Exam 8: Investing Activities

Record Corporation CD Inc. acquires 100% of the outstanding shares of Record Corp. for $1,200,000 and accounts for the transaction using the purchase method. Record Corp's balance sheet at the date of acquisition appears below: -Based on the information concerning Record Corp.what amount of goodwill should CD record at the acquisition date?

Ownership of 50% or more of the voting stock of another company implies an ability to ____________________ the company and _________________ should be prepared

For U.S.GAAP,software development costs are capitalized as intangible assets 

Olivia Co.owns 4,000 of the 10,000 outstanding shares of Hobbitt Corp.common stock and exercises significant influence over the company.During 2011,Hobbitt earns $80,000 and pays cash dividends of $30,000.For the year ended December 31,2011 Olivia should report income related to the investment equal to

Which of the following is(are)a difficulty in determining current market values when determining the value of fixed assets?

Securities that are purchased in order to take advantage of short-term changes in market value should be classified as ____________________ securities.

When a foreign entity operates as a direct and integral extension of the U.S.parent,normally,its functional currency is the _________________________.

Specifically identifiable intangible assets acquired from others may have either a ____________________ useful life or an ____________________ useful life.

When certain kinds of assets are built that require public welfare and safety expenditures at the end of the asset's life, 

Ashley Company Ashley Company purchased 2,000 of the 10,000 outstanding shares of Judd, Inc.'s common stock for $60,000 on January 1, 2010. During 2010, Judd declared a dividend of $5 per share and reported net income of $75,000. At the end of 2010 the market value of a share of Judd, Inc. stock has increased to $32 per share. -If Ashley Company accounts for the investment as a minority,passive investment and classifies it as a available-for-sale security the investment will appear in the December 31,2010 balance sheet at what amount?

Currently,the FASB's Statements of Accounting Concepts (Nos.5 and 6)define an asset as having all of the following characteristics except:

When a firm sells a trading security,it recognizes

Carlson Company began constructing a building for its own use in January 2012.During 2012,Carlson incurred interest of $75,000 on specific construction debt and $16,750 on other borrowings.Interest computed on the weighted-average amount of accumulated expenditures for the building during 2012 as $55,000 Required: What amount of interest should Carlson capitalize?

Unrealized holding gains or losses which are recognized in the income statement are from securities classified as

Discuss how firms should account for intangible assets under U.S.GAAP.Your answer should include discussion of the following areas:a.internally generated intangible assets versus specifically identifiable intangible assets acquired from others. b.amortization and impairment testing

Which of the following is the least effective way for an analyst to understand whether existing long-lived assets must be replaced?

Under US GAAP when an assets carrying amount is deemed _______________the asset is considered impaired

Which of the following would not be used to determine the cost of an asset?

All of the following are difficulties encountered in determining fair values except:

Buchaneer Co.,a waste collection company,estimates that its landfill will be in operation for five years and will cost $300 million to build,with generation of $900 million in revenues during its useful life.According to Federal Law,Buchaneer must decommission and decontaminate the site at the end of its useful life.Based on estimates by its engineers,Buchaneer will have to spend $20 million on this process when the landfill is finally shut down in five years.Buchaneer's credit adjusted rate of interest is 10%.(Hint: Use PV factors to estimate fair value of this ARO.) Required:1.In accounting for asset retirement obligations,how should Buchaneer account for the costs associated with this decommisioning process according to U.S.GAAP? Show journal entries and prepare an amortization table. 2.How should these costs be reported on the income statement and how does this treatment improve the matching process?