ch5Student: ___________________________________________________________________________ 1. On November 8, 2009, Power Corp. sold land to Wood Co., its wholly owned subsidiary. The land cost $61,500 and was sold to Wood for $89,000. From the perspective of the combination, when is the gain on the sale of the land realized? A. Proportionately over a designated period of years B. When Wood Co. sells the land to a third party C. No gain can be recognized D. As Wood uses the land E. When Wood Co. begins using the land productively 2. Edgar Co. acquired 60% of Kindall Co. on January 1, 2009. During 2009, Edgar made several sales of inventory to Kindall. The cost and selling price of the goods were $140,000 and $200,000, respectively. Kindall still owned one-fourth of the goods at the end of 2009. Consolidated cost of goods sold for 2009 was $2,140,000. How would consolidated cost of goods sold have differed if the inventory transfers had been for the same amount and cost, but from Kindall to Edgar? A. Consolidated cost of goods sold would have been $2,140,000 B. Consolidated cost of goods sold would have been $2,175,000 C. The effect on consolidated cost of goods sold cannot be predicted from the information provided D. Consolidated cost of goods sold would have been reduced because of the non-controlling interest in the subsidiary E. Consolidated cost of goods sold would have been higher because of the non-controlling interest in the subsidiary 3. On January 1, 2009, Race Corp. acquired 80% of the voting common stock of Gallow Inc. During the year, Race sold to Gallow for $450,000 goods which cost $330,000. Gallow still owned 15% of the goods at year-end. Gallow's reported net income was $204,000 and Race's net income was $806,000. Race decided to use the equity method to account for this investment. What was the non-controlling interest's share of consolidated net income? A. $37,200 B. $22,800 C. $30,900 D. $32,900 E. $40,800 4. Webb Co. acquired 100% of Rand Inc. on January 5, 2009. During 2009, Webb sold Rand for $2,400,000 goods that cost $1,800,000. Rand still owned 40% of the goods at the end of the year. Cost of goods sold was $10,800,000 for Webb and $6,400,000 for Rand. What was consolidated cost of goods sold? A. $17,200,000 B. $15,040,000 C. $14,800,000 D. $16,960,000 E. $14,560,000 5. Gentry Inc. acquired 100% of Gaspard Farms on January 5, 2009. During 2009, Gentry sold Gaspard Farms for $625,000 goods which had cost $425,000. Gaspard Farms still owned 12% of the goods at the end of the year. In 2010, Gentry sold goods with a cost of $800,000 to Gaspard Farms for $1,000,000 and Gaspard Farms still owned 10% of the goods at year-end. For 2010, cost of goods sold was $1,200,000 for Gaspard Farms and $5,400,000 for Gentry. What was consolidated cost of goods sold for 2010? A. $6,600,000 B. $6,596,000 C. $5,620,000 D. $5,596,000 E. $5,625,000 6. X-Beams Inc. owned 70% of the voting common stock of Kent Corp. During 2009, Kent made several sales of inventory to X-Beams. The total selling price was $180,000 and the cost was $100,000. At the end of the year, 20% of the goods were still in X-Beams' inventory. Kent's reported net income was $300,000. What was the non-controlling interest in Kent's net income? A. $90,000 B. $85,200 C. $54,000 D. $94,800 E. $86,640 7. Justings Co. owned 80% of Evana Corp. During 2009, Justings sold to Evana land with a book value of $48,000. The selling price was $70,000. In its accounting records, Justings should A. Not recognize a gain on the sale of the land since it was made to a related party B. Recognize a gain of $17,600 C. Defer recognition of the gain until Evana sells the land to a third party D. Recognize a gain of $8,000 E. Recognize a gain of $22,000 8. Norek Corp. owned 70% of the voting common stock of Thelma Co. On January 2, 2009, Thelma sold a parcel of land to Norek. The land had a book value of $32,000 and was sold to Norek for $45,000. Thelma's reported net income for 2009 was $119,000. What is the non-controlling interest's share of Thelma's net income? A. $35,700 B. $31,800 C. $39,600 D. $22,200 E. $26,100 9. Clemente Co. owned all of the voting common stock of Snider Co. On January 2, 2009, Clemente sold some equipment to Snider for $125,000. The equipment had cost $140,000. At the time of the sale, the balance in accumulated depreciation was $40,000. The equipment had a remaining useful life of five years and a $0 salvage value. Straight-line depreciation is used by both Clemente and Snider. At what amount should the equipment (net of depreciation) be included on the consolidated balance sheet dated December 31, 2009? A. $100,000 B. $95,000 C. $75,000 D. $80,000 E. $85,000 10. During 2009, Von Co. sold inventory to its wholly-owned subsidiary, Lord Co. The inventory cost $30,000 and was sold to Lord for $44,000. From the perspective of the combination, when is the $14,000 gain realized? A. When the goods are sold to a third party by Lord B. When Lord pays Von for the goods C. When Von sold the goods to Lord D. When the goods are used by Lord E. No gain can be recognized since the transaction was between related parties 11. Bauerly Co. owned 70% of the voting common stock of Devin Co. During 2009, Devin made frequent sales of inventory to Bauerly. There were unrealized gains of $40,000 in the beginning inventory and $25,000 at the end of the year. Devin reported net income of $137,000 for 2009. Bauerly decided to use the equity method to account for the investment. What is the non-controlling interest's share of Devin's net income for 2009? A. $41,100 B. $33,600 C. $21,600 D. $45,600 E. $36,600 000. Net income for Sparis was $912.000. on January 1. The selling price was $83.000 and $60. 2009.12. include the following balances for land: for Chain-$416.000 in 2010. $15. for $115.000. Both companies use straight-line depreciation.000 C. On April 4.000. The equipment had cost $125.375 C. $90. $755.000 and for Shannon-$256. Payton and Starker reported depreciation expense of $84. $654.000 E. Starker Corp.000 and was sold to Ontario for $390. Ontario still had $60. owned a 90% interest in Sparis Co. $32.680 B. the book value of Shannon's land was equal to its fair value. The amount of depreciation expense on the consolidated income statement for 2009 would have been A.000 B.000 during 2010.. $30. owned all of the voting common stock of Shannon Corp.000 of the goods in its inventory at the end of the year. The inventory cost Yukon $260. acquired 75% percent of the voting common stock of Ontario Corp. $144. Gibson still owned 30% of the goods. The corporations' balance sheets dated December 31. $672. 2009.000 and the balance in accumulated depreciation was $45. sold equipment to its subsidiary. $139. $91.000.000 in 2009 and $500. were $420. Chain Co.000 E. which include a markup over cost of 25%.680 E. On the original date of acquisition. The sales. What was the non-controlling interest's share of Sparis' net income for 2010? A. Yukon made sales of inventory to Ontario. Yukon Co.600 C. There were no other transactions which affected the companies' land accounts during 2010. $690.000. During the year.000.000 C. $20. Sparis frequently made sales of inventory to Gibson. $91.800 14. 2010.000 . respectively.000 B.000 13. What is the consolidated balance for land on the 2010 balance sheet? A.000 B. $737. $90. Payton Co.720 D.000 D. Gibson Corp. $109.000 E. At the end of each year. On January 1. $148. $85.625 15. Chain sold to Shannon a parcel of land with a book value of $65. On their separate 2009 income statements. 2009.000 D. The amount of unrealized intercompany profit that should be eliminated in the consolidation process at the end of 2009 is A.500 D. $134. $110. The equipment had an estimated remaining useful life of eight years and $0 salvage value. 092. Also during 2009. $1.'s common stock.800 B. 2009.000 and $1.000. what are consolidated sales and cost of goods sold? A. Consolidated net income must be reduced by $49. Pot had established the transfer price based on its normal markup. Pot reported sales of $1.000. 50% of this merchandise remained in Prince's inventory.400. The subsidiary still possesses 40% of this inventory at the end of 2009. On January 1. $1. $21.000 and $1. At December 31. $22. $1. Dalton sold this building to Shrugs for $392.000 E.000 and $1.200 . Dalton acquired a building with a ten-year life for $420. 2007.400.120.000 B..540. the building had a remaining life of eight years but still no expected salvage value. 2009. Dalton Corp. to Pot Co.000 D.400 E. Pot sold merchandise to Skillet for $140.000 and $966.000 and $1.000 E. $56. No salvage value was anticipated and the building was to be depreciated on the straight-line basis.400. $1.400. $1.000 D. Consolidated net income must be reduced by $44. What are consolidated sales and cost of goods sold? A. $42. $1. At that time. owned 70% of the outstanding common stock of Shrugs Inc. $28. During 2009.000. Kile sold merchandise to Prince for $140.540.022.000 C.540. holds 90% of the common stock of Skillet Co.000.000 and $952.540. Consolidated net income must be reduced by $56. owned 80% of Kile Corp. Skillet had sales of $420. $1.000 and $1.092. 2009 that should be eliminated in the consolidation process is A.000 B.000 and cost of goods sold of $252.000 D. On January 1. Assuming that the transfers were from Skillet Co.16.000. For 2009.400 C.000 B.000 and $974.078.000 and cost of goods sold of $840. Consolidated net income must be reduced by $50. $1. 17. Prince Corp.400.078. Consolidated net income must be reduced by $53. gross profit percentages were 30% of sales for Prince and 40% of sales for Kile.000 and $966.000 and $952.000 Pot Co. For this same period. $1. In preparing financial statements for 2009.000 E.000 18.000 C. $1.000 C. The amount of unrealized intercompany profit in ending inventory at December 31. how does this transfer affect the calculation of Dalton's share of consolidated net income? A. During October 2009.000.400.000 19.400 D. $42.000 E.400 . $28.000 D. the financial statements appeared as follows: During 2009. Only half of this purchase had been paid for by Strong by the end of the year. $53.000 21. 20.000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35.000.000 B. What is the total of consolidated revenues? A.000 B. 2009.000. Any remaining excess was attributable to goodwill which has not been impaired. $644.600 C.On January 1.000 E. Pride bought inventory for $112.000 C. What is the total of consolidated operating expenses? A.200 D. before preparing the consolidated worksheet. bought 80% of the outstanding voting common stock of Strong Corp. $840. $47. $36. $48. Inc. $588.000 and sold it to Strong for $140. $700. 60% of these goods were still in the company's possession on December 31. $560. Pride.000. As of December 31. for $364. Of this payment. 2009. $100. What is the total of consolidated cost of goods sold? A. Select the correct answer.800 25. $1.400 C.840 E. $347. $212. $98. What is the consolidated total of non-controlling interest appearing on the balance sheet? A. $97. $184.000 B.064.058. which of the following choices would be a debit entry in the consolidated worksheet for 2009? A.000 B.600 D.066.000 D.000 B. $93. $1.000 E. $1. at a profit during 2009.000 E. Carter Company.000 C. Investment Strickland Company E.800 D. $952.440 C.069. $349. $1. $168. Additional paid-in capital . $196. What is the consolidated total for inventory at December 31. $203.000 23.300 Strickland Company sells inventory to its parent.800 B. What is the consolidated total for equipment (net) at December 31.22.900 24.800 C. $336.800 D. Cost of goods sold C.200 E. 2009? A. $364. With regard to the intercompany sale. Inventory D. 2009? A. $101. Retained earnings B. $280. 26. Inventory D. With regard to the intercompany sale. With regard to the intercompany sale. Additional paid-in capital Walsh Company sells inventory to its subsidiary. Inventory D. Inventory D. Cost of goods sold C. Fisher Company. Additional paid-in capital 29. at a profit during 2009. Investment Strickland Company E. Cost of goods sold C. Retained earnings B. With regard to the intercompany sale. Additional paid-in capital 28. Investment Strickland Company E. Retained earnings B. With regard to the intercompany sale. Additional paid-in capital . Retained earnings B. Inventory D. which of the following choices would be a debit entry in the consolidated worksheet for 2010? A. which of the following choices would be a credit entry in the consolidated worksheet for 2010? A. Retained earnings B. Cost of goods sold C. which of the following choices would be a debit entry in the consolidated worksheet for 2009? A. Investment Fisher Company E.27. 30. Walsh uses the equity method to account for its investment in Fisher. which of the following choices would be a credit entry in the consolidated worksheet for 2009? A. Cost of goods sold C. Investment Strickland Company E. which of the following statements is true? A. Inventory D. With regard to the intercompany sale. Income from subsidiary will be higher by the amount of the ending inventory profit multiplied by the non-controlling interest percentage for downstream transfers C. which of the following choices would be a debit entry in the consolidated worksheet for 2010? A. Retained earnings B. Cost of goods sold C. Income from subsidiary will be lower by the amount of the ending inventory profit multiplied by the non-controlling interest percentage for downstream transfers B. Additional paid-in capital 32. Additional paid-in capital 33. which of the following choices would be a credit entry in the consolidated worksheet for 2009? A. Investment Fisher Company E.31. which of the following choices would be a credit entry in the consolidated worksheet for 2010? A. before the effect of the non-controlling interest D. Retained earnings B. Investment in Fisher Company E. Cost of goods sold C. With regard to the intercompany sale. Income from subsidiary will be reduced for downstream ending inventory profit but not for upstream profit. Inventory D. Investment Fisher Company E. Income from subsidiary will be reduced for upstream ending inventory profit but not for downstream profit. Cost of goods sold C. Inventory D. Retained earnings B. Additional paid-in capital 34. before the effect of the non-controlling interest E. When comparing the difference between an upstream and downstream transfer of inventory and using the initial value method. Income from subsidiary will be the same for upstream and downstream profit . With regard to the intercompany sale. A loss and a gain are always eliminated on a consolidated income statement C. A loss and a gain are always recognized on a consolidated income statement D. These year-end deferrals are then added to next year's subsidiary net income in the calculation of parent's income from subsidiary. using the initial value method? A. A gain or loss is eliminated by adjusting stockholders' equity through comprehensive income . Income from subsidiary will be reduced for downstream ending inventory profits but not for upstream profits. which of the following statements is true? A. These year-end deferrals are then added to next year's subsidiary net income in the calculation of parent's income from subsidiary. The sale of merchandise between a parent and its subsidiary represents an arm's-length transaction and thus provides the basis for the recognition of profit on such transfers B. Income from subsidiary will be reduced for upstream ending inventory profits but not for downstream profits. This procedure is inappropriate because all the intercompany transactions unsold at year-end may not be sold in the next year C. Profits on upstream transfers associated with the parent's ending inventory are subtracted from subsidiary net income for the current year in the calculation of parent's income from subsidiary. Non-controlling interest in subsidiary's net income should not be reduced for upstream or downstream ending inventory profits 37. Merchandise transfers from a parent to its subsidiary that have not been sold to unaffiliated parties should be included in consolidated inventory at their transfer price E.35. Which of the following statements is true regarding inventory transfers between a parent and its subsidiary. before the non-controlling interest E. When comparing the difference between an upstream and downstream transfer of inventory and using the initial value method. This procedure is appropriate even if all the intercompany transactions unsold at year-end may not be sold in the next year D. Profits on upstream transfers associated with the parent's ending inventory are subtracted from subsidiary net income for the current year in the calculation of parent's income from subsidiary. A gain is always recognized but a loss is eliminated on a consolidated income statement E. Income from subsidiary will be the same for upstream and downstream profits 36. before the non-controlling interest D. Which of the following statements is true regarding an intercompany sale of land? A. Income from subsidiary will be lower by the amount of the beginning inventory profits multiplied by the non-controlling interest percentage for upstream transfers B. Income from subsidiary will be higher by the amount of the beginning inventory profits multiplied by the non-controlling interest percentage for upstream transfers C. A loss is always recognized but a gain is eliminated on a consolidated income statement B. A worksheet entry is made with a debit to investment in subsidiary for an upstream transfer B. Non-controlling interest in subsidiary's net income is affected by a downstream gain only D. No worksheet entry is necessary 41. A worksheet entry is made with a debit to retained earnings for an upstream transfer B. No worksheet entry is necessary 42. An intercompany sale took place whereby the book value exceeded the transfer price of a depreciable asset. A worksheet entry is made with a debit to gain for an upstream transfer C. Non-controlling interest in subsidiary's net income is never affected by a gain on the transfer B. Which statement is true for the year following the sale? A. Non-controlling interest in subsidiary's net income is always affected by a gain on the transfer C. Non-controlling interest in subsidiary's net income is affected only when the transfer is upstream E. A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer E. A worksheet entry is made with a debit to gain for a downstream transfer B. A worksheet entry is made with a debit to retained earnings for a downstream transfer E. An intercompany sale took place whereby the transfer price exceeded the book value of a depreciable asset. A worksheet entry is made with a credit to investment in subsidiary for a downstream transfer when the parent uses the equity method D. A worksheet entry is made with a credit to retained earnings for an upstream transfer C. An intercompany sale took place whereby the transfer price was less than the book value of a depreciable asset. A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer when the parent uses the equity method D. A worksheet entry is made with a debit to retained earnings for an upstream transfer E. Which statement is true for the year following the sale? A. Only the parent company will report a gain in 2010 E. Which of the following statements is true concerning an intercompany transfer of a depreciable asset? A. Which statement is true for the year following the sale? A. No worksheet entry is necessary 40. Parent sold land to its subsidiary for a gain in 2007. Non-controlling interest in subsidiary's net income is increased by an upstream gain in the year of transfer . A gain will be reported on the consolidated income statement in 2007 B. A worksheet entry is made with a debit to retained earnings for a downstream transfer D. The subsidiary sold the land externally for a gain in 2010. A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer C.38. Which of the following statements is true? A. A gain will be reported on the consolidated income statement in 2010 C. The subsidiary will report a gain in 2007 39. No gain will be reported on the 2010 consolidated income statement D. $75. a 90% owned subsidiary of Posito Corporation. A.800 45. Compute the non-controlling interest in Gargiulo's net income for 2009. The following data are available pertaining to Gargiulo's income and dividends. $6. $76. Compute the income from Gargiulo reported on Posito's books for 2010.870 D.970 B. 2009. $6. Gargiulo was acquired on January 1. $84. $63. A. Assume the equity method is used. 43. sells inventory to Posito at a 25% profit on selling price. $62. $84. A.500 B.825 E. $6. A.130 C. $62. Compute the income from Gargiulo reported on Posito's books for 2009. $70. $84. $75.000 B.375 C.270 D.000 C. $83.230 .030 D. $75. The following data are available pertaining to intercompany purchases.600 E. $7.700 44.730 C. Compute the income from Gargiulo reported on Posito's books for 2011.850 46.000 E.270 E. $77.925 D. $7.600 B. $84.Gargiulo Company. $63. Compute the non-controlling interest in Gargiulo's net income for 2011.400 E.400 B. For consolidation purposes. $3. $1.430 D. For consolidation purposes.000 D. A. $9.600 E. $8. $900 51.570 C.000 E. A. $300 B. $9.000 D.000 B.500 B. $9.375 C. $8.400 E.485 49. $9.425 D. $8. $600 B. $800 C. $2. $270 50.325 E.580 48. For consolidation purposes. $8. $750 C. $3. what amount would be debited to cost of goods sold for consolidation (worksheet entry G) in 2009? A. $3. $7. $2.47. what amount would be debited to cost of goods sold for consolidation (worksheet entry G) in 2010? A. $675 . Compute the non-controlling interest in Gargiulo's net income for 2010. $8. what amount would be debited to cost of goods sold for consolidation (worksheet entry G) in 2011? A. $1. $240 C.760 D. $240 B. $3. In the current year.000 D. $2. $10.600 E. $2.000. $1.000 D.000 B.000 E.200. Shannon still possesses 30 percent of this inventory.000 B. $1.000.140. $240 E.000 and cost of goods sold of $7.000 and cost of goods sold of $160. $300 D. $10.000 C. what amount would be debited to retained earnings for consolidation (worksheet entry G) in 2010? A. Patti sold merchandise to Shannon for $60. $900 Patti Company holds 80% of the common stock of Shannon. Patti reports sales of $10.000 at a price based on the normal markup. $0 B. $270 53.000. $270 54.400 C.000 D.260. $10. Inc.000 . what amount would be debited to retained earnings for consolidation (worksheet entry G) in 2009? A. $300 C. For consolidation purposes.126. For the same period. During the year. For consolidation purposes. A. $800 E. $10. At the end of the year. Shannon has sales of $200.52. 55.600 C. $1. what amount would be debited to retained earnings for consolidation (worksheet entry G) in 2011? A.000. For consolidation purposes. Compute consolidated sales.500. $10. 500 D. Assume the same information. $10.500 59.615. The following data are available pertaining to Wilson's income and dividends: 58. 2009.000 C. $18. 2009 Wilson Company.56.000 B. Compute consolidated cost of goods sold.000 C. bought equipment from Simon for $68.500 E.200.000 D.250 C. Compute the amortization of gain for 2009 for consolidation purposes. $10.500.126. $2.500 B. $7. $38.825 C. A.000.140. except Shannon sold inventory to Patti. $7. $1. $19. $7. Compute the gain on transfer of equipment reported by Simon for 2009. $10. $10.750 D. 2009.000 57.000 On April 1. $1.260.250 E. Compute consolidated sales. $7. A. A.000 E.600.000 B.660.250 .250.604. Simon realized that the useful life of the equipment was longer than originally anticipated.000 with a 10-year remaining life as of January 1. $11. $10. $1. On January 1. $37. at ten remaining years. A. $5. $7.000 and a book value of $50.000 E.950 B. The equipment had an original cost to Simon of $80.000 D. a 90% owned subsidiary of Simon Company. 500 63. $106.950 B. $118. $1. $1. $2.000 D.500 E.000 C.825 C. $119. $7.000 E.000 C. $109. $73. $110. $118.825 B. Compute the amortization of gain for 2010 for consolidation purposes.800 64. Compute Simon's share of income from Wilson for consolidation for 2009. A. $90.000 D.000 B. A.800 . $1. $73. $117.575 D.60. $72. $7. $109. $1.000 D. $115. $72. A.000 D. Compute Simon's share of income from Wilson for consolidation for 2010.000 62. A.925 B. $2. $1. $1. $108.000 C. A. Compute Simon's share of income from Wilson for consolidation for 2011. Compute the amortization of gain for 2011 for consolidation purposes.500 E.000 61.825 C.825 E.800 E.000 B. $14.800 E.200 D.000 C.On January 1. Compute the gain recognized by Smeder Company relating to the equipment for 2009. 2009. Debit accumulated depreciation. For consolidation purposes.600 C.000 B. $36.000 for 2009 and 2010.000 E. $18. Debit accumulated depreciation. A.400 C.600 B. Compute Collins' share of Smeder's net income for 2009. $34.400 B.000 .200 D.000. $12. $48. At the date of transfer. $12. Straight-line depreciation is used. $27.000 D.000 less accumulated depreciation of $48.000 E. $46. $10.000 D. $23.000 C.000 and $32. $48. an 80% owned subsidiary of Collins. Inc. $24. $27. Smeder reported net income of $28. $34. Smeder's records carried the equipment at a cost of $120. Debit accumulated depreciation.000 68. Smeder Company.. 65.000 E. A.000 B. Compute Collins' share of Smeder's net income for 2010. $12. $46. $11.000 cash. $0 66. $2. Credit accumulated depreciation. Credit accumulated depreciation.000 67. what net debit or credit will be made in 2009 relating to the equipment transfer? A. transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84. respectively. A. 000 E. Compute the gain or loss on the intercompany sale of land. before allocation to controlling and non-controlling interests. Stiller reported net income of $125.000 B. Leo uses the equity method to account for its investment. due to the equipment transfer? A.000 for 2009 and 2010. Debit retained earnings for $50.000.000 B. $50. The land originally cost Leo $60. What is the net effect on consolidated net income in 2009.000 and $140. Debit land for $15.000 gain E.000 Stiller Company.000 C. $15.000 D. Credit gain for $50. an 80% owned subsidiary of Leo Company. $65.000 D. Credit retained earnings for $50.000 C. Credit gain for $15. 70.000 C. On a consolidation worksheet. Debit retained earnings for $15.000 72. what adjustment would be made for 2009 regarding the land transfer? A. Credit land for $15.000 E. Debit investment in Stiller for $15.000 B.000 gain 71. purchased land from Leo on March 1. A. having used the equity method.000. for $75.000 loss B. Decrease $10. 2009.000 loss D. On a consolidation worksheet.69. Decrease $14. $50. $15.000 . Increase $2.000 D.000 E. Increase $10. what adjustment would be made for 2010 regarding the land transfer? A. Decrease $12. Debit gain for $50.000 gain C. respectively. Credit retained earnings for $15. $5.000 loss C.000.000 D.000 D. Debit retained earnings for $5. Compute income from Stiller on Leo's books for 2010. Credit retained earnings for $5. The land originally cost Stark $85..000 B.000 Stark Company.000 for 2009.000 E. $85.000 B. Debit gain for $5.000 . for $80.000 and $220. A.000 C.000 loss E. $97. $85.000 B. A. $125.000 gain D. Credit land for $5. $140. $100.000 in 2011. $125.000 C.000 E. Debit loss for $5.000 D. A.000 C. $110.73. 2009. $112. Credit investment in subsidiary for $5. Inc. Credit land for $5. $5.000 C.000 D. Credit loss for $5.000. $80. $100.000 E. Parker sold the land it purchased from Stark in 2009 for $92. $88. a 90% owned subsidiary of Parker.000 77.000 E. Which of the following will be included in a consolidation entry for 2010? A. $180.000.000 loss 76. Compute the gain or loss on the intercompany sale of land. Stark reported net income of $200.000 gain B. Compute income from Stiller on Leo's books for 2009. $80. respectively. 2010 and 2011.000 B. Credit gain for $5. Debit investment in subsidiary for $5. Which of the following will be included in a consolidation entry for 2009? A. 75. sold land to Parker on May 1.000 74. 78. $7.000 C.000 loss B.000 gain C. $175.500 D.500 79.000 80. $7. Compute the consolidated gain or loss relating to the land for 2011. $7.500 C.000 loss D.000 gain E. $185. $157.000 gain C. A. $180. $12. A. $5. A. $205. $5.000 loss 81. $184.000 B. $162. A. Compute income from Stark reported on Parker's books for 2009. Compute Stark's reported gain or loss relating to the land for 2011.000 loss B. $7.000 B.000 loss 82. A. Compute income from Stark reported on Parker's books for 2010. $200. $12. $0 . $5. $180. Compute Parker's reported gain or loss relating to the land for 2011.000 D.000 loss C.000 loss D. $7. $5.000 loss E.000 E.500 E. $7.000 gain E. $166.000 gain B.000 gain D. $12. $12. The equipment had a cost of $120.800 C.000 D. $9. Devin reported net income of $300. $9. $172. Compute the income from Devin reported on Pepe's books for 2009. $54.000 with a remaining life of 9 years.600 B.000 gain 85. $174.300 B. A. $0 B. On that date Devin sold equipment to Pepe for $45.000 gain D. $187.600 87.500 D. $195. 2009.000 loss C. $225. $9. respectively.000 E.000 loss 86. $204. 84. $9. $21. $21.500 C. Compute the income from Devin reported on Pepe's books for 2010.000 and accumulated depreciation of $66. $191.000 . $190.000 C.200 B. $196.000 and $325. $21.000 gain B. $171.000 Pepe. Incorporated acquired 60% of Devin Company on January 1. A.000 E. Pepe uses the equity method to account for its investment in Devin.700 E.000 gain E.000 for 2009 and 2010.000 loss E. What is the gain or loss on equipment reported by Devin for 2009? A. A.83. $184. $202.000. $194.000 gain C. $180. What is the consolidated gain or loss on equipment for 2009? A.000 loss D. $193. Compute income from Stark reported on Parker's books for 2011. $21.400 D. using the initial value method.000 89.) Debit investment in subsidiary. Compute the non-controlling interest in the net income of Devin for 2010. Downstream ending inventory profit. $130.600 C. .000 D. $120. using the equity method. A.88. ___ 6. Upstream beginning inventory profit. ___ 5. $126. Upstream ending inventory profit. Compute the non-controlling interest in the net income of Devin for 2009.200 E. using the initial value method. ___ 3. ___ 7. Amortization of cost over book value. (C.) None of the above. using the initial value method. $122. Downstream beginning inventory profit. ___ 4. Upstream transfer of land in the period after transfer where subsidiary recognizes a loss. Upstream transfer of depreciable assets in the period after transfer where subsidiary recognizes a gain. (B. using the initial value method. using the initial value method.600 90.800 B. ___ 9. For each of the following situations (1 . ___ 2.10).) Debit retained earnings. (E. (A. $130.e) that would be required on a consolidated worksheet. $116. $120.) Credit investment in subsidiary. using the initial value method.000 D. $112. Downstream transfer of depreciable assets in the period after transfer where parent recognizes a gain.000 E. A. ___ 1. $123. using the initial value method.400 C. ___ 10.) Credit retained earnings. (D.400 B. using the equity method. using the initial value method. Downstream transfer of land in the period after transfer where parent recognizes a loss. $129. Income from subsidiary. ___ 8. select the correct entry (a . 91. Varton Corp. when will the gain on this transfer actually be earned? 92.000. Throughout 2009. During 2009. From a consolidated point of view.. Why must the gross profit on the sale be deferred when consolidated financial statements are prepared at the end of 2009? . 2009. Cleveland Co. sold land to Shannahan Co. On April 7. on January 1. sold inventory to Leeward Co. sold inventory to its parent company.. acquired all of the voting common stock of Caleb Co. Pate Corp. its subsidiary. its subsidiary. 2009.000 that was sold to Caleb for its fair value of $120. Forsyth Corp. when will the gain on this transfer be earned? 93. Forsyth still owned all of the inventory at the end of 2009. Edwards Co. From a consolidated point of view. Varton owned some land with a book value of $84. How should this transaction be accounted for by the consolidated entity? 94. Dithers Inc. How is the gain on an intercompany transfer of a depreciable asset realized? 98. 2009. acquired all of the common stock of Bumstead Corp. How does a gain on an intercompany sale of equipment affect the calculation of a non-controlling interest? 96. on January 1. Bumstead sold land to Dithers at a gain.95. During 2009. Why do intercompany transfers between the component companies of a business combination occur so frequently? . No consolidation entry for the sale of the land was made at the end of 2009. What errors will this omission cause in the consolidated financial statements? 99. How do upstream and downstream inventory transfers differ in their effect on a year-end consolidation? 97. What is the purpose of the adjustments to depreciation expense within the consolidation process when there has been an intercompany transfer of a depreciable asset? . Inc. owns 90 percent of Richards. and bought $200. The transfer price was equal to 30 percent of the sales price. Fraker. Inc. When preparing consolidated financial statements. What is the impact on the non-controlling interest of a subsidiary when there are downstream transfers of inventory between the parent and subsidiary companies? 103.000 of Richards' inventory in 2009.100. How is the gain on an intercompany transfer of land realized? 104. what amount of these sales is eliminated? 101. What is meant by unrealized inventory gains and how are they treated on a consolidation worksheet? 102. 105. Tara Company holds 80 percent of the common stock of Stodd Inc. In the current year, Tara reports sales of $5,000,000 and cost of goods sold of $3,500,000. For the same period, Stodd has sales of $500,000 and cost of goods sold of $400,000. During the year, Stodd sold merchandise to Tara for $40,000 at a price based on the normal markup. At the end of the year, Tara still possesses 20 percent of this inventory. Prepare the consolidation entry to defer the unrealized gain. 106. King Corp. owns 85% of James Co. King uses the equity method to account for this investment. During 2009, King sells inventory to James for $500,000. The inventory originally cost King $420,000. At 12/31/09, 25% of the goods were still in James' inventory. Required: Prepare the Consolidation Entry TI and Consolidation Entry G for the consolidation worksheet. 107. Flintstone Inc. acquired all of Rubble Co. on January 1, 2009. Flintstone decided to use the initial value method to account for this investment. During 2009, Flintstone sold to Rubble for $600,000 inventory with a cost of $500,000. At the end of the year 30% of the goods were still in Rubble's inventory. Required: Prepare Consolidation Entry TI and Consolidation Entry G for the consolidation worksheet at 12/31/09. 108. Yoderly Co., a wholly owned subsidiary of Nelson Corp., sold goods to Nelson near the end of 2008. The goods had cost Yoderly $105,000 and the selling price was $140,000. Nelson had not sold any of the goods by the end of the year. Required: Prepare Consolidation Entry TI and Consolidation Entry G that are required for 2009. 109. Strayten Corp. is a wholly owned subsidiary of Quint Inc. Quint decided to use the initial value method to account for this investment. During 2009, Strayten sold Quint goods which had cost $48,000. The selling price was $64,000. Quint still had one-fourth of the goods on hand at the end of the year. Required: Prepare Consolidation Entry *G, which would have to be recorded at the end of 2010. 110. Hambly Corp. owned 80% of the voting common stock of Stroban Co. During 2009, Stroban sold a parcel of land to Hambly. The land had a book value of $82,000 and was sold to Hambly for $145,000. Stroban's reported net income for 2009 was $119,000. Required: What was the non-controlling interest's share of Stroban Co.'s net income? 111. McGraw Corp. owned all of the voting common stock of both Ritter Co. and Lawler Co. During 2009, Ritter sold inventory to Lawler. The goods had cost Ritter $65,000 and they were sold to Lawler for $100,000. At the end of 2009, Lawler still held 30% of the inventory. Required: How should the sale between Lawler and Ritter be accounted for by the consolidated entity? Virginia Corp. owned all of the voting common stock of Stateside Co. Both companies use the perpetual inventory method and Virginia decided to use the partial equity method to account for this investment. During 2009, Virginia made cash sales of $400,000 to Stateside. The gross profit rate was 30% of the selling price. By the end of the year, Stateside had used 75% of the goods. 112. Prepare journal entries for Virginia and Stateside to record the sales/purchases during 2009. 113. Prepare the consolidation entries that should be made at the end of 2009. 114. Prepare any 2010 consolidation worksheet entries that would be required for this inventory transfer. 000 in 2009.000 in 2008 and $154. Of this inventory.000 of the 2009 transfers were held until 2010. Assume that Polar sold inventory to Icecap at a markup equal to 40% of cost. 2009: 115. determine the balances that would appear for the following accounts: (1) Cost of Goods Sold. purchased an 80% interest in Icecap Co. Required: On the consolidated financial statements for 2009. Of this inventory.800 of the 2009 transfers were held until 2010.000 in 2008 and $112. Intercompany transfers were $126. $39. Assume that Icecap sold inventory to Polar at a markup equal to 40% of cost. determine the balances that would appear for the following accounts: (1) Cost of Goods Sold. Required: On the consolidated financial statements for 2009. Intercompany transfers were $70.Several years ago Polar Inc.200 of the 2008 transfers were retained and then sold by Icecap in 2009 while $58. (If you use a gross profit percentage. (2) Inventory and (3) Non-controlling Interest in Subsidiary's Net Income.) 116.000 in 2009. (If you use a gross profit percentage. The book values of Icecap's asset and liability accounts at that time were considered to be equal to their fair values.400 of the 2008 transfers were retained and then sold by Polar in 2009 whereas $49. Polar paid an amount corresponding to the underlying book value of Icecap so that no allocations or goodwill resulted from the purchase price. The following selected account balances were from the individual financial records of these two companies as of December 31. $29. (2) Inventory and (3) Non-controlling Interest in Subsidiary's Net Income.) . do not round the calculation. do not round the calculation. 2008 for $112. On January 1. Assuming that Musial owned only 90% of Matin. Assume there is no amortization related to the original investment. On that date.000 in cash. Depreciation expense was calculated using the straight-line method. Musial earned $308. (2) Operating expenses and (3) Non-controlling Interest in Subsidiary's Net Income. The equipment had originally cost $140. What is consolidated net income for 2009? 119.000 when transferred. determine the balances that would appear for the following accounts: (1) Buildings (net).000 but had a book value of only $98. 118. Required: On the consolidated financial statements for 2009.000.117. 2009.000 on that date. Polar sold a building to Icecap on January 1. (a wholly-owned subsidiary) for $168.000. the equipment had a five-year remaining life. Musial Corp. although the book value of this asset was only $70. what is consolidated net income for 2009? . sold equipment to Matin Inc. The building had a five-year remaining useful life and was to be depreciated using the straight-line method with no salvage value.000 in net income in 2009 (not including any investment income) while Matin reported $126. 120. what is consolidated net income for 2009? . Assuming that Musial owned only 90% of Matin and the equipment transfer had been upstream. As Wood uses the land E. sells the land to a third party C.140.500 and was sold to Wood for $89. No gain can be recognized D. Consolidated cost of goods sold would have been reduced because of the non-controlling interest in the subsidiary E. acquired 60% of Kindall Co. on January 1. Consolidated cost of goods sold would have been $2. begins using the land productively Difficulty: Easy Hoyle . Edgar made several sales of inventory to Kindall. How would consolidated cost of goods sold have differed if the inventory transfers had been for the same amount and cost.. Edgar Co. Consolidated cost of goods sold would have been higher because of the non-controlling interest in the subsidiary Difficulty: Medium Hoyle .Chapter 05 #1 2.000. Power Corp. its wholly owned subsidiary. when is the gain on the sale of the land realized? A.175. Consolidated cost of goods sold for 2009 was $2. sold land to Wood Co. but from Kindall to Edgar? A. 2009.ch5 Key 1. Proportionately over a designated period of years B.000.000 C.Chapter 05 #2 .000. Consolidated cost of goods sold would have been $2. The cost and selling price of the goods were $140. When Wood Co. 2009. During 2009. respectively.140. Kindall still owned one-fourth of the goods at the end of 2009.000 and $200. The effect on consolidated cost of goods sold cannot be predicted from the information provided D. From the perspective of the combination. When Wood Co. The land cost $61. On November 8.000 B. 000 to Gaspard Farms for $1.000 Difficulty: Hard Hoyle .200 B.000 B. Race decided to use the equity method to account for this investment.400. 2009. $22. Gentry sold Gaspard Farms for $625. $6. Race sold to Gallow for $450. Gallow's reported net income was $204.000.000 E.000 D. $32. on January 5.400.800 C.900 E. During the year. For 2010.800 Difficulty: Easy Hoyle . What was the non-controlling interest's share of consolidated net income? A.900 D.000. $30. What was consolidated cost of goods sold? A.3.Chapter 05 #5 . What was consolidated cost of goods sold for 2010? A. Rand still owned 40% of the goods at the end of the year.620. $6.000 and Race's net income was $806.Chapter 05 #4 5.596. acquired 80% of the voting common stock of Gallow Inc. $37.000.000 C.000 C. $16.000 B.800. During 2009.600. During 2009.000 and Gaspard Farms still owned 10% of the goods at year-end.000 for Gentry.625. Webb Co. $14. cost of goods sold was $1. acquired 100% of Rand Inc.000 goods which cost $330.040.200.000 D.960.000. acquired 100% of Gaspard Farms on January 5.000 for Gaspard Farms and $5. Gentry Inc.000 goods which had cost $425.Chapter 05 #3 4. $17. $15.000 goods that cost $1. $40. 2009.800. $5. $14.200.000 E. Gentry sold goods with a cost of $800. $5.800. Cost of goods sold was $10. Gallow still owned 15% of the goods at year-end.000 Difficulty: Hard Hoyle . On January 1.000 for Rand. Race Corp. Gaspard Farms still owned 12% of the goods at the end of the year. $5.000. Webb sold Rand for $2. 2009.000 for Webb and $6. In 2010.596.560.400. 200 E.6. What was the non-controlling interest in Kent's net income? A. Thelma sold a parcel of land to Norek. Justings should A.000. $26. On January 2. Defer recognition of the gain until Evana sells the land to a third party D. What is the non-controlling interest's share of Thelma's net income? A. Justings Co.000. $54. The total selling price was $180. Kent's reported net income was $300. At the end of the year. During 2009.000. $86.000.000 E. $94. Recognize a gain of $17.800 E. Kent made several sales of inventory to X-Beams. Recognize a gain of $8. $35. Recognize a gain of $22. $39. Norek Corp.000. $22. Justings sold to Evana land with a book value of $48.000 B.Chapter 05 #6 7. The selling price was $70. Thelma's reported net income for 2009 was $119. 2009.000.000 and was sold to Norek for $45.640 Difficulty: Medium Hoyle . The land had a book value of $32.000 and the cost was $100.800 C. owned 70% of the voting common stock of Kent Corp.000 Difficulty: Medium Hoyle .Chapter 05 #8 . During 2009. $85. 20% of the goods were still in X-Beams' inventory.Chapter 05 #7 8.200 C.600 C. $31.100 Difficulty: Medium Hoyle . owned 80% of Evana Corp. Not recognize a gain on the sale of the land since it was made to a related party B. owned 70% of the voting common stock of Thelma Co. $90. In its accounting records.600 D.700 B.000 D. X-Beams Inc. The equipment had cost $140.600 Difficulty: Medium Hoyle .600 E. $95. owned 70% of the voting common stock of Devin Co. Von Co.Chapter 05 #11 . At what amount should the equipment (net of depreciation) be included on the consolidated balance sheet dated December 31.000 C. $41. The equipment had a remaining useful life of five years and a $0 salvage value. There were unrealized gains of $40.000. $85.000 for 2009. Bauerly Co.100 B. During 2009. When the goods are sold to a third party by Lord B. $80.600 D. At the time of the sale.000 Difficulty: Medium Hoyle . $21. sold inventory to its wholly-owned subsidiary. 2009? A. Straight-line depreciation is used by both Clemente and Snider.000 B.000 in the beginning inventory and $25. Devin reported net income of $137. $45. When the goods are used by Lord E.600 C. owned all of the voting common stock of Snider Co. $100.000 E.Chapter 05 #10 11. 2009. The inventory cost $30. What is the non-controlling interest's share of Devin's net income for 2009? A. Lord Co.Chapter 05 #9 10. $33.000. Clemente sold some equipment to Snider for $125. From the perspective of the combination.9. when is the $14. Bauerly decided to use the equity method to account for the investment. When Von sold the goods to Lord D. During 2009. No gain can be recognized since the transaction was between related parties Difficulty: Easy Hoyle . On January 2. When Lord pays Von for the goods C. Clemente Co.000. $36.000 at the end of the year.000. the balance in accumulated depreciation was $40. Devin made frequent sales of inventory to Bauerly.000 and was sold to Lord for $44. $75.000 D.000 gain realized? A. Chain sold to Shannon a parcel of land with a book value of $65. On the original date of acquisition.375 C. On their separate 2009 income statements. Chain Co. Sparis frequently made sales of inventory to Gibson.000 B.000 E. What was the non-controlling interest's share of Sparis' net income for 2010? A. sold equipment to its subsidiary. Payton and Starker reported depreciation expense of $84.000.000 and for Shannon-$256.000 in 2010. $139. Starker Corp.. owned a 90% interest in Sparis Co. owned all of the voting common stock of Shannon Corp.000 and $60. The selling price was $83.Chapter 05 #12 13.000 D. $90.000. The equipment had cost $125.Chapter 05 #13 14.000. $91. $654.000. Gibson still owned 30% of the goods. $672.680 E. $134.000 B.000 and the balance in accumulated depreciation was $45.600 C. $690. Payton Co. On January 1. $144. $91. $148. Net income for Sparis was $912.12. 2009. were $420. The equipment had an estimated remaining useful life of eight years and $0 salvage value.720 D. Gibson Corp.000 during 2010. 2009. include the following balances for land: for Chain-$416. $109.000 in 2009 and $500. the book value of Shannon's land was equal to its fair value. The corporations' balance sheets dated December 31.680 B. What is the consolidated balance for land on the 2010 balance sheet? A.000 C.000 E.000 Difficulty: Medium Hoyle . On April 4. $90. The sales. for $115. which include a markup over cost of 25%. $85.000. There were no other transactions which affected the companies' land accounts during 2010.Chapter 05 #14 . The amount of depreciation expense on the consolidated income statement for 2009 would have been A. $755. Both companies use straight-line depreciation. respectively. $737.000. 2010.625 Difficulty: Medium Hoyle . At the end of each year.000 D.800 Difficulty: Hard Hoyle . 000 Difficulty: Medium Hoyle . Prince Corp. $30. During October 2009.000 C. $28. Skillet had sales of $420. on January 1.000 C. acquired 75% percent of the voting common stock of Ontario Corp. The amount of unrealized intercompany profit in ending inventory at December 31.000 and was sold to Ontario for $390. 2009.000 and $966.000 E. owned 80% of Kile Corp. The amount of unrealized intercompany profit that should be eliminated in the consolidation process at the end of 2009 is A. Ontario still had $60. $1. 2009 that should be eliminated in the consolidation process is A.000 and cost of goods sold of $252. The inventory cost Yukon $260. $15.078.000 and cost of goods sold of $840.'s common stock. At December 31. $42. $21.Chapter 05 #17 . 2009. Also during 2009.540.000. holds 90% of the common stock of Skillet Co. Pot sold merchandise to Skillet for $140. gross profit percentages were 30% of sales for Prince and 40% of sales for Kile.000. For this same period. During 2009. Hoyle .000 and $952.000 B.000 E.Chapter 05 17.022. What are consolidated sales and cost of goods sold? A. $32.000.000. $20. $1. $110.000 E.000 Difficulty: Medium Hoyle . During the year.540. The subsidiary still possesses 40% of this inventory at the end of 2009.000.000 C.Chapter 05 #16 Pot Co.400 D.000 D. Kile sold merchandise to Prince for $140.000 B.000 and $1. $22. 50% of this merchandise remained in Prince's inventory.500 D. Pot had established the transfer price based on its normal markup.000 B.000 and $1. $1.092.000 Difficulty: Hard Hoyle . Yukon made sales of inventory to Ontario.000 and $1. $1. $56.Chapter 05 #15 16.000 of the goods in its inventory at the end of the year.400. Yukon Co.120.15. For 2009. Pot reported sales of $1.400.400. $1. 078.000 and $974.092. how does this transfer affect the calculation of Dalton's share of consolidated net income? A. Dalton Corp. At that time. $1. Dalton sold this building to Shrugs for $392.540. No salvage value was anticipated and the building was to be depreciated on the straight-line basis.800 B.000 C.Chapter 05 #19 . Consolidated net income must be reduced by $44.400 C.540..Chapter 05 #18 19.000 and $1. In preparing financial statements for 2009. 2007.000 D.000 E. owned 70% of the outstanding common stock of Shrugs Inc.000. what are consolidated sales and cost of goods sold? A. Consolidated net income must be reduced by $49.000 and $966. to Pot Co.400.18. Dalton acquired a building with a ten-year life for $420.400 E. Consolidated net income must be reduced by $50.000. $1. Consolidated net income must be reduced by $53. $1.400.000 and $1. $1.200 Difficulty: Medium Hoyle . Assuming that the transfers were from Skillet Co.000 and $952. Consolidated net income must be reduced by $56.400.000 Difficulty: Hard Hoyle . $1. On January 1. 2009.000 D. the building had a remaining life of eight years but still no expected salvage value. On January 1.000 B. 000. 60% of these goods were still in the company's possession on December 31. Hoyle . bought 80% of the outstanding voting common stock of Strong Corp. before preparing the consolidated worksheet. Pride bought inventory for $112. the financial statements appeared as follows: During 2009. $28. $560.000. $840.000 and sold it to Strong for $140.000 B.000. 2009.000 C. As of December 31. Inc. $700. for $364.000 Difficulty: Medium Hoyle .Chapter 05 20.000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35. $588.000 E. 2009. Of this payment. $644. Only half of this purchase had been paid for by Strong by the end of the year. What is the total of consolidated revenues? A. Pride. Any remaining excess was attributable to goodwill which has not been impaired.Chapter 05 #20 .On January 1.000 D. 064.000 E. $98.440 C.069. $53.Chapter 05 #22 23. $212. $168.Chapter 05 #23 24. $36.000 B.058. $184.000 B.400 Difficulty: Medium Hoyle . What is the total of consolidated cost of goods sold? A. $1.21.400 C. $100. $97. What is the consolidated total for equipment (net) at December 31. $48. $101.800 D.000 E.000 B. $1.Chapter 05 #21 22.000 Difficulty: Medium Hoyle .800 C. $1. $1. $47.800 B. What is the total of consolidated operating expenses? A.066. $196.Chapter 05 #24 . $42.800 Difficulty: Medium Hoyle .200 D.600 C. 2009? A.800 D. $93.900 Difficulty: Medium Hoyle . What is the consolidated total of non-controlling interest appearing on the balance sheet? A.840 E.000 E. $203.600 D. $952. Investment Strickland Company E.Chapter 05 26. at a profit during 2009. 2009? A. $336. Cost of goods sold C. Investment Strickland Company E.000 B. What is the consolidated total for inventory at December 31.000 C. Inventory D. which of the following choices would be a credit entry in the consolidated worksheet for 2009? A. With regard to the intercompany sale. $280. Retained earnings B. Hoyle . Retained earnings B.Chapter 05 #27 . Carter Company. Inventory D.300 Difficulty: Medium Hoyle .Chapter 05 #25 Strickland Company sells inventory to its parent.200 E. $349.25.000 D. $347.Chapter 05 #26 27. Cost of goods sold C. which of the following choices would be a debit entry in the consolidated worksheet for 2009? A. Select the correct answer. Additional paid-in capital Difficulty: Easy Hoyle . Additional paid-in capital Difficulty: Easy Hoyle . With regard to the intercompany sale. $364. Investment Strickland Company E. which of the following choices would be a debit entry in the consolidated worksheet for 2010? A. which of the following choices would be a credit entry in the consolidated worksheet for 2010? A. Additional paid-in capital Difficulty: Medium Hoyle . With regard to the intercompany sale.Chapter 05 #30 . Fisher Company. Additional paid-in capital Difficulty: Medium Hoyle .Chapter 05 30.28. Additional paid-in capital Difficulty: Easy Hoyle . Investment Strickland Company E. at a profit during 2009. With regard to the intercompany sale.Chapter 05 #29 Walsh Company sells inventory to its subsidiary. Cost of goods sold C. With regard to the intercompany sale. Cost of goods sold C. Inventory D. Inventory D. Hoyle . Retained earnings B. Retained earnings B.Chapter 05 #28 29. Retained earnings B. Walsh uses the equity method to account for its investment in Fisher. Cost of goods sold C. which of the following choices would be a debit entry in the consolidated worksheet for 2009? A. Inventory D. Investment Fisher Company E. Chapter 05 #31 32. Retained earnings B. Inventory D.Chapter 05 #32 33. Additional paid-in capital Difficulty: Medium Hoyle .Chapter 05 #33 .31. Cost of goods sold C. Cost of goods sold C. Retained earnings B. Retained earnings B. Investment Fisher Company E. Additional paid-in capital Difficulty: Easy Hoyle . Investment Fisher Company E. which of the following choices would be a credit entry in the consolidated worksheet for 2010? A. Investment in Fisher Company E. which of the following choices would be a credit entry in the consolidated worksheet for 2009? A. Cost of goods sold C. With regard to the intercompany sale. Additional paid-in capital Difficulty: Medium Hoyle . which of the following choices would be a debit entry in the consolidated worksheet for 2010? A. With regard to the intercompany sale. With regard to the intercompany sale. Inventory D. Inventory D. Chapter 05 #35 . before the non-controlling interest E. Income from subsidiary will be reduced for downstream ending inventory profits but not for upstream profits. Income from subsidiary will be lower by the amount of the beginning inventory profits multiplied by the non-controlling interest percentage for upstream transfers B. When comparing the difference between an upstream and downstream transfer of inventory and using the initial value method. Income from subsidiary will be the same for upstream and downstream profits Difficulty: Hard Hoyle . Income from subsidiary will be lower by the amount of the ending inventory profit multiplied by the non-controlling interest percentage for downstream transfers B. before the effect of the non-controlling interest E.34. Income from subsidiary will be higher by the amount of the ending inventory profit multiplied by the non-controlling interest percentage for downstream transfers C. Income from subsidiary will be reduced for upstream ending inventory profits but not for downstream profits. Income from subsidiary will be higher by the amount of the beginning inventory profits multiplied by the non-controlling interest percentage for upstream transfers C. Income from subsidiary will be reduced for upstream ending inventory profit but not for downstream profit. before the non-controlling interest D. Income from subsidiary will be reduced for downstream ending inventory profit but not for upstream profit. Income from subsidiary will be the same for upstream and downstream profit Difficulty: Hard Hoyle . which of the following statements is true? A. When comparing the difference between an upstream and downstream transfer of inventory and using the initial value method. before the effect of the non-controlling interest D.Chapter 05 #34 35. which of the following statements is true? A. 36.Chapter 05 #36 37. These year-end deferrals are then added to next year's subsidiary net income in the calculation of parent's income from subsidiary. A gain is always recognized but a loss is eliminated on a consolidated income statement E. Merchandise transfers from a parent to its subsidiary that have not been sold to unaffiliated parties should be included in consolidated inventory at their transfer price E. Profits on upstream transfers associated with the parent's ending inventory are subtracted from subsidiary net income for the current year in the calculation of parent's income from subsidiary. Profits on upstream transfers associated with the parent's ending inventory are subtracted from subsidiary net income for the current year in the calculation of parent's income from subsidiary. No gain will be reported on the 2010 consolidated income statement D. Which of the following statements is true regarding inventory transfers between a parent and its subsidiary. A gain will be reported on the consolidated income statement in 2007 B. The subsidiary sold the land externally for a gain in 2010. Which of the following statements is true? A. Non-controlling interest in subsidiary's net income should not be reduced for upstream or downstream ending inventory profits Difficulty: Medium Hoyle .Chapter 05 #37 38. This procedure is appropriate even if all the intercompany transactions unsold at year-end may not be sold in the next year D.Chapter 05 #38 . A loss and a gain are always recognized on a consolidated income statement D. A gain will be reported on the consolidated income statement in 2010 C. Parent sold land to its subsidiary for a gain in 2007. This procedure is inappropriate because all the intercompany transactions unsold at year-end may not be sold in the next year C. Only the parent company will report a gain in 2010 E. Which of the following statements is true regarding an intercompany sale of land? A. The subsidiary will report a gain in 2007 Difficulty: Easy Hoyle . These year-end deferrals are then added to next year's subsidiary net income in the calculation of parent's income from subsidiary. using the initial value method? A. A loss and a gain are always eliminated on a consolidated income statement C. The sale of merchandise between a parent and its subsidiary represents an arm's-length transaction and thus provides the basis for the recognition of profit on such transfers B. A loss is always recognized but a gain is eliminated on a consolidated income statement B. A gain or loss is eliminated by adjusting stockholders' equity through comprehensive income Difficulty: Easy Hoyle . A worksheet entry is made with a credit to investment in subsidiary for a downstream transfer when the parent uses the equity method D. A worksheet entry is made with a debit to retained earnings for a downstream transfer D. Non-controlling interest in subsidiary's net income is never affected by a gain on the transfer B.Chapter 05 #42 .Chapter 05 #39 40. An intercompany sale took place whereby the book value exceeded the transfer price of a depreciable asset. No worksheet entry is necessary Difficulty: Hard Hoyle . Non-controlling interest in subsidiary's net income is increased by an upstream gain in the year of transfer Difficulty: Medium Hoyle . A worksheet entry is made with a debit to retained earnings for a downstream transfer E. A worksheet entry is made with a debit to retained earnings for an upstream transfer E. No worksheet entry is necessary Difficulty: Medium Hoyle . Non-controlling interest in subsidiary's net income is affected by a downstream gain only D. A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer C. A worksheet entry is made with a credit to retained earnings for an upstream transfer C. An intercompany sale took place whereby the transfer price exceeded the book value of a depreciable asset. Which statement is true for the year following the sale? A.39. A worksheet entry is made with a debit to gain for a downstream transfer B. Non-controlling interest in subsidiary's net income is always affected by a gain on the transfer C. Non-controlling interest in subsidiary's net income is affected only when the transfer is upstream E. A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer when the parent uses the equity method D. Which of the following statements is true concerning an intercompany transfer of a depreciable asset? A.Chapter 05 #41 42. A worksheet entry is made with a debit to retained earnings for an upstream transfer B. A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer E. Which statement is true for the year following the sale? A.Chapter 05 #40 41. Which statement is true for the year following the sale? A. A worksheet entry is made with a debit to investment in subsidiary for an upstream transfer B. No worksheet entry is necessary Difficulty: Medium Hoyle . A worksheet entry is made with a debit to gain for an upstream transfer C. An intercompany sale took place whereby the transfer price was less than the book value of a depreciable asset. The following data are available pertaining to Gargiulo's income and dividends.000 E.375 C. $75.Chapter 05 43. $75. Compute the income from Gargiulo reported on Posito's books for 2011. $63. $76.730 C.925 D.Chapter 05 #45 . 2009.600 B. $75. $77. $70. $63.870 D.800 Difficulty: Medium Hoyle .270 D. $84. The following data are available pertaining to intercompany purchases. Compute the income from Gargiulo reported on Posito's books for 2009.Gargiulo Company. A. A.130 C. $83. $62. $84.700 Difficulty: Medium Hoyle . $84.Chapter 05 #44 45.Chapter 05 #43 44. Gargiulo was acquired on January 1. Assume the equity method is used.000 B. Compute the income from Gargiulo reported on Posito's books for 2010. A.850 Difficulty: Medium Hoyle .825 E. sells inventory to Posito at a 25% profit on selling price.500 B. Hoyle . a 90% owned subsidiary of Posito Corporation. $84.600 E. $62. $7. Compute the non-controlling interest in Gargiulo's net income for 2011.000 D.400 E.030 D. $7.580 Difficulty: Medium Hoyle .Chapter 05 #46 47. $9. Compute the non-controlling interest in Gargiulo's net income for 2010.970 B. $9. $6. For consolidation purposes. $6. $300 B. A. $270 Difficulty: Medium Hoyle .375 C.325 E. $1. $8. A. A. Compute the non-controlling interest in Gargiulo's net income for 2009. $6. $9.Chapter 05 #49 .230 Difficulty: Medium Hoyle .425 D.270 E. $8. $240 C. what amount would be debited to cost of goods sold for consolidation (worksheet entry G) in 2009? A.Chapter 05 #48 49.500 B. $8. $8.46.Chapter 05 #47 48.400 B.485 Difficulty: Medium Hoyle . $2.430 D.600 E.570 C. $7. $8. $9.000 C. 600 C.50.000 B. $800 C.Chapter 05 #50 51. $1. $2. For consolidation purposes. what amount would be debited to retained earnings for consolidation (worksheet entry G) in 2009? A.600 E. For consolidation purposes. $270 Difficulty: Medium Hoyle .000 D. $240 E. $675 Difficulty: Medium Hoyle . For consolidation purposes. $900 Difficulty: Medium Hoyle .000 D. $240 B.400 E.Chapter 05 #53 . $0 B. $2. $600 B.Chapter 05 #51 52. $300 D. $1. what amount would be debited to retained earnings for consolidation (worksheet entry G) in 2010? A. $1.000 E. $750 C.760 D. what amount would be debited to cost of goods sold for consolidation (worksheet entry G) in 2010? A. $300 C. what amount would be debited to cost of goods sold for consolidation (worksheet entry G) in 2011? A. $3.Chapter 05 #52 53. $3. $3. For consolidation purposes. $270 Difficulty: Medium Hoyle . $7. Hoyle . In the current year. Compute consolidated sales.000 B.000 and cost of goods sold of $160.000 B. $10. Compute consolidated cost of goods sold. At the end of the year.500. Shannon still possesses 30 percent of this inventory.500. $10. $7. For the same period.000 D.Chapter 05 #55 56.000.000. Patti sold merchandise to Shannon for $60.260.615.140.Chapter 05 55. $900 Difficulty: Medium Hoyle . $10. $800 E.Chapter 05 #54 Patti Company holds 80% of the common stock of Shannon.400 C. Shannon has sales of $200. Patti reports sales of $10. Inc.000 B. $1. A.000 Difficulty: Medium Hoyle .000.000 and cost of goods sold of $7. A. $7.000 Difficulty: Medium Hoyle .000. During the year.000 D.604.500 E.000 C. $10.126.54. $7. $7. what amount would be debited to retained earnings for consolidation (worksheet entry G) in 2011? A.000 at a price based on the normal markup.000 D. $3. $2.200. $10.Chapter 05 #56 .600.000 C. For consolidation purposes.660.000 E. a 90% owned subsidiary of Simon Company. except Shannon sold inventory to Patti.000 Difficulty: Medium Hoyle . $1.Chapter 05 #57 On April 1.260.000 B. $10.000 D.250 C.200. 2009 Wilson Company. $11.500 Difficulty: Hard Hoyle .000 and a book value of $50.126. The following data are available pertaining to Wilson's income and dividends: Hoyle .Chapter 05 #58 59.140. $18. $38. Assume the same information. $19.000 with a 10-year remaining life as of January 1. $10. $2. $37. 2009. A.750 D. A.500 B.250 Difficulty: Hard Hoyle . $10.Chapter 05 58. $1.000 E. $10. $5. Simon realized that the useful life of the equipment was longer than originally anticipated.500 D.825 C.250.250 E. $1.000 C. Compute the amortization of gain for 2009 for consolidation purposes. bought equipment from Simon for $68. A.57. 2009.950 B.Chapter 05 #59 . The equipment had an original cost to Simon of $80.000 E. On January 1. Compute the gain on transfer of equipment reported by Simon for 2009. Compute consolidated sales. $10. at ten remaining years.000. $109.575 D. $2. $1.825 C. A. A.800 E.Chapter 05 #60 61. $72.000 Difficulty: Medium Hoyle . A. A. $72.800 Difficulty: Hard Hoyle . $73.000 C. $73.000 D. Compute Simon's share of income from Wilson for consolidation for 2010. $1. Compute Simon's share of income from Wilson for consolidation for 2009. $90.Chapter 05 #61 62. $110.500 E.500 E.500 Difficulty: Hard Hoyle .000 Difficulty: Medium Hoyle .60. $1.000 D.Chapter 05 #63 .950 B.000 B.000 D. $7. $106.Chapter 05 #62 63. Compute the amortization of gain for 2010 for consolidation purposes. $1. $7.825 E. $109.000 C.825 C. $1.925 B. $2. Compute the amortization of gain for 2011 for consolidation purposes. $1.000 B. $108. Smeder reported net income of $28. 2009.000 D. A.000 D.Chapter 05 #65 66. $18. A.000 cash. $14.400 B. Smeder Company. $11. Smeder's records carried the equipment at a cost of $120. $117.000 for 2009 and 2010. transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84. $12. $34.Chapter 05 65.64. $36.000 E. $0 Difficulty: Medium Hoyle . Straight-line depreciation is used. $119. $118. Compute Simon's share of income from Wilson for consolidation for 2011. Hoyle . Inc.Chapter 05 #64 On January 1.000 B.000 and $32. $12.400 C.200 D. Compute the gain recognized by Smeder Company relating to the equipment for 2009. respectively.000. $12.000 E. $115..800 Difficulty: Hard Hoyle .Chapter 05 #66 .000 C.800 E.000 less accumulated depreciation of $48. an 80% owned subsidiary of Collins. A. At the date of transfer. $10.000 Difficulty: Medium Hoyle . $118.825 B. Compute Collins' share of Smeder's net income for 2009.000 C. before allocation to controlling and non-controlling interests. Decrease $10. Compute Collins' share of Smeder's net income for 2010. $48. Increase $2.000. A. $2. Decrease $14. Credit accumulated depreciation.Chapter 05 #68 69. an 80% owned subsidiary of Leo Company. $27. Debit accumulated depreciation.000 Difficulty: Medium Hoyle . 2009. Increase $10.Chapter 05 .000 E.600 B. Debit accumulated depreciation. Debit accumulated depreciation.000 Difficulty: Medium Hoyle . For consolidation purposes. $24. $46. what net debit or credit will be made in 2009 relating to the equipment transfer? A. Credit accumulated depreciation.000 E.000 Difficulty: Medium Hoyle . What is the net effect on consolidated net income in 2009.Chapter 05 #67 68.000 C.000 D. for $75.000 D. Decrease $12. due to the equipment transfer? A. purchased land from Leo on March 1. Hoyle . $46. Leo uses the equity method to account for its investment. Stiller reported net income of $125.200 D. respectively.000 and $140.000 C. $27. $23.600 C. The land originally cost Leo $60.000.67.000 B.000 E. $34.000 for 2009 and 2010. $48.Chapter 05 #69 Stiller Company.000 B. $110. Credit land for $15.000 Difficulty: Medium Hoyle . Debit retained earnings for $50. what adjustment would be made for 2010 regarding the land transfer? A.000 loss D.000 E.000 D.000 loss B.000 D. On a consolidation worksheet.000 B.Chapter 05 #73 .000 gain Difficulty: Easy Hoyle .000 Difficulty: Easy Hoyle . $85.000 B. Credit gain for $15. $15. Compute income from Stiller on Leo's books for 2009.000 Difficulty: Easy Hoyle .000 gain C.000 B. Debit retained earnings for $15.Chapter 05 #70 71.000 D.000 gain E.000 C. Debit land for $15.70. Credit gain for $50. Debit gain for $50. $50. having used the equity method.Chapter 05 #72 73. On a consolidation worksheet.000 C.000 C. what adjustment would be made for 2009 regarding the land transfer? A. $88. $15. $125. A. Credit retained earnings for $50.000 E. Compute the gain or loss on the intercompany sale of land.Chapter 05 #71 72.000 E. $65. Credit retained earnings for $15. $100. Debit investment in Stiller for $15. $50. A. Which of the following will be included in a consolidation entry for 2009? A.000. sold land to Parker on May 1.000 gain D.000 in 2011. Compute income from Stiller on Leo's books for 2010.000 Difficulty: Easy Hoyle .000 gain B. Debit gain for $5. $112. $180.000 loss Difficulty: Easy Hoyle . The land originally cost Stark $85. respectively. Credit loss for $5.000. $5. $97. $85. $125.000 D. A. 2009. Credit gain for $5.Chapter 05 #75 76.000 C.74. $5.000 D. Debit loss for $5.000 and $220.000 Difficulty: Easy Hoyle . 2010 and 2011. Stark reported net income of $200.000 C.000 E. $80. $140..Chapter 05 #74 Stark Company.000 loss E. Inc.000 for 2009.Chapter 05 75.000 E. a 90% owned subsidiary of Parker.000. $100.Chapter 05 #76 . Compute the gain or loss on the intercompany sale of land. $80. for $80. Hoyle . Parker sold the land it purchased from Stark in 2009 for $92.000 B. A. Credit land for $5.000 B.000 loss C. Credit retained earnings for $5. Debit retained earnings for $5.500 C. $162.000 Difficulty: Easy Hoyle .000 C.000 gain C.000 Difficulty: Medium Hoyle . $157.77. Debit investment in subsidiary for $5.000 E.Chapter 05 #77 78. A.000 E. $175.Chapter 05 #80 . $184.000 B.000 loss E. $200.000 gain D. $205.500 E. A. Which of the following will be included in a consolidation entry for 2010? A.500 Difficulty: Medium Hoyle .000 B.000 D. $7.500 D. Credit land for $5. $166.Chapter 05 #78 79. $180. Compute income from Stark reported on Parker's books for 2009.000 loss B. Credit investment in subsidiary for $5.000 B.Chapter 05 #79 80. $5. $7. Compute the consolidated gain or loss relating to the land for 2011. $12. $185. A. $180. $12.000 D.000 loss Difficulty: Hard Hoyle .000 C. Compute income from Stark reported on Parker's books for 2010. respectively. Pepe uses the equity method to account for its investment in Devin. Compute Parker's reported gain or loss relating to the land for 2011.000 loss Difficulty: Medium Hoyle . $12.500 C. Devin reported net income of $300. $7. $0 Difficulty: Medium Hoyle .000.000 for 2009 and 2010. $225.81.500 D. On that date Devin sold equipment to Pepe for $45. The equipment had a cost of $120.300 B. $12.Chapter 05 . 2009. Hoyle .000 loss B. A. Compute Stark's reported gain or loss relating to the land for 2011.000 and accumulated depreciation of $66.000 with a remaining life of 9 years. $5.000 and $325.000 gain E.Chapter 05 #82 83. Compute income from Stark reported on Parker's books for 2011. $191.000 gain B. A. $7.700 E.000 Difficulty: Hard Hoyle . A.000 loss D.000 loss D.000 gain E. $5.000 loss C. Incorporated acquired 60% of Devin Company on January 1. $7.Chapter 05 #83 Pepe.000 gain C. $5.Chapter 05 #81 82. $7. $193. $202. $204. 000 gain E.000 gain C. $171. $196. $9.000 loss Difficulty: Easy Hoyle . $21.000 loss E. Compute the income from Devin reported on Pepe's books for 2009. Compute the income from Devin reported on Pepe's books for 2010. $21.000 Difficulty: Medium Hoyle . $194. $0 B. $190. A.Chapter 05 #84 85. $174.800 C.600 B. $21. $180. $184. $195. What is the gain or loss on equipment reported by Devin for 2009? A.400 D. $187.000 loss C.000 E. A.000 D. $172.600 Difficulty: Medium Hoyle . What is the consolidated gain or loss on equipment for 2009? A.000 C.200 B. $9.000 E. $54. $9.Chapter 05 #87 .000 gain Difficulty: Medium Hoyle .000 loss D.000 gain B. $21.Chapter 05 #86 87.000 gain D. $9.Chapter 05 #85 86.84. (8) B. using the equity method. Income from subsidiary. ___ 5. using the equity method. $120. (1) A. ___ 4. using the initial value method. $116.800 B.600 C. (B.) Debit retained earnings. $130. ___ 6. Upstream ending inventory profit. using the initial value method.Chapter 05 #89 90. Upstream beginning inventory profit. using the initial value method. Downstream beginning inventory profit. ___ 1. Downstream transfer of depreciable assets in the period after transfer where parent recognizes a gain.200 E. Amortization of cost over book value. $122. $129. (A. (9) D. (10) C Difficulty: Hard Hoyle . (3) E. (C.000 E. ___ 3. ___ 7. using the initial value method. Compute the non-controlling interest in the net income of Devin for 2009.10). $126. (4) E. using the initial value method. (D. (7) B. Compute the non-controlling interest in the net income of Devin for 2010. using the initial value method. (5) A.) None of the above. A.000 D. $130.Chapter 05 #88 89. For each of the following situations (1 .88. Downstream transfer of land in the period after transfer where parent recognizes a loss. ___ 10. $120. Downstream ending inventory profit. using the initial value method.000 D. (6) A. ___ 9.400 C.e) that would be required on a consolidated worksheet.Chapter 05 #90 . A.) Debit investment in subsidiary. Upstream transfer of land in the period after transfer where subsidiary recognizes a loss.000 Difficulty: Medium Hoyle .600 Difficulty: Medium Hoyle . (E. using the initial value method.400 B.) Credit investment in subsidiary. select the correct entry (a . $123. Upstream transfer of depreciable assets in the period after transfer where subsidiary recognizes a gain. (2) A. $112. ___ 2.) Credit retained earnings. ___ 8. the parent would be able to manipulate consolidated net income and consolidated net assets by transferring inventory between parent and subsidiary. when will the gain on this transfer be earned? The gain is earned when Leeward uses the goods or sells them to a third party.. although in legal form they are separate. During 2009. Because Caleb recognized a gain on its income statement. Why must the gross profit on the sale be deferred when consolidated financial statements are prepared at the end of 2009? A sale of inventory by a subsidiary to its parent is more accurately understood as a transfer within the entity. Difficulty: Easy Hoyle . sold inventory to its parent company. Pate Corp.Chapter 05 #92 93. sold land to Shannahan Co. 2009. when will the gain on this transfer actually be earned? The gain is earned when Shannahan sells the land to a third party.Chapter 05 #93 94. If recognition of the gross profit on the transfer was allowed. How should this transaction be accounted for by the consolidated entity? Caleb and Varton are in substance one entity. Also. Difficulty: Easy Hoyle . Varton Corp. The consolidation entry must reduce land to its cost. its subsidiary. Since Forsyth still owned the inventory at the end of the year.Chapter 05 #91 92. Forsyth Corp. From a consolidated point of view. 2009. No gain on the transfer should be recognized on the consolidated financial statements since the earnings process is not complete. Difficulty: Medium Hoyle . acquired all of the voting common stock of Caleb Co. Forsyth still owned all of the inventory at the end of 2009. Difficulty: Easy Hoyle . the consolidation process must eliminate the gain.000. From a consolidated point of view. on January 1. the earnings process was not yet complete. Throughout 2009. On April 7. Caleb's separate balance sheet showed the land at an amount greater than its cost to the combined entity.Chapter 05 #94 .000 that was sold to Caleb for its fair value of $120. its subsidiary. The "sale" of land by Varton should be regarded as a transfer of assets within the entity. Edwards Co. Varton owned some land with a book value of $84.. sold inventory to Leeward Co.91. Cleveland Co. Chapter 05 #95 96. any unrealized gain on the sale does not affect the calculation of non-controlling interest.Chapter 05 #97 . When the sale is upstream (from the subsidiary to the parent). Difficulty: Medium Hoyle . this elimination may be allocated between the controlling interest and non-controlling interest share of the subsidiary's earnings. the gain on the sale must be subtracted from the subsidiary's income and according to SFAS 160. When the sale of equipment is upstream. the sale of the equipment does not affect the calculation of the non-controlling interest's share of the subsidiary's net income.Chapter 05 #96 97. the gain on the sale is associated with the subsidiary. Difficulty: Medium Hoyle . Difficulty: Easy Hoyle . this elimination may be allocated between the controlling interest and the non-controlling interest's share of the subsidiary's earnings. How does a gain on an intercompany sale of equipment affect the calculation of a non-controlling interest? If the equipment is sold by the parent to the subsidiary.95. How do upstream and downstream inventory transfers differ in their effect on a year-end consolidation? If the sale of inventory is downstream (from parent to subsidiary). How is the gain on an intercompany transfer of a depreciable asset realized? The gain on an intercompany transfer of a depreciable asset may be realized in one of two ways: (1) through the use of the asset in operations or (2) through the sale of the asset to an independent third party. The gain on goods that the parent still owns should be deducted from the subsidiary's income and according to SFAS 160. When preparing consolidated financial statements. Bumstead sold land to Dithers at a gain. Inc. Difficulty: Medium Hoyle .Chapter 05 #100 . No consolidation entry for the sale of the land was made at the end of 2009. within the consolidation process. Why do intercompany transfers between the component companies of a business combination occur so frequently? "One reason for the significant volume and frequency of intercompany transfers is that many business combinations are specifically organized so that the companies can provide products for each other. Inc. Total Assets and Ending Retained Earnings to be overstated as well. The transfer price was equal to 30 percent of the sales price.000 was simply an intercompany asset transfer for consolidation purposes. Also. Fraker. the entire $200.000 of Richards' inventory in 2009. what amount of these sales is eliminated? Regardless of the ownership percentage or the markup. What errors will this omission cause in the consolidated financial statements? Consolidation Entry for 2009 This omission causes both the amounts for Land and Gain on Sale of Land to be overstated in the consolidated financial statements and ultimately.98. Difficulty: Easy Hoyle . Dithers Inc.000 should be eliminated from both the Sales and the Purchases (Inventory) accounts.Chapter 05 #98 99. owns 90 percent of Richards. more profit can often be generated by the combination if one member is able to buy from another rather than from an outside party". acquired all of the common stock of Bumstead Corp. This design is intended to benefit the business combination as a whole because of the economies provided by vertical integration. according to SFAS 160. During 2009. on January 1. and bought $200. Difficulty: Medium Hoyle . In effect. the $200.Chapter 05 #99 100. 2009. Thus. the correction for gain may be allocated to the non-controlling interest share of subsidiary earnings and the non-controlling interest balance on the consolidated balance sheet. the unrealized gain must again be eliminated within the consolidation process. from the perspective of the business combination as a whole. The gain is deferred until that time. Difficulty: Easy Hoyle . How is the gain on an intercompany transfer of land realized? The gain on an intercompany transfer of land is realized through the sale of the asset to an independent third party. remains unrealized until the asset is consumed or sold to an outside party. Hence. The gain is being moved into the year of realization.Chapter 05 #103 . Any unrealized gain on merchandise still being held by the buyer must be eliminated whenever consolidated financial statements are produced. In the year following the transfer (if the goods are resold or consumed). This second reduction is made on the worksheet to the beginning inventory component of cost of goods sold as well as to the beginning retained earnings balance of the original seller. the seller is recording a gain on its books that. the adjustment in the subsequent year must be made to the equity in subsidiary earnings account rather than to retained earnings". What is the impact on the non-controlling interest of a subsidiary when there are downstream transfers of inventory between the parent and subsidiary companies? None.Chapter 05 #102 103.Chapter 05 #101 102. this consolidation procedure is carried out by removing the unrealized gain from the inventory account on the balance sheet and from the ending inventory balance within cost of goods sold. Difficulty: Medium Hoyle . For the year of transfer. If the transfer was downstream in direction and the parent company has applied the equity method.101. What is meant by unrealized inventory gains and how are they treated on a consolidation worksheet? "In intercompany transactions. Difficulty: Easy Hoyle . a transfer price is often established that exceeds the cost of the inventory. 000. Thus. King Corp. Stodd sold merchandise to Tara for $40. From the perspective of the business combination. Prepare the consolidation entry to defer the unrealized gain. The inventory originally cost King $420. At the end of the year. depreciation should be calculated solely on historical cost figures.500. Difficulty: Medium Hoyle . At 12/31/09. During the year. 25% of the goods were still in James' inventory. Difficulty: Medium Hoyle . owns 85% of James Co.000. Tara Company holds 80 percent of the common stock of Stodd Inc. Tara still possesses 20 percent of this inventory. Stodd has sales of $500. Difficulty: Medium Hoyle . During 2009. King uses the equity method to account for this investment. In the current year.000.Chapter 05 #105 106. What is the purpose of the adjustments to depreciation expense within the consolidation process when there has been an intercompany transfer of a depreciable asset? "Depreciable assets are often transferred between the members of a business combination at amounts in excess of book value.000 and cost of goods sold of $3. adjustment of the depreciation (being recorded by the buyer) is necessary to reduce the expense to a cost based figure".000. within the consolidation process for each period.000 and cost of goods sold of $400.Chapter 05 #106 .000. Tara reports sales of $5. For the same period. Required: Prepare the Consolidation Entry TI and Consolidation Entry G for the consolidation worksheet. King sells inventory to James for $500.Chapter 05 #104 105.000 at a price based on the normal markup. The buyer will then compute depreciation expense based on this inflated transfer price rather than on an historical cost basis.104. on January 1. Flintstone Inc. a wholly owned subsidiary of Nelson Corp. During 2009. Difficulty: Medium Hoyle . During 2009. Yoderly Co. Nelson had not sold any of the goods by the end of the year.000 inventory with a cost of $500.000. At the end of the year 30% of the goods were still in Rubble's inventory. The goods had cost Yoderly $105.000.. Quint decided to use the initial value method to account for this investment.Chapter 05 #109 . Quint still had one-fourth of the goods on hand at the end of the year.. Flintstone decided to use the initial value method to account for this investment. Difficulty: Medium Hoyle . which would have to be recorded at the end of 2010.000. Required: Prepare Consolidation Entry TI and Consolidation Entry G for the consolidation worksheet at 12/31/09. Required: Prepare Consolidation Entry *G. Flintstone sold to Rubble for $600. The selling price was $64. is a wholly owned subsidiary of Quint Inc. Strayten Corp.000 and the selling price was $140.Chapter 05 #107 108.107. Difficulty: Medium Hoyle . Required: Prepare Consolidation Entry TI and Consolidation Entry G that are required for 2009. acquired all of Rubble Co. Strayten sold Quint goods which had cost $48. sold goods to Nelson near the end of 2008. 2009.000.Chapter 05 #108 109. At the end of 2009. Lawler still held 30% of the inventory.Chapter 05 #111 Virginia Corp. owned all of the voting common stock of both Ritter Co. During 2009. owned 80% of the voting common stock of Stroban Co. The following Consolidation Entries should be prepared: These entries (1) eliminate the sale from the consolidated income statement.110.'s net income? Difficulty: Medium Hoyle . Stateside had used 75% of the goods. Stroban sold a parcel of land to Hambly. During 2009. Difficulty: Medium Hoyle .000. Ritter sold inventory to Lawler. Hambly Corp. Virginia made cash sales of $400.000 and they were sold to Lawler for $100. owned all of the voting common stock of Stateside Co. Required: What was the non-controlling interest's share of Stroban Co. The gross profit rate was 30% of the selling price.Chapter 05 #110 111. By the end of the year.000 and was sold to Hambly for $145.000. and Lawler Co. Hoyle . Required: How should the sale between Lawler and Ritter be accounted for by the consolidated entity? Lawler and Ritter are related parties since they are both part of a combined entity. During 2009. Stroban's reported net income for 2009 was $119. (2) decrease cost of goods sold and (3) reduce consolidated inventory to its cost to the combined entity. Both companies use the perpetual inventory method and Virginia decided to use the partial equity method to account for this investment.000. The land had a book value of $82. The goods had cost Ritter $65.Chapter 05 . McGraw Corp.000 to Stateside. Chapter 05 #112 113.112.Chapter 05 #113 114.Chapter 05 #114 . Prepare journal entries for Virginia and Stateside to record the sales/purchases during 2009. Prepare the consolidation entries that should be made at the end of 2009. Difficulty: Medium Hoyle . Prepare any 2010 consolidation worksheet entries that would be required for this inventory transfer. Difficulty: Easy Hoyle . Difficulty: Medium Hoyle . The book values of Icecap's asset and liability accounts at that time were considered to be equal to their fair values. purchased an 80% interest in Icecap Co. The following selected account balances were from the individual financial records of these two companies as of December 31.000 in 2009.800 of the 2009 transfers were held until 2010. Polar paid an amount corresponding to the underlying book value of Icecap so that no allocations or goodwill resulted from the purchase price. Intercompany transfers were $126. $39. Assume that Polar sold inventory to Icecap at a markup equal to 40% of cost. (2) Inventory and (3) Non-controlling Interest in Subsidiary's Net Income.Chapter 05 #115 . 2009: Hoyle .) Difficulty: Medium Hoyle .200 of the 2008 transfers were retained and then sold by Icecap in 2009 while $58.Chapter 05 115. do not round the calculation. (If you use a gross profit percentage. Required: On the consolidated financial statements for 2009. determine the balances that would appear for the following accounts: (1) Cost of Goods Sold.Several years ago Polar Inc.000 in 2008 and $154. Of this inventory. 000 in 2008 and $112. (If you use a gross profit percentage.000 of the 2009 transfers were held until 2010. determine the balances that would appear for the following accounts: (1) Cost of Goods Sold. Of this inventory. (2) Inventory and (3) Non-controlling Interest in Subsidiary's Net Income. Assume that Icecap sold inventory to Polar at a markup equal to 40% of cost. Required: On the consolidated financial statements for 2009. $29.116. Intercompany transfers were $70. do not round the calculation.400 of the 2008 transfers were retained and then sold by Polar in 2009 whereas $49.000 in 2009.Chapter 05 #116 .) Difficulty: Medium Hoyle . 000 but had a book value of only $98.Chapter 05 #117 On January 1. (2) Operating expenses and (3) Non-controlling Interest in Subsidiary's Net Income.000. Musial Corp. Hoyle . Musial earned $308. Difficulty: Medium Hoyle . Assume there is no amortization related to the original investment. 2008 for $112. the equipment had a five-year remaining life.000 in net income in 2009 (not including any investment income) while Matin reported $126.000. sold equipment to Matin Inc. On that date.000 when transferred. (a wholly-owned subsidiary) for $168.117.000 in cash. Required: On the consolidated financial statements for 2009. The building had a five-year remaining useful life and was to be depreciated using the straight-line method with no salvage value. Polar sold a building to Icecap on January 1. 2009. The equipment had originally cost $140. although the book value of this asset was only $70. Depreciation expense was calculated using the straight-line method.Chapter 05 . determine the balances that would appear for the following accounts: (1) Buildings (net).000 on that date. 118. What is consolidated net income for 2009? Difficulty: Medium Hoyle .Chapter 05 #118 119. Assuming that Musial owned only 90% of Matin and the equipment transfer had been upstream. what is consolidated net income for 2009? Difficulty: Medium Hoyle .Chapter 05 #120 .Chapter 05 #119 120. Assuming that Musial owned only 90% of Matin. what is consolidated net income for 2009? Difficulty: Medium Hoyle . ch5 Summary Category # of Questions Difficulty: Easy 25 Difficulty: Hard 16 Difficulty: Medium 79 Hoyle .Chapter 05 134 .