Cumulative Accounting MC
All Swamp sales are at 125% of cost. One-fourth of this merchandise remained in the Pond's inventory at year-end. A working paper entry to eliminate unrealized profits from consolidated inventory would include a credit to Inventory in the amount of A) $2,000. B) $2,500. C) $8,000. D) $10,000.
A
An investor uses the cost method of accounting for its investment in common stock. During the current year, the investor received $25,000 in dividends, an amount that exceeded the investor's share of the investee company's undistributed income since the investment was acquired. The investor should report dividend income of what amount? A) $25,000 as a reduction in the investment account B) $25,000 less the amount in excess of its share of undistributed income since the investment was acquired C) $25,000 less the amount that is not in excess of its share of undistributed income since the investment was acquired D) $25,000 less recognized earnings
A
Consolidated amounts for equipment and accumulated depreciation at December 31, 2014 were respectively A) $1,125,000 and $255,000. B) $1,125,000 and $260,000. C) $1,150,000 and $255,000. D) $1,150,000 and $260,000.
A
If the sale referred to above was a downstream sale, the total sales revenue reported in the consolidated income statement for 2014 would be A) $870,000. B) $880,000. C) $920,000. D) $970,000.
A
In the preparation of consolidated financial statements, which of the following intercompany transactions must be eliminated as part of the preparation of the consolidation working papers? A) All revenues, expenses, gains, losses, receivables, and payables B) All revenues, expenses, gains, and losses but not receivables and payables C) Receivables and payables but not revenues, expenses, gains, and losses D) Only sales revenue and cost of goods sold
A
Historically, much of the controversy concerning accounting requirements for business combinations involved the ________ method. A) purchase B) pooling of interests C) equity D) acquisition
B
In preparing the consolidated financial statements for 2014, the elimination entry for depreciation expense was a A) debit for $5,000. B) credit for $5,000. C) debit for $15,000. D) credit for $15,000.
B
A working paper entry to consolidate the financial statements of Bigg and Little on December 31, 2014 included a A) debit to equipment for $10,000. B) credit to gain on sale of equipment for $10,000. C) debit to accumulated depreciation for $1,000. D) credit to depreciation expense for $3,000.
C
Immediately following the acquisition, equipment will be included on the consolidated balance sheet at A) $150,000. B) $200,000. C) $210,000. D) $280,000.
C
The unamortized excess account is A) a contra-equity account. B) used in allocating the amounts paid for recorded balance sheet accounts that are above or below their fair values. C) used in allocating the amounts paid for each asset and liability that are above or below their book values, especially when numerous assets or liabilities are involved. D) the excess purchase cost that is attributable to goodwill.
C
According to ASC 810-10, liabilities assumed in an acquisition will be valued at the ________. A) fair value B) historical book value C) current replacement cost D) present value using market interest rates
A
What is Goldberg's percentage ownership in Savannah after Savannah issues its stock to Goldberg? A) 76.32% B) 80.43% C) 82.57% D) 83.43%
A
If SOS sold the additional shares directly to Great, Great's Investment in SOS account after the sale would be A) $1,350,000. B) $1,395,000. C) $1,425,000. D) $1,500,000.
B
Noncontrolling interest share for Achille is A) $18,000. B) $25,200. C) $36,200. D) $72,000.
B
The 2014 consolidated income statement showed cost of goods sold of A) $500,000. B) $516,000. C) $532,000. D) $660,000.
B
Assume the functional currency of a foreign entity is the U.S. dollar, but the books are kept in euros. The objective of remeasurement of a foreign entity's accounts is to A) produce the same results as if the foreign entity's books were maintained in the currency of the largest customer. B) produce the same results as if the foreign entity's books were maintained solely in the local currency. C) produce the same results as if the foreign entity's books were maintained solely in the U.S. dollar. D) produce the results reflective of the foreign entity's economics in the local currency.
C
Consolidated cost of goods sold for Pelga and Subsidiary for 2015 were A) $512,000. B) $526,000. C) $522,500. D) $528,000.
C
Noncontrolling interest share for 2013 was A) $23,000. B) $23,600. C) $24,000. D) $24,400.
C
Smackem's separate income statement must have reported net income of A) $13,750. B) $14,750. C) $15,750. D) $15,250.
C
Which of the following foreign subsidiary accounts will have the same value on consolidated financial statements, regardless of whether the statements are remeasured or translated? A) Trademark B) Deferred Income C) Accounts Receivable D) Goodwill
C
Which of the following methods does the FASB consider the best indicator of fair values in the evaluation of goodwill impairment? A) Senior executive's estimates B) Financial analyst forecasts C) Fair value D) The present value of future cash flows discounted at the firm's cost of capital
C
A foreign subsidiary's accounts receivable balance should be translated for the consolidated financial statements at A) the appropriate historical rate. B) the prior year's forecast rate. C) the future rate for the next year. D) the spot rate at year-end.
D
In the eliminating/adjusting entries on consolidation working papers for 2014, the Truck account was A) debited for $3,000. B) credited for $3,000. C) debited for $15,000. D) credited for $15,000.
D
The amount of noncontrolling interest share for the current year is A) $69,000. B) $85,000. C) $95,000. D) $99,000.
D
) Pepper Company paid $2,500,000 for the net assets of Salt Corporation and Salt was then dissolved. Salt had no liabilities. The fair values of Salt's assets were $3,750,000. Salt's only non-current assets were land and buildings with book values of $100,000 and $520,000, respectively, and fair values of $180,000 and $730,000, respectively. At what value will the buildings be recorded by Pepper? A) $730,000 B) $520,000 C) $210,000 D) $0
A
A business merger differs from a business consolidation because A) a merger dissolves all but one of the prior entities, but a consolidation dissolves all of the prior entities and forms a new corporation. B) a consolidation dissolves all but one of the prior entities, but a merger dissolves all of the prior entities. C) a merger is created when two entities join, but a consolidation is created when more than two entities join. D) a consolidation is created when two entities join, but a merger is created when more than two entities join.
A
A foreign entity is a subsidiary of a U.S. parent company and has always used the current rate method to translate its foreign financial statements on behalf of its parent company. Which one of the following statements is false? A) The U.S. dollar is the functional currency of this company. B) Changes in exchange rates between the subsidiary's country and the parent's country are not expected to affect the foreign entity's cash flows. C) Translation adjustments are shown in stockholders' equity as increases or decreases in other comprehensive income. D) Translation adjustments are not shown on the income statement.
A
A newly acquired subsidiary had pre-existing goodwill on its books. The parent company's consolidated balance sheet will A) not show any value for the subsidiary's pre-existing goodwill. B) treat the goodwill similarly to other intangible assets of the acquired company. C) not show any value for the pre-existing goodwill unless all other assets of the subsidiary are stated at their full fair value. D) always show the pre-existing goodwill of the subsidiary at its book value.
A
A parent company regularly sells merchandise to its 70%-owned subsidiary. Which of the following statements describes the computation of noncontrolling interest share? A) The subsidiary's net income times 30% B) (The subsidiary's net income × 30%) + unrealized profits in the beginning inventory - unrealized profits in the ending inventory C) (The subsidiary's net income + unrealized profits in the beginning inventory - unrealized profits in the ending inventory) × 30% D) (The subsidiary's net income + unrealized profits in the ending inventory - unrealized profits in the beginning inventory) × 30%
A
After eliminating/adjusting entries are prepared, what was the intercompany sale impact on the consolidated financial statements for the year ended December 31, 2014? A) Consolidated Net Income Consolidated Net Assets No effect No effect B) Consolidated Net Income Consolidated Net Asset No effect Increased C) Consolidated Net Income Consolidated Net Asset Decreased Decreased D) Consolidated Net Income Consolidated Net Asset Decreased No effect
A
Assume Salter's net income for 2014 is $220,000. No dividends are declared or paid in 2014. What is the change in Pardy's Investment in Salter for the year ending December 31, 2014? A) $84,000 B) $119,000 C) $154,000 D) $189,000
A
Assume that Penguin sold the additional 3,000 shares to outside interests for $150,000 on January 2, 2014. Giant's percentage ownership immediately after the sale of additional stock would be A) 66-2/3%. B) 75%. C) 80%. D) 83-1/3%.
A
Assume the functional currency of the subsidiary is the U.S. dollar and the books are kept in a different currency. The assets should be reported in the consolidated financial statements of Poole Corporation and Subsidiary in the total amount of A) $2,325,000. B) $2,350,000. C) $2,375,000. D) $2,650,000.
A
Bailey's noncontrolling interest share for 2014 is A) $7,609. B) $8,044. C) $15,652. D) $23,696.
A
Consolidated Interest Expense and consolidated Interest Income, respectively, that appeared on the consolidated income statement for the year ended December 31, 2013 was A) $10,800 and $0. B) $10,800 and $6,600. C) $0 and $0. D) $16,200 and $6,600.
A
Controlling interest share of consolidated net income for Paint Corporation and Subsidiaries is: A) $234,800. B) $244,800. C) $260,000. D) $270,000.
A
Exchange gains or losses from remeasurement appear A) in the continuing operations section of the consolidated income statement. B) as an extraordinary item on the consolidated income statement. C) as other comprehensive income typically reported in a statement of stockholders' equity. D) as an adjustment to the beginning balance of retained earnings on the consolidated Statement of retained earnings.
A
For the year ending December 31, 2014, the amount of Pamplin's income from Sage (associated with the common stock investment in Sage) is A) $32,400. B) $36,000. C) $60,000. D) $90,000.
A
If the intercompany sale mentioned above was an upstream sale, what will be the reported amount of total consolidated sales revenue for 2015? A) $1,025,000 B) $1,900,000 C) $1,950,000 D) $2,000,000
A
If the sale referred to above was a downstream sale, by what amount must Inventory on the consolidated balance sheet be reduced to reflect the correct balance as of the end of 2014? A) $3,000 B) $10,000 C) $14,000 D) $20,000
A
In a business combination, which of the following will occur? A) All identifiable assets and liabilities are recorded at fair value at the date of acquisition. B) All identifiable assets and liabilities are recorded at book value at the date of acquisition. C) Goodwill is recorded if the fair value of the net assets acquired exceeds the book value of the net assets acquired. D) The Sarbanes-Oxley Act requires firms to report material aggregate amounts of goodwill as a separate balance sheet line item.
A
Noncontrolling interest share for 2013 is A) $21,000. B) $32,400. C) $36,000. D) $50,000.
A
On June 1, 2014, Puell Company acquired 100% of the stock of Sorrell Inc. On this date, Puell had Retained Earnings of $100,000 and Sorrell had Retained Earnings of $50,000. On December 31, 2014, Puell had Retained Earnings of $120,000 and Sorrell had Retained Earnings of $60,000. The amount of Retained Earnings that appeared in the December 31, 2014 consolidated balance sheet was A) $120,000. B) $130,000. C) $170,000. D) $180,000.
A
Paglia Corporation owns 80% of Aburn Corporation and has separate net income of $200,000 for 2013. Aburn Corporation has separate net income of $100,000 and owns 70% of the outstanding stock of Badley Corporation. Badley Corporation has separate net income of $80,000. (Separate net incomes exclude investment income.) The cost of each investment was equal to book value and fair value. The controlling interest share of consolidated net income for 2013 is A) $324,800. B) $328,800. C) $344,800. D) $348,800.
A
Palmquist Corporation and its 80%-owned subsidiary, Sadler Corporation, are members of an affiliated group. They do not file consolidated tax returns. Sadler had $3,000,000 of income and paid $1,000,000 dividends in 2014. Palmquist and Sadler had 35% income tax rates. What amount of Sadler's dividends is taxable to Palmquist in 2014? A) $0 B) $70,000 C) $160,000 D) $200,000
A
Parrot Company owns all the outstanding voting stock of Southern Manufacturing. On January 1, 2014, Parrot sold machinery to Southern at its book value of $24,000. Parrot had the machinery three years before selling it and used an eight-year straight-line depreciation method, with zero salvage value. Southern will use the straight-line depreciation method, and assumes the machine has five years remaining and no salvage value. In the 2014 consolidating working papers, the depreciation expense A) required no adjustment. B) decreased by $4,800. C) increased by $4,800. D) increased by $8,000.
A
Pelican Corporation acquired a 25% interest in Seafare Incorporated at book value several years ago. Seafare declared $100,000 dividends in 2013 and reported its income for the year as follows: Income from continuing operations $600,000 Loss on discontinued division (100,000) Net income $500,000 Pelican's Investment in Seafare account for 2013 should increase by A) $ 100,000. B) $ 125,000. C) $ 150,000. D) $ 180,000.
A
Pilga Corporation purchased a 30% interest in Sadie's common stock from other shareholders on January 1, 2014 for $5,800,000. What was the book value of Pilga's investment in Sadie on January 1, 2014? A) $5,400,000 B) $5,700,000 C) $7,120,000 D) $7,440,000
A
Pitch Co. paid $50,000 in fees to its accountants and lawyers in acquiring Slope Company. Pitch will treat the $50,000 as A) an expense for the current year. B) a prior period adjustment to retained earnings. C) additional cost to investment of Slope on the consolidated balance sheet. D) a reduction in additional paid-in capital.
A
The consolidated amounts for Buildings and Accumulated Depreciation - Buildings that appeared, respectively, on the balance sheet at December 31, 2014, were A) $700,000 and $256,000. B) $700,000 and $259,000. C) $730,000 and $256,000. D) $730,000 and $259,000.
A
The noncontrolling interest share for 2014 was A) $18,000. B) $22,000. C) $23,000. D) $27,000.
A
Under the provisions of ASC 805-30, in a business combination, when the investment cost exceeds the total fair value of identifiable net assets acquired, which of the following statements is correct? A) The excess is first assigned to identifiable net assets according to their fair values; then the rest is assigned to goodwill. B) The difference is allocated first to reduce proportionately (according to market value) non-current assets, then to non-monetary current assets, and any negative remainder is classified as a deferred credit. C) The difference is allocated first to reduce proportionately (according to market value) non-current assets, and any negative remainder is classified as an extraordinary gain. D) The difference is allocated first to reduce proportionately (according to market value) non-current, depreciable assets to zero, and any negative remainder is classified as a deferred credit.
A
Using the original information, the balances for the Bonds Payable and Bond Interest Payable accounts, respectively, on the consolidated balance sheet for December 31, 2015 were A) $3,000,000 and $ 90,000. B) $3,000,000 and $180,000. C) $6,000,000 and $ 90,000. D) $6,000,000 and $180,000.
A
What is Pew's income from Sordid for 2014? A) $32,000 B) $48,000 C) $60,000 D) $75,000
A
What is Pouch's income from Shenley for 2014? A) $27,200 B) $29,600 C) $39,200 D) $49,000
A
What should be the noncontrolling interest share, common in the consolidated financial statements of Parminter for the year ending December 31, 2014? A) $5,000 B) $20,000 C) $25,000 D) $30,000
A
What should be the noncontrolling interest share, preferred in the consolidated financial statements of Parminter for the year ending December 31, 2014? A) $1,000 B) $2,000 C) $4,000 D) $5,000
A
When a parent acquires the preferred stock of a subsidiary, there will be a constructive retirement and A) any difference paid above the book value of the preferred stock reduces the parent's additional paid-in capital. B) any difference paid above the book value of the preferred stock reduces the subsidiary's retained earnings. C) any difference paid above the book value of the preferred stock increases the parent's additional paid-in capital. D) any difference paid above the book value of the preferred stock increases the parent's retained earnings.
A
Which one of the following items, originally recorded in the Investment in Falcon Co. account under the equity method, would not be systematically used to reduce investment income on a periodic basis? A) Amortization expense of goodwill B) Depreciation expense on the excess fair value attributed to machinery C) Amortization expense on the excess fair value attributed to lease agreements D) Depreciation expense on the excess fair value attributed to building
A
reacquisition income for 2013 is A) $50,000. B) $35,000. C) $44,000. D) $36,000.
A
A U.S. parent corporation loans funds to a foreign subsidiary to be used to purchase equipment. The loan is denominated in U.S. dollars and the functional currency of the subsidiary is the euro. This intercompany transaction is a foreign currency transaction of A) neither the subsidiary nor the parent, as it is eliminated as part of the consolidation procedure. B) the subsidiary but not the parent. C) both the subsidiary and the parent. D) the parent but not the subsidiary.
B
A stock dividend by a subsidiary causes A) the parent company investment account to decrease. B) the parent company investment account to remain the same. C) the parent company investment account to increase. D) the noncontrolling interest equity to increase.
B
A subsidiary can be excluded from consolidation if A) control rests with the majority owner. B) formation of joint ventures. C) the acquisition of an asset or group of assets constitutes a business. D) acquisition of a not-for-profit entity by a for-profit business.
B
According to ASC 805-30, which one of the following items may not be accounted for as an intangible asset apart from goodwill? A) A production backlog B) A valuable employee workforce C) Noncontractual customer relationships D) Employment contracts
B
Ackroyd's noncontrolling interest share for 2014 is A) $7,609. B) $8,044. C) $15,652. D) $23,696.
B
Anthony Company was acquired on June 1, 2014 by Google Company. Google acquired 100 percent of Anthony Company. Both companies have a December 31 fiscal year end. What is the amount of preacquisition dividends in 2014? A) 0 B) $5,000 C) $10,000 D) $15,000
B
Assume an upstream sale of machinery occurs on January 1, 2014. The parent owns 70% of the subsidiary. There is a gain on the intercompany transfer and the machine has five remaining years of useful life and no salvage value. Straight-line depreciation is used. Which of the following statements is correct? A) Noncontrolling interest share for 2014 is equal to: subsidiary income for 2014 multiplied by 30%. B) Noncontrolling interest share for 2014 is equal to: (subsidiary income for 2014 minus the gain on sale plus the excess depreciation expense) multiplied by 30%. C) Noncontrolling interest share for 2014 is equal to: (subsidiary income for 2014 minus the gain on sale) multiplied by 30%. D) Noncontrolling interest share for 2014 is equal to: (subsidiary income for 2014 plus the excess depreciation expense) multiplied by 30%.
B
Assume that Pansy Incorporated used the cost method of accounting for its investment in Sunflower. The balance in the Investment in Sunflower account at December 31, 2015 was A) $76,700. B) $80,000. C) $83,300. D) $95,000.
B
Assume there are routine inventory sales between parent companies and subsidiaries. When preparing the consolidated financial statements, which of the following line items is indifferent to the sales being either upstream or downstream? A) Consolidated retained earnings B) Consolidated gross profit C) Noncontrolling interest share D) Controlling interest share of consolidated net income
B
At the time of a business acquisition, A) identifiable assets and liabilities are allocated the portion of the translation or remeasurement adjustment that existed on the date of acquisition. B) a foreign entity's assets and liabilities are translated into U.S. dollars using the current exchange rate in effect on that date. C) the difference between investment fair value and translated net assets acquired is treated as a remeasurement gain or loss on the income statement. D) the difference between investment fair value and translated net assets acquired is recorded as a cumulative translation adjustment on the balance sheet.
B
Bond Interest Receivable for 2013 of Pfadt's bonds on Senat's books was A) $5,400. B) $6,000. C) $10,800. D) $12,000.
B
Controlling interest share in consolidated net income for 2014 was A) $121,000. B) $125,000. C) $131,000. D) $143,000.
B
Controlling interest share of consolidated net income for 2013 was A) $443,600. B) $444,000. C) $444,400. D) $448,000.
B
Controlling interest share of consolidated net income for the current year is A) $504,800. B) $516,800. C) $545,200. D) $557,200.
B
Firms must conduct impairment tests more frequently than annually when A) other shareholders hold more than 50% interest. B) a "more likely than not" expectation exists that a reporting unit will be sold or disposed of. C) a specific unit does not have publicly traded stock. D) using the equity method.
B
For 2014, consolidated net income will be what amount if the intercompany sale was downstream? A) $180,000 B) $253,000 C) $256,000 D) $259,000
B
From the standpoint of accounting theory, which of the following statements is the best justification for the preparation of consolidated financial statements? A) In substance the companies are separate, but in form the companies are one entity. B) In substance the companies are one entity, but in form they are separate. C) In substance and form the companies are one entity. D) In substance and form the companies are separate entities.
B
How much should the Parminter's Investment in Sanchez—Common Stock, change during 2014? A) $5,000 B) $20,000 C) $25,000 D) $30,000
B
If SOS sold the additional shares to the general public, Great's Investment in SOS account after the sale would be ________. (Use four decimal places.) A) $945,000 B) $1,157,100 C) $1,225,000 D) $1,245,000
B
If a parent company and outside investors purchase shares of a subsidiary in relation to existing stock ownership (ratably), then A) there will be an adjustment to additional paid-in capital if the stock is sold above book value. B) there will be no adjustment to additional paid-in capital regardless whether the stock is sold above or below book value. C) there will be an adjustment to additional paid-in capital if the stock is sold below book value. D) there will be the elimination of a gain.
B
If an affiliate purchases bonds in the open market, the book value of the intercompany bond liability at the time of purchase is A) always assigned to the parent company because it has control. B) the par value of the bonds less the unamortized discount or plus the unamortized premium. C) par value. D) the par value of the bonds plus the unamortized discount or less the unamortized premium.
B
If the bonds were originally issued at 103, and 70% of them were purchased on January 2, 2016 at 104, the constructive gain or (loss) on the purchase was A) $(142,800). B) $( 42,000). C) $ 42,000. D) $ 142,800.
B
In reference to the determination of goodwill impairment, which of the following statements is correct? A) The goodwill impairment test under ASC 350-20-35 is a three-step process. B) If the reporting unit's fair value exceeds its carrying value, goodwill is unimpaired. C) Under FASB 142, firms must first compare carrying values (book values) at the headquarter level. D) Firms can reverse previously recognized impairment losses.
B
In the business combination of Polka and Spot A) the costs of registering and issuing the securities are included as part of the purchase price for Spot. B) the salaries of Polka's employees assigned to the merger are treated as expenses. C) all of the costs except those of registering and issuing the securities are included in the purchase price of Spot. D) only the accounting and legal fees are included in the purchase price of Spot.
B
No constructive gain or loss arises from the purchase of an affiliate's bonds if the A) affiliate is a 100%-owned subsidiary. B) bonds are purchased at book value. C) bonds are purchased with arm's-length bargaining from outside entities. D) gain or loss cannot be reasonably estimated.
B
Noncontrolling interest share for Badrack is A) $9,000. B) $10,000. C) $20,000. D) $40,000.
B
On January 1, 2014 Saffron Co. recorded a $40,000 profit on the upstream sale of some equipment that had a remaining four-year life under the straight-line depreciation method. The equipment has no salvage value. Saffron had separate income of $100,000 in 2014. The parent company, Pommel Incorporated, owns 90% of Saffron. Pommel would report investment income from Saffron in 2014 of A) $54,000. B) $63,000. C) $90,000. D) $126,000.
B
On January 1, 2014, assume the fair values of Savannah's identifiable assets and liabilities equal book values. What is the change in the amount of goodwill associated with the issuance of 80,000 additional shares to Goldberg? (Use four decimal places.) A) Increase goodwill $38,176. B) Decrease goodwill $38,176. C) Increase goodwill $384,000. D) Decrease goodwill $384,000.
B
Page's controlling interest share of consolidated net income for 2013 is A) $808,000. B) $848,000. C) $920,000. D) $960,000.
B
Pallet Corporation owns 80% of Adelt Corporation and Adelt owns 60% of Bajo Inc. Which of the following is correct? A) Bajo should not be consolidated because noncontrolling interests hold 52%. B) Bajo should be consolidated because the 60% of Bajo stock is held in the affiliate structure. C) Pallet has 8% indirect ownership of Bajo. D) Pallet has 80% indirect ownership of Bajo.
B
Palm owns a 70% interest in Sable, a domestic subsidiary. Sable is not part of Palm's affiliated group. Palm will pay taxes on A) none of the dividends it receives from Sable. B) 20% of the dividends it receives from Sable. C) 66% of the dividends it receives from Sable. D) 80% of the dividends it receives from Sable.
B
Palomba Corporation allocates consolidated income taxes to its 90%-owned subsidiary using the percentage allocation method. Under this method, consolidated income tax expense will be allocated to a subsidiary A) on the basis of the agreement between the parent and subsidiary. B) on the basis of the subsidiary's pretax income as a percentage of consolidated pretax income. C) on the basis of the income taxes remitted to the IRS. D) at the rate of 90%.
B
Panda Corporation purchased 100,000 previously unissued shares of Skunk Company's $10 par value common stock directly from Skunk for $2,200,000. Skunk's stockholders' equity immediately before the investment by Panda consisted of $3,000,000 of common stock and $4,800,000 in retained earnings. What is Panda's book value of equity in the net assets of Skunk? A) $2,200,000 B) $2,500,000 C) $3,000,000 D) $3,333,000
B
Panini Corporation owns 85% of the outstanding voting stock of Strathmore Company and Malone Corporation owns the remaining 15% of Strathmore's voting stock. On the consolidated financial statements of Panini Corporation and Strathmore, Malone is A) an affiliate. B) a noncontrolling interest. C) an equity investee. D) a related party.
B
Parrot Corporation acquired a 70% interest in Swifti Corp. on January 1, 2013, when Swifti's book values and fair values were equivalent. On January 1, 2014, Swifti sold a building with a book value of $60,000 to Parrot for $80,000. The building had a remaining life of five years, no salvage value, and was depreciated by the straight-line method. Swifti reported net income of $200,000 for 2014. What was the noncontrolling interest share for 2014? A) $54,000 B) $55,200 C) $60,000 D) $128,800
B
Pental Corporation bought 90% of Sedacor Company's common stock at its book value of $400,000 on January 1, 2014. During 2014, Sedacor reported net income of $130,000 and paid dividends of $40,000. At what amount should Pental's Investment in Sedacor account be reported on December 31, 2014? A) $400,000 B) $481,000 C) $490,000 D) $530,000
B
Raymond Company owns 90% of Rachel Company. Rachel Company owns 10% of Raymond Company. The treasury stock method is used. On the books of Rachel Company, we maintain the Investment in Raymond using the ________ method. The ending balance in Investment in Raymond is ________ stockholders' equity in the consolidated balance sheet. A) equity; deducted from B) cost; deducted from C) treasury stock; deducted from D) conventional; added to
B
Subsequent to an acquisition, the parent company and consolidated financial statement amounts would not be the same for A) investments in unconsolidated subsidiaries. B) investments in consolidated subsidiaries. C) capital stock. D) ending retained earnings.
B
The 2014 unrealized gain from the intercompany sale A) should be recognized in consolidation in 2014 by a working paper entry. B) should be eliminated from consolidated net income by a working paper entry that credits land for $14,000. C) should be eliminated from consolidated net income by a working paper entry that debits land for $14,000. D) should be eliminated from consolidated net income by a working paper entry that credits gain on sale of land for $14,000.
B
The acquisition of treasury stock by a subsidiary from noncontrolling shareholders at a price above book value A) decreases the parent's share of subsidiary book value and decreases the parent's ownership percentage. B) decreases the parent's share of subsidiary book value and increases the parent's ownership percentage. C) increases the parent's share of subsidiary book value and decreases the parent's ownership percentage. D) increases the parent's share of subsidiary book value and increases the parent's ownership percentage.
B
The amount of income for the current year assigned to the noncontrolling shareholders of Badock Corporation is A) $100,000. B) $104,000. C) $120,000. D) $140,000.
B
The consolidated income statement for Pouch Corporation and subsidiary for the year ended December 31, 2014 will show consolidated cost of sales of A) $120,000. B) $136,000. C) $148,000. D) $210,000.
B
The income from an equity method investee is reported on one line of the investor company's income statement except when A) the cost method is used. B) the investee has extraordinary items. C) the investor company is amortizing cost-book value differentials. D) the investor company changes from the cost to the equity method.
B
The net income reported for Pahm Corporation for the current year is A) $504,800. B) $516,800. C) $545,200. D) $557,200.
B
Using the original information, the amount of consolidated Interest Expense for 2014 was A) $ 135,000. B) $ 180,000. C) $ 270,000. D) $ 360,000.
B
Using the original information, the elimination entries on the consolidation working papers prepared on December 31, 2014 included at least A) debit to Bond Interest Expense for $360,000. B) credit to Bond Interest Expense for $180,000 and a debit to Bond Interest Payable for $90,000. C) credit to Bond Interest Receivable for $180,000. D) debit to Bond Interest Revenue for $360,000.
B
What amount of unrealized profit did Pelga Company have at the end of 2015? A) $10,000 B) $12,500 C) $50,000 D) $62,500
B
What was the amount of gain or (loss) from the intercompany purchase of Plenty's bonds on January 2, 2014? A) $(56,250) B) $(75,000) C) $ 75,000 D) $ 56,250
B
With respect to goodwill, an impairment A) will be amortized over the remaining useful life. B) is a two-step process which first compares book value to fair value at the business reporting unit level. C) is a one-step process considering the entire firm. D) occurs when asset values are adjusted to fair value in a purchase.
B
With respect to the bond purchase, the consolidated income statement of Pfadt Corporation and Subsidiary for 2013 showed a gain or loss of A) $ 4,500. B) $ 5,000. C) $10,800. D) $12,000.
B
) In the business combination of Polka and Spot, A) all of the items listed above are treated as expenses. B) all of the items listed above except the cost of registering and issuing the securities are included in the purchase price. C) the costs of registering and issuing the securities are deducted from the fair market value of the common stock used to acquire Spot. D) only the costs of closing duplicate facilities, the salaries of Polka's employees assigned to the merger, and the costs of the shareholders' meeting would be treated as expenses.
C
) Pomograte Corporation bought 75% of Sycamore Company's common stock, with a book value of $900,000, on January 2, 2014 for $750,000. The law firm of Dewey, Cheatam and Howe was paid $55,000 to facilitate the purchase. At what amount should Pomograte's Investment in Sycamore account be reported on January 2, 2014? A) $675,000 B) $695,000 C) $750,000 D) $845,000
C
A subsidiary has dilutive securities outstanding that include convertible bonds payable. The bonds are convertible into the parent's common stock. When calculating consolidated diluted earnings per share, the convertible bonds will affect A) the numerator of consolidated diluted EPS only. B) the denominator of consolidated diluted EPS only. C) the numerator and denominator of consolidated diluted EPS. D) the numerator and denominator of the parent diluted EPS only.
C
An elimination entry at December 31, 2014 for the intercompany sale will include a A) credit of $6,000 to Depreciation Expense. B) credit of $6,000 to Accumulated Depreciation. C) credit of $6,000 to Equipment. D) credit of $6,000 to Gain on Sale of Equipment.
C
Assume that Pansy has significant influence and uses the equity method of accounting for its investment in Sunflower. The balance in the Investment in Sunflower account at December 31, 2015 was A) $78,200. B) $80,000. C) $81,800. D) $83,300.
C
Assume that Penguin sold the additional 3,000 shares directly to Giant for $150,000 on January 2, 2014. Giant's percentage ownership in Penguin immediately after the purchase of the additional stock is A) 66-2/3%. B) 80%. C) 83-1/3%. D) 86-2/3%
C
Bart Company purchased a 30% interest in Simpson Corporation on January 1, 2013, and Bart accounted for its investment in Simpson under the equity method for the next 3 years. On January 1, 2016, Bart sold one-half of its interest in Simpson after which it could no longer exercise significant influence over Simpson. Bart should A) continue to account for its remaining investment in Simpson under the equity method for the sake of consistency. B) adjust the investment in Simpson account to one-half of its original amount and account for the remaining 15% interest using the equity method. C) account for the remaining investment under the cost method, using the investment in Simpson account balance immediately after the sale as the new cost basis. D) adjust the investment account to one-half of its original amount (one-half of the purchase price in 2013), and account for the remaining 15% investment under the cost method.
C
Bonds Payable appeared in the December 31, 2013 consolidated balance sheet of Pfadt Corporation and Subsidiary in the amount of A) $398,925. B) $443,500. C) $441,000. D) $450,000.
C
Bonds issued by a company remain on their books as a liability, but are considered constructively retired when A) the company borrows money from unaffiliated entities to re-purchase its own bonds at a gain. B) the company borrows money from an affiliate to re-purchase its own bonds at a gain. C) the company's parent or subsidiary purchases the bonds from outside entities. D) the company borrows money from an affiliate to repurchase its own bonds at a gain or at a loss.
C
Consider a sale of stock by a subsidiary to parties outside the consolidated entity. This transaction requires an adjustment of the parent's investment and additional paid-in capital accounts except when A) the shares are sold below book value per share. B) the shares are sold above book value per share. C) the shares are sold at book value per share. D) the shares are sold at market value.
C
Controlling interest share of consolidated net income for 2014 is A) $304,000. B) $324,000. C) $344,000. D) $364,000.
C
Durer Inc. acquired Sea Corporation in a business combination and Sea Corp. went out of existence. Sea Corp. developed a patent listed as an asset on Sea Corp.'s books at the patent office filing cost. In recording the combination, A) fair value is not assigned to the patent because the research and development costs have been expensed by Sea Corp. B) Sea Corp.'s prior expenses to develop the patent are recorded as an asset by Durer at purchase. C) the patent is recorded as an asset at fair market value. D) the patent's market value increases goodwill.
C
If a consolidated balance sheet was prepared immediately after the business combination, the noncontrolling interest would be A) $9,000. B) $13,500. C) $15,000. D) $16,667.
C
If the price paid by a parent company to acquire the debt of a subsidiary is greater than the book value of the liability, a ________ occurs. A) realized loss on the retirement of debt from the viewpoint of the subsidiary B) realized gain on the retirement of debt from the viewpoint of the subsidiary C) constructive loss on the retirement of debt from the viewpoint of the consolidated entity D) constructive gain on the retirement of debt from the viewpoint of the consolidated entity
C
In reference to intercompany transactions between an investor and an investee, when the investor can significantly influence the investee, which of the following statements is correct, assuming that the investor is using the equity method? A) There is the presumption of arms-length bargaining between the related parties. B) As long as the investor recognizes the effects of the transaction in its financial statements, it is not required to provide any additional disclosures. C) In reporting its share of earnings and losses of an investee, the investor must eliminate the effect of profits and losses on the intercompany transactions until they are realized. D) None of the above is correct.
C
In reference to the FASB disclosure requirements about a business combination in the period in which the combination occurs, which of the following is correct? A) Firms are not required to disclose the name of the acquired company. B) Firms are not required to disclose the business purpose for a combination. C) Firms are required to disclose the nature, terms and fair value of consideration transferred in a business combination. D) Firms are not required to disclose the details about step acquisitions.
C
Jabiru Corporation purchased a 20% interest in Fish Company common stock on January 1, 2013 for $300,000. This investment was accounted for using the complete equity method and the correct balance in the Investment in Fish account on December 31, 2015 was $440,000. The original excess purchase transaction included $60,000 for a patent amortized at a rate of $6,000 per year. In 2016, Fish Corporation had net income of $4,000 per month earned uniformly throughout the year and paid $20,000 of dividends in May. If Jabiru sold one-half of its investment in Fish on August 1, 2016 for $500,000, how much gain was recognized on this transaction? A) $278,950 B) $280,000 C) $280,950 D) $282,000
C
Jacana Corporation paid $200,000 for a 25% interest in Lilypad Corporation's common stock on January 1, 2013, but was not able to exercise significant influence over Lilypad. During 2014, Jacana reported income of $120,000, excluding its income from Lilypad, and paid dividends of $50,000. Lilypad reported net income of $40,000 during 2014 and paid dividends of $20,000. Jacana should report net income for 2014 in the amount of A) $115,000. B) $120,000. C) $125,000. D) $130,000.
C
Jersey Company acquired 90% of York Company on April 1, 2014. Both Jersey Company and York Company have December 31 fiscal year ends. Under current GAAP, which of the following statements is false? A) The consolidated income statement in 2014 should not include York's revenues and expenses prior to April 1, 2014. B) When preparing consolidating work papers in 2014, York's revenues prior to April 1, 2014 are eliminated. C) York's earnings prior to April 1, 2014 should appear as a deduction on the consolidated income statement in 2014. D) The consolidated income statement in 2014 should include York's revenues and expenses after April 1, 2014.
C
On January 1, 2014, Plastam Industries acquired an 80% interest in Sparta Company to assure a steady supply of Sparta's inventory that Plastam uses in its own manufacturing businesses. Sparta sold 100% of its output to Plastam during 2014 and 2015 at a markup of 125% of Sparta's cost. Plastam had $12,000 of these items remaining in its inventory at December 31, 2015. If Plastam neglected to eliminate unrealized profits from all intercompany sales from Sparta, the inventory on the consolidated balance sheet at December 31, 2015 was A) overstated by $1,920. B) understated by $1,920. C) overstated by $2,400. D) understated by $2,400.
C
Palmer Company owns a 25% interest in Sad, Incorporated, a domestic company. Sad had net income of $60,000 and paid dividends of $20,000. Palmer's tax rate is 35%. For simplicity, assume that Sad's undistributed earnings are Palmer's only temporary timing difference. Assume Sad qualifies for the 80% dividend received deduction. Which of the following statements is correct? A) The current tax liability is $700. B) The current tax liability is $1,050. C) Under GAAP, Palmer provides for income taxes on Sad's undistributed earnings with a credit to deferred tax liability of $700. D) Under GAAP, Palmer provides for income taxes on Sad's undistributed earnings with a credit to deferred tax liability of $1,050.
C
Pan Corporation has total stockholders' equity of $5,000,000 consisting of $1,000,000 of $10 par value Common Stock, $1,000,000 of Additional Paid-in Capital, and $3,000,000 of Retained Earnings. Pan owns 80% of Sailor Corporation's common stock purchased at book value, which equals fair value. Sailor has $900,000 of 10% cumulative preferred stock outstanding, with no preferred dividends in arrears. The preferred stock has no call price, redemption price or liquidation price. Pan acquired 60% of the preferred stock of Sailor for $500,000. After this transaction the balances in Pan's Retained Earnings and Additional Paid-in Capital accounts, respectively, are A) $2,960,000 and $1,000,000. B) $3,000,000 and $960,000. C) $3,000,000 and $1,040,000. D) $3,040,000 and $1,000,000.
C
Pardo Corporation paid $140,000 for a 70% interest in Spedeal Inc. on January 1, 2014, when Spedeal had Capital Stock of $50,000 and Retained Earnings of $100,000. Fair values of identifiable net assets were the same as recorded book values. During 2014, Spedeal had income of $40,000, declared dividends of $15,000, and paid $10,000 of dividends. On December 31, 2014, the consolidated financial statements will show A) investment in Spedeal account of $170,000. B) investment in Spedeal account of $165,000. C) consolidated goodwill of $50,000. D) consolidated dividends receivable of $5,000.
C
Paskin Corporation's wholly-owned Canadian subsidiary has a Canadian dollar functional currency. In translating the subsidiary's account balances into U.S. dollars for reporting purposes, which one of the following accounts would be translated at historical exchange rates? A) Accounts Receivable B) Notes Payable C) Capital Stock D) Retained Earnings
C
Pelmer has a foreign subsidiary, Sapp Corporation of Germany, whose functional currency is the euro. Sapp's books are maintained in euros. On December 31, 2014, Sapp has an account receivable denominated in British pounds. Which one of the following statements is true? A) Because all accounts of the subsidiary are translated into U.S. dollars at the current rate, the Account Receivable is not adjusted on the subsidiary's books before translation. B) The Account Receivable is remeasured into the functional currency, thus eliminating the need for translation. C) The Account Receivable is first adjusted to reflect the current exchange rate in euros and then translated at the current exchange rate into dollars. D) The Account Receivable is adjusted to euros at the current exchange rate, and any resulting gain or loss is included as a translation adjustment in the stockholders' equity section of the subsidiary's separate balance sheet.
C
Peregrine's investment income from Serine for 2014 was A) $108,000. B) $144,000. C) $147,600. D) $180,000.
C
Phast Corporation owns a 80% interest in Stechno Company, acquired several years ago at a cost equal to book value and fair value. Stechno sells merchandise to Phast for the first time in 2014, and some is unsold at December 31, 2014. In computing income from the investee for 2014 under the equity method, Phast uses which equation? A) 80% of Stechno's income less 100% of the unrealized profit in Phast's ending inventory B) 80% of Stechno's income plus 100% of the unrealized profit in Phast's ending inventory C) 80% of Stechno's income less 80% of the unrealized profit in Phast's ending inventory D) 80% of Stechno's income plus 80% of the unrealized profit in Phast's ending inventory
C
Pied Imperial Corporation acquired a 90% interest in Somest Corporation in 2012 when Somest's book values were equivalent to fair values. Somest sold equipment with a book value of $80,000 to Pied for $130,000 on January 1, 2014. Pied is fully depreciating the equipment over a 4-year period by using the straight-line method. Somest reported net income for 2014 was $320,000. Pied's 2014 income from Somest was A) $249,250. B) $250,500. C) $254,250. D) $288,000.
C
Pregler Inc. has 70% ownership of Sach Company, but should exclude Sach from its consolidated financial statements if A) Sach is in a regulated industry. B) Pregler uses the equity method for Sach. C) Sach is in legal reorganization. D) Sach is in a foreign country and records its books in a foreign currency.
C
Pyming Corporation accounts for its 40% investment in Sillabog Company using the equity method. On the date of the original investment, fair values were equal to the book values except for a patent, which cost Pyming an additional $40,000. The patent had an estimated life of 10 years. Sillabog has a steady net income of $20,000 per year and consistently pays out 40% of its net income as dividends to its shareholders. Which one of the following statements is correct? A) The net change in the investment account for each full year will be a debit of $8,000. B) The net change in the investment account for each full year will be a debit of $4,800. C) The net change in the investment account for each full year will be a debit of $800. D) The net change in the investment account for each full year will be a credit of $800.
C
Selvey Inc. is a wholly-owned subsidiary of Parsfield Incorporated, a U.S. firm. The country where Selvey operates is determined to have a highly inflationary economy according to GAAP definitions. Therefore, for purposes of preparing consolidated financial statements, the functional currency is A) its reporting currency. B) its current rate method currency. C) the U.S. dollar. D) its local currency.
C
Shalles Corporation, an 80%-owned subsidiary of Pani Corporation, sold inventory items to its parent at a $48,000 profit in 2014. Pani resold one-third of this inventory to outside entities. Shalles reported net income of $200,000 for 2014. Noncontrolling interest share of consolidated net income that will appear in the income statement for 2014 is A) $30,400. B) $32,000. C) $33,600. D) $40,000.
C
The inflation rate that is used in determining if the subsidiary is operating in a highly inflationary economy is A) 37.50%. B) 90.58%. C) 133.33%. D) 350.00%.
C
The material sale of inventory items by a parent company to an affiliated company A) enters the consolidated revenue computation only if the transfer was the result of arm's length bargaining. B) affects consolidated net income under a periodic inventory system but not under a perpetual inventory system. C) does not result in consolidated income until the merchandise is sold to outside parties. D) does not require a working paper adjustment if the merchandise was transferred at cost.
C
When a subsidiary has preferred stock that is convertible into subsidiary common stock, the parent's equity in the subsidiary's diluted earnings is calculated by the number of A) subsidiary shares into which the subsidiary's dilutive securities can be converted times the subsidiary's basic EPS figure. B) parent shares into which the subsidiary's dilutive securities can be converted times the parent's basic EPS figure. C) subsidiary common shares held by the parent times the subsidiary's diluted EPS figure. D) parent shares into which the subsidiary's dilutive securities can be converted times the subsidiary's basic EPS figure.
C
Which method of accounting will generally be used when one company purchases between 20% to 50% of the outstanding stock of another company? A) Only the fair value method may be used. B) Only the equity method may be used. C) The GAAP prescribed the equity method may be used. D) The GAAP prescribed the fair value method may be used.
C
Which method of accounting will generally be used when one company purchases less than 20% of the outstanding stock of another company? A) Only the fair value method may be used. B) Only the equity method may be used. C) Either the fair value method or the equity method may be used, depending upon the relationship between the companies. D) Only the acquisition method.
C
Which of the following assets and/or liabilities are considered monetary? A) Intangible Assets and Plant, Property, and Equipment B) Bonds Payable and Common Stock C) Cash and Accounts Payable D) Notes Receivable and Inventories carried at cost
C
Which of the following is correct? A) No consolidation working paper entry is required for this transaction in 2014. B) A consolidation working paper entry is required only if the subsidiary was less than 100% owned in 2014. C) A consolidation working paper entry is required each year that Sidd has the land. D) A consolidation working paper entry was required only if the land was held for resale in 2014.
C
Which one of the following statements is correct for an investor company? A) The balance in the Investment in Osprey Co. account can be reduced to represent a decline in the fair market value of the investment, but will not be adjusted if the fair market value increases. B) Under the equity method, the balance in the Investment in Osprey Co. account can be negative if the investee corporation operates at a loss. C) Once the balance in the Investment in Osprey Co. is reduced to zero, it will not be reduced any further. D) Under the equity method, the balance in the Investment in Osprey Co. account will increase when cash dividends are received.
C
he controlling interest share of consolidated net income for the current year is A) $341,000. B) $348,400. C) $351,000. D) $355,000.
C
n computing consolidated diluted EPS, the replacement calculation replaces the parent's equity in subsidiary earnings with the A) parent's share of basic EPS of the subsidiary. B) subsidiary's share of basic EPS of the parent. C) parent's share of diluted EPS of the subsidiary. D) subsidiary's share of diluted EPS of the parent.
C
) If the intercompany sale was an upstream sale, the total amount of consolidated cost of goods sold for 2015 will be A) $300,000. B) $430,000. C) $470,000. D) $477,000.
D
A U.S. firm has a Belgian subsidiary that uses the British pound as its functional currency. According to GAAP, the U.S. dollar from Belgian unit's point of view will be A) its only foreign currency. B) its local currency. C) its current rate method currency. D) its reporting currency.
D
A subsidiary split its stock 2 for 1. Which of the following statements is false? A) A stock split does not affect the amount of net assets of the subsidiary. B) A stock split does not affect parent and noncontrolling interest ownership percentages. C) A stock split does not affect consolidation procedures. D) A 2 for 1 stock split decreases the number of shares outstanding.
D
A(n) ________ sale is a sale by a parent company to a subsidiary. A(n) ________ sale is a sale by a subsidiary to a parent company. A) deferred; realized B) realized; deferred C) upstream; downstream D) downstream; upstream
D
Accounts representing an allowance for uncollectible accounts are converted into U.S. dollars at A) historical rates when the U.S. dollar is the functional currency. B) current rates only when the U.S. dollar is the functional currency. C) historical rates regardless of the functional currency. D) current rates regardless of the functional currency.
D
All of the following factors would be used to define a foreign entity's functional currency, except A) high volume of intercompany transactions. B) expenses for foreign entity primarily driven by local factors. C) financing for foreign entity denominated in local currency. D) foreign entity's status as a local tax haven for transfer pricing purposes.
D
Assume a company's preferred stock is cumulative with a call provision and has dividends in arrears. The amount of stockholders' equity allocated to preferred stockholders is equal to the number of shares outstanding times the A) sum of the par value per share plus any liquidation premium per share, plus the sum of any preferred dividends in arrears, plus the current year's dividend requirement, but only if dividends have been declared. B) sum of the par value per share, plus any liquidation premium per share, plus the sum of any preferred dividends in arrears, plus the current year's dividend requirement, regardless of whether dividends have been declared. C) call price plus the sum of any preferred dividends in arrears, plus the current year's dividend requirement, but only if dividends have been declared. D) call price plus the sum of any preferred dividends in arrears, plus the current year's dividend requirement, regardless of whether dividends have been declared.
D
Controlling interest share of consolidated net income and noncontrolling interest share, respectively, for 2013 are A) $211,200 and ($1,200). B) $211,200 and ($3,600). C) $213,600 and ($1,200). D) $213,600 and ($3,600).
D
Following the accounting concept of a business combination, a business combination occurs when a company acquires an equity interest in another entity and has A) at least 20% ownership in the entity. B) more than 50% ownership in the entity. C) 100% ownership in the entity. D) control over the entity, irrespective of the percentage owned.
D
Griffon Incorporated holds a 30% ownership in Duck Corporation. Griffon should use the equity method under which of the following circumstances? A) Griffon has surrendered significant stockholder rights by agreement between Griffon and Duck. B) Griffon has been unable to secure a position on the Duck Corporation's Board of Directors. C) Griffon has inadequate or untimely information to apply the equity method. D) The ownership of Duck Corporation is diverse.
D
If a U.S. company wants to hedge a prospective loss on its investment in a foreign entity that may result from a foreign currency fluctuation, the U.S. company should A) purchase a forward to swap currency of the foreign entity's local country for U.S. currency. B) purchase a call option to buy currency of the foreign entity's local country. C) issue a loan in the foreign entity's local country. D) borrow money in the foreign entity's local country.
D
If a parent company has controlling interest in a subsidiary which has no potentially dilutive securities outstanding, then in the calculation of consolidated diluted EPS, it will be necessary to A) only make an adjustment of subsidiary's basic earnings. B) replace the parent's equity in subsidiary earnings with the parent's equity in subsidiary's diluted EPS. C) make a replacement calculation in the parent's basic earnings for the EPS. D) only use the parent's common shares and shares represented by the parent's potentially dilutive securities.
D
If the bonds were originally issued at 106, and 80% of them were purchased by Scrawn on January 2, 2015 at 98, the gain or (loss) from the intercompany purchase was A) $(384,000). B) $(211,200). C) $ 211,200. D) $ 384,000.
D
In the consolidated income statement of Wattlebird Corporation and its 85% owned Forest subsidiary, the noncontrolling interest share was reported at $45,000. Assume the book value and fair value of Forest's net assets were equal at the acquisition date. What amount of net income did Forest have for the year? A) $52,941 B) $38,250 C) $235,000 D) $300,000
D
On April 1, 2014, Paramount Company acquires 100% of the outstanding stock of Yester Company on the open market. Paramount and Yester have December 31 fiscal year ends. Under GAAP, a consolidated income statement for the year ending December 31, 2014, will include A) 100 percent of the revenues and expenses in 2014 of Yester Company after January 1, 2014. B) no revenues and expenses in 2014 of Yester Company. C) 80 percent of the revenues and expenses in 2014 of Yester Company. D) 100 percent of the revenues and expenses in 2014 of Yester Company after April 1, 2014.
D
On January 2, 2014, Paogo Company sold a truck with book value of $15,000 to Sanall Corporation, its wholly-owned subsidiary, for $20,000. The truck had a remaining useful life of five years with zero salvage value. Both firms use the straight-line depreciation method. If Paogo failed to make year-end adjustments/eliminations on the consolidated working papers in 2014, consolidated depreciation expense for 2014 would be A) $5,000 too high. B) $5,000 too low. C) $1,000 too low. D) $1,000 too high.
D
On July 1, 2014, when Salaby Company's total stockholders' equity was $360,000, Pogana Corporation purchased 14,000 shares of Salaby's common stock at $30 per share. Salaby had 20,000 shares of common stock outstanding both before and after the purchase by Pogana, and the book value of Salaby's net assets on July 1, 2014 was equal to the fair value. On a consolidated balance sheet prepared at July 1, 2014, goodwill would be A) $60,000. B) $85,714. C) $100,000. D) $240,000.
D
Parnaby has 25,000 common stock shares outstanding and its 100%-owned subsidiary Sandal has 5,000 common stock shares outstanding. Parnaby and Sandal do not have any potentially dilutive securities outstanding. The separate net incomes for Parnaby and Sandal are $150,000 and $75,000, respectively. Diluted EPS for the consolidated company is A) $5.00. B) $6.00. C) $7.50. D) $9.00.
D
Percy Inc. acquired 80% of the outstanding stock of Sillson Company in a business combination. The book values of Sillson's net assets are equal to the fair values except for the building, whose net book value and fair value are $500,000 and $800,000, respectively. At what amount is the building reported on the consolidated balance sheet? A) $400,000 B) $500,000 C) $640,000 D) $800,000
D
Picasso Co. issued 5,000 shares of its $1 par common stock, valued at $100,000, to acquire shares of Seurat Company in an all-stock transaction. Picasso paid the investment bankers $35,000 and will treat the investment banker fee as A) an expense for the current year. B) a prior period adjustment to Retained Earnings. C) additional goodwill on the consolidated balance sheet. D) a reduction to additional paid-in capital.
D
Pickle Incorporated acquired a $10,000 bond originally issued by its 80%-owned subsidiary on January 2, 2013. The bond was issued in a prior year for $11,250, matures January 1, 2018, and pays 9% interest at December 31. The bond's book value at January 2, 2013 is $10,625, and Pickle paid $9,500 to purchase it. Straight-line amortization is used by both companies. How much interest income should be eliminated in 2013? A) $720 B) $800 C) $900 D) $1,000
D
Pigeon Corporation purchased land from its 60%-owned subsidiary, Seed Inc., in 2012 at a cost $50,000 greater than Seed's book value. In 2014, Pigeon sold the land to an outside entity for $20,000 more than Pigeon's book value. The 2014 consolidated income statement should report a gain on the sale of land of A) $12,000. B) $20,000. C) $42,000. D) $70,000.
D
Pinkerton Inc. owns 10% of Sable Company. In the most recent year, Sable had net earnings of $40,000 and paid dividends of $6,000. Pinkerton's accountant mistakenly assumed Pinkerton had considerable influence over Sable and used the equity method instead of the cost method. What is the impact on the investment account and net earnings, respectively? A) By using the equity method, the accountant has understated the investment account and overstated the net earnings. B) By using the equity method, the accountant has overstated the investment account and understated the net earnings. C) By using the equity method, the accountant has understated the investment account and understated the net earnings. D) By using the equity method, the accountant has overstated the investment account and overstated the net earnings.
D
Pogo Corporation acquired a 75% interest in Sperry Corporation on January 1, 2011 at a cost equal to book value and fair value. In the same year Sperry sold land costing $25,000 to Pogo for $50,000. On July 1, 2014, Pogo sold the land to an unrelated party for $85,000. What was the gain on the sale of the land on the consolidated income statement for 2014? A) $25,000 B) $35,000 C) $45,000 D) $60,000
D
Pond Corporation uses the fair value method of accounting for its investment in Swan Company. Which one of the following events would not affect the Investment in Swan Co. account? A) Investee losses B) Investee dividend payments C) An increase in the investee's share price from last period D) Unrealized gains and losses from the available-for-sale securities classification
D
Prussia Corporation owns 80% of the voting stock of Stad Corporation. On January 1, 2013, Prussia paid $391,000 cash for $400,000 par of Stad's 10% $1,000,000 par value outstanding bonds, due on April 1, 2018. Stad's bonds had a book value of $1,045,000 on January 1, 2013. Straight-line amortization is used. The gain or loss on the constructive retirement of $400,000 of Stad bonds on January 1, 2013 was reported in the 2013 consolidated income statement in the amount of A) $14,000. B) $27,000. C) $23,000. D) $21,600.
D
Push-down accounting A) requires a subsidiary to use the same accounting principles as its parent company. B) is required when the parent company uses the equity method to account for its investment in a subsidiary. C) is required when the parent company uses the cost method to account for its investment in a subsidiary. D) is the process of recording the effects of the purchase price assignment directly on the books of the subsidiary.
D
Salter has a 2014 net loss of $200,000. No dividends are declared or paid in 2014. What is the change in Pardy's Investment in Salter for the year ending December 31, 2014? A) $50,000 B) $70,000 C) $140,000 D) $210,000
D
The 2014 consolidated income statement showed noncontrolling interest share of A) $3,200. B) $6,400. C) $8,800. D) $12,000.
D
The amount of income for the current year assigned to the noncontrolling shareholders of Abussi Corporation is A) $48,000. B) $53,200. C) $74,000. D) $79,200.
D
The equation, in a set of simultaneous equations, that computes Paiva Corporation income on a consolidated basis is A) P = $50,000 + 0.8B. B) P = $30,000 + 0.2A. C) P = $100,000 + 0.2A. D) P = $100,000 + 0.8A.
D
The gain from the bond purchase that appeared on the December 31, 2013 consolidated income statement was A) $4,320. B) $4,800. C) $5,400. D) $6,000.
D
The primary goal behind consolidating financial statements of a controlled subsidiary is A) assuring that the subsidiary financial statements are the same under the temporal method or the current rate method. B) assuring that the individual nature of the subsidiary entity is not lost in the consolidation. C) representing the conversion of statements at the historical exchange rate. D) representing the company's underlying economic condition.
D
Under the current GAAP, Goodwill arising from a business combination is A) charged to Retained Earnings after the acquisition is completed. B) amortized over 40 years or its useful life, whichever is longer. C) amortized over 40 years or its useful life, whichever is shorter. D) never amortized.
D
Utah Company holds 80% of the stock of a subsidiary company. The subsidiary issues 100 additional shares of stock to Utah Company at a price above book value per share. The subsidiary does not issue any additional shares at the same time. How will Utah Company record the purchase? A) Utah Company records a gain on sale of stock. B) Utah Company increases additional paid-in capital. C) Utah Company decreases additional paid-in capital. D) Utah Company assigns any excess cost over book value acquired to increase undervalued identifiable assets or goodwill as appropriate.
D
What is the goodwill on the consolidated balance sheet for Pamplin and Subsidiaries on December 31, 2014 based on Pamplin's purchase of Sage's common stock? A) $140,000 B) $240,000 C) $290,000 D) $306,667
D
What is the implied goodwill for Salter based on Pardy's purchase price for Salter on January 1, 2014? A) $0 B) $35,000 C) $70,000 D) $100,000
D
When considering an acquisition, which of the following is NOT a method by which one company may gain control of another company? A) Purchase of the majority of outstanding voting stock of the acquired company. B) Purchase of all assets and liabilities of another company. C) Purchase of all the outstanding voting stock of the acquired company. D) Purchase of 25% of outstanding voting stock of the acquired company.
D
When mutually-held stock involves subsidiaries holding the stock of each other, the ________ method is not used. A) equity B) cost C) conventional D) treasury stock
D
When translating foreign subsidiary income statements using the current rate method, why are some accounts translated at an average rate? A) This approach improves matching. B) This approach accentuates the conservatism principle. C) This approach smoothes out highly volatile exchange rate fluctuations. D) This approach approximates the effect of transactions which occur continuously during the period.
D
Which method must be used if ASC 810-10-65 prohibits full consolidation of a 70% owned subsidiary? A) The cost method B) The Liquidation value C) Market value D) Equity method
D
Which of the following is correct? The direct sale of additional shares of stock at book value per share to only the parent company from a subsidiary A) decreases the parent's interest and decreases the noncontrolling shareholders' interest. B) decreases the parent's interest and increases the noncontrolling shareholders' interest. C) increases the parent's interest and increases the noncontrolling shareholders' interest. D) increases the parent's interest and decreases the noncontrolling shareholders' interest.
D
Which of the following statements about the Current Rate method is false? A) Translation involves restating the functional currency amounts into the reporting currency. B) All assets and liabilities are translated at the current rate. C) If the subsidiary maintains their books in their functional currency, the current rate method is used. D) The effect of exchange rate changes are reported on the income statement as a foreign exchange gain or loss.
D
here are several theories for allocating constructive gains or losses between purchasing and issuing affiliates. The Agency Theory A) does so based on the par value of the bonds purchased. B) assigns the entire constructive gain or loss to the parent based on their control of the decision to purchase the bonds. C) assigns the entire constructive gain or loss to the subsidiary based on the need to have the noncontrolling interest share in the retirement of the debt. D) assigns the entire constructive gain or loss to whichever company issued the bonds.
D
