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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 amount should have been reported for the land in a
consolidated balance sheet at the acquisition date?
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$52,500
$70,000
$75,000
$100,000
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Question 2. 2.When Jones
Co. acquired 75% of the common stock of Jackson Corp., Jackson 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
non-controlling interest at the acquisition date? (Points : 2)
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$0
$7,500
$30,000
$22,500
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Question 3. 3.Perch Co.
acquired 80% of the common stock of Float Corp. for $1,600,000. The fair
value of Float's net assets was $1,850,000, and the book value was
$1,500,000. The non-controlling interest shares of Float Corp. are not
actively traded.
What amount of goodwill should be attributed to Perch at the
date of acquisition?
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$250,000
$0
$120,000
$170,000
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Question 4. 4.Parnell Co.
acquired 80% of the common stock of Franklin Corp. for $1,600,000. The fair
value of Franklin's net assets was $1,850,000, and the book value was
$1,500,000. The non-controlling interest shares of Franklin Corp. are not
actively traded.
What is the dollar amount of Franklin Corp.'s net assets that
would be represented in a consolidated balance sheet prepared at the date
of acquisition?
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$1,600,000
$1,480,000
$1,850,000
$1,780,000
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Question 5. 5.Femur Co.
acquired 70% of the voting common stock of Harbor Corp. on January 1, 2013.
During 2013, Harbor had revenues of $2,500,000 and expenses of $2,000,000.
The amortization of excess cost allocations totaled $60,000 in 2013.
The non-controlling interest's share of the earnings of Harbor
Corp. is calculated to be what amount?
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$132,000
$0
$150,000
$168,000
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Question 6. 6.
Bell Company purchases 80% of Demers Company
for $500,000 on January 1, 2013. Demers reported common stock of $300,000
and retained earnings of $200,000 on that date. Equipment was undervalued
by $30,000 and buildings were undervalued by $40,000, each having a 10-year
remaining life. Any excess cost over fair value was attributed to goodwill
with an indefinite life. Based on an annual review, goodwill has not been
impaired.
Demers earns income and pays dividends as follows:
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2013
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2014
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2015
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Net income
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$100,000
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$120,000
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$130,000
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Dividends
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40,000
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50,000
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60,000
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Assume the equity method is applied.Compute
Bell's income from Demers for the year ended December 31, 2015.
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$50,400
$56,000
$98,400
$124,400
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Question 7. 7.In a
step acquisition, which of the following statements is false?
(Points : 2)
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Each investment
is viewed as an individual purchase with its own cost allocations and related
amortizations.
Income from
subsidiary is computed by applying a partial year for a new purchase acquired
during the year.
Income from
subsidiary is computed for the entire year for a new purchase acquired during
the year.
Noncontrolling
interest is computed by multiplying the book value of the subsidiary at
year-end by the new percent ownership.
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Question 8. 8.Keefe,
Incorporated, acquires 70% of George Company on September 1, 2013, and an
additional 10% on April 1, 2014. Annual amortization of $5,000 relates to
the first acquisition and $3,000 to the second. George reports the
following figures for 2014:
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Revenues
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$500,000
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Expenses
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400,000
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Retained earnings 1/1/14
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300,000
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Dividends paid
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50,000
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Common Stock
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200,000
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Without regard for this investment, Keefe
earns $300,000 in net income during 2014.
What is consolidated net income for 2014?
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$365,000
$370,250
$372,000
$374,000
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Question 9. 9.All of
the following statements regarding the sale of subsidiary shares are true
except which of the following.
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The use of
specific identification based on serial number is acceptable.
The use of the
FIFO assumption is acceptable.
The use of the
averaging assumption is acceptable.
The use of
specific LIFO assumption is acceptable.
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Question 10. 10.Kordel
Inc. holds 75% of the outstanding common stock of Raxston Corp. Raxston
currently owes Kordel $500,000 for inventory acquired over the past few
months. In preparing consolidated financial statements, what amount
of this debt should be eliminated?
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$375,000
$125,000
$300,000
$500,000
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Question 11. 11.X-Beams Inc. owned 70% of the voting common
stock of Kent Corp. During 2013, 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 noncontrolling
interest in Kent's net income?
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$90,000
$88,560
$85,200
$77,700
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Question 12. 12.Yukon Co. purchased 75% percent of the
voting common stock of Ontario Corp. on January 1, 2013. During the year,
Yukon made sales of inventory to Ontario. The inventory cost Yukon $260,000
and was sold to Ontario for $390,000. Ontario still had $60,000 of the
goods in its inventory at the end of the year. The amount of unrealized
intercompany profit which should be eliminated in the consolidation
process at the end of 2013 is
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$15,000
$20,000
$32,500
$30,000
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Question 13. 13.On
January 1, 2013, Race Corp. purchased 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 noncontrolling interest's share of consolidated net income?
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$37,200
$22,800
$30,900
$40,800
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Question 14. 14.
Norek Corp. owned 70%
of the voting common stock of Thelma Co. On January 2, 2013, 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 2013 was $119,000.
What is the noncontrolling interest's share of Thelma's net income?
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$35,700
$31,800
$39,600
$26,100
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Question 15. 15.Prince Corp. owned 80%
of Kile Corp.'s common stock. During October 2013, Kile sold merchandise to
Prince for $140,000. At December 31, 2013, 50% of this merchandise remained
in Prince's inventory. For 2013, gross profit percentages were 30% of sales
for Prince and 40% of sales for Kile. The amount of unrealized intercompany
profit in ending inventory at December 31, 2013 that should be eliminated
in the consolidation process is
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$28,000
$56,000
$22,400
$42,000
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Question 16. 16.
On November 8, 2013, 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?
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Proportionately
over a designated period of years.
When Wood Co.
sells the land to a third party.
No gain can be
recognized.
When Wood Co.
begins using the land productively.
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Question 17. 17.Which
of the following statements is true regarding an intercompany sale of
land?
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A loss is always
recognized but a gain is eliminated on a consolidated income statement.
A loss and a gain
are always eliminated on a consolidated income statement.
A loss and a gain
are always recognized on a consolidated income statement.
A gain is always
recognized but a loss is eliminated on a consolidated income statement.
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Question 18. 18.Shannon Co. owned all of the voting common
stock of Chain Corp. The corporations' balance sheets dated December 31,
2013, include the following balances for land: for
Shannon--$416,000, and for Chain--$256,000. On the original date of
acquisition, the book value of Chain's land was equal to its fair market
value. On April 4, 2014, Shannon sold to Chain a parcel of land with a book
value of $65,000. The selling price was $83,000. There were no other
transactions which affected the companies' land accounts during
2014. What is the consolidated balance for land on the 2014 balance
sheet?
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$672,000
$690,000
$755,000
$737,000
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Question 19. 19.Justings Co. owned 80% of Evana Corp. During
2013, Justings sold to Evana land with a book value of $48,000. The selling
price was $70,000. In its accounting records, Justings should
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recognize a gain
of $17,600.
defer recognition of the gain until Evana
sells the land to a third party.
recognize a gain
of $8,000.
recognize a gain
of $22,000.
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Question 20. 20.On January
1, 2013, Demers Company, an 80% owned subsidiary of Collins, Inc.,
transferred equipment with a 10-year life (six of which remain with no
salvage value) to Collins in exchange for $84,000 cash. At the date of
transfer, Demers records carried the equipment at a cost of $120,000 less
accumulated depreciation of $48,000. Straight-line depreciation is used.
Demers reported net income of $28,000 and $32,000 for 2013 and 2014,
respectively. Compute the gain recognized by Demers Company relating to the
equipment for 2014
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$36,000
$34,000
$12,000
$10,000
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21. What is meant by unrealized
inventory gains, and how are they treated on a consolidation worksheet?
Solution: Correct answers