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Topaz Company reports a total controlling interest in the net assets of the consolidated entity of $1,200,000. The consolidated Common Stock is $90,000 and the total noncontrolling interest in net assets is $80,000. Calculate total stockholders' equity.

$1,280,000 Reason: Total stockholders' equity = Total controlling interest + Noncontrolling interest in subsidiary company = $1,200,000 + $80,000 = $1,280,000.

Goldenrod Corporation holds 85% of the common stock of Orchid Corporation. The parent's revenues are $500,000 and the subsidiary's are $200,000. The parent's expenses are $350,000 and the subsidiary's are $150,000. Calculate the consolidated net income attributable to the controlling interest.

$192,500 Reason: Consolidated net income attributable to the controlling interest = Consolidated net income - Consolidated net income of the NCI shareholders = [($500,000 + $200,000) - ($350,000 + $150,000)] - [($200,000 - $150,000) × 0.15] = $192,500.

Which of the following factors determines control? The proportion of inventory of a company owned directly or indirectly by another company The proportion of voting shares of a company's stock owned directly or indirectly by another company The proportion of bonds of a company owned directly or indirectly by another company The proportion of assets of a company owned directly or indirectly by another company

The proportion of voting shares of a company's stock owned directly or indirectly by another company

A parent company cannot exercise control over a subsidiary, even though it owns more than 50% of its outstanding voting stock, in which of the following circumstances? The subsidiary company is controlled by other subsidiaries jointly. The subsidiary company is controlled through another subsidiary. The subsidiary is located in a foreign country that has placed restrictions on the remittance of profits or assets to the parent. The subsidiary is in legal reorganization.

The subsidiary is located in a foreign country that has placed restrictions on the remittance of profits or assets to the parent. The subsidiary is in legal reorganization.

Which of the following are limitations of consolidated financial statements? Unrepresentative combined financial ratios Limited availability of resources The masking of poor performance No clear picture of the total resources of the combined entity under the parent's control A lack of detailed disclosures

Unrepresentative combined financial ratios Limited availability of resources The masking of poor performance A lack of detailed disclosures

In practice, control has been determined by the proportion of _____ _____of a company owned directly or indirectly by another company.

Voting Shares

The noncontrolling interest in a subsidiary represents the claim of the bondholders of a subsidiary, other than the parent, on the income and net assets of the parent. total claim of all shareholders of a subsidiary on the income and net assets of the parent. claim of the shareholders of a parent on the income and net assets of the parent. claim of the shareholders of a subsidiary, other than the parent, on the income and net assets of the subsidiary.

claim of the shareholders of a subsidiary, other than the parent, on the income and net assets of the subsidiary.

In the absence of transactions between companies included in the consolidation, consolidated net income is equal to the parent's income from its own operations, excluding any investment income from consolidated subsidiaries, less the net income from each of the consolidated subsidiaries. including any investment income from consolidated subsidiaries, less the net income from each of the consolidated subsidiaries. including any investment income from consolidated subsidiaries, plus the net income from each of the consolidated subsidiaries. excluding any investment income from consolidated subsidiaries, plus the net income from each of the consolidated subsidiaries.

excluding any investment income from consolidated subsidiaries, plus the net income from each of the consolidated subsidiaries.

When it is inappropriate for a parent company to consolidate a subsidiary, it is reported as a(n) _____ investment

intercompany

A subsidiary should not be consolidated with a parent when the parent suffers a loss. is precluded from exercising control. has indirect control of a subsidiary. has direct control of a subsidiary.

is precluded from exercising control.

Consolidated net income is ______.

the difference between consolidated revenues and expenses the parent's income from its own operations, excluding any investment income from consolidated subsidiaries, plus the net income from each of the consolidated subsidiaries

Which of the following statements are true regarding a parent's consolidated retained earnings if it uses the equity method to account for its investment in a subsidiary?

It includes the parent's share of the subsidiary's cumulative net income since the acquisition date. Consolidated retained earnings are equal to the parent's retained earnings.

Limited availability of resources

Not all of the consolidated retained earnings balance is necessarily available for dividends of the parent because a portion may represent the parent's share of undistributed subsidiary earnings.

A lack of uniformity

Similar accounts of different companies that are combined in the consolidation may not be entirely comparable.

When a parent holds majority ownership in a subsidiary that is in legal reorganization or in bankruptcy, control of that subsidiary resides with which of the following? There is not enough information to determine. The subsidiary The parent The courts or court-appointed trustee

The courts or court-appointed trustee

The masking of poor performance

The operating results and financial position of individual companies included in the consolidation are not disclosed.

A parent company purchased 80% of the common stock of a subsidiary in the previous year. During the current year, the subsidiary reports net income of $30,000 and the parent reports net income of $140,000, including equity method income from the subsidiary. Calculate the consolidated net income attributable to the controlling interest.

140,000 Reason: Income attributable to controlling interest = (Parent's net income - Equity method income from the subsidiary) + Subsidiary income - Income attributable to noncontrolling interest = [$140,000 - (80% × $30,000)] + $30,000 - ($30,000 x 20%) = $116,000 + $30,000 - $6,000 = $140,000.

The lack of detailed disclosures

Additional information about individual companies or groups of companies included in the consolidation often is necessary for fair presentation and may require voluminous footnotes.

Ivory Company reports Common Stock of $60,000, Additional Paid-In Capital of $500,000, and Retained Earnings of $360,000. The Noncontrolling Interest in the Net Assets of its subsidiary is $70,000. Calculate the total consolidated stockholders' equity.

$990,000 Reason: Total stockholders' equity = Total controlling interest + Noncontrolling interest in subsidiary company = ($60,000 + $500,000 + $360,000) + $70,000 = $990,000.

Which of the following is an example of direct control? A company owns a majority of another company's common stock. A company owns a minority of another company's bonds. A company owns a minority of another company's common stock. A company owns a majority of another company's bonds.

A company owns a majority of another company's common stock.