Advanced Accounting chapter 1-7

Based on the information provided, what amount will be included as Investment in Saturn Corporation in the consolidated balance sheet immediately following the acquisition?

$0

Based on the preceding information, what amount will be reported as investment in Stamp Corporation stock in the consolidated balance sheet immediately following the acquisition?

$0

Based on the preceding information, what amount would be reported by Pullman Company as the balance in its investment account on December 31, 20X8?

$123,400

Pluto Company owns 80 percent of the common stock of Star Corporation. During the year, Pluto reported sales of $1,000,000, and Star reported sales of $500,000, including sales to Pluto of $80,000. The amount of sales that should be reported in the consolidated income statement for the year is:

$1,420,000

Based on the preceding information, what amount of Stamp's land will be included in the consolidated balance sheet immediately following the acquisition?

$100,000

Based on the preceding information, what amount will be reported as noncontrolling interest in the consolidated balance sheet immediately following the acquisition?

$100,000

On October 1, 20X3, Pole Corporation paid $450,000 for all of Stick Company's outstanding common stock. On that date, the book values and fair values of Stick's recorded assets and liabilities were as follows: Book Value Fair Value Cash and Receivables $ 75,000 $ 75,000 Inventory 155,000 160,000 Buildings and Equipment (net) 260,000 320,000 Liabilities (150,000 ) (150,000 ) Net Assets $ 340,000 $ 405,000 Based on the preceding information, the differential implicit in this acquisition is

$110,000

On January 1, 20X9, Pirate Corporation acquired 80 percent of Sea-Gull Company's common stock for $160,000 cash. The fair value of the noncontrolling interest at that date was determined to be $40,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Pirate Corp. Sea-Gull Corp. Cash $ 60,000 $ 20,000 Accounts Receivable 80,000 30,000 Inventory 90,000 40,000 Land 100,000 40,000 Buildings and Equipment 200,000 150,000 Less: Accumulated Depreciation (80,000 ) (50,000 ) Investment in Sea-Gull Corp. 160,000 Total Assets $ 610,000 $ 230,000 Accounts Payable $ 110,000 $ 30,000 Bonds Payable 95,000 40,000 Common Stock 200,000 40,000 Retained Earnings 205,000 120,000 Total Liabilities and Equity $ 610,000 $ 230,000 At the date of the business combination, the book values of Sea-Gull's net assets and liabilities approximated fair value except for inventory, which had a fair value of $45,000, and land, which had a fair value of $60,000. Based on the preceding information, what amount of total inventory will be reported in the consolidated balance sheet prepared immediately after the business combination? A) $130,000

$135,000

Based on the preceding information, what amount of goodwill will be reported in the consolidated balance sheet prepared immediately after the business combination?

$15,000

Based on the information provided, the consolidated balance sheet of Pirate and Ship will reflect goodwill in the amount of:

$22,000

On January 1, 20X9 Pathlon Company acquired 30 percent of the common stock of Sopteron Corporation, at underlying book value. For the same year, Sopteron reported net income of $55,000, which includes a gain from discontinued operations of $40,000. It did not pay any dividends during the year. By what amount would Pathlon's investment in Sopteron Corporation increase for the year, if Pathlon used the equity method?

$16,500

Parent Corporation purchased land from S1 Corporation for $220,000 on December 26, 20X8. This purchase followed a series of transactions between P-controlled subsidiaries. On February 15, 20X8, S3 Corporation purchased the land from a nonaffiliate for $160,000. It sold the land to S2 Company for $145,000 on October 19, 20X8, and S2 sold the land to S1 for $197,000 on November 27, 20X8. Parent has control of the following companies: Parent reported income from its separate operations of $200,000 for 20X8. Based on the preceding information, at what amount should the land be reported in the consolidated balance sheet as of December 31, 20X8?

$160,000

Based on the preceding information, Selvick Company will report additional paid-in capital of

$176,000

On January 1, 20X8, Pullman Company acquired 30 percent of Skate Company's common stock, at underlying book value of $100,000. Skate has 100,000 shares of $2 par value, 5 percent cumulative preferred stock outstanding. No dividends are in arrears. Skate reported net income of $150,000 for 20X8 and paid total dividends of $72,000. Pullman uses the equity method to account for this investment. Based on the preceding information, what amount would Pullman Company receive as dividends from Skate for the year?

$18,600

On January 1, 20X9, Peanuts Corporation acquired 80 percent of Schulz Corporation's voting common stock. On that date, Peanuts had equipment with a book value of $50,000 and a fair value of $200,000. Schulz's buildings and equipment had a book value of $300,000 and a fair value of $300,000 at the time of acquisition. What will be the amount at which buildings and equipment will be reported in consolidated statements immediately following the acquisition?

$350,000

On January 1, 20X4, Pony Company acquired 25% of Stallion Company's common stock at underlying book value of $200,000. Stallion has 80,000 shares of $10 par value, 6 percent cumulative preferred stock outstanding. No dividends are in arrears. Stallion reported net income of $270,000 for 20X4 and paid total dividends of $140,000. Pony uses the equity method to account for this investment. Based on the preceding information, what amount would Pony Company receive as dividends from Stallion for the year?

$23,000

Patch Corporation purchased land from Sub1 Corporation for $350,000 on December 3, 20X5. This purchase followed a series of transactions between Patch-controlled subsidiaries. On January 23, 20X5, Sub3 Corporation purchased the land from a nonaffiliate for $240,000. It sold the land to Sub2 Company for $220,000 on July 15, 20X5, and Sub2 sold the land to Sub1 for $305,000 on September 5, 20X5. Patch has control of the following companies: Subsidiary Level of Ownership 20X5 Net Income Sub3 60 percent $ 60,000 Sub2 90 percent $ 140,000 Sub1 70 percent $ 90,000 Patch reported income from its separate operations of $345,000 for 20X5. Based on the preceding information, at what amount should the land be reported in the consolidated balance sheet as of December 31, 20X5?

$240,000

Based on the preceding information, what amount should be allocated to goodwill in the consolidated balance sheet, prepared after this business combination?

$25,000

Primo Corporation acquired 60 percent of Secondo Corporation's voting common stock. On the date of acquisition, Primo had equipment with a book value of $50,000 and a fair value of $150,000. Secondo's buildings and equipment had a book value of $200,000 and a fair value of $200,000 at the time of the acquisition. What will be the amount at which buildings and equipment will be reported in consolidated statements immediately following the acquisition?

$250,000

Based on the preceding information, what amount of total liabilities will be reported in the consolidated balance sheet prepared immediately after the business combination?

$275,000

Based on the preceding information, what amount of gain or loss on sale of land should be reported in the consolidated income statement for 20X8?

0

Postage Corporation receives management consulting services from its 92 percent-owned subsidiary, Stamp Inc. During 20X7, Postage paid Stamp $125,432 for its services. For the year 20X8, Stamp billed Postage $140,000 for such services and collected all but $7,900 by year-end. Stamp's labor cost and other associated costs for the employees providing services to Postage totaled $86,000 in 20X7 and $121,000 in 20X8. Postage reported $2,567,000 of income from its own separate operations for 20X8, and Stamp reported net income of $695,000. Based on the preceding information, what amount of consolidated net income should be reported in 20X8?

$3,362,000

Based on the preceding information, what amount of Stamp's buildings and equipment (net) will be included in the consolidated balance sheet immediately following the acquisition?

$300,000

Based on the preceding information, what amount of gain or loss on the sale of land should be reported in the consolidated income statement for 20X5?

0

Based on the information provided, what amount would be reported by Peacock Company as investment in Selvick Company common stock?

$301,000

Based on the information given above, by what amount was unadjusted revenue overstated in the combined income statement for 20X8?

$31,250

Pluto Company owns 100 percent of the capital stock of both Saturn Corporation and Sol Corporation. Saturn purchases merchandise inventory from Sol at 125 percent of Sol's cost. During 20X8, Sol sold inventory to Saturn that it had purchased for $25,000. Saturn sold all of this merchandise to unrelated customers for $56,892 during 20X8. In preparing combined financial statements for 20X8, Pluto's bookkeeper disregarded the common ownership of Saturn and Sol. Based on the information given above, what amount should be eliminated from cost of goods sold in the combined income statement for 20X8?

$31,250

Based on the information provided, what amount would be reported by Devon Company as investment in Regan Company common stock?

$312,000

Based on the preceding information, what should be the amount of income assigned to the controlling shareholders in the consolidated income statement for 20X8?

$369,400

Based on the preceding information, what amount of investment income will Pullman Company report from its investment in Skate for the year?

$42,000

Based on the information provided, what amount of goodwill will be included in the consolidated balance sheet immediately following the acquisition?

$45,000

Based on the preceding information, what amount should be allocated to goodwill in the consolidated balance sheet prepared immediately after the combination?

$45,000

Based on the preceding information, what should be the amount of income assigned to the controlling shareholders in the consolidated income statement for 20X5?

$474,000

Pepper Company acquired 60 percent of the common stock of Safton Corporation on December 31, 20X9. On the date of acquisition, Pepper held land with a book value of $200,000 and a fair value of $350,000; Safton held land with a book value of $300,000 and fair value of $300,000. At what amount would land be reported in a consolidated balance sheet prepared immediately after the combination?

$500,000

Based on the preceding information, what amount of investment income will Pony Company report from its investment in Stallion for the year?

$55,000

Based on the preceding information, what amount of income should be assigned to the noncontrolling shareholders in the consolidated income statement for 20X8?

$55,600

Based on the information given above, what balance will be reported for inventory in the consolidated balance sheet for December 31, 20X8?

$56,573

Pirate Corporation acquired 100 percent of Ship Corporation's common stock on January 1, 20X9. Summarized balance sheet information for the two companies immediately after the combination is provided: Pirate Corp. Ship Corporation Item Book Value Fair Value Cash and Receivables $ 60,000 $ 15,000 $ 15,000 Inventory 110,000 32,000 38,000 Buildings and Equipment (net) 160,000 90,000 120,000 Investment in Ship Stock 150,000 Total $ 480,000 $ 137,000 Accounts Payable $ 40,000 $ 5,000 $ 5,000 Bonds Payable 200,000 40,000 40,000 Common Stock 100,000 40,000 Retained Earnings 140,000 52,000 Total $ 480,000 $ 137,000 Based on the preceding information, the amount of differential associated with the acquisition is:

$58,000

On December 31, 20X9, Pluto Company acquired 100 percent of Saturn Corporation's common stock for $300,000. Balance sheet information for Saturn just prior to the acquisition is given here: Cash and Receivables $ 35,000 Inventory 75,000 Land 100,000 Buildings and Equipment (net) 220,000 Total Assets $ 430,000 Accounts Payable $65,000 Bonds Payable 150,000 Common Stock 100,000 Retained Earnings 115,000 Total Liabilities and Stockholders' Equity $ 430,000 At the date of the business combination, Saturn's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, land which had a fair value of $125,000, and buildings and equipment (net), which had a fair value of $250,000. Based on the information provided, what amount of inventory will be included in the consolidated balance sheet immediately following the acquisition?

$60,000

Perth Corporation owns 90 percent of Sydney Company's stock. At the end of 20X8, Perth and Sydney reported the following partial operating results and inventory balances: Perth regularly prices its products at cost plus a 30 percent markup for profit. Sydney prices its sales at cost plus a 10 percent markup. The total sales reported by Perth and Sydney include both intercompany sales and sales to nonaffiliates. Based on the information given above, what amount of sales will be reported in the consolidated income statement for 20X8?

$600,000

Based on the preceding information, what amount of goodwill will be reported in the consolidated balance sheet immediately following the acquisition?

$65,000

Postage Corporation acquired 75 percent of Stamp Corporation's common stock on December 31, 20X8, for $300,000. The fair value of the noncontrolling interest at that date was determined to be $100,000. Stamp's balance sheet immediately before the combination reflected the following balances: Cash and Receivables $ 40,000 Inventory 70,000 Land 90,000 Buildings and Equipment (net) 250,000 Total Assets $ 450,000 Accounts Payable $ 30,000 Income Taxes Payable 40,000 Bonds Payable 100,000 Common Stock 100,000 Retained Earnings 180,000 Total Liabilities and Stockholders' Equity $ 450,000 A careful review of the fair value of Stamp's assets and liabilities indicated that inventory, land, and buildings and equipment (net) had fair values of $65,000, $100,000, and, $300,000 respectively. Goodwill is assigned proportionately to Postage and the noncontrolling shareholders. Based on the preceding information, what amount of Stamp's inventory will be included in the consolidated balance sheet immediately following the acquisition?

$65,000

Princeton Company acquired 75 percent of the common stock of Sheffield Corporation on December 31, 20X9. On the date of acquisition, Princeton held land with a book value of $150,000 and a fair value of $300,000; Sheffield held land with a book value of $500,000 and fair value of $500,000. At what amount would land be reported in a consolidated balance sheet prepared immediately after the combination?

$650,000

On January 1, 20X5, Playa Company acquires 90 percent ownership in Seaside Corporation for $180,000. The fair value of the noncontrolling interest at that time is determined to be $20,000. Seaside reports net assets with a book value of $200,000 and fair value of $200,000. Playa Company reports net assets with a book value of $480,000 and a fair value of $525,000 at that time, excluding its investment in Seaside. What will be the amount of consolidated net assets that would be reported immediately after the combination?

$680,000

On July 1, 20X9, Playa Corporation paid $340,000 for all of Seashore Company's outstanding common stock. On that date, the costs and fair values of Seashore's recorded assets and liabilities were as follows: Cost Fair Value Cash and Receivables $ 50,000 $ 50,000 Inventory 120,000 125,000 Buildings and Equipment (net) 200,000 240,000 Liabilities (100,000 ) (100,000 ) Net assets $ 270,000 $ 315,000 Based on the preceding information, the differential reflected in a consolidation worksheet to prepare a consolidated balance sheet immediately after the business combination is:

$70,000

On December 31, 20X9, Play Company acquired 80 percent of the common stock of Station Company. At the time, Play held land with a book value of $100,000 and a fair value of $260,000; Station held land with a book value of $600,000 and fair value of $600,000. At what amount would land be reported in a consolidated balance sheet prepared immediately after the combination?

$700,000

Based on the preceding information, what amount of total assets will be reported in the consolidated balance sheet prepared immediately after the business combination?

$720,000

Pole regularly prices its productPole regularly prices its products at cost plus a 40 percent markup for profit. Stick prices its sales at cost plus a 25 percent markup. The total sales reported by Pole and Stick include both intercompany sales and sales to nonaffiliates. Based on the information given above, what amount of sales will be reported in the consolidated income statement for 20X3?s at cost plus a 40 percent markup for profit. Stick prices its sales at cost plus a 25 percent markup. The total sales reported by Pole and Stick include both intercompany sales and sales to nonaffiliates. Based on the information given above, what amount of sales will be reported in the consolidated income statement for 20X3?

$725,000Pillar Company owns 70 percent of Salt Company's outstanding common stock. On December 31, 20X8, Salt sold equipment to Pillar at a price in excess of Salt's carrying amount, but less than its original cost. On a consolidated balance sheet at December 31, 20X8, the carrying amount of the equipment should be reported at:

All of the following statements accurately describe Special Purpose Entities (SPEs) except for:

A variable interest entity (vie) is atype of SPE with a limited number of equity investors

During its inception, Devon Company purchased land for $100,000 and a building for $180,000. After exactly 3 years, it transferred these assets and cash of $50,000 to a newly created subsidiary, Regan Company, in exchange for 15,000 shares of Regan's $10 par value stock. Devon uses straight-line depreciation. Useful life for the building is 30 years, with zero residual value. An appraisal revealed that the building has a fair value of $200,000. Based on the information provided, at the time of the transfer, Regan Company should record:

Building at $180,000 and accumulated depreciation of $18,000

When there are intercompany sales of inventory during the year and a three-part consolidation worksheet is prepared, consolidation entries related to the intercompany sales: I. Always are needed. II. Are not needed if the entire inventory is resold to unrelated parties prior to the end of the year.

I

Based on the information given above, by what amount was unadjusted revenue overstated in the combined income statement for 20X8?

I,II,III

Playa Inc. owns 85 percent of Seashore Inc. During 20X8, Playa sold goods with a 25 percent gross profit to Seashore. Seashore sold all of these goods in 20X8. How should 20X8 consolidated income statement items be adjusted?

Sales and cost of goods sold should be reduced by the intercompany sales

Which of the following usually does not represent a variable interest?

Senior debt

For which of the following reporting units is the preparation of combined financial statements most appropriate?

Several corpoatiions with related operations owned by one individual

A business combination in which the acquired company's assets and liabilities are combined with those of the acquiring company into a single entity is defined as:

Statutory Merger

In which of the following situations do accounting standards not require that the financial statements of the parent and subsidiary be consolidated?

a corporation owns less-than controlling interest in an unincorporated company

Based on the preceding information, Regan Company will report

additional paid-in capital of $162,000

Given the increased development of complex business structures, which of the following regulators is responsible for the continued usefulness of accounting reports?

all of the other answers are correct

Assuming no impairment in value prior to transfer, assets transferred by a parent company to another entity it has created should be recorded by the newly created entity at the assets':

book value on the parent company's books at the date of transfer

Which of the following observations is NOT consistent with the accounting for investments in equity securities where there is no significant influence?

changes in the number of investment shares resulting from stock dividends, stock splits, or reverse splits must be formally recorded by the investor

Tanner Company, a subsidiary acquired for cash, owned equipment with a fair value higher than the book value as of the date of combination. A consolidated balance sheet prepared immediately after the acquisition would include this difference in:

eqiupment

Usually, an investment of 20 to 50 percent in another company's voting stock is reported under the:

equity method

If Push Company owned 51 percent of the outstanding common stock of Shove Company, which method would be appropriate for financial reporting purposes?

full consolidation method

In the case of an investment in equity securities where the investor does not have significant influence and the investment is carried at fair value, a dividend from the investee is:

income to the investor in the period of declaration

Pillar Company owns 70 percent of Salt Company's outstanding common stock. On December 31, 20X8, Salt sold equipment to Pillar at a price in excess of Salt's carrying amount, but less than its original cost. On a consolidated balance sheet at December 31, 20X8, the carrying amount of the equipment should be reported at:

pillars original cost less Salt's recorded gain

Consolidated net income may include the parent's separate operating income plus the parent's share of the subsidiary's reported net income:

plus the profit realized this year from upstream intercompany sales of inventory made last year

A parent and its 80 percent-owned subsidiary have made several intercompany sales of noncurrent assets during the past two years. The amount of income assigned to the noncontrolling interest for the second year should include the noncontrolling interest's share of gains:

realized in the second year from upstream sales made in both years

At its inception, Peacock Company purchased land for $50,000 and a building for $220,000. After exactly 4 years, it transferred these assets and cash of $75,000 to a newly created subsidiary, Selvick Company, in exchange for 25,000 shares of Selvick's $5 par value stock. Peacock uses straight-line depreciation. When purchased, the building had a useful life of 20 years with no expected salvage value. An appraisal at the time of the transfer revealed that the building has a fair value of $250,000. Based on the information provided, at the time of the transfer, Selvick Company should record

the building at $220,000 and accumulated depreciation of $44,000

During the year a parent makes sales of inventory at a profit to its 75 percent owned subsidiary. The subsidiary also makes sales of inventory at a profit to its parent during the same year. Both the parent and the subsidiary have on hand at the end of the year 20 percent of the inventory acquired from one another. Consolidated revenues for the year should exclude:

total revenues from intercompany sales