Help With Investments
Exerting Influence
Business Combo
Potpourri
Mix-n-Match
100
This method is used when the investor's ownership interest is less than 20% in the investee company.
What is the Cost Method
100
True or False. Under the Equity Method, the investor records its share of investee dividends as a income
What is False?
100
__________ is used when one company owns more than 50% of another.
What is consolidated financial statements?
100
If an investor invests in a company and pays above the book value, how is the excess accounted for?
What is first to identifiable plant assets that have fair values which is different from the book value and then to Goodwill?
100
When consideration transferred is less than net amount of fair values of identified assets acquired and liabilities assumed.
What is a bargain purchase?
200
The investment is initially recorded at cost and then subsequently adjusted to reflect the market value.
What is the Fair-Value Method?
200
Company Y invests in the shares of Company Z. Company Z then suffers a net loss and declares and pay dividends, what is the change in the balance of the Company Y's Investment account?
What is the balance is decreased?
200
When two or more companies transfer either their assets or their capital stock to a newly formed corporation. Both original companies are dissolved, leaving only the new organization in existence.
What is a Statutory Consolidation?
200
What is the journal to record the amortization of excess payment allocated to an identifiable plant asset?
What is Dr. Equity in Investee Income Cr. Investment Investee Company
200
The direct or indirect ability to determine the direction of management and policies through ownership, contract, or otherwise.
What is Control?
300
This method is used when the investor ownership interest is greater than 50% of the investee.
What is Consolidated financial statements?
300
What causes the balance in the Investee in Investment account to increase?
What is initial investment in an investee company and the reporting of income by the investee company?
300
Name three of the six common reasons for firms to combine.
What is: (1) Vertical integration on one firm's out and another's distribution (2) Cost savings through elimination of duplication (3) Quick entry into a new market (4) Economies of scale; greater efficiency and negotiating power (5) The ability to access financing at more attractive rates (6) Diversification of business risk
300
Company A invested in Company B by acquiring a 10% interest and properly accounts for the investment using the ______ method. In year 2, it purchased an additional 15% interest, what method should be used to account for the investment in year 2?
What is the fair value; and equity methods?
300
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
What is the fair value?
400
The ________ method is used when an investor company can exert influence over how the investee's company operates.
What is the Equity Method?
400
Name two of the three conditions that indicate degree of influence whereas the Equity Method must be used.
What is: (1) Investor representation on the board of directors of the investee. (2) Investor participation in the policy-making process of the investee. (3) Material intra-entity transactions.
400
In a statutory merger, how are the accounting records affected?
What is the accounts are adjusted to include appropriate balances of the dissolved company on the surviving company's books, and the dissolved company's records are closed out?
400
What are the valuation techniques which are typically used for business combination?
What are the market, income and cost approaches?
400
A loss in value of an investment which is other than a temporary decline evidence by loss of major customers, changes in economic conditions, loss of a significant patent or other legal right or damage to the company's reputation
What is an Impairment?
500
Robinson's Corp. has a 15% ownership interest in Kaye Company. Robinson's president and CEO serves as the chairman of the board for Kaye Company. What method should Robinson use to account for its investment in Kaye Company?
What is Equity Method?
500
Bigley Company invested Little John Inc. by purchasing 40% of its common shares on January 1, 2017 for $500,000. Little John reported net income of $$350,000 and declared and paid dividends of $220,000 for the year. What is the carrying value of the investment on January 1, 2018?
What is $552,000?
500
The fair value of the assets and liabilities of an acquired company, plus any cash paid, securities and other property or obligations exchanged.
What is consideration?
500
Chic Co pays $150,000 for a 30% ownership in Grandville Co. On the date of the transaction Grandville's balance showed assets of $600,000 and liabilities of $300,000. In addition, Grandville equipment and patents were undervalued by $60,000 and $40,000 respectively. How much Goodwill is associated with the purchase?
What is $30,000? Book value of Grandville Co $300,000 Undervaluation of Equipment 60,000 Undervaluation of Patents 40,000 Value of Net Assets $400,000 % acquired .30 Purchase Price $120,000 Payment by investor $150,000 % of book value acquired 90,000 Payment in excess of book val 60,000 Excess payment identified: Equipment ($60,000 x 30%) 18,000 Patents ($40,000 x 30%) 12,000 Goodwill $30,000
500
One company obtains the assets, and often the liabilities of another company in exchange for cash, other assets, liabilities, stock, or a combination of these.
What is a Statutory Merger?
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