1. When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000. What is the amount of excess land allocation attributed to the noncontrolling interest at the acquisition date? (Points : 3) $0 $30,000 $22,500 $7,500 $17,500 2. MacHeath Inc. bought 60% of the outstanding common stock of Nomes Inc. in an acquisition business combination that resulted in the recognition of goodwill. Nomes owned a piece of land that cost $250,000 but was worth $600,000 at the date of acquisition. What value would be attributed to this land in a consolidated balance sheet at the date of acquisition? (Points : 3) $250,000 $150,000 $600,000 $360,000 $460,000 3. A basic premise of the acquisition method is that the (Points : 2) ultimate objective of consolidated financial statements is to serve as a report to the stockholders of the parent company subsidiary's book value and the purchase price paid by the parent are viewed as separate elements that can be accounted for individually within the consolidation process subsidiary's individual accounts cannot be divided along ownership lines Equipment was undervalued by $30.000 and buildings were undervalued by $40.000 $130. Pell Company acquires 80% of Demers Company for $500.values utilized for consolidation reflect the parent's payment attributed to each subsidiary asset and liability controlled company must always be consolidated in phases depending on the parent's level of ownership 4. When a subsidiary is acquired sometime after the first day of the fiscal year. each having a 10-year remaining life.000.000 $120.000 50. Compute Pell's investment in Demers at December 31.000 on that date. 2010 .000 on January 1. goodwill has not been impaired.000 Assume the equity method is applied. Demers reported common stock of $300. Demers earns income and pays dividends as follows: 2010 2011 2012 Net income $100.000 and retained earnings of $210.000 Dividends $40. 2010. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life.000 60. which of the following statements is true? (Points : 2) Income from subsidiary is not recognized until there is an entire year of consolidated operations Income from subsidiary is recognized from date of acquisition to year-end Excess cost over acquisition value is recognized at the beginning of the fiscal year No goodwill can be recognized Income from subsidiary is recognized for the entire year 5. Based on an annual review. 000 60. (Points : 3) $20.000 $574.(Points : 4) $580. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Equipment was undervalued by $30.600 $10. goodwill has not been impaired.000 on that date.600 $14. Pell Company acquires 80% of Demers Company for $500.000 Assume the equity method is applied.400 $548. 2010. each having a 10-year remaining life.400 $541.000 $542.000 50.000 6.000 and retained earnings of $210.400 . Demers reported common stock of $300.000 $12. 2010.000 and buildings were undervalued by $40.000 on January 1. Demers earns income and pays dividends as follows: 2010 2011 2012 Net income $100.000 $18.000 $120. Compute the noncontrolling interest in the net income of Demers at December 31.000 $130.000.000 Dividends $40. Based on an annual review. 000.000. at a profit during 2010.000 $200.850. for $1. At what amount would consolidated goodwill be reported for 2013? (Points : 3) $150. acquired 80% of the common stock of Float Corp. .000 at that date. During 2013 an analysis of the fair value of Roxy's assets determined an impairment of goodwill in the amount of $50. The fair value of Float's net assets was $1.000 $0 $135. The noncontrolling interest is valued at $400.000 $0 $120. and the book value was $1.000. Parsons Company acquired 90% of Roxy Company several years ago and recorded goodwill of $200.000 9. Carter Company.000 $250. One-third of the inventory is sold by Carter in 2010.7. What is the total amount of goodwill recognized at the date of acquisition? (Points : 3) $150.500.600.000 8.000. Perch Co.000 $50. Strickland Company sells inventory to its parent.000.000 $170. Carter Company. Which of the following statements is true? (Points : 2) A gain will be reported in the consolidated income statement in 2008 A gain will be reported in the consolidated income statement in 2011 No gain will be reported in the 2011 consolidated income statement Only the parent company will report a gain in 2011 The subsidiary will report a gain in 2008 . which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? (Points : 2) Retained earnings Cost of goods sold Inventory Investment in Strickland Company Sales 11. which of the following choices would be a debit entry to eliminate the intra-entity transfer of inventory? (Points : 2) Retained earnings Cost of goods sold Inventory Investment in Strickland Company Sales 10.In the consolidation worksheet for 2010. The subsidiary sold the land externally for a gain in 2011. One-third of the inventory is sold by Carter in 2010 In the consolidation worksheet for 2010. Parent sold land to its subsidiary for a gain in 2008. at a profit during 2010. Strickland Company sells inventory to its parent. The equipment had a remaining useful life of five years and a $0 salvage value. The selling price was $83. 2010. Chain Co. On the original date of acquisition.12.000 $690.000 $654. Chain sold to Shannon a parcel of land with a book value of $65. 2011. At the time of the sale.000 $80.000 13. 2010.000.000 $737.000 . and for Shannon--$256. include the following balances for land: for Chain--$416.000. Clemente sold equipment to Snider for $125. At what amount should the equipment (net of depreciation) be included in the consolidated balance sheet dated December 31.000 $95.000. Clemente Co. owned all of the voting common stock of Snider Co.000. On April 4. What is the consolidated balance for land on the 2011 balance sheet? (Points : 4) $672.000. 2010? (Points : 4) $105.000 $755. The equipment had cost Clemente $140. the book value of Shannon's land was equal to its fair value.000.000 $100. There were no other transactions which affected the companies' land accounts during 2010. owned all of the voting common stock of Shannon Corp. the balance in accumulated depreciation was $40. The corporations' balance sheets dated December 31. On January 2. Straight-line depreciation is used by both Clemente and Snider.000.000 $85. 000 that cost Webb $1.000.560.14. Rand still owned 40% of the goods at the end of the year.400.000 $15.800 . Webb sold goods to Rand for $2.960.000.000 $14.000 for Rand.800. owned 70% of the voting common stock of Thelma Co. The amount of unrealized profit in the ending inventory on December 31.000 $60.000 $14. Cost of goods sold was $10.000 $16.200.040. During October 20X7. What was consolidated cost of goods sold? (Points : 4) $17. 2010.000 $32.000 15. gross profit percentages were 30% for Diller and 40% for Lake. 20X7.000 and was sold to Norek for $45.000. The land had a book value of $32. For 20X7. Thelma's reported net income for 2010 was $119.000 for Webb and $6.000.000 $0 16. What is the noncontrolling interest's share of Thelma's net income? (Points : 4) $35. Webb Co. acquired 100% of Rand Inc.700 $31. Thelma sold a parcel of land to Norek. one-half of this merchandise remained in Diller's inventory. Norek Corp.800. During 2011. Diller owns 80% of Lake Company common stock.000 $30. 20011. Lake sold merchandise to Diller for $300. On January 2.400.800. on January 5. On December 31. 20X7 that should be eliminated in consolidation is (Points : 4) $80. 2011. Stark Company.000. 2010.$39.000 loss .200 $26.000 in 2012. The land originally cost Stark $85.100 17.000 loss $12..000 gain $12. Compute the gain or loss relating to the land that will be reported in consolidated net income for 2012. a 90% owned subsidiary of Parker. for $80. Parker sold the land it purchased from Stark in 2010 for $92.000. Stark reported net income of $200. sold land to Parker on May 1. Which of the following statements is true concerning an intra-entity transfer of a depreciable asset? (Points : 2) Noncontrolling interest in subsidiary's net income is never affected by a gain on the transfer Noncontrolling interest in subsidiary's net income is always affected by a gain on the transfer Noncontrolling interest in subsidiary's net income is affected by a downstream gain only Noncontrolling interest in subsidiary's net income is affected only when the transfer is upstream Noncontrolling interest in subsidiary's net income is increased by an upstream gain in the year of transfer 18. and $220.000 gain $7. $180.000. and 2012. Inc. (Points : 4) $5.000 loss.600 $22. respectively.000 for 2010.000. $7. is a wholly owned subsidiary of Parks Company. Whether the balances agree or not. The bonds are treated as having been retired. both the subsequent interest income and interest expense are recorded in the consolidated income statement. with an extraordinary gain shown on the consolidated income statement. with an extraordinary loss shown on the consolidated income statement. To Safire because Safire is the controlling party in the business combination. Interest expense and interest income would exactly offset so no adjustment to net income is necessary. On January 1 of the next year. 20.19. The bonds have no impact on the current consolidation. Toy Co. and Parks amortize any premium or discount using the straight-line method. has $100. The loss should be allocated between Safire and Regency based on the purchase price and the original face value of the debt. Safire Corp. 21. to whom would the loss probably be attributed? (Points : 3) To Regency because the bonds were issued by Regency.. Both Toy Co.000 of the bonds of Regency Co. Which of the following is NOT identified by GAAP as a characteristic of a "primary beneficiary" of a . one of its subsidiaries. On January 1 of the current year. According to the text.000. How should this transaction be reflected in the consolidated financial statements in the year that Parks acquires the bonds? (Points : 3) The bonds are treated as having been retired. Toy Co. paying more than the carrying value of the bonds. Parks will purchase Toy Co. recently acquired $500. The loss should be amortized over the life of the bonds and need not be attributed to either party.'s bonds for $96.000 of 8% bonds outstanding that were issued at face value and have five years to maturity. The loss should be deferred until it can be determined to whom the attribution can be made. The right to receive expected residual returns from the VIE. The financial statements of the primary beneficiary of VIE must provide: (Points : 2) a description of the nature and purpose of the VIE. 23. The obligation to absorb expected losses of the VIE.VIE? (Points : 2) The ability to make decisions about the VIE's activities. The obligation to absorb potentially significant losses of the entity. . The right to receive potentially significant benefits of the entity. the lack of recourse if creditors of the consolidated VIE have no recourse to general credit of primary beneficiary. 22. All of the above are characteristics of a "primary beneficiary". all of the above. Which of the following characteristics is not indicative of an enterprise qualifying as a primary beneficiary with a controlling financial interest in a variable interest entity? (Points : 2) The power to direct the most significant economic performance activities. No ability to make decisions about the entity's activities. Ownership of a controlling equity interest in the VIE. the carrying amount of the consolidated assets used as collateral for VIE's the size of the VIE. The power through voting or similar rights to direct activities which significantly impact economic performance. 24.500. There will be $0 net gain or loss on the bond transaction.000. and 7% preferred stock with a total par value of $6.000. Entitles holder to receive shares of common stock.400.200. The book value of the company was $85.000 $7.400 25. net gain or loss on the bond transaction will be reported. 26. Which of the following is not a potential loss or return of a variable interest entity? (Points : 2) Entitles holder to residual profits.000.000. Interest revenue needs to be eliminated on the consolidated income statement.000 $2. A company had common stock with a total par value of $18. what portion of the value would be assigned to the noncontrolling interest? (Points : 4) $8.929.000. honoring the guarantee will produce a loss. Interest expense needs to be eliminated on the consolidated income statement. which of the following statements is false? (Points : 2) Any premium or discount on bonds payable is exactly offset by a premium or discount on bond investment.000 and fair value of $62. honoring a debt guarantee will produce a loss. . If 90% of this company's total equity was acquired by another. Entitles holder to benefit from increases in asset fair value.000 $6. If newly issued debt is issued from a parent to its subsidiary.000. If leased asset declines below the residual value. If the variable interest entity cannot repay liabilities.000.000.000 $6.000.000 and a fair value of $8. 000 Interest expense 140.520 Gain on retirement 63.000 .000 Investment in bonds 700.360 Interest expense 59. The bonds pay a 10% interest rate every December 31.840 Bonds payable 714.000 Interest income 140. Sanatee sold $1.500 Interest income 51.360 Interest income 59. Consequently. 2012? (Points : 4) Bonds payable 560.000 Investment in bonds 700.000 Interest income 140. Fargus Corporation owned 51% of the voting common stock of Sanatee. for 95% of the face value.27.000 Premium on bonds payable 32.520 Gain on retirement 63. Both companies utilized the straight-line method of amortization.840 Bonds payable 714.400.500 Investment in bonds 535. no goodwill or other allocation was recorded in connection with the acquisition price. On January 1.000 Gain on retirement 46.000 Interest expense 140. Inc.000 Discount on bonds payable 32. The parent's interest was acquired several years ago on the date that the subsidiary was formed. 2012.000 Premium on bonds payable 31.000 in ten-year bonds to the public at 108.000 Discount on bonds payable 31. What consolidation entry would be recorded in connection with these intra-entity bonds on December 31. Fargus acquired 40% of these bonds on January 1.000 Bonds payable 560. 2010.500 Investment in bonds 535.000 Gain on retirement 46.500 Interest expense 51. what amounts were added. Forsyth still owned all of the inventory at the end of 2011. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. . During 2011.000 60.000 on that date. 2011. 28. Demers reported common stock of $300.100. Fisher believed that one of Bast's buildings. with a twelve-year life.000 50.000 on January 1.000. sold inventory to its parent company.000 $120.400 shares $50 par value 1. What type of sale is this? How is the gross profit on the sale recognized in the consolidated financial statements for 2011? Why? (Points : 7) 30.281. Based on an annual review.000 as follows: Preferred stock 2. Pell Company acquires 80% of Demers Company for $500.120.000 Retained earnings 840. Demers earns income and pays dividends as follows: 2010 2011 2012 Net income $100.None of the above entries are correct.000 Dividends $40. divided. 2010. Equipment was undervalued by $30. What is the amount of goodwill to be recognized from this purchase? Show your work. Forsyth Corp.000 and retained earnings of $210.e. i. each having a 10-year remaining life. acquired all of the outstanding preferred shares for $148.000 and buildings were undervalued by $40. The fair value of the noncontrolling interest in common stock was $854. was undervalued on the company's financial records by $70. or multiplied.000 Assume the equity method is applied.000.000 Fisher Co. goodwill has not been impaired. Edwards Co.000 Common stock 22.000.000 shares $70 par value $140. subtracted. had a net book value of $2.000 $130. On January 1.000 and 60% of the common stock for $1. (Points : 7) 29.000. Bast Co. 2012. multiplied or divided. subtracted.e. what numbers were added.Compute Pell's investment in Demers at December 31. Show your work. (Points : 7) . i.