RMI test 2

Jasper, Inc. purchased 25% interest in Stone Corp. on January 2, 2014, paying $1,000,000 cash. During 2015., Stone's net income was $2,000,000 and it paid dividends of $600,000. Jasper's 2015 income from Stone was:

a. $ 150,000 b. $ 420,000 c. $ 500,000 d. $1,400,000 e. none of the above

Jasper, Inc. purchased 25% interest in Stone Corp. on January 2, 2014, paying $1,000,000 cash. During 2015, Stone's net income was $2,000,000 and it paid dividends of $600,000. What Equity Investment balance should Jasper report at December 31, 2015

a. $ 850,000 b. $1,250,000 c. $1,000,000 d. $1,350,000 e. none of the above

Hairington Corporation issues 20,000 shares of its common stock for all of the outstanding shares of Alton, Inc. Hairington's shares have a par value of $10 and a market value of $18 per share. If Alton's net assets have book values and fair values of $240,000 and $300,000, respectively, what is the resulting amount of goodwill/gain?

a. $-0- b. $ 60,000 c. $120,000 d. $360,000 e. none of the above.

On December 30, 2016, Big Stuff acquired 100% of Little Stuff for $300,000 cash. After making all necessary eliminating and other consolidation entries, the total assets for Big and Little, respectively, are $612,500 and $157,500. The total assets on the consolidated balance sheet would be:

a. $300,000 b. $870,000 c. $612,500 d. $570,000 e. none of the above

Hairington Corporation issues 20,000 shares of its common stock for all of the outstanding shares of Alton, Inc. Hairington's shares have a par value of $10 and a market value of $18 per share. What is the increase in consolidated additional paid-in capital resulting from the combination?

a. $360,000 b. $200,000 c. $160,000 d. $-0- e. none of the above

Toga Company purchased 100% of Sheet Company, paying 1,500,000. At the time of the acquisition Sheet Company had a book value of 1,000,000 and fair value of net assets of 1,250,000. During the year subsequent to the acquisition, Sheet had income of 100,000 and paid dividends of 25,000. Any excess of fair value of net identifiable assets over book value was attributed to an unrecorded patent. There was no impairment in the year subsequent to the acquisition. What is the balance in the equity investment account at the end of the first year?

a. 0 b. 1,250,000 c. 1,575,000 d. 1,500,000 e. none of the above.

Big Flake Company purchased 100% of Little Chip Company for 2,000,000. At the time of the acquisition, Little Chip had a Book value of 1,500,000. The fair value of net identifiable assets was 2,100,000. What is the bargain acquisition gain?

a. 0 b. 100,000 c. 500,000 d. 600,000 e. none of the above

Parent B purchases 80% of the subs common shares of Sub A for 4,000,000. The fair value of the net identifiable assets is 5,000,000. The fair value of the entity is 5,000,000. Book value is equal to fair value. What amount of goodwill will be recorded in the purchase?

a. 0 b. 800,000 c. 1,000,000 d. 780,000 e. none of the above

Pike purchased all of Milk Company's common stock on January 1, 2014, for 1,000,000 cash. The investee's stockholders' equity amounted to 800.000. The excess of 200,000 was due to an unrecorded patent with a four-year life. In 2014, Milk reported net income of 160,000 and paid dividends of 20,000. What is the Equity Investment balance at December 31, 2014?

a. 1,110,000 b. 1,090,000 c. 1,130,000 d. 1,140,000 e. none of the above

On December 31, 2013, Smith, Inc. paid 430,000 for all of the common stock of Small Corp. On that date, Small had assets and liabilities with book values of 400,000 and 90,000; and fair values of 420,000 and 80,000, respectively. What amount of goodwill will be reported on the December 31, 2013 balance sheet?

a. 10,000 b. 80,000 c. 90,000 d. 120,000 e. none of the above

Catwalk Co. purchased a 30% interest in Shell Corporation for 125,000 on January 2, 2013. Fair values of Shell's net assets exceeded book values due to land undervalued by 100,000. In 2013, Shell reported net income of 50,000 and paid no dividends. What is the amount of Equity Investment on the December 31, 2013, balance sheet?

a. 105,000 b. 110,000 c. 138,000 d. 140,000 e. none of the above

Pike purchased all of Milk Company's common stock on January 1, 2014, for 1,000,000 cash. The investee's stockholders' equity amounted to 800.000. The excess of 200,000 was due to an unrecorded patent with a four-year life. In 2014, Milk reported net income of 160,000 and paid dividends of 20,000. For 2014, what amount of Equity Income will Pike record?

a. 110,000 b. 120,000 c. 150,000 d. 160,000 e. none of the above

Consolidated entity "WeAreUs" allocated goodwill in the amounts of 125,000 and 20,000 to its controlling and noncontrolling interests, respectively. The goodwill was allocated proportionally, with each interest receiving its proportionate share, based on stock ownership. Goodwill is unimpaired as of the date of the last financial statements. On the last financial statements, what is the amount of goodwill that will be shown on the consolidated balance sheet: _________

a. 145,000 b. 125,000 c. 20,000 d. 0 e. none of the above

Assume the following facts relating to an 80% owned subsidiary company: BOY Stockholders' Equity $600,000 BOY AAP assets 50,000 Net income of subsidiary (not including [A] asset depreciation and amortization) 125,000 AAP assets depreciation and amortization expense 20,000 Dividends declared and paid to noncontrolling shareholders 2,500 What is the amount reported as noncontrolling equity at the end of the year?

a. 151,000 b. 148,500 c. 120,000 d. 153,500 e. none of the above

Assume the following facts relating to an 80% owned subsidiary company: BOY Stockholders' Equity $600,000 BOY AAP assets 50,000 Net income of subsidiary (not including [A] asset depreciation and amortization) 125,000 AAP assets depreciation and amortization expense 20,000 Dividends declared and paid to noncontrolling shareholders 2,500 What is the net income attributable to noncontrolling interests for the year?

a. 20,000 b. 25,000 c. 26,000 d. 21,000 e. none of the above

Kite Co. acquired a 40% interest in Flier, Inc. with the excess of purchase price over book value solely attributable to equipment with a five-year life and undervaluation by 100,000. During the year of acquisition, Flier reported net income of 200,000. What amount of Equity Income should Kite report on its income statement for the year of acquisition?

a. 200,000 b. 100,000 c. 72,000 d. 40,000 e. none of the above

On January 2, 2014, Quincy Corporation purchased a 40% interest in Mary, Inc. for 200,000. Fair values of Mary's net assets equaled book values except for equipment undervalued by 45,000. The equipment had a six-year remaining life. During 2014, Mary reported net income of 60,000 and paid dividends of 10,000. What is Quincy's Equity Income for 2014?

a. 4,000 b. 20,000 c. 21,000 d. 24,000 e. none of the above

Haven Co. obtained control with its purchase of 30% interest in Vacation Enterprises on December 31, 2014 for 300,000. On that date, Vacation's net assets had a book value of 500,000 and fair value of 700,000. What amount of goodwill resulted from this acquisition?

a. 400,000 b. 200,000 c. 90,000 d. 0 e. none of the above

Smiles, Inc. purchased a 15% interest in The Toy Company on January 2, 2015. The purchase price was 400,000. Smiles exerts significant influence over Toy. The investee reported net income of 500,000 and paid dividends of 150,000 in 2015. On the December 31, 2015, balance sheet, what amount should Smiles report as Equity Investment in The Toy Company?

a. 400,000 b. 452,500 c. 475,000 d. 650,000 e. none of the above

Cannon Company purchased 25% of the outstanding common stock of Angel Inc. on January 2, 2014, and used the equity method to account for the investment. During 2014 Angel, Inc. reported net income of 310,000 and distributed dividends of 90,000. The ending balance in the Investment in Angel, Inc. account at December 31, 2014 was 160,000 after applying the equity method during 2014. What was the purchase price Cannon paid for its investment in Angel, Inc.?

a. 85,000 b. 130,000 c. 190,000 d. 215,000 e. none of the above

Assume that on July 1, 2016 a parent company purchased 75% interest in the common stock of Sub A, paying 1,891,000. The fair value of the remaining interest was 625,000. On July 1, 2016, the fair value of the identifiable net assets was 2,400,000. What is the amount of goodwill assigned to the controlling and noncontrolling interests, respectively, as of the acquisition date?

a. 91,000 and 25,000 b. 89,500 and 26,500 c. 90,000 and 26,000 d. 86,000 and 25,000 e. none of the above

What is the impact on the noncontrolling interest of a subsidiary when there are downstream transfers of inventory between the parent and the subsidiary?

a. A pro rata portion of deferred gain or loss is recognized in the income statement. b. Any resulting gain or loss is reported (in total) in the current period income statement c. Any cash received is reported in Accumulated Other Comprehensive Income d. The noncontrolling interest dividends or other disbursements are increased by the amount of the gross profit e. None of the above

Which of the following statements is true regarding the acquisition method of accounting for a business combination?

a. Assets of the acquired company are recorded at book values. b. Assets of the acquired company are recorded at fair value, but only if the acquisition cost equals or exceeds fair value of the subsidiary's net assets. c. Assets of the acquired company are recorded at fair values regardless of the acquisition cost. d. Consulting costs related to the combination reduce additional paid-in capital. e. none of the above.

Burger Hut acquired Hot Dog on January 1. On that date, Hot Dog's land and its buildings were undervalued, resulting in an excess of fair value of net identifiable assets (FVNIA) over book value. How do these excesses of fair value over book value affect Burger Hut's Income from Hot Dog?

a. Building, Decrease; Land, Decrease b. Building, Decrease; Land, No Effect c. Building, Increase; Land, Increase d. Building, Increase; Land, No Effect e. Buidling, No Effect; Land, No Effect

If a practitioner were to follow the suggested integrated approach for mastering complex consolidations shown in your text, the first thing he/she would do is

a. Calculate and organize profit and losses on intercompany transactions and balances. b. Compute the pre-consolidation Equity Investment account balances c. Account for and document the AAP d. Compute owners' equity attributable to the controlling and noncontrolling interest. e. None of the above

Which of the following best describes current GAAP with respect to the translation process (current rate approach)?

a. Current assets and current liabilities are translated at the exchange rate at the balance sheet date regardless of when they arose. b. Assets and liabilities are translated at the exchange rate in effect when they arose. c. Assets are translated at the exchange rate at the balance sheet date, but liabilities are translated at the exchange rate in effect with the liabilities were incurred. d. Revenues and expenses must be translated at the exchange rate in effect then they are recognized. e. none of the above

Assume Investor Company owns 100% of Investor Company and properly recorded $100,000 in Goodwill at the date of acquisition. After two years, Investor Company believes the Goodwill recorded at the date of acquisition is impaired and that the new implied Goodwill is $25,000. Which of the following entries represents the entry that will be made on the books and records of the Investor Company to signify the change in Goodwill?

a. Debit: Equity Income, 75,000 Credit: Equity Investment, 75,000 b. Debit: Equity Income, 25,000 Credit: Equity Investment, 25,000 c. Debit: Equity Income, 75,000 Credit: Goodwill, 75,000 d. Debit: Equity Income, 25,000 Credit: Goodwill, 25,000 e. none of the above

Assume during the first year following acquisition a 100%-owned sub reports sales, profits, and dividends to the parent. Which of the following would be one of the equity method journal entries required by the parent:

a. Debit: Equity Investment Credit: Cash b. Debit: Cash Credit: Equity Income c. Debit: Cash Credit: Equity Investment d. Debit: Equity Income Credit: Cash e. none of the above

Assume during the first year following acquisition a 100%-owned sub reports sales, profits, and dividends to the parent. Also assume that the sub was purchased at a premium and that the premium is related directly to property, plant, and equipment. Which of the following would be one of the equity method journal entries required by the parent:

a. Debit: Equity Investment Credit: Cash b. Debit: Equity Income Credit: Equity Investment c. Debit: Equity Income Credit: Cash d. Debit: Cash Credit: Equity Investment e. none of the above

On January 1, 2014, Woody Company acquires 80% of the outstanding common stock of Buzz, for a purchase price of $785,000. It was determined that the fair market value of the noncontrolling interest in the subsidiary is $190,000. The book value of the Buzz's stockholders' equity on the date of acquisition is $500,000 and its fair market value of identifiable tangible and intangible assets is $900,000. The excess fair market value over book value is allocated $200,000 to equipment with a remaining useful life of 10 years, and $200,000 to a patent with a remaining useful life of 8 years. The journal entry (on Woody's books) to recognize the acquisition date AAP assets and allocate the ownership interest in those assets to the parent and noncontrolling interests (entry A) includes:

a. Equity investment, credit, $400,000 b. Noncontrolling interest, credit, $100,000 c. Buzz retained earnings, debit, $332,500 d. Noncontrolling interest, credit, $90,000 e. None of the above

Which of the following statements best describes the relationship between a parent and its consolidated subsidiary?

a. In legal form they are separate, but in economic substance they are one. b. In legal form and economic substance they are one. c. In legal form they are one, but in economic substance they are separate. d. In legal form and economic substance they are separate. e. none of the above.

Big Company acquired a 100% investment in Little and accounts for the investment using the equity method. Little earned $20,000 and paid $5,000 in dividends. Big made the following entries: Equity Investment 20,000 Equity Income 20,000 Cash 12,000 Dividend Income 12,000 What adverse effect will these entries have on Big's balance sheet?

a. Investment overstated, retained earnings overstated b. Investment overstated, retained earnings understated c. Investment overstated, retained earnings understated d. no adverse effect, all accounts will be properly stated

A bargain purchase arises when

a. Investor pays exactly BV for an acquisition b. Investor pays more than FVNIA but less than BV for an acquisition c. Investor pays less than the FVNIA for an acquisition d. Investor pays exactly FVNIA for an acquisition e. none of the above

Current GAAP identifies three approaches to assigning values to assets acquired in a business combination. Which of the following is not a recognized valuation technique?

a. Market approach b. Book value approach c. Cost approach d. Income approach e. none of the above (i.e., all of the above are approaches)

Happy Co. receives a cash dividend from a common stock investment. Will the Investment account increase if it accounts for the investment under either the market method or the equity method

a. Market value method, NO; Equity method, YES b. Market method, YES; Equity method, NO c. Market method, YES; Equity method, YES d. Market method, NO; Equity method, NO

An exchange rate of $1.32:€1

a. Means that each $US is worth 1.32€ b. Implies that the $US has strengthened vis-à-vis the € c. Implies that the € has strengthened vis-à-vis the $US d. Can also be expressed as $1:€0.76

In the presence of a noncontrolling interest, the financial reports include a line item indicating noncontrolling ownership participation. One of the indications is the line item ____________ which is found on the ___________.

a. Net income attributable to parent, income statement b. Net income attributable to noncontrolling interest, equity section of the balance sheet c. Noncontrolling interest, liability section of the balance sheet d. Noncontrolling interest share of entity, equity section of the balance sheet e. None of the above

Which of the following best describes the accounting for foreign currency-denominated receivables and payables?

a. No gains or losses are recorded until the receivable/payable is collected or the payable is paid. b. No gains or losses are recorded because there has been no cash effect. c. Companies are required to report the foreign-currency denominated receivables and payables at their current market value on the financial statement date, but no gain or loss is recognized in the income statement. d. Companies are required to accrue gains and losses on foreign currency-denominated receivables and payable on every financial statement date and when the receivable/payable is collected/discharged. e. none of the above

An investor uses the equity method to account for an investment in common stock. After the date of acquisition, the equity investment account of the investor is:

a. Not affected by its share of the earnings or losses of the investee b. Not affected by its share of the earnings of the investee but is decreased by its share of the losses of the investee. c. Increased by its share of the earnings of the investee but is not affected by its share of the investee's losses. d. Increased by its share of the earnings of the investee and is decreased by its share of the investee's losses.

Assume that our US-based company purchases 1,000 units of inventories from a UK supplier at £3/unit. To record the purchase:

a. Our company will debit inventories and credit accounts payable for £3,000. b. Our company will debit inventories and credit accounts payable for the $US equivalent of £3,000. c. Our company will not record the purchase of inventory until the payable is paid. d. None of the above

Assume that the $US has weakened with respect to the Euro and that we have a Euro-denominated payable.

a. Our company will report the loss on the payment date. b. Our company will report the gain on the payment date. c. Our company will not report a gain or loss because there has been no cash effect. d. none of the above

Which of the following statements is true?

a. Revenues and expenses can only be translated at the exchange rate in effect when recognized. b. US GAAP permits an averaging of exchange rates in order to facilitate the balance sheet translation process and prescribes a specific approach for companies to use. c. Companies are required to use an averaging method that weights transactions by the relative proportion of sales volume during the period. d. Companies are permitted to use an average exchange rate for the period to translate revenues and expenses under the assumptions that revenues and expenses occur evenly throughout the period. e. None of the above

Which of the following best describes the cumulative translation adjustment (current rate approach)?

a. The cumulative translation adjustment is a plug figure to balance the trial balance. b. Changes in the cumulative translation adjustment are reflected in net income for the period. c. The cumulative translation adjustment reflects changes in the fair values of marketable securities on the balance sheet. d. The cumulative translation adjustment can only be a positive dollar amount. e. none of the above

Which of the following provides the best definition of a functional currency?

a. The currency that is the most useful to companies in order to transact business. b. The currency of the primary economic environment in which the subsidiary operates c. The currency with the least fluctuation in $US value d. None of the above

Which of the following statements is correct?

a. The functional currency must always be the currency of the US parent company. b. Non-US subsidiaries always record transactions in $US. c. If the foreign-currency-denominated subsidiary financial statements are already in the functional currency, but not in the parent's currency, then the financial information must be "translated" into the parent's currency. d. None of the above

When a company holds between 20% and 50% of the outstanding stock of an investee, which of the following statements applies?

a. The investor should always use the equity method to account for its investment. b. The investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise "significant influence" over the investee. c. The investor must use the market method unless it can clearly demonstrate the ability to exercise "significant influence" over the investee. d. The investor should always use the fair value method to account for its investment e. None of the above

If a 30% acquisition is made at book value, what will be the relationship between the Equity Investment account and the investee's stockholders' equity?

a. There is no particular relationship b. The equity investment account will remain at original cost even as the investee's stockholders equity increases c. The equity investment account balance will equal 30% of investee's stockholders' equity at the date of acquisition, but the relationship will change as the investee reports income and dividends. d. The equity investment account balance will equal 30% of investee's stockholders' equity throughout the life of the investment e. None of the above

GAAP specifies the accounting for business combinations using the ______, which is described in ___________.

a. acquisition method, ASC 810 b. purchase method, ASC 805 c. acquisition method, ASC 805 d. purchase method, ASC 810 e. none of the above

When gross profit on intercompany sales is deferred, there is a journal entry which includes

a. an increase in the Equity Investment account b. an increase in the Equity Income account c. a decrease in the Equity Investment account d. a decrease in the Equity Income account e. a and b, but not c or d f. c and d, but not a or b g. none of the above

Which of the following two items are needed to calculate goodwill?

a. book value and consideration given in exchange (purchase price) b. book value and the fair value of net identifiable assets c. consideration given in exchange and book value d. consideration given in exchange and fair value of net identifiable assets e. none of the above

If an entity has both controlling and non-controlling interests, the financial statements prepared by its parent will

a. have revenues and expenses equal to the revenues and expenses that would be present if there was no non-controlling interest b. have net income allocated to two separate groups of shareholders on the face of the financial reports c. must have a per share value that is the same for the controlling and non-controlling interest d. all of the above are possible e. none of the above are possible

The gross profit on intercompany sales must be deferred and

a. is recognized when the goods are transferred to an internal party b. is recognized when the goods are sold to an external party c. is recognized only when the goods are sold within the current period d. none of the above

Which of the following acquisition methods records assets at fair value

a. net acquisition b. stock acquisition c. both of the above d. neither "a" nor "b"

The overwhelming and consistent idea behind accounting for business combinations consummated as stock acquisitions, assuming 100% of the stock is purchased, is

a. stockholders' equity of the investee increases by the amount of the investment account b. stockholders' equity of the investee must equal the "investment" account of the investor c. the investment account of the investor represents the book value of the investee d. all of the above are true e. none of the above are true

When an investor makes a 100% stock acquisition of an investee and pays an amount greater than book value and appropriately records no goodwill in the purchase, we can assume

a. the assets at fair value are greater than the assets at book value b. the investor will need to amortize/depreciate the portion of each asset that is greater than its book value c. any amortization of the excess of fair value over book value will be deducted from income d. all of the above e. none of the above

If investor prepares a balance sheet immediately following the purchase of an equity investment

a. the investee's equity is equal to the Investor's net assets b. the investee's equity is equal to the Investor's Investment account plus amortized stock costs c. the investee's equity is equal to the investor's Investment account d. none of the above

Investor A purchases 100% of the common stock of Investee B. At the end of any accounting period, we would expect to see

a. the investment account of the investor increased by the amount of the investee's income for the period b. the investment account of the investor decreased by the amount of the investee's dividends declared or paid for the period c. the investment account of the investor decreased by the amount of amortized depreciation of the excess of fair value of net assets over book value d. all of the above e. none of the above

Under GAAP, if the "degree of influence" is significant, the appropriate accounting method is

a. the market method b. mark to market method c. equity method d. none of the above

If Investor A pays Investor B more than book value for its acquisition of 100% of Investor B's stock, then Investor A most likely acquires

a. the net assets as reflected on the financial statements plus goodwill b. the net assets as reflected on the financial statements plus any excess of fair value of identified assets over book value c. the net assets as reflected on the financial statements and some previously unrecorded assets d. none of the above

A parent purchases 80% interest in a subsidiary, paying 1,000,000 for 50,000 shares. The fair value of the noncontrolling interest at the date of acquisition was 400,000 for the remaining 12,500 shares. Based on these facts and these facts only, we can assume

a. the parent overpaid for its share b. the parent underpaid for its share c. there is a control premium that will be assigned to the noncontrolling interest d. there is a discount for lack of control that will be assigned to the noncontrolling interest e. none of the above

The method of accounting for intercorporate investments depends on

a. the percentage of ownership interest of the investor b. the degree of control of the investor c. whether or not the equity method of accounting is used d. all of the above e. none of the above

If an investor owns less than 100% of an investee,

a. the proportionate share of dividends is recognized in equity income b. the proportionate share of income is deducted from the Equity Investment account c. the proportionate share of income is recognized in equity income d. none of the above

Under GAAP, if the degree of influence is control, the method of accounting depends on the percentage ownership of the investor.

a. true b. false

A parent company purchased an 80% interest in its subsidiary several years ago at a purchase price that was $500,000 in excess of the subsidiary's Stockholders' Equity on the acquisition date. The excess was assigned to a building that was estimated to be undervalued by $200,000 and to an unrecorded Patent valued at $300,000. The building asset is being depreciated over a 20-year period and the Patent is being amortized over a 10-year period, both on the straight-line basis with no salvage value. Each company reports the following income statement for the current year: Parent Sub Sales 12,000,000 1,200,000 Cost of goods sold (8,400,000) (720,000) Gross profit 3,600,000 480,000 Equity income ? Operating expenses (2,280,000) (312,000) Net income 168,000 What is equity income? SHOW YOUR CALCULATIONS!

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Assume that Parent acquires 80% of the outstanding voting stock of Sub on January 1, 2015. The identifiable net assets of the Sub included a patent that was not recorded by the Sub, had a fair value of 100,000, and had an estimated remaining useful life of 5 years. The Sub recorded sales to the parent for 80,000, earning an entity gross profit of 40%. Approximately 25% of the merchandise was in the parent's inventory at year end. What are consolidated expenses?

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Assume that Parent acquires 80% of the outstanding voting stock of Sub on January 1, 2015. The identifiable net assets of the Sub included a patent that was not recorded by the Sub, had a fair value of 100,000, and had an estimated remaining useful life of 5 years. The Sub recorded sales to the parent for 80,000, earning an entity gross profit of 40%. Approximately 25% of the merchandise was in the parent's inventory at year end. What are consolidated retained earnings?

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Assume that Parent acquires 80% of the outstanding voting stock of Sub on January 1, 2015. The identifiable net assets of the Sub included a patent that was not recorded by the Sub, had a fair value of 100,000, and had an estimated remaining useful life of 5 years. The Sub recorded sales to the parent for 80,000, earning an entity gross profit of 40%. Approximately 25% of the merchandise was in the parent's inventory at year end. What are consolidated revenues?

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Assume that Parent acquires 80% of the outstanding voting stock of Sub on January 1, 2015. The identifiable net assets of the Sub included a patent that was not recorded by the Sub, had a fair value of 100,000, and had an estimated remaining useful life of 5 years. The Sub recorded sales to the parent for 80,000, earning an entity gross profit of 40%. Approximately 25% of the merchandise was in the parent's inventory at year end. What are current assets?

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Assume that Parent acquires 80% of the outstanding voting stock of Sub on January 1, 2015. The identifiable net assets of the Sub included a patent that was not recorded by the Sub, had a fair value of 100,000, and had an estimated remaining useful life of 5 years. The Sub recorded sales to the parent for 80,000, earning an entity gross profit of 40%. Approximately 25% of the merchandise was in the parent's inventory at year end. What are noncurrent assets?

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Assume that Parent acquires 80% of the outstanding voting stock of Sub on January 1, 2015. The identifiable net assets of the Sub included a patent that was not recorded by the Sub, had a fair value of 100,000, and had an estimated remaining useful life of 5 years. The Sub recorded sales to the parent for 80,000, earning an entity gross profit of 40%. Approximately 25% of the merchandise was in the parent's inventory at year end. What is income attributable to the noncontrolling interest?

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Assume that Parent acquires 80% of the outstanding voting stock of Sub on January 1, 2015. The identifiable net assets of the Sub included a patent that was not recorded by the Sub, had a fair value of 100,000, and had an estimated remaining useful life of 5 years. The Sub recorded sales to the parent for 80,000, earning an entity gross profit of 40%. Approximately 25% of the merchandise was in the parent's inventory at year end. What is the noncontrolling interest?

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On January 1, 2014, Smokey acquired 75% of the common stock of Bear and accounts for the purchase using the equity method. At that date, the excess of fair value of net identifiable assets over book value was 400,000, all of which was attributed to depreciable assets with a remaining useful life of 10 years. Net income of the Smokey was 500,000 and net income of Bear was 250,000. By what amount will depreciation expense increase for the consolidated entities?

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On January 1, 2014, Smokey acquired 75% of the common stock of Bear and accounts for the purchase using the equity method. At that date, the excess of fair value of net identifiable assets over book value was 400,000, all of which was attributed to depreciable assets with a remaining useful life of 10 years. Net income of the Smokey was 500,000 and net income of Bear was 250,000. What was the amount of income attributable to the consolidated entity for the year ending December 31, 2014.

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On January 1, 2014, Smokey acquired 75% of the common stock of Bear and accounts for the purchase using the equity method. At that date, the excess of fair value of net identifiable assets over book value was 400,000, all of which was attributed to depreciable assets with a remaining useful life of 10 years. Net income of the Smokey was 500,000 and net income of Bear was 250,000. What was the amount of income attributable to the noncontrolling interest, for the year ending December 31, 2014.

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On January 1, 2014, Woody Company acquires 80% of the outstanding common stock of Buzz, for a purchase price of $785,000. It was determined that the fair market value of the noncontrolling interest in the subsidiary is $190,000. The book value of the Buzz's stockholders' equity on the date of acquisition is $500,000 and its fair market value of identifiable tangible and intangible assets is $900,000. The excess fair market value over book value is allocated $200,000 to equipment with a remaining useful life of 10 years, and $200,000 to a patent with a remaining useful life of 8 years. Determine the total goodwill to be recognized at acquisition date.

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On January 1, 2014, Woody Company acquires 80% of the outstanding common stock of Buzz, for a purchase price of $785,000. It was determined that the fair market value of the noncontrolling interest in the subsidiary is $190,000. The book value of the Buzz's stockholders' equity on the date of acquisition is $500,000 and its fair market value of identifiable tangible and intangible assets is $900,000. The excess fair market value over book value is allocated $200,000 to equipment with a remaining useful life of 10 years, and $200,000 to a patent with a remaining useful life of 8 years. What is the acquisition accounting premium (AAP)?

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On January 1, 2014, Woody Company acquires 80% of the outstanding common stock of Buzz, for a purchase price of $785,000. It was determined that the fair market value of the noncontrolling interest in the subsidiary is $190,000. The book value of the Buzz's stockholders' equity on the date of acquisition is $500,000 and its fair market value of identifiable tangible and intangible assets is $900,000. The excess fair market value over book value is allocated $200,000 to equipment with a remaining useful life of 10 years, and $200,000 to a patent with a remaining useful life of 8 years. What portion of the AAP should be assigned to noncontrolling interest?

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Parents purchased 75% of the voting stock of Kids. In the current fiscal year, Parents sold inventory to Kids for 500,000. The parent has a gross profit percentage of 30% and the sub has a gross profit percentage of 25%. At the end of the current fiscal year, 35% of the inventory remained with the parent. What is the amount of intercompany profit that must be deferred for the current fiscal period?

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At what amounts will the following be reported in the consolidated financial statements for the year ended December 31, 2016? APIC

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At what amounts will the following be reported in the consolidated financial statements for the year ended December 31, 2016? Accounts receivable

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At what amounts will the following be reported in the consolidated financial statements for the year ended December 31, 2016? Common stock

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At what amounts will the following be reported in the consolidated financial statements for the year ended December 31, 2016? Consolidated net income

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At what amounts will the following be reported in the consolidated financial statements for the year ended December 31, 2016? Equity investment

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At what amounts will the following be reported in the consolidated financial statements for the year ended December 31, 2016? Goodwill

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At what amounts will the following be reported in the consolidated financial statements for the year ended December 31, 2016? Property, plant and equipment (PPE), net

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At what amounts will the following be reported in the consolidated financial statements for the year ended December 31, 2016? Retained earnings

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Investor Company purchased 100% of Investee Company. At the date of the acquisition, Investee Company's fair value of net identifiable assets was equal to book value except for tangible fixed assets with remaining useful life of 10 years which had fair value that was $100,000 higher than the investee's book value. There was goodwill of $200,000. What is the balance in the "income from investee" account in the December 31, 2013, pre-consolidation income statement?

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Investor Company purchased 100% of Investee Company. At the date of the acquisition, Investee Company's fair value of net identifiable assets was equal to book value except for tangible fixed assets with remaining useful life of 10 years which had fair value that was $100,000 higher than the investee's book value. There was goodwill of $200,000. What is the balance in the "investment in investee" account for the pre-consolidation balance on December 31, 2013? _____________

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Investor Company purchased 100% of Investee Company. At the date of the acquisition, Investee Company's fair value of net identifiable assets was equal to book value. There was no goodwill or bargain purchase gain. What is the balance in the "income from investee" account in the investor's pre-consolidation income statement for the year ended December 31, 2013? _________

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On January 1, 2013, Compton Co. paid 20,000 for a 20% interest in General Enterprises. General's stockholders' equity amounted to 40,000 on that date. The excess of purchase price over book values was due to an unrecorded patent valued at 60,000 with a 10-year life. During 2013, General Enterprises reported income of 10,000 and paid dividends of 2,000. During 2014, it reported income of 15,000 and dividends of 3,000. Assume that Compton has significant influence over the operations of General. What is the balance in the Equity Investment account at December 31, 2014? [Your answer should be in the form xx,xxx; no dollar sign and a comma where needed.]

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On January 1, 2013, Samuel Corporation acquired a 30% interest in Blanton, Inc. for 315,000, which was equal to book value of Blanton's net assets. During 2013, Blanton reported net income of 120,000 and paid total dividends of 37,500. What amount should Samuel report as Equity Investment on its December 31, 2013 balance sheet? [Your answer should be in the form xx,xxx; no dollar sign and a comma where needed.]

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On January 1, 2015, Eva, Inc. purchased 30% of the voting common stock of Bob Corp. for 500,000. There was no amortization. During 2015, Bob paid dividends of 12,000 and reported a net loss of 70,000. What is the balance in the Equity Investment account on December 31, 2015? [Your answer should be in the form xx,xxx; no dollar sign and a comma where needed.]

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On January 1, 2015, Samuel Corporation acquired a 30% interest in Blanton, Inc. for 315,000, which was equal to book value of Blanton's net assets. During 2015, Blanton reported net income of 120,000 and paid total dividends of 37,500. How much 2015 income should Samuel report from its equity method investment in Blanton? [Your answer should be in the form xx,xxx; no dollar sign and a comma where needed.]

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Show the computation to determine whether any portion of the purchase price should be assigned to the Goodwill asset on January 1, 2016.

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Show the computation to yield the Equity Investment balance of $1,951,140 reported by the parent on December 31, 2016.

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Show the computation to yield the equity income of $159,900 reported by the parent in its income statement during 2016.

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The beginning balance in the Equity Investment account contains three individual components that are used in accounting for business combinations. Those components are:

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What intangible assets will be reported on the consolidated balance sheet and at what amounts? Why were they not previously reported in pre-acquisition financial statements of the parent or the subsidiary

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Investor Company purchased 100% of Investee Company. At the date of the acquisition, Investee Company's fair value of net identifiable assets was equal to book value. There was no goodwill or bargain purchase gain. What is the balance in the "investment in investee" account on December 31, 2013? _________________

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What is the journal entry necessary to record the acquisition of the subsidiary? Assume that the parent company acquires its subsidiary on January 1, 2016, by exchanging 38,000 shares of its Common Stock, with a market value on the acquisition date of $48 per share, for all of the outstanding voting shares of the acquiree. On the acquisition date, all of the subsidiary's individual net assets had fair values that equaled their book values except for a building (included in PPE, net) that is undervalued by $248,000 (depreciation expense 5 $15,500 per year), an unrecorded License Agreement that has a fair value of $216,000 (amortization expense 5 $27,000 per year), and an unrecorded Customer List owned by the subsidiary that has a fair value of $144,000 (amortization expense 5 $16,000 per year). Any further discrepancy between the purchase price and the book value of the subsidiary's Stockholders' Equity is attributed to expected synergies to be realized by the consolidated company as a result of the acquisition. The financial statements of the parent and its subsidiary for the year ended December 31, 2016, are as follows:

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