COLLEGE OF MANAGEMENT & TECHNOLOGY

Department:
Lecturer: Dr. Heba Srour
Course Name: Advance Accounting
Course Code: ACC 424 E Allowed Time: 120 Minutes
Dates: 15 Nov. 2023 Start Time: 02:30 PM

Mid-term Exam
Student Name:
ID:

Question (1): problem ----- (5 Marks)

Internet Corporation is considering the acquisition of Homepage Corporation and has obtained
the following audited condensed balance sheet:

Internet and Homepage agree on a price of $280,000 for Homepage's net assets. Prepare the
necessary journal entry to record the purchase given the following scenarios:
1. The Internet pays cash for Homepage Corporation and incurs $5,000 of acquisition costs.

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 COLLEGE OF MANAGEMENT & TECHNOLOGY
Department:
Lecturer: Dr. Heba Srour
Course Name: Advance Accounting
Course Code: ACC 424 E Allowed Time: 120 Minutes
Dates: 15 Nov. 2023 Start Time: 02:30 PM

2. Internet issues its $5 par value stock as consideration. The fair value of the stock at the
acquisition date is $50 per share. Additionally, the Internet incurs $5,000 of security issuance
costs.

Question (2): Problem ----- (10 Marks)

Diamond acquired Heart's net assets. At the time of the acquisition Heart's Balance sheet was as
follows:

Required:

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 COLLEGE OF MANAGEMENT & TECHNOLOGY
Department:
Lecturer: Dr. Heba Srour
Course Name: Advance Accounting
Course Code: ACC 424 E Allowed Time: 120 Minutes
Dates: 15 Nov. 2023 Start Time: 02:30 PM

Record the entry for the purchase of the net assets of Heart by Diamond at the following cash
prices:
a. $700,000
b. $300,000

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 COLLEGE OF MANAGEMENT & TECHNOLOGY
Department:
Lecturer: Dr. Heba Srour
Course Name: Advance Accounting
Course Code: ACC 424 E Allowed Time: 120 Minutes
Dates: 15 Nov. 2023 Start Time: 02:30 PM

Question (3): Problem ----- (6 Marks)

Paulos Company purchases a controlling interest in Sanjoy Company. Sanjoy had identifiable net
assets with a book value of $500,000 and a fair value of $800,000. It was agreed that the total
fair value of Sanjoy’s common stock was $1,200,000. Use value analysis schedules to determine
what adjustments will be made to Sanjoy’s accounts and what new accounts and amounts will be
recorded if:
a. Paulos purchases 100% of Sanjoy’s common stock for $1,200,000.
b. Paulos purchases 80% of Sanjoy’s common stock for $960,000.

Question (4): Problem ----- (9 Marks)

Santos Corporation is considering investing in Fenco Corporation but is unsure about what level of
ownership should be undertaken. Santos and Fenco have the following reported incomes:

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 COLLEGE OF MANAGEMENT & TECHNOLOGY
Department:
Lecturer: Dr. Heba Srour
Course Name: Advance Accounting
Course Code: ACC 424 E Allowed Time: 120 Minutes
Dates: 15 Nov. 2023 Start Time: 02:30 PM

Fenco paid $15,000 in cash dividends to its investors. Prepare a pro forma income statement for Santos
Corporation that compares income under 10%, 30%, and 80% ownership levels.

Good Luck
Dr. Heba Srour

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