{"product_id":"new-acc-405module-1-practice-problems-and-solutions","title":"(Take My Online Class) ACC-405 Module 1 Practice Problems and Solutions","description":"\u003ch2\u003eACC-405Module 1 Practice Problems and Solutions\u003c\/h2\u003e\n\u003ch3\u003e1) Acquisition with contingent consideration (liability-classified)\u003c\/h3\u003e\n\u003cp\u003eOn \u003cstrong\u003eJanuary 1, 2026\u003c\/strong\u003e, \u003cstrong\u003eLumo Co.\u003c\/strong\u003e acquired \u003cstrong\u003e100%\u003c\/strong\u003e of \u003cstrong\u003eKibo Co.\u003c\/strong\u003e Lumo paid \u003cstrong\u003e$910,000 cash\u003c\/strong\u003e and agreed to additional \u003cstrong\u003ecash contingent consideration\u003c\/strong\u003e if Kibo’s postcombination income targets are met in 2026–2027. The \u003cstrong\u003efair value of the contingent consideration at acquisition\u003c\/strong\u003e was \u003cstrong\u003e$140,000\u003c\/strong\u003e (liability).\u003c\/p\u003e\n\u003cp\u003eFair values of Kibo’s identifiable assets and liabilities on Jan 1, 2026:\u003c\/p\u003e\n\u003cul\u003e\n\u003cli\u003e\n\u003cp\u003eAccounts receivable (gross) \u003cstrong\u003e$120,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eAllowance for doubtful accounts \u003cstrong\u003e$8,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eInventory \u003cstrong\u003e$210,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eLand \u003cstrong\u003e$180,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eBuildings \u003cstrong\u003e$520,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eEquipment \u003cstrong\u003e$300,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eAccounts payable \u003cstrong\u003e$145,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eNotes payable \u003cstrong\u003e$190,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ul\u003e\n\u003cp\u003eAt \u003cstrong\u003eDec 31, 2026\u003c\/strong\u003e, the fair value of the contingent consideration increased to \u003cstrong\u003e$165,000\u003c\/strong\u003e.\u003cbr\u003eAt \u003cstrong\u003eDec 31, 2027\u003c\/strong\u003e, the target was not met; fair value became \u003cstrong\u003e$0\u003c\/strong\u003e.\u003c\/p\u003e\n\u003cp\u003e\u003cstrong\u003eRequired:\u003c\/strong\u003e\u003c\/p\u003e\n\u003col\u003e\n\u003cli\u003e\n\u003cp\u003ePrepare Lumo’s \u003cstrong\u003eacquisition-date journal entry\u003c\/strong\u003e (Jan 1, 2026).\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eRecord the \u003cstrong\u003eDec 31, 2026\u003c\/strong\u003e adjustment for the contingent consideration.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eRecord the \u003cstrong\u003eDec 31, 2027\u003c\/strong\u003e adjustment when the fair value becomes zero.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ol\u003e\n\u003chr\u003e\n\u003ch3\u003e2) Acquisition with bargain purchase\u003c\/h3\u003e\n\u003cp\u003eOn \u003cstrong\u003eApril 1, 2026\u003c\/strong\u003e, \u003cstrong\u003eRangi Inc.\u003c\/strong\u003e acquired \u003cstrong\u003e100%\u003c\/strong\u003e of \u003cstrong\u003eMara Ltd.\u003c\/strong\u003e for \u003cstrong\u003e$620,000 cash\u003c\/strong\u003e. The fair values of Mara’s identifiable net assets total \u003cstrong\u003e$690,000\u003c\/strong\u003e.\u003c\/p\u003e\n\u003cp\u003e\u003cstrong\u003eRequired:\u003c\/strong\u003e\u003c\/p\u003e\n\u003col\u003e\n\u003cli\u003e\n\u003cp\u003eCompute whether there is \u003cstrong\u003egoodwill or a bargain purchase gain\u003c\/strong\u003e.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003ePrepare Rangi’s \u003cstrong\u003eacquisition-date journal entry\u003c\/strong\u003e (ignore transaction costs).\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ol\u003e\n\u003chr\u003e\n\u003ch3\u003e3) Acquisition with noncontrolling interest (NCI) at fair value\u003c\/h3\u003e\n\u003cp\u003eOn \u003cstrong\u003eJanuary 1, 2026\u003c\/strong\u003e, \u003cstrong\u003eTaji Co.\u003c\/strong\u003e purchased \u003cstrong\u003e80%\u003c\/strong\u003e of \u003cstrong\u003eNuru Co.\u003c\/strong\u003e for \u003cstrong\u003e$880,000\u003c\/strong\u003e. The \u003cstrong\u003efair value of the NCI\u003c\/strong\u003e at acquisition was \u003cstrong\u003e$210,000\u003c\/strong\u003e. The fair value of Nuru’s identifiable \u003cstrong\u003enet assets\u003c\/strong\u003e at acquisition was \u003cstrong\u003e$980,000\u003c\/strong\u003e.\u003c\/p\u003e\n\u003cp\u003e\u003cstrong\u003eRequired:\u003c\/strong\u003e\u003c\/p\u003e\n\u003col\u003e\n\u003cli\u003e\n\u003cp\u003eCompute \u003cstrong\u003egoodwill\u003c\/strong\u003e using the \u003cstrong\u003efair value method\u003c\/strong\u003e.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003ePrepare the \u003cstrong\u003eacquisition-date entry\u003c\/strong\u003e on Taji’s books.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ol\u003e\n\u003chr\u003e\n\u003ch3\u003e4) Step acquisition (equity method to control)\u003c\/h3\u003e\n\u003cp\u003eOn \u003cstrong\u003eJanuary 1, 2025\u003c\/strong\u003e, \u003cstrong\u003eKali Co.\u003c\/strong\u003e purchased \u003cstrong\u003e30%\u003c\/strong\u003e of \u003cstrong\u003eSafi Co.\u003c\/strong\u003e for \u003cstrong\u003e$240,000\u003c\/strong\u003e and used the \u003cstrong\u003eequity method\u003c\/strong\u003e.\u003cbr\u003eOn \u003cstrong\u003eJanuary 1, 2026\u003c\/strong\u003e, Kali acquired an additional \u003cstrong\u003e50%\u003c\/strong\u003e of Safi for \u003cstrong\u003e$520,000\u003c\/strong\u003e, obtaining control.\u003c\/p\u003e\n\u003cp\u003eOn Jan 1, 2026:\u003c\/p\u003e\n\u003cul\u003e\n\u003cli\u003e\n\u003cp\u003eThe \u003cstrong\u003efair value of Safi\u003c\/strong\u003e (100%) is \u003cstrong\u003e$1,020,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eKali’s \u003cstrong\u003e30% interest\u003c\/strong\u003e has a \u003cstrong\u003efair value of $306,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eSafi’s identifiable \u003cstrong\u003enet assets fair value\u003c\/strong\u003e is \u003cstrong\u003e$860,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ul\u003e\n\u003cp\u003e\u003cstrong\u003eRequired:\u003c\/strong\u003e\u003c\/p\u003e\n\u003col\u003e\n\u003cli\u003e\n\u003cp\u003eDetermine the \u003cstrong\u003eremeasurement gain or loss\u003c\/strong\u003e on Kali’s previously held 30% interest.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eCompute \u003cstrong\u003egoodwill\u003c\/strong\u003e at the step acquisition date.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003ePrepare Kali’s \u003cstrong\u003ejournal entry\u003c\/strong\u003e on Jan 1, 2026 to record the business combination.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ol\u003e\n\u003chr\u003e\n\u003ch3\u003e5) Acquisition-related costs and stock issuance costs\u003c\/h3\u003e\n\u003cp\u003eOn \u003cstrong\u003eMarch 1, 2026\u003c\/strong\u003e, \u003cstrong\u003eZuri Co.\u003c\/strong\u003e acquired \u003cstrong\u003e100%\u003c\/strong\u003e of \u003cstrong\u003eAsha Co.\u003c\/strong\u003e by issuing \u003cstrong\u003e40,000 shares\u003c\/strong\u003e of Zuri common stock. The shares had a \u003cstrong\u003emarket price of $18\u003c\/strong\u003e on the acquisition date. Zuri also paid:\u003c\/p\u003e\n\u003cul\u003e\n\u003cli\u003e\n\u003cp\u003eLegal\/consulting fees related to the acquisition: \u003cstrong\u003e$52,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eStock issuance costs: \u003cstrong\u003e$16,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ul\u003e\n\u003cp\u003eThe fair value of Asha’s identifiable net assets was \u003cstrong\u003e$690,000\u003c\/strong\u003e.\u003c\/p\u003e\n\u003cp\u003e\u003cstrong\u003eRequired:\u003c\/strong\u003e\u003c\/p\u003e\n\u003col\u003e\n\u003cli\u003e\n\u003cp\u003eCompute \u003cstrong\u003econsideration transferred\u003c\/strong\u003e.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eCompute \u003cstrong\u003egoodwill\u003c\/strong\u003e (if any).\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003ePrepare the \u003cstrong\u003eacquisition-date entries\u003c\/strong\u003e, including proper treatment of acquisition-related costs and stock issuance costs.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ol\u003e\n\u003chr\u003e\n\u003ch3\u003e6) Measurement period adjustment\u003c\/h3\u003e\n\u003cp\u003eOn \u003cstrong\u003eJanuary 1, 2026\u003c\/strong\u003e, \u003cstrong\u003eImara Co.\u003c\/strong\u003e acquired \u003cstrong\u003e100%\u003c\/strong\u003e of \u003cstrong\u003ePendo Co.\u003c\/strong\u003e for \u003cstrong\u003e$780,000 cash\u003c\/strong\u003e. Provisional fair values on Jan 1, 2026 included:\u003c\/p\u003e\n\u003cul\u003e\n\u003cli\u003e\n\u003cp\u003eCustomer relationships (intangible): \u003cstrong\u003e$90,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ul\u003e\n\u003cp\u003eOn \u003cstrong\u003eJune 30, 2026\u003c\/strong\u003e (within the measurement period), new information indicates the acquisition-date fair value of customer relationships should have been \u003cstrong\u003e$130,000\u003c\/strong\u003e (an increase of \u003cstrong\u003e$40,000\u003c\/strong\u003e). Assume no amortization has been recorded yet.\u003c\/p\u003e\n\u003cp\u003e\u003cstrong\u003eRequired:\u003c\/strong\u003e\u003c\/p\u003e\n\u003col\u003e\n\u003cli\u003e\n\u003cp\u003ePrepare the \u003cstrong\u003emeasurement period adjustment entry\u003c\/strong\u003e on June 30, 2026.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eExplain (briefly) what accounts are affected (no numbers beyond the entry).\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ol\u003e\n\u003chr\u003e\n\u003ch3\u003e7) Contingent consideration classified as equity\u003c\/h3\u003e\n\u003cp\u003eOn \u003cstrong\u003eJanuary 1, 2026\u003c\/strong\u003e, \u003cstrong\u003eKifaru Co.\u003c\/strong\u003e acquired \u003cstrong\u003e100%\u003c\/strong\u003e of \u003cstrong\u003eNia Co.\u003c\/strong\u003e for \u003cstrong\u003e$600,000 cash\u003c\/strong\u003e plus a promise to issue \u003cstrong\u003e10,000 shares\u003c\/strong\u003e of Kifaru stock if Nia meets a revenue milestone in 2026. On the acquisition date, the arrangement \u003cstrong\u003emeets equity classification\u003c\/strong\u003e, and the fair value of the equity-classified contingent consideration is \u003cstrong\u003e$120,000\u003c\/strong\u003e.\u003c\/p\u003e\n\u003cp\u003eAt \u003cstrong\u003eDec 31, 2026\u003c\/strong\u003e, the fair value of that contingent consideration (still equity-classified) is \u003cstrong\u003e$150,000\u003c\/strong\u003e.\u003c\/p\u003e\n\u003cp\u003e\u003cstrong\u003eRequired:\u003c\/strong\u003e\u003c\/p\u003e\n\u003col\u003e\n\u003cli\u003e\n\u003cp\u003eRecord the \u003cstrong\u003eacquisition-date entry\u003c\/strong\u003e including equity-classified contingent consideration.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eDetermine and record any \u003cstrong\u003eDec 31, 2026\u003c\/strong\u003e entry related to changes in fair value (if applicable under equity classification).\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ol\u003e\n\u003chr\u003e\n\u003ch3\u003e8) Recognizing identifiable intangible assets and goodwill\u003c\/h3\u003e\n\u003cp\u003eOn \u003cstrong\u003eMay 1, 2026\u003c\/strong\u003e, \u003cstrong\u003eHaki Co.\u003c\/strong\u003e acquired \u003cstrong\u003e100%\u003c\/strong\u003e of \u003cstrong\u003eJua Co.\u003c\/strong\u003e for \u003cstrong\u003e$1,150,000\u003c\/strong\u003e. The fair values of Jua’s identifiable net assets (excluding intangibles not on Jua’s books) are \u003cstrong\u003e$980,000\u003c\/strong\u003e.\u003c\/p\u003e\n\u003cp\u003eAdditional identifiable intangibles at acquisition:\u003c\/p\u003e\n\u003cul\u003e\n\u003cli\u003e\n\u003cp\u003eTrademark (indefinite-lived) \u003cstrong\u003e$90,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eCustomer list (10-year life) \u003cstrong\u003e$130,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ul\u003e\n\u003cp\u003e\u003cstrong\u003eRequired:\u003c\/strong\u003e\u003c\/p\u003e\n\u003col\u003e\n\u003cli\u003e\n\u003cp\u003eCompute \u003cstrong\u003egoodwill\u003c\/strong\u003e.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003ePrepare the \u003cstrong\u003eacquisition-date entry\u003c\/strong\u003e recognizing all identifiable intangibles.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ol\u003e\n\u003chr\u003e\n\u003ch3\u003e9) Deferred tax effect from fair value adjustments\u003c\/h3\u003e\n\u003cp\u003eOn \u003cstrong\u003eJanuary 1, 2026\u003c\/strong\u003e, \u003cstrong\u003eSanaa Co.\u003c\/strong\u003e acquired \u003cstrong\u003e100%\u003c\/strong\u003e of \u003cstrong\u003eTamu Co.\u003c\/strong\u003e for \u003cstrong\u003e$900,000\u003c\/strong\u003e. A major fair value adjustment relates to equipment:\u003c\/p\u003e\n\u003cul\u003e\n\u003cli\u003e\n\u003cp\u003eEquipment fair value exceeds tax basis by \u003cstrong\u003e$200,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eTax rate is \u003cstrong\u003e25%\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ul\u003e\n\u003cp\u003eIdentifiable net assets fair value \u003cstrong\u003ebefore\u003c\/strong\u003e deferred taxes is \u003cstrong\u003e$820,000\u003c\/strong\u003e.\u003c\/p\u003e\n\u003cp\u003e\u003cstrong\u003eRequired:\u003c\/strong\u003e\u003c\/p\u003e\n\u003col\u003e\n\u003cli\u003e\n\u003cp\u003eCompute the \u003cstrong\u003edeferred tax liability\u003c\/strong\u003e created by the equipment fair value adjustment.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eRecompute the \u003cstrong\u003enet identifiable assets\u003c\/strong\u003e after deferred taxes.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eCompute \u003cstrong\u003egoodwill\u003c\/strong\u003e.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003ePrepare the \u003cstrong\u003eacquisition-date entry\u003c\/strong\u003e including the deferred tax liability.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ol\u003e\n\u003chr\u003e\n\u003ch3\u003e10) Acquisition of less than 100% with NCI measured at proportionate share\u003c\/h3\u003e\n\u003cp\u003eOn \u003cstrong\u003eJuly 1, 2026\u003c\/strong\u003e, \u003cstrong\u003eMaji Co.\u003c\/strong\u003e purchased \u003cstrong\u003e70%\u003c\/strong\u003e of \u003cstrong\u003eKora Co.\u003c\/strong\u003e for \u003cstrong\u003e$560,000\u003c\/strong\u003e. Kora’s identifiable net assets at fair value are \u003cstrong\u003e$760,000\u003c\/strong\u003e. Assume \u003cstrong\u003eNCI is measured at proportionate share of net assets\u003c\/strong\u003e.\u003c\/p\u003e\n\u003cp\u003e\u003cstrong\u003eRequired:\u003c\/strong\u003e\u003c\/p\u003e\n\u003col\u003e\n\u003cli\u003e\n\u003cp\u003eCompute the \u003cstrong\u003eNCI amount\u003c\/strong\u003e at acquisition under the proportionate share method.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003eCompute \u003cstrong\u003egoodwill\u003c\/strong\u003e under this method.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003ePrepare Maji’s \u003cstrong\u003eacquisition-date entry\u003c\/strong\u003e.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ol\u003e\n\u003chr\u003e\n\u003ch3\u003e11) Contingent consideration settled in cash after remeasurement\u003c\/h3\u003e\n\u003cp\u003eOn \u003cstrong\u003eJanuary 1, 2026\u003c\/strong\u003e, \u003cstrong\u003eNuru Co.\u003c\/strong\u003e acquired \u003cstrong\u003e100%\u003c\/strong\u003e of \u003cstrong\u003eTia Co.\u003c\/strong\u003e for \u003cstrong\u003e$700,000 cash\u003c\/strong\u003e plus \u003cstrong\u003econtingent consideration\u003c\/strong\u003e (liability) with acquisition-date fair value \u003cstrong\u003e$90,000\u003c\/strong\u003e.\u003c\/p\u003e\n\u003cp\u003eFair value of contingent consideration:\u003c\/p\u003e\n\u003cul\u003e\n\u003cli\u003e\n\u003cp\u003e\u003cstrong\u003eDec 31, 2026:\u003c\/strong\u003e \u003cstrong\u003e$110,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003e\u003cstrong\u003eMarch 31, 2027:\u003c\/strong\u003e settled in cash for \u003cstrong\u003e$105,000\u003c\/strong\u003e\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ul\u003e\n\u003cp\u003e\u003cstrong\u003eRequired:\u003c\/strong\u003e\u003c\/p\u003e\n\u003col\u003e\n\u003cli\u003e\n\u003cp\u003ePrepare the \u003cstrong\u003eJan 1, 2026 acquisition-date entry\u003c\/strong\u003e.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003ePrepare the \u003cstrong\u003eDec 31, 2026 remeasurement entry\u003c\/strong\u003e.\u003c\/p\u003e\n\u003c\/li\u003e\n\u003cli\u003e\n\u003cp\u003ePrepare the \u003cstrong\u003eMarch 31, 2027 settlement entry\u003c\/strong\u003e (including any gain\/loss at settlement, if applicable).\u003c\/p\u003e\n\u003c\/li\u003e\n\u003c\/ol\u003e\n\u003chr\u003e\n\u003cp\u003e\u003cbr\u003e\u003c\/p\u003e","brand":"NurseQuizPrep","offers":[{"title":"Default Title","offer_id":45640082587809,"sku":null,"price":2.99,"currency_code":"USD","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0685\/5806\/1729\/files\/mathsol3.png?v=1768390107","url":"https:\/\/nursequizprep.store\/products\/new-acc-405module-1-practice-problems-and-solutions","provider":"NurseQuizPrep","version":"1.0","type":"link"}