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1. On January 1, 2009, Race Corp. acquired 80% of...

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1. On January 1, 2009, Race Corp. acquired 80% of the voting common stock of Gallow Inc. During the year, Race sold to Gallow for $450,000 goods which cost $330,000. Gallow still owned 15% of the goods at year-end. Gallow?s reported net income was $204,000 and Race?s net income was $806,000. Race decided to use the equity method to account for this investment. What was the non-controlling interest?s share of consolidated net income? ? $37,200 ? $22,800 ? $30,900 ? $32,900 ? $40,800 2. Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2009, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000 and $220,000 for 2009, 2010, and 2011 respectively. Parker sold the land it purchased from Stark in 2009 for $92,000 in 2011. Which of the following will be included in a consolidation entry for 2010? ? Debit retained earnings for $5,000 ? Credit retained earnings for $5,000 ? Debit investment in subsidiary for $5,000 ? Credit investment in subsidiary for $5,000 ? Credit land for $5,000 3. Which of the following statements is true regarding an intercompany sale of land? ? A lost is always recognized but a gain is eliminated on a consolidated income statement ? A loss and a gain are always eliminated on a consolidated income statement ? A loss and a gain are always recognized on a consolidated income statement ? A gain is always recognized but a loss is eliminated on a consolidated income statement ? A gain or loss is eliminated by adjusting stockholders? equity through comprehensive Income 4. Strickland Company sells inventory to its parent, Carter Company, at a profit during 2009. Select the correct answer. With regard to the intercompany sale, which of the following choices would be a debit entry in the consolidated worksheet for 2009? ? Retained earnings ? Cost of goods sold ? Inventory ? Investment Strickland Company ? Additional paid-in capital 5. On January 1, 2009, Riley Corp. acquired some of the outstanding bonds of one of its subsidiaries. The bonds had a carrying value of $421,620 and Riley paid $401,937 for them. How should you account for the difference between the carrying value and the purchase price in the consolidated financial statements for 2009? ? The difference is added to the carrying value of the debt ? The difference is deducted from the carrying value of the debt ? The difference is treated as a loss from the extinguishment of the debt ? The difference is treated as a gain from the extinguishment of the debt ? The difference does not influence the consolidated financial statements 6. These questions are based on the following information and should be viewed as independent situations. Popper Co. purchased 80% of the common stock of Cocker Co. on January 1, 2004, when Cocker had the following stockholders? equity accounts. Common stock- 40,000 shares outstanding $140,000 Additional paid-in capital 105,000 Retained earnings 476,000 Total stockholders? equity $721,000 To acquire this interest in Cocker, Popper paid a total of $682,000 with any excess cost being allocated to goodwill, which has been measured for impairment annually and has not been determined to be impaired as of January 1, 2009 On January 1, 2009, Cocker reported a net book value of $1,113,000 before the following transactions were conducted. Popper uses the equity method to account for its investment in Cocker, thereby reflecting the change in book value of Cocker. Stevens Company has had bonds payable of $10,000 outstanding for several years. On January 1, 2009, when there was an unamortized discount of $ 2,000 and a remaining life of 5 years. Its 80% owned subsidiary, Matthews Company, purchased the bonds in the open market for $11,000. The bonds pay 6% interest annually on December 31. The companies use the straight-line method to amortize interest revenue and expense. Compute the consolidated gain or loss on a consolidated income statement for 2009. ? $1,000 gain ? $1,000 loss ? $2,000 loss ? $3,000 loss ? $3,000 gain 7. Ryan Company owns 80% of Chase Company. The original balances presented for Ryan and Chase as of January 1, 2009 are as follow: Chase Company: Share outstanding 50,000 Book value $400,000 Book value per share $8 Ryan Company: Shares owned of Chase 40,000 Book value of investment in Chase $320,000 Assume Chase reacquired 8,000 shares of its common stock from outsiders at $10 per share. Wolf Corporation owns 70% of the outstanding stock of Donald, Inc. During the current year, Donald made $75,000 in sales to Wolff. How does this transfer affect the consolidated statement of cash flows? ? Included as a decrease in the investing section ? Includes as an increase in the operating section ? Included as a decrease in the operating section ? Included as an increase in the investing section ? Not reported in the consolidated statement of cash flows 8. Belsen purchased inventory on December 1, 2008. Payment of 200,000 stickles was to be made in sixty days. Also on December 1, Belsen signed a contract to purchase ? 200,000 in sixty days. The spot rate was $1= ?2.80 and the 60 day forward rate was $1= ?2.60. On December 31, the spot rate was $1= ?2.90 and the 30 day forward rate was $1 = ? 2.62. Assume an annual interest rate of 12% and a fair value hedge. The present value for one month at 12% is .9901. In the journal entry to record the establishment of a forward exchange contract, at what amount should the Forward Contract account be recorded on December 1? ? $71,428.57 ? $76,923.08 ? $5,549.51 ? $587.20 ? $0 since there is no cost, there is no value for the contract at this date 9. When a U.S. company purchases parts from a foreign company, which of the following will result in no foreign exchange gain or loss? ? The transaction is denominated in U.S. dollars ? The transaction resulted in an extraordinary gain ? The transaction resulted in an extraordinary loss ? The foreign currency appreciated in value relative to the U.S. dollar ? The foreign currency depreciated in value relative to the U.S. dollar 10. Darron Co. was formed on January 1, 2009 as a wholly owned foreign subsidiary of a U.S. corporation. Darron?s functional currency was the stickle ?. The following transactions events occurred during 2007: Jan. 1 Darron issued common stock for ?1,000,000 June 30 Darron paid dividends of ? 20,000 Dec. 31 Darron reported net income of ? 80,000 for the year Exchange rates for 2009 were: Jan. 1 $1= ?.48 June 30 $1= ?.46 Dec. 31 $1=?.42 Weighted average rate for the year $1=?.44 What exchange rate should have been use in translating Darron?s revenues and expenses for 2009? ? $1= ?.48 ? $1=?.44 ? $1=?.44 ? $1=?.42 ? $1=?.45 11. In translating a foreign subsidiary?s financial statements, which exchange rate does the current method require for the subsidiary?s asset and liabilities? ? The exchange rate in effect when each asset or liability was acquired ? The average exchange rate for the current year ? A calculated exchange rate based on market value ? The exchange rate in effect as o the balance sheet date ? The exchange rate in effect at the start o the current year 12. Dilty Corp. owned a subsidiary in France. Dilty concluded that the subsidiary?s functional currency was the U.S. dolar. What must Dilty do to ready the subsidiary?s financial statements for consolidation? ? First translate them, then re-measure them ? First re-measure them, then translate them ? State all of the subsidiary?s account in U.S. dollar using the exchange rate in effect at the balance sheet date. ? Translate them ? Re-measure them 13. Under the current rate method, common stock would be restated at what rate? ? Beginning of the year rate ? Average rate ? Current rate ? Historical rate ? Composite amount 14 What is a company?s functional currency? ? The currency of the primary economic environment in which it operates ? The currency of the country where it has its headquarters ? The currency in which it prepares its financial statements ? The reporting currency of its parent for a subsidiary ? The currency it chooses to designate as such 15 Which method of translating a foreign subsidiary?s financial statement is correct? ? Historical rate method ? Working capital method ? Current rate method ? Re-measurement ? Temporal method 16 The advantages of the partnership form of business organization, compared to corporations include ? Single taxation ? Ease of raising capital ? Mutual agency ? Limited liability ? Difficulty of formation 17 The Henry, Isaac, Jacobs partnership was about to enter liquidation with the following account balances: Cash $90,000 Liabilities $60,000 Noncash assets 300,000 Henry, capital 80,000 Isaac, capital 110,000 Jacobs, capital 140,000 Total $390,000 Total $390,000 Estimated expenses of liquidation were $5,000. Henry, Isaac and Jacobs shared profits and losses in a ratio of 2:4:4. What amount of cash was available for safe payment, based on the above information? ? $30,000 ? $85,000 ? $25,000 ? $35,000 ? $40,000 18 In accounting, the term translation refers to: ? The calculation of gains or losses from hedging translations ? The calculation of exchange rate gains or losses on individual transactions in foreign currencies ? The procedure required to identify a company?s functional currency ? The calculation of gains or losses from all transactions for the year ? A procedure to prepare a foreign subsidiary?s financial statements for consolidation 19 According to SFAS 52, which method is usually required for translating a foreign subsidiary?s financial statements into the parent?s reporting currency? ? The temporal method ? The current rate method ? The current/noncurrent method ? The monetary/non-monetary method ? The noncurrent rate method 20 The forward rate may be defined as: ? The price a foreign currency can be purchased or sold today ? The price today at which a foreign currency can be purchased or sold in the future ? The forecasted future value of a foreign currency ? The U.S. dollar value of a foreign currency ? The Euro value of a foreign currency

 

Paper#7632 | Written in 18-Jul-2015

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