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

  1. Willkom Corporation bought 100 percent of Szabo, Inc., on January 1, 2011. On that date, Willkom’s 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?
  2. $600,000.
  3. $490,000.
  4. $480,000.
  5. $420,000.



  1. Goodwill recognized in a business combination must be allocated among a firm’s 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 unit’s 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.




  1. 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



  1. 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, Francisco’s stock had a fair value of $12 per share. The combination is a statutory merger with Beltran subsequently dissolved as a legal corporation. Beltran’s assets and liabilities are assigned to a new reporting unit.


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