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ACCT4110 Exam 2

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Question;Question 1 3;/ 3 points;On January 1, 20X9, Gulliver Corporation acquired 80 percent;of Sea-Gull Company's common stock for $160,000 cash. The fair value of the;noncontrolling interest at that date was determined to be $40,000. Data from;the balance sheets of the two companies included the following amounts as of;the date of acquisition;At the date of the business combination, the book values of;Sea-Gull's net assets and liabilities approximated fair value except for;inventory, which had a fair value of $45,000, and land, which had a fair value;of $60,000.;Based on the preceding information, what amount of total;inventory will be reported in the consolidated balance sheet prepared;immediately after the business combination?;a) $130,000;b) $135,000;c) $90,000;d) $45,000;Question 2 3;/ 3 points;On January 1, 20X9, Gulliver Corporation acquired 80 percent;of Sea-Gull Company's common stock for $160,000 cash. The fair value of the;noncontrolling interest at that date was determined to be $40,000. Data from the;balance sheets of the two companies included the following amounts as of the;date of acquisition;At the date of the business combination, the book values of;Sea-Gull's net assets and liabilities approximated fair value except for;inventory, which had a fair value of $45,000, and land, which had a fair value;of $60,000.;Based on the preceding information, what amount of goodwill;will be reported in the consolidated balance sheet prepared immediately after;the business combination?;a) $0;b) $40,000;c) $20,000;d) $15,000;Question 3 3;/ 3 points;On January 1, 20X9, Gulliver Corporation acquired 80 percent;of Sea-Gull Company's common stock for $160,000 cash. The fair value of the;noncontrolling interest at that date was determined to be $40,000. Data from;the balance sheets of the two companies included the following amounts as of;the date of acquisition;At the date of the business combination, the book values of;Sea-Gull's net assets and liabilities approximated fair value except for;inventory, which had a fair value of $45,000, and land, which had a fair value;of $60,000.;Based on the preceding information, what amount of total;assets will be reported in the consolidated balance sheet prepared immediately;after the business combination?;a) $720,000;b) $840,000;c) $825,000;d) $865,000;Question 4 3;/ 3 points;On January 1, 20X9, Gulliver Corporation acquired 80 percent;of Sea-Gull Company's common stock for $160,000 cash. The fair value of the;noncontrolling interest at that date was determined to be $40,000. Data from;the balance sheets of the two companies included the following amounts as of;the date of acquisition;At the date of the business combination, the book values of;Sea-Gull's net assets and liabilities approximated fair value except for;inventory, which had a fair value of $45,000, and land, which had a fair value;of $60,000.;Based on the preceding information, what amount of total;liabilities will be reported in the consolidated balance sheet prepared;immediately after the business combination?;a) $395,000;b) $280,000;c) $275,000;d) $195,000;Question 5 3;/ 3 points;On January 1, 20X9, Gulliver Corporation acquired 80 percent;of Sea-Gull Company's common stock for $160,000 cash. The fair value of the;noncontrolling interest at that date was determined to be $40,000. Data from;the balance sheets of the two companies included the following amounts as of;the date of acquisition;At the date of the business combination, the book values of;Sea-Gull's net assets and liabilities approximated fair value except for;inventory, which had a fair value of $45,000, and land, which had a fair value;of $60,000.;Based on the preceding information, what amount will be;reported as noncontrolling interest in the consolidated balance sheet prepared;immediately after the business combination?;a) $0;b) $15,000;c) $40,000;d) $46,000;Question 6 3;/ 3 points;On January 1, 20X9, Gulliver Corporation acquired 80 percent;of Sea-Gull Company's common stock for $160,000 cash. The fair value of the;noncontrolling interest at that date was determined to be $40,000. Data from;the balance sheets of the two companies included the following amounts as of;the date of acquisition;At the date of the business combination, the book values of;Sea-Gull's net assets and liabilities approximated fair value except for;inventory, which had a fair value of $45,000, and land, which had a fair value;of $60,000.;Based on the preceding information, what amount of;consolidated retained earnings will be reported immediately after the business;combination?;a) $205,000;b) $120,000;c) $325,000;d) $310,000;Question 7 3;/ 3 points;On January 1, 20X9, Gulliver Corporation acquired 80 percent;of Sea-Gull Company's common stock for $160,000 cash. The fair value of the;noncontrolling interest at that date was determined to be $40,000. Data from;the balance sheets of the two companies included the following amounts as of;the date of acquisition;At the date of the business combination, the book values of;Sea-Gull's net assets and liabilities approximated fair value except for;inventory, which had a fair value of $45,000, and land, which had a fair value;of $60,000.;Based on the preceding information, what amount will be;reported as total stockholders' equity in the consolidated balance sheet;prepared immediately after the business combination?;a) $405,000;b) $205,000;c) $565,000;d) $550,000;Question 8 0;/ 3 points;On January 1, 20X8, Colorado Corporation acquired 75 percent;of Denver Company's voting common stock for $90,000 cash. At that date, the;fair value of the noncontrolling interest was $30,000. Denvers's balance sheet;at the date of acquisition contained the following balances;At the date of acquisition, the reported book values of;Denver's assets and liabilities approximated fair value. Eliminating entries;are being made to prepare a consolidated balance sheet immediately following;the business combination.;Based on the preceding information, in the entry to;eliminate the investment balance;a) retained;earnings will be credited for $20,000.;b) additional;paid-in-capital will be credited for $20,000.;c) retained;earnings will be credited for $10,000.;d) noncontrolling;interest will be debited for 30,000.;Question 9 3;/ 3 points;On January 1, 20X8, Colorado Corporation acquired 75 percent;of Denver Company's voting common stock for $90,000 cash. At that date, the;fair value of the noncontrolling interest was $30,000. Denvers's balance sheet;at the date of acquisition contained the following balances;At the date of acquisition, the reported book values of;Denver's assets and liabilities approximated fair value. Eliminating entries;are being made to prepare a consolidated balance sheet immediately following;the business combination.;Based on the preceding information, the amount of goodwill;reported is;a) $0;b) $10,000;c) $15,000;d) $20,000;Question 10 0;/ 3 points;When there are intercompany sales of inventory during the;year and a three-part consolidation worksheet is prepared, elimination entries;related to the intercompany sales;I. Always are needed.;II. Are not needed if the entire inventory is resold to;unrelated parties prior to the end of the year.;a) I;b) II;c) Both I;and II;d) Either I;or II;Question 11 3;/ 3 points;Earth Company owns 100 percent of the capital stock of both;Mars Corporation and Venus Corporation. Mars purchases merchandise inventory;from Venus at 125 percent of Venus's cost. During 20X8, Venus sold inventory to;Mars that it had purchased for $25,000. Mars sold all of this merchandise to;unrelated customers for $56,892 during 20X8. In preparing combined financial statements;for 20X8, Earth's bookkeeper disregarded the common ownership of Mars and;Venus.;Based on the information given above, what amount should be;eliminated from cost of goods sold in the combined income statement for 20X8?;a) $31,250;b) $25,000;c) $56,892;d) $6,250;Question 12 3;/ 3 points;Earth Company owns 100 percent of the capital stock of both;Mars Corporation and Venus Corporation. Mars purchases merchandise inventory;from Venus at 125 percent of Venus's cost. During 20X8, Venus sold inventory to;Mars that it had purchased for $25,000. Mars sold all of this merchandise to;unrelated customers for $56,892 during 20X8. In preparing combined financial;statements for 20X8, Earth's bookkeeper disregarded the common ownership of;Mars and Venus.;Based on the information given above, by what amount was;unadjusted revenue overstated in the combined income statement for 20X8?;a) $25,000;b) $56,892;c) $31,250;d) $6,250;Question 13 3;/ 3 points;Senior Inc. owns 85 percent of Junior Inc. During 20X8;Senior sold goods with a 25 percent gross profit to Junior. Junior sold all of;these goods in 20X8. How should 20X8 consolidated income statement items be;adjusted?;a) No;adjustment is necessary.;b) Sales and;cost of goods sold should be reduced by 85 percent of the intercompany sales.;c) Net;income should be reduced by 85 percent of the gross profit on intercompany;sales.;d) Sales and;cost of goods sold should be reduced by the intercompany sales.;Question 14 3;/ 3 points;During the year a parent makes sales of inventory at a;profit to its 75 percent owned subsidiary. The subsidiary also makes sales of;inventory at a profit to its parent during the same year. Both the parent and;the subsidiary have on hand at the end of the year 20 percent of the inventory;acquired from one another. Consolidated revenues for the year should exclude;a) 80;percent of the total revenues from intercompany sales.;b) total;revenues from intercompany sales.;c) only the;revenues from the subsidiary's intercompany sales.;d) only the;revenues from the parent's intercompany sales.;Question 15 3;/ 3 points;Global Corporation acquired 85 percent of Local Company's;voting shares of stock in 20X7. During 20X8, Global purchased 50,000 picture;tubes for $15 each and sold 28,000 of them to Local for $20 each. Local sold;all of the units to unrelated entities prior to December 31, 20X8, for $30;each. Both companies use perpetual inventory systems.;Which worksheet eliminating entry is needed in preparing;consolidated financial statements for 20X8 to remove all effects of the;intercompany sale?;a) Option A;b) Option B;c) Option C;d) Option D;Question 16 3;/ 3 points;On January 1, 20X8, Parent Company acquired 90 percent;ownership of Subsidiary Corporation, at underlying book value. The fair value;of the noncontrolling interest at the date of acquisition was equal to 10;percent of the book value of Subsidiary Corporation. On Mar 17, 20X8;Subsidiary purchased inventory from Parent for $90,000. Subsidiary sold the;entire inventory to an unaffiliated company for $120,000 on November 21, 20X8.;Parent had produced the inventory sold to Subsidiary for $62,000. The companies;had no other transactions during 20X8.;Based on the information given above, what amount of sales;will be reported in the 20X8 consolidated income statement?;a) $62,000;b) $120,000;c) $90,000;d) $58,000;Question 17 3;/ 3 points;On January 1, 20X8, Parent Company acquired 90 percent;ownership of Subsidiary Corporation, at underlying book value. The fair value;of the noncontrolling interest at the date of acquisition was equal to 10;percent of the book value of Subsidiary Corporation. On Mar 17, 20X8;Subsidiary purchased inventory from Parent for $90,000. Subsidiary sold the;entire inventory to an unaffiliated company for $120,000 on November 21, 20X8.;Parent had produced the inventory sold to Subsidiary for $62,000. The companies;had no other transactions during 20X8.;Based on the information given above, what amount of cost of;goods sold will be reported in the 20X8 consolidated income statement?;a) $62,000;b) $120,000;c) $90,000;d) $58,000;Question 18 0;/ 3 points;On January 1, 20X8, Parent Company acquired 90 percent;ownership of Subsidiary Corporation, at underlying book value. The fair value;of the noncontrolling interest at the date of acquisition was equal to 10;percent of the book value of Subsidiary Corporation. On Mar 17, 20X8;Subsidiary purchased inventory from Parent for $90,000. Subsidiary sold the;entire inventory to an unaffiliated company for $120,000 on November 21, 20X8.;Parent had produced the inventory sold to Subsidiary for $62,000. The companies;had no other transactions during 20X8.;Based on the information given above, what amount of;consolidated net income will be assigned to the controlling shareholders for;20X8?;a) $58,000;b) $59,000;c) $55,000;d) $52,200;Question 19 0;/ 3 points;Blue Company owns 70 percent of Black Company's outstanding;common stock. On December 31, 20X8, Black sold equipment to Blue at a price in;excess of Black's carrying amount, but less than its original cost. On a;consolidated balance sheet at December 31, 20X8, the carrying amount of the;equipment should be reported at;a) Blue's;original cost.;b) Black's;original cost.;c) Blue's;original cost less Black's recorded gain.;d) Blue's;original cost less 70 percent of Black's recorded gain.;Question 20 0;/ 3 points;A wholly owned subsidiary sold land to its parent during the;year at a gain. The parent continues to hold the land at the end of the year.;The amount to be reported as consolidated net income for the year should equal;a) the;parent's separate operating income, plus the subsidiary's net income.;b) the;parent's separate operating income, plus the subsidiary's net income, minus the;intercompany gain.;c) the;parent's separate operating income, plus the subsidiary's net income, plus the;intercompany gain.;d) the;parent's net income, plus the subsidiary's net income, minus the intercompany;gain.;Question 21 3;/ 3 points;Any intercompany gain or loss on a downstream sale of land;should be recognized in consolidated net income;I. in the year of the downstream sale.;II. over the period of time the subsidiary uses the land.;III. in the year the subsidiary sells the land to an;unrelated party.;a) I;b) II;c) III;d) I or II;Question 22 3;/ 3 points;ABC Corporation purchased land on January 1, 20X6, for;$50,000. On July 15, 20X8, it sold the land to its subsidiary, XYZ Corporation;for $70,000. ABC owns 80 percent of XYZ's voting shares.;Based on the preceding information, what will be the;worksheet eliminating entry to remove the effects of the intercompany sale of;land in preparing the consolidated financial statements for 20X8?;a) Option A;b) Option B;c) Option C;d) Option D;Question 23 0;/ 3 points;Parent Company owns 70% of Son Company's outstanding stock.;During 20X1 Son Company sold land to Parent Company for a gain of $25,000.;Parent company held the land all of 20X1. The gain on the sale to Parent should;be;a) recorded;on Son's books as a gain of $25,000 and then eliminated during the;consolidation process.;b) deferred;by Son until Parent sells the land to an outside party.;c) recorded;on Son's books as a gain of $17,500 and eliminated during the consolidation;process.;d) recorded;on Parent's book as a gain of $17,500 and eliminated during the consolidation;process.;Question 24 3;/ 3 points;Cutler Company owns 80 percent of the common stock of Marina;Inc. Cutler acquires some of Marina's bonds from an unrelated party for less;than the carrying value on Marina's books and holds them as a long-term;investment. For consolidated reporting purposes, how is the acquisition of;Marina's bonds treated?;a) As a;decrease in the Bonds Payable account on Marina's books.;b) As an;increase in noncurrent assets.;c) Everything;related to the bonds is eliminated in the consolidation worksheet, and nothing;related to the bonds appears in the consolidated financial statements.;d) As a;retirement of bonds.;Question 25 3;/ 3 points;Culver owns 80 percent of the common stock of Fowler;Company. Culver also purchases some of Fowler's bonds directly from Fowler and;holds the bonds as a long-term investment. How is the acquisition of the bonds;treated for consolidated reporting purposes?;a) As a;retirement of bonds.;b) As an;increase in the Bonds Payable account on Fowler's books.;c) Everything;related to the intercompany bonds is eliminated in the consolidation worksheet;and nothing related to the bonds appears in the consolidated financial;statements.;d) As an;increase in noncurrent assets.;Question 26 3;/ 3 points;When one company purchases the debt of an affiliate from an;unrelated party, a gain or loss on the constructive retirement of debt is;recognized by which of the following?;a) Option A;b) Option B;c) Option C;d) Option D;Question 27 3;/ 3 points;Which sections of the cash flow statement are affected by;the difference in the direct and indirect approaches of presenting a cash flow;statement?;I. Operating activities section;II. Investing activities section;III. Financing activities section;a) I;b) II;c) III;d) I, II;and III;Question 28 3;/ 3 points;Dividends paid to noncontrolling shareholders;I. are reported as a cash outflow in the consolidated cash;flow statement.;II. represent funds that are no longer available to the;consolidated entity.;III. are reported in the consolidated retained earnings;statement.;a) Observation;I alone is true.;b) Observation;III alone is true.;c) Observations;I and II are true.;d) Observations;I, II, and II are true.;Question 29 0;/ 3 points;For a subsidiary to be eligible to be included in a;consolidated tax return, at least _____ of its stock must be held by the parent;company or another company included in the consolidated return.;a) 50;percent;b) 40;percent;c) 75;percent;d) 80;percent;Question 30 0;/ 3 points;Company A holds 70 percent of the voting shares of Company;B. During 20X8, Company B sold land with a book value of $125,000 to Company A;for $150,000. Company A continues to hold the land at the end of the year. The;companies file separate tax returns and are subject to a 40 percent tax rate.;Assume that Company A uses the fully adjusted equity method in accounting for;its investment in Company B.;Based on the information given, which eliminating entry;relating to the intercorporate sale of land is to be entered in the;consolidation worksheet prepared at the end of 20X8?;a) Option A;b) Option B;c) Option C;d) Option D;Question 31 8;/ 10 points;Colton Company acquired 80 percent ownership of Mota;Company's voting shares on January 1, 2008, at underlying book value. The fair;value of the noncontrolling interest on that date was equal to 20 percent of;the book value of Mota Company. During 2008, Colton purchased inventory for;$30,000 and sold the full amount to Mota Company for $50,000. On December 31;2008, Mota's ending inventory included $10,000 of items purchased from Colton.;Also in 2008, Mota purchased inventory for $80,000 and sold the units to Colton;for $100,000. Colton included $30,000 of its purchase from Mota in ending inventory;on December 31, 2008. Summary income statement data for the two companies;revealed the following;Required;a. Compute the amount to be reported as sales in the 20X8;consolidated income statement.;b. Compute the amount to be reported as cost of goods sold;in the 20X8 consolidated income statement.Question 32 5;/ 5 points;On April 7 2012, Pate Corp. sold land to Shannahan Co., its;wholly owned subsidiary. From a;consolidated point of view, WHEN will the gain on this transfer actually be;earned?Question 33 5;/ 5 points;Throughout 2012, Cleveland Co. sold inventory to Leeward;Co., its wholly owned subsidiary. From a;consolidated point of view, WHEN will the gain on this transfer be earned?Question 34 10;/ 10 points;How does a gain on an intercompany sale of equipment affect;the calculation of a non-controlling interest?;Downstream and/or upstream.The correct answer is not displayed for Long Answer type;questions.;Question 35 20;/ 30 points;The sales of merchandise by Pater Corporation to its;80%-owned subsidiary, Sibling Company, during the fiscal year ended March 31;2012, may be analyzed as follows;Pater and Sibling file separate income tax returns, the;income tax rate is 40%, and the criteria for recognizing a deferred tax asset;without a valuation allowance are met.;Prepare working paper eliminations, including income taxes;(in journal entry format) for Pater Corporation and subsidiary on March 31;2012. Omit explanations.

 

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