1. Pizza purchased 100% of the net assets of Submarine Companyin an “Asset Acquisition.” Pizza paid $5 million for SubmarineCompany. Submarine Company had identifiable net assets of $3.5million.
The difference of $1.5 million will be accounting for as:
A. Ordinary Gain
B. Bargain Purchase
C. Goodwill
D. Other Assets
2. The following is the list of assets and liabilities ofSubmarine Company
Book Value Fair Value
AccountReceivable 1,400,000 1,350,000
Inventory 500,000 600,000
Plant and Equipment 750,000 1,900,000
AccountsPayable 100,000 150,000
Mortgage Payable 200,000 200,000
2,350,000 3,500,000
Complete the journal entry to record the assetacquisition
Debit Credit
3 If Pizza Co. had instead purchased Submarine through a “StockAcquisition” (purchased 100% of Submarine Stock) the journal entryto record the stock acquisition would be as follows:
StockAcquisition Debit Credit
Investmentsubsidiary 5,000,000
Cash 5,000,000
A.True
B. False
4. (Stock Acquisition) The current method of accounting for astock acquisition is more aligned with Parent Company Conceptversus the Economic Unit Concept.
A. True
B. False
5. (Stock Acquisition) Noncontrolling interest represents theequity position of the subsidiary shareholders who continue to holdstock (did not sell their ownership) in the subsidiary.
A. True
B. False
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