Scribd Logo
Upload

Welcome to Scribd!

  • Exercise Answers - General Concepts

    Uploaded by

    John Philip L Concepcion
    377 views2 pages
    A consolidation is a business combination where a new corporation is created and two or more existing corporations are combined into the newly created corporation. A business combination occurs when one company acquires control over another entity through an equity interest, regardless of the percentage owned. In a business combination where the fair value exceeds the cost, a gain from a bargain purchase is recognized for the amount the fair value of net assets acquired exceeds the acquisition price.

    Original Description:

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    A consolidation is a business combination where a new corporation is created and two or more existing corporations are combined into the newly created corporation. A business combination occurs when one company acquires control over another entity through an equity interest, regardless of the percentage owned. In a business combination where the fair value exceeds the cost, a gain from a bargain purchase is recognized for the amount the fair value of net assets acquired exceeds the acquisition price.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    377 views2 pages

    Exercise Answers - General Concepts

    Uploaded by

    John Philip L Concepcion
    A consolidation is a business combination where a new corporation is created and two or more existing corporations are combined into the newly created corporation. A business combination occurs when one company acquires control over another entity through an equity interest, regardless of the percentage owned. In a business combination where the fair value exceeds the cost, a gain from a bargain purchase is recognized for the amount the fair value of net assets acquired exceeds the acquisition price.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 2

    A business combination in which a new corporation is created and two or more existing

    corporations are combined into the newly created corporation is called a


    consolidation.
    A business combination occurs when a company acquires an equity interest in another entity
    and has
    control over the entity, irrespective of the percentage owned
    In a business combination, when the fair value exceeds the investment cost, which of the
    following statements is correct?
    A gain from a bargain purchase is recognized for the amount that the fair value of the
    identifiable net assets acquired exceeds the acquisition price
       Goodwill arising from a business combination is
    never amortized.
    Kennedy Company is acquiring Ross Company in an acquisition. What date should be used as
    the acquisition date for the transaction? 
    The date Kennedy obtains control of Ross. 
    Lebow Corp. acquired control of Wilson Corp. by purchasing stock in steps. Which of the
    following regarding this type of acquisition is true? 
    The previously held shares should be remeasured at fair value on the acquisition date and the
    gain recognized in earnings of the period. 
    Which of the following is not one of those steps in accounting for an acquisition in business
    combination? 
    Prepare pro forma financial statements prior to acquisition

    On December 31, Year 2, Saxe Corporation was acquired by Poe Corporation. In


    the business combination, Poe issued 200,000 shares of its 10 par common stock,
    with a market price of 18 a share, for all of Saxe’s common stock. The stockholders’
    equity section of each company’s balance sheet immediately before the combination
    was
     
      Poe Saxe
    Common stock 3,000,000 1,500,000
    Additional paid-in 1,300,000 150,000
    capital
    Retained earnings 2,500,000 850,000
      6,800,000 2,500,000
     
    In the December 31, Year 2 consolidated balance sheet, additional paid-in capital
    should be reported at 
    2,900,000
    In a business combination, an acquirer's interest in the fair value of the net assets acquired
    exceeds the consideration transferred in the combination. Under IFRS3 Business combinations,
    the acquirer should:

    recognise the excess immediately in profit or loss

    Raphael Company paid 2,000,000 for the net assets of Paris Corporation and Paris was then
    dissolved. Paris had no liabilities. The fair values of Paris’ assets were 2,500,000. Paris’s only
    non-current assets were land and equipment with fair values of 160,000 and 640,000,
    respectively. At what value will the equipment be recorded by Raphael?

    640,000

    Which of the following situations would require the use of the acquisition method in a business
    combination?

    The purchase of more than 50% of a business

    Which of the following is a reason why a company would expand through a combination, rather
    than by building new facilities?

    All of the other choices are possible reasons that a company might choose a
    combination.
     

    You might also like