Description of this paper

accounts data bank

Description

solution


Question

Question;1.;Pedro purchased 100% of the common stock of the;Sanburn Company on January 1, 20X1, for $500,000. On that date, the;stockholders' equity of Sanburn Company was $380,000. On the purchase date;inventory of Sanburn Company, which was sold during 20X1, was understated by;$20,000. Any remaining excess of cost over book value is attributable to patent;with a 20-year life. The reported income and dividends paid by Sanburn Company;were as follows:..........................;Net income;20X1;20X2;$80,000;$90,000;Dividends paid......................;10,000;10,000;Using the;simple equity method, which of the following amounts are correct?;Investment;Income;Investment Account Balance;a.;20X1;December 31;20X1;$80,000;$570,000;b.;$70,000;$570,000;c.;$70,000;$550,000;d.;$80,000;$550,000;OBJ: 1;2.;Pedro purchased 100% of the common stock of the;Sanburn Company on January 1, 20X1, for $500,000. On that date, the;stockholders' equity of Sanburn Company was $380,000. On the purchase date;inventory of Sanburn Company, which was sold during 20X1, was understated by;$20,000. Any remaining excess of cost over book value is attributable to patent;with a 20-year life. The reported income and dividends paid by Sanburn Company;were as follows:..........................;Net income;20X1;20X2;$80,000;$90,000;Dividends paid......................;10,000;10,000;Using the;sophisticated (full) equity method, which of the following amounts are correct?;Investment;Income;Investment Account Balance;a.;20X1;December 31;20X1;$55,000;$555,000;b.;$55,000;$545,000;c.;$75,000;$565,000;d.;$80,000;$570,000;OBJ: 1;Chapter 3;3.;Pedro purchased 100% of the common stock of the;Sanburn Company on January 1, 20X1, for $500,000. On that date, the;stockholders' equity of Sanburn Company was $380,000. On the purchase date;inventory of Sanburn Company, which was sold during 20X1, was understated by;$20,000. Any remaining excess of cost over book value is attributable to patent;with a 20-year life. The reported income and dividends paid by Sanburn Company;were as follows:..........................;Net income;20X1;20X2;$80,000;$90,000;Dividends paid......................;10,000;10,000;Using the cost method, which of the following;amounts are correct?;Investment Income;Investment;Account Balance;a.;20X1;December 31;20X1;$10,000;$500,000;b.;$10,000;$570,000;c.;$0;$570,000;d.;$80,000;$500,000;4.;What is the effect if an unconsolidated subsidiary;is accounted for by the equity method but consolidated statements are being;prepared for the parent company and other subsidiaries?;a. All of the;unconsolidated subsidiary's accounts will be included individually in the;consolidated statements.;b. The;consolidated retained earnings will not reflect the earnings of the;unconsolidated subsidiary.;c. The;consolidated retained earnings will be the same as if the subsidiary had been;included in the consolidation.;d. Dividend;revenue from the unconsolidated subsidiary will be reflected in consolidated;net income.;3-2;Chapter 3;5.;On January 1, 20X1, Promo, Inc. purchased 70% of Set;Corporation for $469,000. On that date the book value of the net assets of Set;totaled $500,000. Based on the appraisal done at the time of the purchase, all;assets and liabilities had book values equal to their fair values except as;follows:...........................;Inventory;Book Value;Fair;Value;$100,000;$120,000;Land...............................;75,000;85,000;Equipment (useful life 4 years).....;125,000;165,000;The $70,000;of excess of cost over book value was allocated to a patent with a 10-year;useful life.;During 20X1;Promo reported net income of $200,000 and Set had net income of $100,000.;What is;consolidated net income if Promo includes in its net income, income from Set;using the sophisticated equity method?;a.;$42,000;b.;$70,000;c.;$200,000;d. $270,000;6.;On January 1, 20X1, Promo, Inc. purchased 70% of Set;Corporation for $469,000. On that date the book value of the net assets of Set;totaled $500,000. Based on the appraisal done at the time of the purchase, all;assets and liabilities had book values equal to their fair values except as;follows:...........................;Inventory;Book Value;Fair;Value;$100,000;$120,000;Land...............................;75,000;85,000;Equipment (useful life 4 years).....;125,000;165,000;The $70,000;of excess of cost over book value was allocated to a patent with a 10-year;useful life.;During 20X1;Promo reported net income of $200,000 and Set had net income of $100,000.;What income;from subsidiary did Promo include in its net income if Promo uses the simple equity;method?;a.;$33,000;b.;$42,000;c.;$70,000;d. $100,000;3-3;Chapter 3;7.;On January 1, 20X1, Promo, Inc. purchased 70% of Set;Corporation for $469,000. On that date the book value of the net assets of Set;totaled $500,000. Based on the appraisal done at the time of the purchase, all;assets and liabilities had book values equal to their fair values except as;follows:...........................;Inventory;Book Value;Fair;Value;$100,000;$120,000;Land...............................;75,000;85,000;Equipment (useful life 4 years).....;125,000;165,000;The $70,000;of excess of cost over book value was allocated to a patent with a 10-year;useful life.;During 20X1;Promo reported net income of $200,000 and Set had net income of $100,000.;What income;from subsidiary did Promo include in its net income if Promo uses the sophisticated;equity method?;13.$33,000;14.$42,000;15.$70,000;16.$100,000;8.;On January 1, 20X1, Rabb Corp. purchased 80% of;Sunny Corp.'s $10 par common stock for $975,000. On this date, the carrying;amount of Sunny's net assets was $1,000,000. The fair values of Sunny's;identifiable assets and liabilities were the same as their carrying amounts;except for plant assets (net), which were $100,000 in excess of the carrying;amount.;In the January 1, 20X1, consolidated balance sheet, goodwill;should be reported at _______.;a.;$0;b.;$75,000;c.;$95,000;d. $175,000;9.;Which of the following statements applying to the;use of the equity method versus the cost method is true?;a.;The equity method is required when one firm owns 20%;or more of the common stock of another firm.;b. If no;dividends were paid by the subsidiary, the investment account would have the;same balance under both methods.;c.;The method used has no significance to consolidated;statements.;d.;An advantage of the equity method is that no;amortization of excess adjustments needs to be made on the consolidated work;sheet.;3-4;Chapter 3;10. In consolidated financial;statements it is expected that;a.;Dividends declared equals the sum of the total;parent company's declared dividends and the total subsidiary's declared;dividends.;b.;Retained Earnings equals the sum of the controlling;interest's separate retained earnings and the noncontrolling interest's separate;retained earnings.;c.;Common Stock equals the sum of the parent company's;outstanding shares and the subsidiary's outstanding shares.;d.;Net Income equals the sum of the income distributed;to the controlling interest and the income distributed to the noncontrolling;interest.;11.;How is the portion of consolidated earnings to be;assigned to noncontrolling interest in consolidated financial statements;determined?;a. The net;income of the parent is subtracted from the subsidiary's net income to;determine the noncontrolling interest.;b. The;subsidiary's net income is extended to the noncontrolling interest.;c.;The amount of the subsidiary's earnings recognized;for consolidation purposes is multiplied by the noncontrolling's percentage;ownership.;d.;The amount of consolidated earnings determined on;the consolidated working papers is multiplied by the noncontrolling interest;percentage at the balance-sheet date.;12.;Patti Corp. has several subsidiaries (Aeta, Beta;and Gaeta) that are included in its consolidated financial statements. In its;12/31/X1 separate balance sheet, Patti had the following intercompany balances;before eliminations:.....;Current Receivable due;from Aeta;$;Debit;Credit;40,000;Noncurrent;Receivable due from Beta...;100,000;Cash;Advance to Beta..................;26,000;75,000;Cash;Advance from Gaeta...............;Intercompany Payable to;Gaeta.........;40,000;In its;12/31/X1 consolidated balance sheet, what amount should Patti report as;intercompany receivables?;a.;$166,000;b.;$51,000;c.;$26,000;d. $0;3-5

 

Paper#44355 | Written in 18-Jul-2015

Price : $22
SiteLock