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Question;14.;When a parent purchases a portion of the newly;issued stock of its subsidiary and the ownership interest remains the same;a. any;difference between the change in equity and the price paid is the excess of;cost or book value attributable to the new block.;b. any;difference between the change in equity and the price paid is viewed as a gain;or loss on the sale of an interest.;c. any;difference between the change in equity and the price paid is viewed as a;change in paid-in capital or retained earnings.;d. there will be no adjustment.;15.;When a parent purchases a portion of the newly;issued stock of its subsidiary in a private offering and the ownership interest;decreases;a. any;difference between the change in equity and the price paid is the excess of;cost or book value attributable to the new block.;b. any;difference between the change in equity and the price paid is viewed as a gain;or loss on the sale of an interest.;c. any;difference between the change in equity and the price paid is viewed as a;change in paid-in capital or retained earnings.;d. there will be no adjustment.;16.;When a parent purchases a portion of the newly;issued stock of its subsidiary and the ownership interest increases;a. any;difference between the change in equity and the price paid is the excess of;cost or book value attributable to the new block.;b. any difference;between the change in equity and the price paid is viewed as a gain or loss on;the sale of an interest.;c. any;difference between the change in equity and the price paid is viewed as a;change in paid-in capital or retained earnings.;d. there will be no adjustment.;17.;Apple Inc. purchased a 70% interest in the Banana;Company for $450,000 on January 1, 20X3, when Banana Company had the following;stockholders' equity;Common stock, $10 par................. $100,000 Other paid-in;capital................. 250,000 Retained earnings..................... 150,000;At the time;of the purchase, Banana Company was an 80% owner of the Carrot Company. The;investment in Carrot Company is accounted for under the sophisticated equity;method. On the date of the purchase, Carrot Company has a machine that has a;market value in excess of book value of $20,000. There is no difference between;book and market value for any Banana Company assets. The goodwill that would;result from this purchase is __________.;a.;$100,000;b.;$86,000;c.;$84,000;d. $88,800;8-6;Chapter 8;18.;Apple Inc. owns a 90% interest in Banana Company.;Banana Company, in turn, owns a 80% interest in Carrot Company. During 20X4;Carrot Company sold $50,000 of merchandise to Apple Inc. at cost plus 25%. Of;this merchandise, $10,000 was still unsold by Apple Inc. at year end. The;adjustment to the controlling interest in consolidated net income for 20X4 is;a.;$560;b.;$1,440;c.;$1,600;d. $1,800;19.;Able Company owns an 80% interest in Barns Company;and a 20% interest in Carns Company. Barns owns a 40% interest in Carns;Company.;a. Able does;not control Carns, thus, Carns' income is not included in the consolidated;statements.;b. Able controls;Carns, the noncontrolling interest of Carns Company is 48%.;c. Able;controls Carns, the noncontrolling interest of Carns Company is 40%.;d. Barns;accounts for Carns under the sophisticated cost method, Barns is then;consolidated with Able.;20.;Able Company owns an 80% interest in Barns Company;and a 20% interest in Carns Company. Barns owns a 40% interest in Carns;Company. The reported income of Carns is $20,000 for 20X4. Which of the;following shows how it will be distributed?;Barns;Carns;Controlling;Non-;Controlling;Non-;Interest;Interest;Controlling;a.;$10,400;$1,600;$8,000;b.;$ 2,000;$8,000;$8,000;c.;$12,000;$;0;$8,000;d. $10,400;$9,600;$;0;21. Consolidated statements for;X, Y, and Z are proper if;a. X owns 100%;of the outstanding common stock of Y and 49% of Z, M owns 51% of Z.;b.;X owns 100% of the outstanding common stock of Y and;75% of Z, X bought the stock of Z one month before the statement date and sold;it 6 weeks later.;c.;X owns 100% of the outstanding stock of Y, Y owns;75% of Z.;d. There is no;interrelation of financial control among X, Y, and Z, however, they are;contemplating the joint purchase of 100% of the outstanding stock of D.;e.;X owns 100% of the outstanding common stock of Y and;Z, Z is in bankruptcy.;8-7;Chapter 8;22. Which of the following;situations is a mutual holding?;a.;A owns 80% of B, and B owns 70% of C.;b.;A owns 80% of B and 20% of C, B owns 70% of C.;c.;A owns 80% of B, and B owns 20% of A.;d. None of the above;23.;Company P had 300,000 shares of common stock;outstanding. It owned 80% of the outstanding common stock of S. S owned 20,000;shares of P common stock. In the consolidated balance sheet, Company P's;outstanding common stock may be shown as;a.;285,000 shares.;b.;300,000 shares.;c.;300,000 shares, less 20,000 shares of treasury;stock.;d. 300,000 shares, footnoted to;indicate that S holds 20,000 shares.;24.;A owns 80% of B and 20% of C. B owns 32% of C, and C;owns 10% of A. Which interest will not be included in the consolidated balance;sheet?;a.;10% of A;b.;100% of C;c.;10% of A and 48% of C;d. 20% of B and 48% of C;25. Manke Company owns a 90%;interest in Neske Company. Neske, in turn, owns;a;10% interest in Manke. Neske has 10,000 common stock;shares outstanding, and Manke has 20,000 common stock shares outstanding. How;many shares would each firm show as outstanding in the consolidated balance;sheet, under the treasury stock method?;a.;Manke, 20,000;b.;Manke, 20,000, Neske, 1,000;c.;Manke, 18,000, Neske, 1,000;d. Manke, 18,000;8-8;Chapter 8;26.;Alston Inc. owns 90% of the capital stock of Balance;Co. Balance owns 15% of the capital stock of Alston. Net income, before;adjusting for interest in intercompany net income for each firm, was $50,000;for Alston and $19,000 for Balance.;The;following notations are used. Ignore all income tax considerations.;Ai = Alston's consolidated net income, i.e., its net income plus;its share of the consolidated net income of Balance;Bi = Balance's consolidated net income, i.e., its net income;plus its share of the consolidated net income of Alston;The;equation, in a set of simultaneous equations, that computes Bi is;a.;Bi =.10 x (19,000 +.15Ai).;b.;Bi = 19,000 +.15Ai.;c.;Bi = (.10 x 10,000) +.15Ai.;d. Bi = (.10 x 19,000) + (.15 x;50,000).;27.;Alston Inc. owns 90% of the capital stock of Balance;Co. Balance owns 15% of the capital stock of Alston. Net income, before;adjusting for interest in intercompany net income for each firm, was $50,000;for Alston and $19,000 for Balance.;The;following notations are used. Ignore all income tax considerations.;Ai = Alston's consolidated net income, i.e., its net income plus;its share of the consolidated net income of Balance;Bi = Balance's consolidated net income, i.e., its net income;plus its share of the consolidated net income of Alston;Balance's;noncontrolling interest in consolidated net income is;a.;(.10 x 19,000).;b.;19,000 +.15Ai.;c.;10 x (19,000 +.15Ai).;d. (10 x 19,000) + (.15 x;50,000).

 

Paper#44382 | Written in 18-Jul-2015

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