THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 5 THROUGH
10.
On October 30, 2013 Y corporation issued 100000 shares of its
no-par, no stated-value common stock [current fair value $12 a
share] for 18800 shares of the 20000 outstanding shares $20 par
common stock of X company. The $150000 out-of-pocket costs of the
business combination paid by Y on October 30, 2013, were as
follows, $90000 directly related to the business combination; and
$60000 indirect costs. Prior to the business combination, separate
balance sheets of the constituent companies were as follows:
Assets
Y
X
Lia & Stockholders’ equity
Y
X
Cash
200000
100000
Current liabilities
800000
400000
A/R
400000
200000
Long term debts
0
100000
inventory
600000
300000
Common stocks no par
1200000
Plant assets
1300000
1000000
common stocks, $20 par
400000
Retained Earnings
500000
700000
total
2500000
1600000
total
2500000
1600000
Current fair values of X's identifiable net assets differed
their carrying amounts as follows: Inventories $340000, Plant
assets 1100000
Required: select the correct answer
5– The cash account of Y after business combination is
--------
A
$200,000
C
$150,000
B
$50,000
D
$70,000.
6– The “stock investment account” in the balance sheet of Y is
--------
A
$1,2,000,000
C
$1,290,000
B
$1,260,000
D
1,250,000.
7– After business combination. The value of common stock in Y
balance sheet is----
A
$2,400,000
C
$2,490,000
B
$1,200,000
D
$2,340,000
8–business combination goodwill is----
A
$124,400 positive goodwill
C
$74400 positive goodwill
B
$124,400 negative goodwill
D
$74400 negative goodwill
9–The minority interest is----
A
$124,400
C
$150,000
B
$74400
D
124,600.
10– The value of consolidated inventory is
A
$900,000
C
$940000
B
$$860,000
D
$960000.
11– Occurs when a new corporation is formed to take over the
assets and operations of two or more separate business entities and
dissolves the previously separate entities
A- Legal consolidation
B- Legal merger
C- Acquisition
D- Trading securities