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Question;1.;The separate condensed balance sheets and income;statements of Par Corp. and its wholly owned subsidiary, Sub Corp., are as;follows;Balance Sheets;December 31, 20X8......................................;Assets;Par;Sub;Current;$;149,000;$;50,000;Cash.....................................;Accounts receivable (net)...............;190,000;60,000;Inventories..............................;90,000;40,000...................Totalcurrentassets;$;429,000;$150,000;Property, plant, and equipment (net).......;$;361,000;$200,000;Investment in Sub (equity method)..........;320,000;--...........................Totalassets;$1,110,000;$350,000;==========;========;Liabilities;and Stockholders' Equity;Current;liabilities;$;100,000;$;70,000;Accounts payable.........................;Accrued;liabilities......................;30,000;20,000..............Totalcurrentliabilities;$;130,000;$ 90,000;==========;========;Stockholders' equity;$;220,000;$;30,000;Common stock ($10 par)...................;Additional paid-in capital...............;140,000;100,000;Retained earnings........................;620,000;130,000.............Totalstockholders'equity;$;980,000;$260,000;Total liabilities and stockholders;$1,100,000;$350,000;equity...............................;==========;========;Income;Statement;For the Year;Ended December 31, 20X8;Sales;Par;Sub;$1,000,000;$300,000;Cost of goods sold.........................;770,000;200,000...............................Grossmargin;$;230,000;$100,000;Other operating expenses...................;130,000;50,000...........................Operatingincome;$;100,000;$ 50,000;Equity in earnings of Sub..................;30,000;--........................Incomebeforetaxes;$;130,000;$ 50,000;Provision for income taxes.................;40,000;20,000...............................Netincome;$;90,000;$ 30,000;==========;========;6-11;Chapter 6;On January;1, 20X8, Par purchased all of Sub $10 par, voting common stock for $300,000. On;January 1, 20X8, the fair value of Sub assets and liabilities equaled the;carrying amounts of $330,000 and $90,000, respectively. The excess purchase;price is attributable to goodwill.;During 20X8, Par and Sub paid cash dividends of $50,000 and $10,000;respectively. For tax purposes, Par receives the 100% exclusion for dividends;received from Sub.;There were;no intercompany transactions other than Par's receipt of dividends from Sub and;Par's recording of its share of Sub's earnings.;On June 30;20X8, Par issued 2,000 shares of common stock for $17 per share. There were no;other changes in either Par's or Sub's common stock during 19X8.;Both Par and Sub paid income taxes at the rate of;40%.;Required;(1);In the 20X8 consolidated income statement of Par and;its subsidiary, what amount should be reported as consolidated;net;income?;b. $87,600;c. $90,000;d. $117,600;a. $60,000;(2);The consolidated balance sheet of Par and its;subsidiary should report total consolidated assets of;a.;$1,110,000 b. $1,144,000 c. $1,200,000;d. $1,460,000;(3);The consolidated balance sheet of Par and its;subsidiary should report total retained earnings of;a. $620,000;b. $640,000;c. $650,000;d.;$750,000;(4) In the;consolidated income statement of Par and;its;subsidiary, how much;expense should be reported for;amortization?;b. $3,000;c. $4,000;d. $10,000;a. $0;(5);In computing the consolidated earnings per share for;Par and Sub, the number of shares used should be;a. 25,000 b. 24,000 c. 22,000 d. 21,000;(6);In the December 31, 20X8, consolidated balance sheet;of Par and its subsidiary, how much should be reported as total;current assets?;b. $280,000;c. $429,000;d. $579,000;a. $150,000;(7);Par's January 1, 20X8, inventory was $110,000. Par's;(parent only) 20X6 inventory turnover ratio was;a. 11.1 b. 10.0 c. 7.7 d. 7.0;(8) In Par's 20X8 income;statement, what amount of deferred income taxes on Par's equity in Sub's;earnings should be included in Par's provision for income taxes?;a. $0;b. $2,000;c. $10,000;d. $12,000;6-12;Chapter 6;2.;Company S has been an 80%-owned subsidiary of;Company P since January 1, 20X7. The determination and distribution of excess;schedule prepared at the time of purchase was as follows;Price paid.................................;$570,000;Less;interest acquired;$600,000;Total stockholders' equity...............;480,000;Interest;acquired........................;80%.............Excessofcostoverbookvalue;$ 90,000;Undervaluation;of equipment;50,000;$62,500 x.8 x;(10-year life)..............................................Goodwill;$ 40,000;========;On January 2, 20X9, Company P issued $120,000 of 8% bonds at;face value to help finance the purchase of 25% of the outstanding common stock;of Alpha Company for $200,000. No excess resulted from this transaction.;Alpha;earned $100,000 net income during 20X7 and paid $20,000 in dividends.;The only change in plant assets during 20X9 was that Company S;sold a machine for $10,000. The machine had a cost of $60,000 and accumulated;depreciation of $40,000. Depreciation expense recorded during 20X7 was as;follows:.................;Buildings;Company P;Company S;Alpha;Company;$15,000;$ 8,000;$12,000;Machinery.................;35,000;20,000;4,000;The 20X9;consolidated income was $180,000, of which the NCI was $10,000. Company P paid;dividends of $12,000, and Company S paid dividends of $10,000.;Consolidated;inventory was $287,000 in 20X8 and $223,000 in 20X9, consolidated current;liabilities were $246,000 in 20X8 and $216,700 in 20X9. Cash increased by;$205,700.;Required;Prepare the;20X9 consolidated statement of cash flows for Company P. and its subsidiary;Company S.;6-13;Chapter;6;6-14;Chapter 6;3.;Company P purchased an 80% interest in Company S on;January 1, 20X3, for $246,000 cash. The appraisal showed that some of Company;S's equipment, with a 5-year estimated remaining life, was undervalued $25,000.;The excess purchase price is attributed to goodwill. The following is the;Company S balance sheet on December 31, 20X2:..........................;Assets;Cash...................................................;$;30,000;Inventory..............................................;30,000;Property, plant, and equipment.........................;300,000;Accumulated;depreciation...............................;(90,000);Total assets.........................................;$270,000;========;Liabilities and Equity;Current;liabilities....................................;$;30,000;Long-term;liabilities..................................;40,000;Common;stock ($10 par).................................;150,000;Retained;earnings......................................;50,000;Total liabilities and equity.........................;$270,000;========;Comparative balance sheet;data are as follows;December;31, 20X2;December;31, 20X3;Cash;(Parent only);(Consolidated);$;100,000;$;87,100;Inventory.....................;60,000;84,200;Property, plant, and equipment;950,000;1,346,000;Accumulated depreciation......;(360,000);(574,000);Goodwill......................;0;66,000;Current liabilities...........;(80,000);(115,000);Long-term liabilities.........;(100,000);(130,000);NCI...........................;0;(43,000);Controlling;interest;(350,000);(400,000);Common stock ($10 par)......;Additional paid-in capital..;(50,000);(90,000);Retained earnings...........;$;(170,000);$;(231,300);0;0;=========;=========;The;following information relates to the activities of the two firms for 20X3;(1);Company S issued 5,000 shares of common stock for;$18 a share.;(2) Company S paid off $10,000;of its long-term debt.;(3) Company P purchased;production equipment for $76,000.;(4);Consolidated net income was $103,900, the NCI's;share was $6,000. Depreciation expense taken by Company P and Company S on;their separate books was $92,000 and $28,000, respectively.;(5) Company P paid $30,000 in;dividends, Company S paid $15,000.;6-15;Chapter;6;6-16;Chapter 6;Required;Prepare the;consolidated statement of cash flows for the year ended December 31, 20X3, for;Company P and its subsidiary, Company S.;4.;On January 1, 20X1, Price Company purchased 80% of;the common stock of Sidex Company for $228,000.;Presented;below are columns for the January 1, 20X1 condensed balance sheets of Sidex and;Price, as well as the December 31, 20X1 consolidated balance sheet.......................;Balances;1-1-20X1;12-31-20X1;Consolidated;Cash;Sidex;Price;Balances;$ 20,000;$ 210,000;$;90,000;Other Current Assets......;80,000;100,000;250,000;Land......................;50,000;60,000;110,000;Building..................;200,000;350,000;550,000;Accumulated Depreciation..;(40,000);(100,000);(159,200);Patent....................;18,000;$310,000;$ 620,000;$ 858,800;========;=========;=========;Current Liabilities.......;$;25,000;$120,000;$185,000;Long-term Liabilities.....;50,000;100,000;150,000;Common Stock..............;20,000;50,000;50,000;Other Paid-in Capital.....;80,000;150,000;150,000;Retained Earnings.........;135,000;200,000;270,800;NCI.......................;53,000;$310,000;$620,000;$858,800;========;========;========;On January;1, 20X1, the only tangible net assets of Sidex which were undervalued were;inventory and building. Inventory, for which FIFO is used, was undervalued;$10,000. The building was worth $15,000 more than book value. It had a;remaining useful life of 10 years on January 1, 20X1 and straight-line;depreciation was used. The excess purchase price was attributed to a patent;with a remaining life of 10 years. The Price company concept (pro rata market;value approach) was used in revaluation of assets.;6-18;Chapter;6;The 20X1 Consolidated Income Statement showed;Sales..................................................;$;800,000;Cost of Goods;Sold.....................................;(488,000);Operating;Expenses.....................................;(203,200);Consolidated Net;Income................................;$ 108,800;To NCI.................................................;8,000................................ToControllingInterest;$ 100,800;=========;Operating;expenses include depreciation of $31,200 and patent amortization of $2,000. In;December 19X1, Price declared and paid dividends of $30,000, Sidex declared and;paid dividends of $10,000.;Required;a. Complete;the Figure 6-1 worksheet for a consolidated statement of cash flows for 20X1.;b. Prepare the;supplementary disclosure of non-cash investing and financing activities for the;statement of cash flows for 20X1.;6-19;Chapter 6;11.On January;1, 20X1, Parent Company purchased 80% of the common stock of Subsidiary Company;at a cost of $252,000. Parent paid $152,000 in cash and issued 1,000 shares of;8% preferred stock with par and market value of $100,000 for 80% of;Subsidiary's common stock.;Presented;below are columns for the January 1, 20X1 condensed balance sheets of;Subsidiary and Parent, as well as the December 31, 20X1 consolidated balance;sheet.;Balances;1-1-20X1;12-31-20X1;Consolidated;Subsidiary;Parent;Balances.......................Cash;$ 25,000;$ 160,000;$;177,000;Other Current Assets.......;90,000;100,000;266,000;Land.......................;40,000;110,000;150,000;Building...................;200,000;350,000;650,000;Accumulated Depreciation...;(40,000);(100,000);(180,000);Patent.....................;56,000;$315,000;$ 620,000;$1,119,000;========;=========;==========;Current Liabilities........;$;25,000;$120,000;$;185,000;Long-term Liabilities......;50,000;100,000;300,000;Preferred Stock............;20,000;50,000;100,000;Common Stock...............;50,000;Other Paid-in Capital......;80,000;150,000;150,000;Retained Earnings..........;140,000;200,000;280,000;NCI........................;54,000;$315,000;$620,000;$1,119,000;========;========;==========;On January;1, 20X1, all of the identifiable net assets of Subsidiary had market values;equal to book values, except for an internally-developed patent. In the;consolidated statements, the patent was amortized over 15 years.;The 20X1 Consolidated Income Statement showed;Sales..................................................;$;800,000;Cost of Goods;Sold.....................................;(480,000);Operating;Expenses.....................................;$;(204,000);Consolidated Net;Income................................;16,000;To NCI.................................................;8,000................................ToControllingInterest;$;108,000;=========;Operating;expenses include depreciation of $40,000, as well as amortization of the;patent. In December 20X1, Parent declared and paid dividends of $28,000;Subsidiary declared and paid dividends of $10,000.;On July 1;20X1, Parent sold land to Subsidiary for cash equal to the cost of the land;$50,000. Subsidiary then paid cash of $100,000 to have a building constructed;by an independent contractor. To finance the property acquisition, Subsidiary;borrowed $150,000 from the bank on a long-term note, guaranteed by Parent;Company.;6-20;Chapter 6;Required;a. Complete;the Figure 6-2 worksheet for a consolidated statement of cash flows for 20X1.;b. Prepare the;supplementary disclosure of non-cash investing and financing activities for the;statement of cash flows for 20X1.;6-21;Chapter 6;6.;Dills Company purchased an 80% interest in the;common stock of Sarada Company for $860,000 on January 1, 20X7. The price was;$90,000 in excess of the book value of the underlying equity, and the excess;was attributed to a patent with a 10-year life.;During 20X9, Dills Company and Sarada Company reported the;following internally generated income before taxes:......................................;Sales;Dills Co.;Sarada Co.;$;300,000;$120,000;Cost of goods;sold.........................;(200,000);(90,000);Gain on;machine............................;10,000;--;Expenses...................................;(40,000);(20,000)........................Incomebeforetaxes;$;70,000;$ 10,000;=========;========;Sarada;Company sold goods to Dills Company for $60,000. Dills Company had $30,000 of;Sarada Company's goods in its beginning inventory and $12,000 of Sarada;Company's goods in its ending inventory. Sarada Company sells goods to Dills;Company at cost plus 20%.;Dills;Company sold a new machine to Sarada Company on January 1, 20X9, for $40,000.;The cost of the machine was $30,000. It has a 5-year life.;The;affiliated group files a consolidated tax return and is taxed at 30%.;Required;Prepare a;consolidated income statement for 20X9. Include income distribution for both;firms.;6-22;Chapter;6

 

Paper#44373 | Written in 18-Jul-2015

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