McGuire Company Acquired 90 Percent of Hogan Company on January

question 44

Multiple Choice

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: $$\begin{array} { l c c } & \text { Book Value } & \text { Fair Value } \\\text { Buildings (10-year life) } & \$ 10,000 & \$ 8,000 \\\text { Equipment (4-year life) } & 14,000 & 18,000 \\\text { Land } & 5,000 & 12,000\end{array}$$ Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years. In consolidation at December 31, 2015, what adjustment is necessary for Hogan's Buildings account?

• A)$1,440 increase.
• B)$1,440 decrease.
• C)$1,600 increase.
• D)$1,600 decrease.
• E)No adjustment is necessary.

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Definitions:

Standardization

In psychological testing, the process by which one obtains and organizes test scores from various population groups, so that the results of a person’s completing a test can be compared to those of others of his or her gender, in his or her age group, and so on.

Population Groups

Categories of individuals, often distinguished by sociodemographic or genetic characteristics, used in the analysis of epidemiological and sociological research.

Test Scores

Quantitative measures used to evaluate and compare an individual’s knowledge or understanding in a specific area or subject.

Validity

The extent to which a concept, conclusion, or measurement is well-founded and corresponds accurately to the real world.