ACCT 405 Chapter 3 Problems: 4, 6, 9, 17

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ACCT 405 Chapter 3 Problems: 4, 6, 9, 17

Chapter 3 Problems: 4, 6, 9, 17

4. Willkom Corporation bought 100 percent of Szabo, Inc., on January 1, 2011. On that
date, Willkoms equipment (10-year life) has a book value of $300,000 but a fair value of
$400,000. Szabo has equipment (10-year life) with a book value of $200,000 but a fair
value of $300,000. Willkom uses the equity method to record its investment in Szabo. On
December 31, 2013, Willkom has equipment with a book value of $210,000 but a fair
value of $330,000. Szabo has equipment with a book value of $140,000 but a fair value
of $270,000. What is the consolidated balance for the Equipment account as of December
31, 2013?

5. $600,000.

6. $490,000.

7. $480,000.

8. $420,000.
 6. Goodwill recognized in a business combination must be allocated among a firms
identified reporting units. If the fair value of a particular reporting unit with recognized
goodwill falls below its carrying amount, which of the following is true?

1. No goodwill impairment loss is recognized unless the implied value for goodwill exceeds
its carrying amount.

2. A goodwill impairment loss is recognized if the carrying amount for goodwill exceeds its
implied value.

3. A goodwill impairment loss is recognized for the difference between the reporting units
fair value and carrying amount.

4. The reporting unit reduces the values assigned to its long-term assets (including any
unrecognized intangibles) to reflect its fair value.

9. What is consolidated net income for Phoenix and Sedona for 2013?

1. $148,000

2. $203,000

3. $228,000

4. $238,000

Phoenix Revenue $498,000

Phoenix Expense 350,000

Net income 148,000

Sedona equity income 55,000

17. Francisco Inc. acquired 100 percent of the voting shares of Beltran Company on January
1, 2012. In exchange, Francisco paid $450,000 in cash and issued 104,000 shares of its
own $1 par value common stock. On this date, Franciscos stock had a fair value of $12
per share. The combination is a statutory merger with Beltran subsequently dissolved as a
legal corporation. Beltrans assets and liabilities are assigned to a new reporting unit.