Exam 3: Business Combinations

Push-down accounting requires ________.

Sya Ltd.acquired all the assets and liabilities of Littman Ltd.by issuing common shares to Littman.After this transaction,Littman owned 30% of Sya's outstanding shares.Which of the following statements is true?

After an exchange of shares in a business combination,each group of shareholders held 50% of the voting rights.Which of the following factors should be considered in determining the acquirer?

What is the most common valuation method used for intangible assets?

On December 31,20X6,the statements of financial position of the Power Company and the Pro Company are as follows: (in 000s) Power Company has 100,000 shares of common stock outstanding.Pro Company has 45,000 shares outstanding.On January 1,20X7 Power issued an additional 90,000 shares of common stock in exchange for all the net assets of Pro.All assets and liabilities have book value equal to fair values,except as noted.In addition,Pro has a patent that has an appraised fair value of $450. Market value of the new shares issued was $95 per share at the date of acquisition. Required: a.What is the amount of goodwill to be recorded for this business combination? Prepare the journal entry that Power would record on January 1,20X7 related to this acquisition.In this case,who are the shareholders and their percentage holdings on January 1,20X7? Prepare the statement of financial position for Power as at January 1,20X7. b.How would your answer differ if Power had purchased the shares rather than the net assets of Pro Company? In this case,who are the shareholders and their percentage holdings on January 1,20X7?

Sya Ltd.acquired all the assets and liabilities of Littman Ltd.by issuing common shares to Littman.After this transaction,Littman owned 30% of Sya's outstanding shares.Which of the following statements is true?

On January 1,20X7,Falcon acquired the net assets of Intra for $3,400,000 with the issue of shares.The statement of financial position for Intra at the date of acquisition is shown below together with estimated of the fair values of Intra's recorded assets and liabilities. Required: What is the amount of goodwill to be recorded for this business combination? Prepare the journal entry that Falcon will use to record the business combination.Prepare the statement of financial position for Intra on January 1,20X7 directly after the transaction is completed.Reconcile the book value of the retained earnings for Intra on December 31,20X6 to its balance on January 1,20X7.Explain any differences.

How should negative goodwill be shown on the consolidated financial statements of the acquirer?

Which of the following is not a business combination?

How should the cost of issuing debt in an acquisition be recognized?

Perez Co.plans to acquire Roo Co.Roo has substantial depreciable assets that have fair values in excess of their book values.Considering only the income tax impact,which of the following statements is true?

Thad Ltd.acquired 100% of the common shares of Zoe Co.for $560,000.At the time of acquisition,Zoe had the following: In this acquisition,how much goodwill has been created?

On December 31,20X6,the statements of financial position of the Power Company and the Pro Company are as follows: (in 000s) Power Company has 100,000 shares of common stock outstanding.Pro Company has 45,000 shares outstanding.On January 1,20X7 Power issued an additional 90,000 shares of common stock in exchange for all the outstanding shares of Pro.All assets and liabilities have book value equal to fair values,except as noted.In addition,Pro has a patent that has an appraised fair value of $450. Market value of the new shares issued was $95 per share at the date of acquisition. Required: What is the amount of goodwill to be recorded for this business combination? Prepare the journal entry that Power would record on January 1,20X7 related to this acquisition.Prepare the consolidated statement of financial position as at January 1,20X7.

Ski Ltd.has 500,000 shares outstanding.On July 1,20X7,Ski purchased all of the outstanding shares of Snow Ltd.The consideration paid by Ski was in the form of 500,000 shares,valued at $20 per share,which was premium of 10% over the market value prior to the announcement.It has been decided that the CEO of the combined company will come from Ski,but the CFO and the COO will come from Snow.The Chairman of the Board of Directors will come from Snow.The Board will have six other directors,three from Ski and three from Snow. Required: Define what the acquirer is in a business combination.How would you identify the acquirer in the above transaction?

In Canada,what type of business combination can still use the pooling-of-interests method?

On December 31,20X5,CI Co.purchased 100% of the outstanding common shares of SA Ltd.for $1,100,000 in cash;80% of the cash was obtained by issuing a five-year note payable.The statements of financial position of CI and SA immediately before the acquisition and issuance of the notes payable were as follows (in 000s): Required: Prepare the journal entry that CI will post to record the acquisition of CI.Prepare the consolidated statement of financial position for CI immediately following the acquisition of SA.

Hurricane Inc.wants to acquire 100% of the net assets of Flood Inc.using all cash consideration.From the Flood's shareholders' point of view,what are the advantages and disadvantages of Hurricane purchasing shares rather than net assets of Flood?

How should the transaction costs of issuing shares in an acquisition be recognized?

What does push down accounting refer to?

Ha Ltd.and Hee Ltd.exchanged shares in a business combination.After the share exchange,each company held the same number of voting shares.Which of the following statements is true?