Exam 8: Investing Activities

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: Snowflake, Corp. Balance Sheet Acquisition Date Historical Cost Current Market Value Assets \ 900,000 \ 900,000 Current Assets \ 875,000 \ 1,250,000 Depreciable Assets less Accumulated Depreciation Goodwill \ 1,775,000 Total Assets Liabilities and Equities Liabilities \ 1,100,000 \ 1,100,000 Deferred Income Tax Liability \ 125,000 \ 125,000 Shareholders' Equity \ 550,000 Total Liabilities and Equities \ 1,775,000 -Based on the information concerning Snowflake Corp.what is the value of the goodwill related to the acquisition?

Caruso Company incurred the following costs during 2012 in connection with its research and development activities. Cost of equipment acquired that will have alternative \ 220,000 uses in future R\&D projects over the next 4 years (uses straight-line depreciation) Materials consumed in R\&D projects 67,000 Consulting fees paid to outsiders for R\&D projects 80,000 Personnel costs of persons involved in R\&D projects 108,000 Indirect costs reasonably allocable to R\&D projects 45,000 Materials purchased for future R\&D projects 34,000 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.)

For some transactions U.S.GAAP requires that value changes are recognized on the balance sheet and the income statement when they occur,even if not realized.Discuss what types of transactions get this type of treatment and the logic behind this accounting.

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,then the investment will appear in the December 31,2010 balance sheet at what amount?

Solo Corp.purchased $500,000 of bonds for $515,000 as an investment.If Solo expects to hold the bonds until they mature,the initial investment should be recorded at:

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

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

Goodwill represents:

An investing firm consolidates the variable interest entity if it absorbs the majority of the entity's expected ____________________ if they occur,receives a majority of the entity's expected ______________________________ if they occur,or both.

Assume that Hsu Company needs to acquire a large special-purpose materials handling facility.Given that no outside vendor exists for this type of facility and that the company has available engineering,management,and productive capacity,the Hsu borrows funds and builds the facility.Identify the costs that should be capitalized as part of this facility.

Using the information below,calculate the average total depreciable life of the assets: Infarmation from the Balance Sheet: Depreciable As5ets 400,000 Accumulated Depreciation Depreciable Assets (Net) \ 425,000 \3 00,000 From the Incame Statement 2012 Depreciation Expense \ 50,000

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

When a firm sells a trading security,it recognizes:

All of the following are typically costs that fail the future benefits test of long-lived operating assets except:

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

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

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

When a foreign entity has the U.S.dollar as its functional currency,it uses which exchange rate to translate monetary assets and liabilities?

All of the following are consistent with the purpose of determining the useful life of a long-lived asset except:

When dividends from an investment are recognized as a reduction of the investment account,the investment must have been of which type?