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Question;15. When a parent;sells part of its subsidiary interest, a gain or loss is recognized if the;parent;a.;sells its entire investment.;b.;loses control and significant influence.;c.;loses control only.;d. sells any portion on its;investment.;16.Company P;purchased a 55% interest in Company S on January 1, 20X1, for $200,000. At the;time of the purchase, Company S had the following stockholders' equity;Common stock ($10;par)........................... $;80,000 Retained earnings................................ 120,000 Total stockholders;equity..................... $200,000;========;Any excess;is attributable to equipment with a 10-year life. On January 1, 20X6, the;retained earnings of Company S was $175,000. During the first 6 months of 20X6;$25,000 was earned by Company S. The entire investment was sold for $300,000 on;July 1, 20X6. The gain was;2.;$(35,000);3.;$90,000;4.;$105,500;5. $100,000;7-5;Chapter 7;17.;Company P purchased a 55% interest in Company S on;January 1, 20X1, for $200,000. At the time of the purchase, Company S had the;following stockholders' equity;Common stock ($10;par)........................... $;80,000 Retained earnings................................ 120,000 Total stockholders;equity..................... $200,000;========;Any excess;is attributable to equipment with a 10-year life. On January 1, 20X6, the;retained earnings of Company S was $175,000. The entire investment was sold for;$300,000 on January 1, 20X6. The gain was;a.;$(20,250);b.;$90,000;c.;$114,750;d. $100,000;18.;A parent company owns a 90% interest in a subsidiary;at the start of the year and during the year sells a 10% interest to reduce its;ownership percentage to 80%. The most popular view of the transaction under;current consolidations theory is that;a.;it is a sale of an investment at a gain or a loss.;b.;it is likened to a treasury stock transaction which;may not result in a gain or a loss.;c.;it is a transaction between the controlling and;noncontrolling ownership interests and has no effect on consolidated income.;The transaction would impact only paid-in capital.;d. the;increase or decrease in equity as a result of the sale is an adjustment to;donated capital.;19. In the year;a parent sells its subsidiary investment, the results of subsidiary operations;prior to the sale date are;a.;typically consolidated to the point of sale.;b. typically;shown on the balance sheet in the stockholders' equity section as an adjustment;to retained earnings.;c.;not typically reflected on any of the parent's;statements.;d. not typically consolidated.;7-6;Chapter 7;20.;Patten Company purchased an 80% interest in Salty;Inc. on January 1, 20X1, for $500,000 when the stockholders' equity of Salty;was $500,000. Any excess of cost was attributed to a building with a 20-year;life. On July 1, 20X4, Patten sold part of its investment and reduced its;ownership interest to 60%. Salty earned $62,000, evenly, during 20X4. The share;of income earned by the NCI during 20X4 is __________.;a.;$10,000;b.;$12,400;c.;$18,600;d. $43,400;21.;Page Company purchased an 80% interest in the common;stock of the Seed Company for $600,000 on January 1, 20X4, when Seed Company;had the following stockholders' equity;Common;stock, $10;par............................;$300,000;Preferred;stock, 10%, $10 par....................;100,000;Paid-in;excess of par, common....................;50,000;Retained;earnings................................;200,000;The;preferred stock is cumulative and was 1 year in arrears on January 1, 20X4. Any;excess of cost over book value on the common stock purchase was attributed to;goodwill. The goodwill that will appear on the consolidated balance sheet;prepared on January 1, 20X4, is __________.;a.;$80,000;b.;$88,000;c.;$160,000;d. $168,000;22.;Page Company purchased an 80% interest in the common;stock of the Seed Company for $600,000 on January 1, 20X4, when Seed Company;had the following stockholders' equity;Common stock, $10;par............................;$300,000;Preferred;stock, 10%, $10 par....................;100,000;Paid-in;excess of par, common....................;50,000;Retained;earnings................................;200,000;The;preferred stock is cumulative and was 2 years in arrears on January 1, 20X4.;Any excess of cost over book value on the common stock purchase was attributed;to goodwill. Seed had net income of $40,000 during 20X4 and paid no dividends.;The noncontrolling interest share of net income was __________.;a.;$3,200;b.;$6,400;c.;$8,000;d. $16,000;7-7;Chapter 7;23.;Page Company purchased an 80% interest in the common;stock of the Seldom Company for $600,000 on January 1, 20X4, when Seed Company;had the following stockholders' equity;Common;stock, $10;par............................;$300,000;Preferred;stock, 10%, $10 par....................;100,000;Paid-in;excess of par, common....................;50,000;Retained;earnings................................;200,000;The;preferred stock is cumulative and was 2 years in arrears on January 1, 20X4.;Any excess of cost over book value on the common stock purchase was attributed;to goodwill. Seed had net income of $40,000 during 20X4 and paid no dividends.;The controlling interest's share of Seed's income was __________.;a.;$24,000;b.;$23,360;c.;$25,600;d. $32,000;24.;Plant company owns 80% of the common stock of Surf;Company. Surf Company also has outstanding preferred stock. Plant Company owned;none of the preferred stock prior to January 1, 20X5. Plant Company purchased;100% of the outstanding preferred stock on January 1, 20X5, at a price in;excess of book value. The result of this transaction with regard to the;consolidated statements is that;a.;there will be added goodwill.;b.;there will be a loss recorded in the year of the;purchase.;c.;the preferred stock will not appear on the balance;sheet and there will be a decrease in retained earnings as a result of the;purchase.;d.;the investment in preferred stock will appear on the;balance sheet.;25.;Pickle Company owns 80% of the common stock of Souer;Company and none of the preferred stock. Souer Company has the following;stockholders' equity;Preferred stock, cumulative, 10%, $100 par.......;$100,000;Common stock ($5;par)............................;200,000;Paid-in capital in excess of;par.................;300,000;Retained;earnings................................;150,000;Total..........................................;$750,000;========;The;preferred stock dividends are 2 years in arrears. What is the NCI in retained;earnings?;a.;$20,400;b.;$24,000;c.;$30,000;d.;$46,000;e. None of the above;7-8;Chapter 7;26.;Company P has consistently sold merchandise for;resale to its subsidiary at cost plus 25%. There were intercompany goods in;both the subsidiary's beginning and ending inventory. As a result of these;sales, which of the following amounts must be adjusted for when preparing only;a consolidated balance sheet?;Sales Profit;Beginning;Ending;by Co. P During;Inventory;Inventory;a.;the Year;Profit;Profit;Yes;Yes;Yes;b.;Yes;No;Yes;c.;No;No;Yes;d.;No;No;No;27.;Company P owns an 90% interest in Company S. Company;S has outstanding $100,000 of 10% bonds that were sold at face value and have 6;years to maturity as of the balance sheet date. Company P owns $70,000 of the;bonds and has a remaining unamortized book value of $66,000. Company S bonds;will be presented on the consolidated balance sheet as;a.;bonds payable, $30,000.;b.;bonds payable, $34,000.;c.;bonds payable, $100,000.;d. bonds payable will not;appear.;28.;Saddle Corporation is an 80%-owned subsidiary of;Paso Company. On January 1, 20X1, Saddle sold Paso a machine for $50,000.;Saddle's cost was $60,000 and the book value was $40,000. The machine had a;5-year remaining life at the time of the sale. A consolidated balance sheet;only is being prepared on December 31, 20X3. The retained earnings of the;controlling interest requires which of the following adjustments?;a.;$(10,000);b.;$(4,000);c.;$(2,000);d. No adjustment needed

 

Paper#44377 | Written in 18-Jul-2015

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