Question

8)Poe Co. paid cash for all of the voting common stock of Stormtrooper Corp. Stormtrooper will continue to exist as a separate corporation. Entries for the consolidation of Poe and Stormtrooper would be recorded in
A. a worksheet.
B. Poe's general journal.
C. Stormtrooper 's general journal.
D. Stormtrooper 's secret consolidation journal.
E. the general journals of both companies.

9)Using the acquisition method for a business combination, goodwill is generally defined as:
A. Cost of the investment less the subsidiary's fair value at the beginning of the year.
B. Cost of the investment less the subsidiary's fair value at acquisition date.
C. Cost of the investment less the subsidiary's book value at the beginning of the year.
D. Cost of the investment less the subsidiary's book value at the acquisition date.
E. is no longer allowed under federal law.

10)How are stock issuance costs and direct combination costs in a business combination accounted for when the subsidiary will retain its incorporation?
A. Stock issuance costs are a part of the acquisition costs, and the direct combination costs are expensed.
B. Direct combination costs are a part of the acquisition costs, and the stock issuance costs are a reduction to additional paid-in capital.
C. Direct combination costs are expensed and stock issuance costs are a reduction to additional paid-in capital.
D. Both are treated as part of the acquisition consideration transferred.
E. Both are treated as a reduction to additional paid-in capital.

Answer 1

8. Option C- Stormtooper's general journal, Because after consolidation , the consolidating company merges into the holding companyand so the books of minority company doesnot exist

9. Option B - Goodwill under purchase or acquisition method will be calculated as the difference between Consideration paid or cost of investment and Fair market value of the subsidiary company as on the date when the acquirer holds control over acquiree

10. Option C - Direct combination costs need t be expensed whereas stock issuanc costs are to be reduced from additional oaid up capital