Exam 7: Investing Activities

Pop,Inc.acquires 100% of the outstanding shares of Snap Corp.for $3,923,450 and accounts for the transaction using the purchase method.The purchase price Pop paid for Snap exceeded Snap's book value for four reasons: 1.Snap's long-term depreciable assets have a market value of $1,250,000. 2.Deferred income taxes of $125,000 arise from the excess of market value over the book value of the depreciable assets. 3.Pop assigns a value of $90,000 to Snap's customer list and records it as an intangible asset. 4.Goodwill exists equal to the difference between the acquisition cost and the market value of the identifiable assets and liabilities acquired. Information about Pop and Snap's balance sheet at the acquisition date and the current market value of Snap's assets appears below: Required: Complete the table for Snap's current market values and the consolidated amounts at the date of acquisition.

When the functional currency is the U.S.dollar,financial reporting requires firms to use the ___________________________________ translation method.

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,active investment and uses the equity method to account for the investment,the investment will appear in the December 31,2010 balance sheet at what amount?

Snowflake Corp. Penguin,Inc.acquires 100% of the outstanding shares of Snowflake Corp.for $2,250,000 and accounts for the transaction using the purchase method.Snowflake's balance sheet at the acquisition date is as follows: Based on the information concerning Snowflake Corp.what is the value of the goodwill related to the acquisition?

Ownership of 50% or more of the voting stock of another company implies an ability to ____________________.

The method used to account for oil and gas exploration costs that capitalizes the exploration costs of productive wells is the

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

An analyst can estimate the average total life of depreciable assets by

Stock Trader,Inc.began operations in 2012.Stock Trader has acquired a number of equity investments during 2012.None have been sold.Stock Trader exerts no influence over any of its investments each of which represents a small percentage of the investee.An analysis of Stock Trader's investment portfolios shows the following totals at December 31,2012: Based on the information provided,describe how Stock Trader would present this information in its financial statements.You should discuss what amounts would appear in each financial statement.

Carlson Company began constructing a building for its own use in January 2012.During 2012,Carlson incurred interest of $70,000 on specific construction debt and $15,000 on other borrowings.Interest computed on the weighted-average amount of accumulated expenditures for the building during 2012 as $60,000. Required: What amount of interest should Carlson capitalize?

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

Caruso Company incurred the following costs during 2012 in connection with its research and development activities. REQUIRED: Compute the amount to be reported as research and development expense by Caruso on its income statement for 2012.(Assume equipment is purchased at the beginning of the year and economic viability has not been achieved.)

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?

When a long-lived asset loses its ability to generate future benefits U.S.GAAP requires firms to write down the assets to their fair values and recognize an ______________________________ in income from continuing operations.

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

Under the equity method the investor's share of investee income ____________________ the investment account and dividends ____________________ the investment account.

Firms recognize an impairment loss when the carrying amount of a tangible fixed asset is deemed "not recoverable" as specified by GAAP.GAAP defines a carrying amount as "not recoverable" if

Expenditures included in the cost of a long-lived asset are

Most publicly traded firms in the United States use the _________________________ method of depreciation.

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