Question : 71. Photo Finish Corporation bought a 40% interest in the voting : 1228455

71. Photo Finish Corporation bought a 40% interest in the voting stock of Click It Corporation’s $1 par value common stock for $20 million (2 million shares at a $10 market price) on March 31, 2011. On December 31, 2011, Click It paid a $1 million cash dividend declared earlier in 2011 and reported net income for the year ended 2011 of $10 million. On December 31, 2011, Click It’s stock was trading at $11.50 per share. At what amount will the Click It investment be reported on Photo Finish’s December 31, 2011 balance sheet? 
A. $20,000,000
B. $23,000,000
C. $23,600,000
D. $24,000,000

72. Fun with Florals Corporation acquired all the voting shares of Crafts to Go Corporation under the purchase method. Which of the following statements about the consolidated statements is true? 
A. The assets and liabilities of Crafts to Go Corporation would be not revalued and disclosed at their market values on the date of acquisition.
B. Fun with Florals will use the equity method of accounting for this investment.
C. Fun with Florals will report Crafts to Go Corporation’s revenues and expenses on a consolidated income statement.
D. Fun with Florals will use the market value method of accounting for this investment.

73. The balance sheet of Mini Company was as follows immediately before it was acquired by Maxi Company:
  
On January 1, 2010, Maxi Company paid $350,000 in cash for 100% of the outstanding common stock of Mini Company. The current market value of Mini Company’s plant and equipment was $140,000 on the date of acquisition. If the market value and book value are the same for Mini’s remaining assets, what was the amount of goodwill purchased by Maxi Company? 
A. $20,000
B. $40,000
C. $50,000
D. $60,000

74. On January 1, 2010, Shelley Company paid $650,000 cash for 100% of the outstanding common stock of SCD Company; SCD’s stockholders equity on the date of acquisition was $500,000. The current market value of SCD’s plant and equipment was $100,000 in excess of the equipment’s book value. If the market value and book value are the same for SCD’s remaining assets, what was the amount of goodwill purchased by Shelley Company? 
A. $150,000
B. $40,000
C. $50,000
D. $250,000

75. On January 1, 2010, Sheldon Company paid $750,000 cash for 100% of the outstanding common stock of Mullen Company; Mullen’s stockholders equity on the date of acquisition was $550,000. The current market value of Mullen’s net assets was $70,000 in excess of their book value. What was the amount of goodwill purchased by Sheldon Company? 
A. $200,000
B. $130,000
C. $480,000
D. $270,000

76. The balance sheet of Mini Company was as follows immediately before it was acquired by Maxi Company:
  
On January 1, 2010, Maxi Company paid $350,000 in cash for 100% of the outstanding common stock of Mini Company. The current market value of Mini Company’s plant and equipment was $140,000 on the date of acquisition. If the market value and book value are the same for Mini’s remaining assets, what is the net increase in Maxi’s assets as a result of the merger with Mini? 
A. $430,000
B. $470,000
C. $120,000
D. $390,000

77. Paxton Corporation acquired all of the outstanding voting stock of Stanley Company. How should the assets and liabilities of the acquired company be reported on the consolidated financial statements immediately after the acquisition? 
A. Nominal estimated values determined by the parent company.
B. Market values on the date of the acquisition.
C. The previously reported book values.
D. Market values on the date of the acquisition less accumulated depreciation.

78. During 2010, Manning Corporation purchased 100% of the outstanding voting shares of Brady Corporation for $4.0 million. Brady’s assets had a book value of $5.0 million and fair market value of $6.5 million. The book value as well as fair market value of Brady’s liabilities equaled $3.2 million. How much was paid for goodwill? 
A. $0
B. $2,200,000
C. $700,000
D. $1,000,000

79. How is goodwill accounted for subsequent to acquisition? 
A. It should be written off as soon as possible against retained earnings.
B. It should not be amortized because it has an indefinite life.
C. It should be written off as soon as possible as an expense.
D. It is amortized over its estimated useful life.

80. Which of the following is the primary justification for reporting the acquisition of a controlling interest on a consolidated basis? 
A. The companies are legally and in economic substance separate.
B. The companies are legally and in economic substance one entity.
C. The companies are legally one entity but they are separate in economic substance.
D. The companies are legally separate but they are one entity in economic substance.