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Question;Pawnee Company Scenario;Balance;sheet information for Pawnee Company and its 90% owned subsidiary, Sioux;Corporation, at December 31, 20X1 is summarized as follows:..................;Current assets-net;Pawnee;Sioux;$;200,000;$ 50,000;Property, plant, and;equipment-net..;1,000,000;600,000;Investment in Sioux.................;558,000;$1,758,000;$650,000;==========;========;Current liabilities.................;$;100,000;$;30,000;Capital;stock.......................;800,000;400,000;Retained earnings...................;858,000;220,000;$1,758,000;$650,000;==========;========;Pawnee acquired;its interest in Sioux for cash at book value several years ago when Sioux's;assets and liabilities were equal to their fair values.;13.;Refer to the Pawnee Company Scenario. Consolidated;total assets of Pawnee and Sioux at December 31, 20X1 will be _______.;a.;$1,785,000;b.;$1,850,000;c.;$2,343,000;d. $2,408,000;DIF;14.;Refer to the Pawnee Company Scenario. The;consolidated balance sheet of Pawnee and Sioux at December 31, 20X1 will show;a.;Investment in Sioux, $558,000.;b.;Capital stock, $800,000.;c.;Retained earnings, $1,078,000.;d. Noncontrolling interest;$65,000.;15.;Pahl Corporation owns a 60% interest in Sauer;Corporation, acquired at book value equal to fair value at the beginning of;20X1. On December 20, 20X1 Sauer declares dividends of $80,000, and the;dividends remain unpaid at year end. Pahl has not recorded the dividends;receivable at December 31. A consolidated working paper entry is necessary to;a.;Enter the $80,000 dividends receivable in the;consolidated balance sheet.;b. Enter;$48,000 dividends receivable in the consolidated balance sheet.;c.;Reduce the dividend payable account to $32,000 in;the consolidated balance sheet.;d.;Eliminate the dividend payable account in the;consolidated balance sheet.;3-6;Chapter 3;16.;If the investment in subsidiary account is increased;or decreased by the amount determined by the following calculation;Parent;ownership percentage x (current balance in the subsidiary's retained earnings;minus the subsidiary's retained earnings balance on the date of acquisition);the investment account is being converted from;a.;cost to simple equity.;b.;cost to sophisticated equity.;c.;simple equity to sophisticated equity.;d. simple equity to cost.;17.;On January 1, 20X1, Payne Corp. purchased 70% of;Shayne Corp.'s $10 par common stock for $900,000. On this date, the carrying;amount of Shayne's net assets was $1,000,000. The fair values of Shayne's;identifiable assets and liabilities were the same as their carrying amounts;except for plant assets (net), which were $200,000 in excess of the carrying;amount. For the year ended December 31, 20X1, Shayne had net income of $150,000;and paid cash dividends totaling $90,000. Excess attributable to plant assets;is amortized over 10 years.;In the December 31, 20X1, consolidated balance sheet;noncontrolling interest should be reported at _______.;a.;$282,500;b.;$300,500;c.;$318,000;d. $345,000;18.;Alpha purchased an 80% interest in Beta on June 30;20X1. Both Alpha's and Beta's reporting periods end December 31. Which of the;following represents the controlling interest in consolidated net income for;20X1?;a.;100% of Alpha's July 1-December 31 income plus 80%;of Beta's July 1-December 31 income;b. 100% of;Alpha's July 1-December 31 income plus 100% of Beta's July 1-December 31 income;c.;100% of Alpha's January 1-December 31 income plus;80% of Beta's July 1-December 31 income;d.;100% of Alpha's January 1-December 31 income plus;80% of Beta's January 1-December 31 income;19. In a mid-year purchase when;the subsidiary's books are not closed until the end of the year, the purchased;income account contains the parent's share of the;a.;subsidiary's income earned for the entire year.;b. subsidiary's;income earned from the beginning of the year to the date of acquisition.;c.;subsidiary's income earned from the date of;acquisition to the end of the year.;d. Consolidated Net Income.;3-7;Chapter 3;20. On January 1, 20X1, Piston;Inc. acquired Spur Corp. While recording the acquisition Piston established a;deferred tax liability. It is most likely that this account was created because;a.;the transaction was a tax-free exchange to Piston.;b.;Piston had not paid all of the income taxes due the;government when acquiring Spur.;c.;the transaction was a tax-free exchange to Spur.;d.;Spur had not paid all of the income taxes due the;government prior to the acquisition by Piston.;PROBLEM;1.;On January 1, 20X1, Parent Company purchased 80% of;the common stock of Subsidiary Company for $316,000. On this date, Subsidiary;had common stock, other paid-in capital, and retained earnings of $40,000;$120,000, and $190,000, respectively. Net income and dividends for 2 years for;Subsidiary Company were as follows:.................................;Net income;20X1;20X2;$50,000;$90,000;Dividends..................................;10,000;20,000;On January 1, 20X1, the only tangible assets of Subsidiary which;were undervalued were inventory and building. Inventory, for which FIFO is;used, was worth $5,000 more than cost. The inventory was sold in 20X1.;Building, which was worth $15,000 more than book value, has a remaining life of;8 years, and straight-line depreciation is used. Patent, if any, is to be;amortized over 10 years.;Required;a.;Using the information above or on the separate;worksheet, prepare a determination and distribution of excess schedule. Use the;parent company concept (pro-rata fair value approach) in any write-up of;assets.;b.;Parent Company carries the Investment in Subsidiary;Company under the simple equity method. In general journal form, record the;entries that would be made to apply the equity method in 20X1 and 20X2.;c.;Compute the balance which should appear in;Investment in Subsidiary Company and in Subsidiary Income on December 31, 20X2;(the second year). Fill in these amounts on Parent Company's trial balance for;20X2.;d. Complete;the Figure 3-1 worksheet for consolidated financial statements for 20X2.;3-8;Chapter 3

 

Paper#44458 | Written in 18-Jul-2015

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