition Arnold J. Pahler - Solutions

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