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Topic: MCQ: Consolidation through Acquisition (

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phung80219
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Posted: 16 May 2010 at 16:04 \| IP Logged

Is there some sort of reasoning behind the answer being D or is it just one of those things you have to just memorize?

PDX Corp. acquired 100% of the outstanding common stock of Sea Corp. in an acquisition transaction. The cost of the acquisition exceeded the fair value of the
identifiable assets and assumed liabilities. The general guidelines for assigning amounts to the inventories acquired provide for:

a.   Raw materials to be valued at original cost.
b.   Work in process to be valued at the estimated selling prices of finished goods, less both costs to complete and costs of disposal.
c.   Finished goods to be valued at replacement cost.
d.   Finished goods to be valued at estimated selling prices, less both costs of disposal and a reasonable profit allowance.

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OrDieTryng!
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Posted: 16 May 2010 at 17:51 \| IP Logged

LOL, I remember that question! I don't recall any specific mention of it in
Becker (or anywhere else). I guess that's one you just try to tuck into the
wrinkles of your brain and hope it sticks.

I wish they did a better job of explaining answers. If I know the logic or
reasoning behind, I usually don't have to bother with sitting there trying to
memorize it by repeating it 100 times. Unfortunately, Becker doesn't do a
good job in this area.

Maybe someone else can give you the logic. What did Becker say?

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CharliePetApple
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Posted: 16 May 2010 at 18:12 \| IP Logged

fair value has to be assigned. Saying that look for a guideline that defines the "fair value" best

I don't know, though, if I would choose D if you did not tell the answer, but answer A is easy to eliminate. B doesn't sounds right either: sales price minus cost to complete aproximates fair value, but not really is the fair value

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