At the date of an acquisition which is not a bargain purchase, the acquisition method
A. consolidates the subsidiary's assets at fair value and the liabilities at book value.
B. consolidates all subsidiary assets and liabilities at book value.
C. consolid

C. consolidates all subsidiary assets and liabilities at fair value.

Lisa Co. paid cash for all of the voting common stock of Victoria Corp. Victoria will continue to exist as a separate corporation. Entries for the consolidation of Lisa and Victoria would be recorded in
A. a worksheet.
B. Lisa's general journal.
C. Victor

A. a worksheet.

Using the acquisition method for a business combination, goodwill is generally defined as:
A. Cost of the investment less the subsidiary's book value at the beginning of the year.
B. Cost of the investment less the subsidiary's book value at the acquisiti

D. Cost of the investment less the subsidiary's fair value at acquisition date.

What is the primary accounting difference between accounting for when the subsidiary is dissolved and when the subsidiary retains its incorporation?
A. If the subsidiary is dissolved, it will not be operated as a separate division.
B. If the subsidiary is

E. If the subsidiary retains its incorporation, the consolidation is not formally recorded in the accounting records of the acquiring company.

According to GAAP, the pooling of interest method for business combinations
A. Is preferred to the purchase method.
B. Is allowed for all new acquisitions.
C. Is no longer allowed for business combinations after June 30, 2001.
D. Is no longer allowed for

C. Is no longer allowed for business combinations after June 30, 2001.

An example of a difference in types of business combination is:
A. A statutory merger can only be effected by an asset acquisition while a statutory consolidation can only be effected by a capital stock acquisition.
B. A statutory merger can only be effec

C. A statutory merger requires dissolution of the acquired company while a statutory consolidation does not require dissolution.

Acquired in-process research and development is considered as
A. a definite-lived asset subject to amortization.
B. a definite-lived asset subject to testing for impairment.
C. an indefinite-lived asset subject to amortization.
D. an indefinite-lived asse

D. an indefinite-lived asset subject to testing for impairment.

Which one of the following is a characteristic of a business combination accounted for as an acquisition?
A. The combination must involve the exchange of equity securities only.
B. The transaction establishes an acquisition fair value basis for the compan

B. The transaction establishes an acquisition fair value basis for the company being acquired.

Which one of the following is a characteristic of a business combination that is accounted for as an acquisition?
A. Fair value only for items received by the acquirer can enter into the determination of the acquirer's accounting valuation of the acquired

C. Fair value for the consideration transferred by the acquirer as well as the fair value of items received by the acquirer can enter into the determination of the acquirer's accounting valuation of the acquired company.

A statutory merger is a(n)
A. business combination in which only one of the two companies continues to exist as a legal corporation.
B. business combination in which both companies continue to exist.
C. acquisition of a competitor.
D. acquisition of a sup

A. business combination in which only one of the two companies continues to exist as a legal corporation.

How are stock issuance costs and direct combination costs treated in a business combination which is accounted for as an acquisition when the subsidiary will retain its incorporation?
A. Stock issuance costs are a part of the acquisition costs, and the di

C. Direct combination costs are expensed and stock issuance costs are a reduction to additional paid-in capital.

Which of the following is a not a reason for a business combination to take place?
A. Cost savings through elimination of duplicate facilities.
B. Quick entry for new and existing products into domestic and foreign markets.
C. Diversification of business

E. Increase in stock price of the acquired company.

Which of the following statements is true regarding a statutory merger?
A. The original companies dissolve while remaining as separate divisions of a newly created company.
B. Both companies remain in existence as legal corporations with one corporation n

C. The acquired company dissolves as a separate corporation and becomes a division of the acquiring company.

Which of the following statements is true regarding a statutory consolidation?
A. The original companies dissolve while remaining as separate divisions of a newly created company.
B. Both companies remain in existence as legal corporations with one corpor

A. The original companies dissolve while remaining as separate divisions of a newly created company.

In a transaction accounted for using the acquisition method where consideration transferred exceeds book value of the acquired company, which statement is true for the acquiring company with regard to its investment?
A. Net assets of the acquired company

A. Net assets of the acquired company are revalued to their fair values and any excess of consideration transferred over fair value of net assets acquired is allocated to goodwill.

In a transaction accounted for using the acquisition method where consideration transferred is less than fair value of net assets acquired, which statement is true?
A. Negative goodwill is recorded.
B. A deferred credit is recorded.
C. A gain on bargain p

C. A gain on bargain purchase is recorded.

Which of the following statements is true regarding the acquisition method of accounting for a business combination?
A. Net assets of the acquired company are reported at their fair values.
B. Net assets of the acquired company are reported at their book

A. Net assets of the acquired company are reported at their fair values.

Which of the following statements is true?
A. The pooling of interests for business combinations is an alternative to the acquisition method.
B. The purchase method for business combinations is an alternative to the acquisition method.
C. Neither the purc

C. Neither the purchase method nor the pooling of interests method is allowed for new business combinations.