Deck 4: A: Consolidated Financial Statements and Outside Ownership

Question 1

What is the amount of excess land allocation attributed to the noncontrolling interest at the acquisition date?

A) $ 0.
B) $30,000.
C) $22,500.
D) $ 7,500.
E) $17,500.

Answer 1

D

Question 2

What is the dollar amount of noncontrolling interest that should appear in a consolidated balance sheet prepared at the date of acquisition?

A) $350,000.
B) $300,000.
C) $400,000.
D) $370,000.
E) $0.

Answer 2

C

Question 3

What is the amount of excess land allocation attributed to the controlling interest at the acquisition date?

A) $ 0.
B) $30,000.
C) $22,500.
D) $25,000.
E) $17,500.

Answer 3

C

Question 4

What is the total amount of goodwill recognized at the date of acquisition?

A) $150,000.
B) $250,000.
C) $ 0.
D) $120,000.
E) $170,000.

Question 5

In consolidation, the total amount of expenses related to Kailey, and to Denber's acquisition of Kailey, for 2019 is determined to be

A) $153,750.
B) $161,250.
C) $205,000.
D) $210,000.
E) $215,000.

Question 6

What amount of goodwill should be attributed to the noncontrolling interest at the date of acquisition?

A) $ 0.
B) $ 20,000.
C) $ 30,000.
D) $100,000.
E) $120,000.

Question 7

What is the amount of the noncontrolling interest's share of Kailey's income for 2019?

A) $22,000.
B) $24,000.
C) $48,000.
D) $66,000.
E) $72,000.

Question 8

What amount of goodwill should be attributed to Perch at the date of acquisition?

A) $150,000.
B) $250,000.
C) $ 0.
D) $120,000.
E) $170,000.

Question 9

What amount should have been reported for the land in a consolidated balance sheet at the acquisition date?

A) $ 52,500.
B) $ 70,000.
C) $ 75,000.
D) $ 92,500.
E) $100,000.

Question 10

What is the amount of Kailey's net income to the controlling interest for 2019?

A) $31,000.
B) $33,000.
C) $55,000.
D) $60,000.
E) $39,000.

Question 11

What amount of consolidated net income for 2019 should be allocated to Femur's controlling interest in Harbor?

A) $ 582,000
B) $1,050,000
C) $1,358,000
D) $1,808,000
E) $2,140,000

Question 12

MacHeath Inc.bought 60% of the outstanding common stock of Nomes Inc.in an acquisition that resulted in the recognition of goodwill.Nomes owned a piece of land that cost $250,000 but was worth $600,000 at the date of acquisition.What value would be attributed to this land in a consolidated balance sheet at the date of acquisition?

A) $250,000.
B) $150,000.
C) $600,000.
D) $360,000.
E) $460,000.

Question 13

The noncontrolling interest's share of the earnings of Harbor Corp.for 2019 is calculated to be

A) $132,000.
B) $150,000.
C) $168,000.
D) $160,000.
E) $0.

Question 14

What is the dollar amount of fair value over book value differences attributed to Perch at the date of acquisition?

A) $120,000.
B) $150,000.
C) $280,000.
D) $350,000.
E) $370,000.

Question 15

Which of the following methods is not used to value a noncontrolling interest under circumstances where a control premium is applied to determine the appropriate value for such interest?

A) Valuation models based on subsidiary discounted cash flows.
B) Valuation models based on subsidiary residual income projections.
C) Comparison with comparable investments.
D) The application of a safe harbor discount rate.
E) Fair value based on market trades.

Question 16

For business combinations involving less than 100 percent ownership, the acquirer recognizes and measures all of the following at the acquisition date except:

A) Identifiable assets acquired, at fair value.
B) Liabilities assumed, at book value.
C) Non-controlling interest, at fair value.
D) Goodwill, or a gain from bargain purchase.
E) None of these choices is correct.

Question 17

What is the total amount of excess land allocation at the acquisition date?

A) $ 0.
B) $30,000.
C) $22,500.
D) $25,000.
E) $17,500.

Question 18

What amount would Femur Co.report as consolidated net income for 2019?

A) $440,000.
B) $500,000.
C) $1,500,000.
D) $1,940,000.
E) $2,000,000.

Question 19

What is the dollar amount of Float Corp.'s net assets that would be represented in a consolidated balance sheet prepared at the date of acquisition?

A) $1,600,000.
B) $1,480,000.
C) $1,200,000.
D) $1,780,000.
E) $1,850,000.

Question 20

What is the effect of including Kailey in consolidated net income for 2019?

A) $31,000.
B) $33,000.
C) $55,000.
D) $60,000.
E) $39,000.

Question 21

Which of the following statements is false regarding multiple acquisitions of a subsidiary's existing common stock?

A) The parent recognizes a larger percent of subsidiary income.
B) A step acquisition resulting in control may result in a parent recognizing a gain on revaluation.
C) The book value of the subsidiary will increase.
D) The parent's percent ownership in subsidiary will increase.
E) Noncontrolling interest in subsidiary's net income will decrease.

Question 22

When a parent uses the initial value method throughout the year to account for its 80% investment in an acquired subsidiary, which of the following statements is true at the date immediately preceding the date on which adjustments are made on the consolidated worksheet?

A) Parent company net income equals consolidated net income.
B) Parent company retained earnings equals consolidated retained earnings.
C) Parent company total assets equals consolidated total assets.
D) Parent company dividends equal consolidated dividends.
E) Goodwill is recorded on the parent's books.

Question 23

What is the consolidated balance of the Equipment account at December 31, 2020?

A) $644,400.
B) $784,000.
C) $719,600.
D) $770,000.
E) $775,600.

Question 24

Kordel Inc.acquired 75% of the outstanding common stock of Raxston Corp.Raxston currently owes Kordel $500,000 for inventory acquired over the past few months.In preparing consolidated financial statements, what amount of Raxston's liability should be eliminated?

A) $375,000
B) $125,000
C) $300,000
D) $500,000
E) $0.

Question 25

What is the amount attributable to consolidated noncurrent assets at January 2, 2019?

A) $195,000.
B) $192,200.
C) $186,600.
D) $181,000.
E) $169,800.

Question 26

In a step acquisition, which of the following statements is false?

A) The acquisition method views a step acquisition essentially the same as a single step acquisition.
B) Income from subsidiary is computed by applying a partial year for a new purchase acquired during the year.
C) Income from subsidiary is computed for the entire year for a new purchase acquired during the year.
D) Obtaining control through a step acquisition is a significant measurement event.
E) Pre-acquisition earnings are not included in the consolidated income statement.

Question 27

What is the noncontrolling interest's share of the subsidiary's net income for the year ended December 31, 2020 and what is the ending balance of the noncontrolling interest in the subsidiary at December 31, 2020?

A) $56,000 and $280,000.
B) $50,400 and $218,400.
C) $56,000 and $224,000.
D) $56,000 and $336,000.
E) $50,400 and $330,400.

Question 28

When a parent uses the partial equity method throughout the year to account for its 80% investment in an acquired subsidiary, which of the following statements is true at the date immediately preceding the date on which adjustments are made on the consolidated worksheet?

A) Parent company net income equals consolidated net income.
B) Parent company retained earnings equals consolidated retained earnings.
C) Parent company total assets equals consolidated total assets.
D) Parent company dividends equal consolidated dividends.
E) Goodwill is recorded on the parent's books.

Question 29

When a subsidiary is acquired sometime after the first day of the fiscal year, which of the following statements is true?

A) Income from subsidiary is not recognized until there is an entire year of consolidated operations.
B) Income from subsidiary is recognized from date of acquisition to year-end.
C) Excess cost over acquisition value is recognized at the beginning of the fiscal year.
D) No goodwill can be recognized.
E) Income from subsidiary is recognized for the entire year.

Question 30

What are the total consolidated current liabilities at January 2, 2019?

A) $53,200.
B) $56,000.
C) $64,400.
D) $42,000.
E) $70,000.

Question 31

When a parent uses the acquisition method for business combinations and sells shares of its subsidiary, which of the following statements is false?

A) If majority control is still maintained, consolidated financial statements are still required.
B) If majority control is not maintained but significant influence exists, the equity method to account for the investment is still used but consolidated financial statements are not required.
C) If majority control is not maintained but significant influence exists, the equity method is still used to account for the investment and consolidated financial statements are still required.
D) If majority control is not maintained and significant influence no longer exists, a prospective change in accounting principle to the fair value method is required.
E) A gain or loss calculation must be prepared if control is lost.

Question 32

When consolidating a subsidiary that was acquired on a date other than the first day of the fiscal year, which of the following statements is true of the subsidiary with respect to the presentation of consolidated financial statement information?

A) Pre-acquisition earnings are deducted from consolidated revenues and expenses.
B) Pre-acquisition earnings are added to consolidated revenues and expenses.
C) Pre-acquisition earnings are deducted from the beginning consolidated stockholders' equity.
D) Pre-acquisition earnings are added to the beginning consolidated stockholders' equity.
E) Pre-acquisition earnings are ignored in the consolidated income statement.

Question 33

What is consolidated stockholders' equity at January 2, 2019?

A) $112,000.
B) $133,000.
C) $168,000.
D) $182,000.
E) $203,000.

Question 34

Jax Company used the acquisition method when it acquired its investment in Saxton Company.Jax now sells some of its shares of Saxton such that neither control nor significant influence exists.Which of the following statements is true?

A) The difference between selling price and acquisition value is recorded as a realized gain or loss.
B) The difference between selling price and acquisition value is recorded as an unrealized gain or loss.
C) The difference between selling price and carrying value is recorded as a realized gain or loss.
D) The difference between selling price and carrying value is recorded as an unrealized gain or loss.
E) The difference between selling price and carrying value is recorded as an adjustment to retained earnings.

Question 35

All of the following statements regarding the sale of subsidiary shares are true except which of the following?

A) The use of specific identification based on serial number is acceptable.
B) The use of the FIFO assumption is acceptable.
C) The use of the averaging assumption is acceptable.
D) The use of specific LIFO assumption is acceptable.
E) The parent company must determine whether consolidation is still appropriate for the remaining shares owned.

Question 36

In measuring the noncontrolling interest immediately following the date of acquisition, which of the following would not be indicative of the value attributed to the noncontrolling interest?

A) Fair value based on stock trades of the acquired company.
B) Subsidiary cash flows discounted to present value.
C) Book value of subsidiary net assets.
D) Projections of residual income.
E) Consideration transferred by the parent company that implies a total subsidiary value.

Question 37

What amount represents consolidated current assets at January 2, 2019?

A) $127,000.
B) $129,800.
C) $143,800.
D) $148,000.
E) $135,400.

Question 38

When a parent uses the equity method throughout the year to account for its 80% investment in an acquired subsidiary, which of the following statements is false at the date immediately preceding the date on which adjustments are made on the consolidated worksheet?

A) Parent company net income equals controlling interest in consolidated net income.
B) Parent company retained earnings equals consolidated retained earnings.
C) Parent company total assets equals consolidated total assets.
D) Parent company dividends equals consolidated dividends.
E) Goodwill is not recorded on the parent's books.

Question 39

What amount of consolidated net income for 2020 is attributable to Royce's controlling interest?

A) $686,000.
B) $560,000.
C) $644,000.
D) $635,600.
E) $691,600.

Question 40

Which of the following statements is true regarding the sale of subsidiary shares when using the acquisition method for accounting for business combinations?

A) If control continues, the difference between selling price and acquisition value is recorded as a realized gain or loss.
B) If control continues, the difference between selling price and acquisition value is an unrealized gain or loss.
C) If control continues, the difference between selling price and carrying value is recorded as an adjustment to additional paid-in capital.
D) If control continues, the difference between selling price and carrying value is recorded as a realized gain or loss.
E) If control continues, the difference between selling price and carrying value is recorded as an adjustment to retained earnings.

Question 41

In consolidation at December 31, 2019, what adjustment is necessary for Hogan's Buildings account?

A) $1,620 increase.
B) $1,620 decrease.
C) $1,800 increase.
D) $1,800 decrease.
E) No adjustment is necessary.

Question 42

In consolidation at January 1, 2019, what adjustment is necessary for Hogan's Patent account?

A) $7,000.
B) $6,300.
C) $11,000.
D) $9,900.
E) No adjustment is necessary.

Question 43

Compute Pell's Investment in Demers account balance at December 31, 2019.

A) $580,000.
B) $574,400.
C) $548,000.
D) $542,400.
E) $541,000.

Question 44

Compute Pell's income from Demers for the year ended December 31, 2020.

A) $90,400.
B) $89,000.
C) $50,400.
D) $56,000.
E) $96,000.

Question 45

In consolidation at December 31, 2020, what adjustment is necessary for Hogan's Land account?

A) $7,000 decrease.
B) $7,000 increase.
C) $6,300 increase.
D) $6,300 decrease.
E) No adjustment is necessary.

Question 46

In consolidation at December 31, 2020, what adjustment is necessary for Hogan's Equipment account?

A) $2,000 increase.
B) $2,000 decrease.
C) $1,800 increase.
D) $1,800 decrease.
E) No adjustment is necessary.

Question 47

In consolidation at December 31, 2019, what adjustment is necessary for Hogan's Equipment account?

A) $3,000 increase.
B) $3,000 decrease.
C) $2,700 increase.
D) $2,700 decrease.
E) No adjustment is necessary.

Question 48

The acquisition value attributable to the noncontrolling interest at January 1, 2019 is:

A) $23,400.
B) $24,000.
C) $24,900.
D) $26,000.
E) $20,000.

Question 49

In consolidation at January 1, 2019, what adjustment is necessary for Hogan's Equipment account?

A) $4,000 increase.
B) $4,000 decrease.
C) $3,600 increase.
D) $3,600 decrease.
E) No adjustment is necessary.

Question 50

In consolidation at December 31, 2020, what net adjustment is necessary for Hogan's Patent account?

A) $4,200.
B) $5,500.
C) $8,000.
D) $6,600.
E) No adjustment is necessary.

Question 51

Keefe, Inc., a calendar-year corporation, acquires 70% of George Company on September 1, 2019, and an additional 10% on January 1, 2020.Total annual amortization of $6,000 relates to the first acquisition.George reports the following figures for 2020: Without regard for this investment, Keefe independently earns $300,000 in net income during 2020.
All net income is earned evenly throughout the year.
What is the controlling interest in consolidated net income for 2020?

A) $380,000.
B) $375,200.
C) $375,800.
D) $376,000.
E) $400,000.

Question 52

Compute Pell's investment account balance in Demers at December 31, 2020.

A) $577,200.
B) $604,000.
C) $592,800.
D) $632,800.
E) $572,000.

Question 53

Compute Pell's investment account balance in Demers at December 31, 2021.

A) $639,000.
B) $643,200.
C) $763,200.
D) $676,000.
E) $620,000.

Question 54

In consolidation at January 1, 2019, what adjustment is necessary for Hogan's Buildings account?

A) $2,000 increase.
B) $2,000 decrease.
C) $1,800 increase.
D) $1,800 decrease.
E) No change.

Question 55

Compute Pell's income from Demers for the year ended December 31, 2019.

A) $74,400.
B) $73,000.
C) $42,400.
D) $41,000.
E) $80,000.

Question 56

Compute Pell's income from Demers for the year ended December 31, 2021.

A) $50,400.
B) $56,000.
C) $98,400.
D) $97,000.
E) $104,000.

Question 57

In consolidation at December 31, 2019, what net adjustment is necessary for Hogan's Patent account?

A) $5,600.
B) $8,800.
C) $7,000.
D) $7,700.
E) No adjustment is necessary.

Question 58

In consolidation at January 1, 2019, what adjustment is necessary for Hogan's Land account?

A) $7,000 increase.
B) $7,000 decrease.
C) $6,300 increase.
D) $6,300 decrease.
E) No adjustment is necessary.

Question 59

In consolidation at December 31, 2019, what adjustment is necessary for Hogan's Land account?

A) $8,000 decrease .
B) $7,000 increase.
C) $6,300 increase.
D) $6,300 decrease.
E) No adjustment is necessary.

Question 60

In consolidation at December 31, 2020, what adjustment is necessary for Hogan's Buildings account?

A) $1,440 increase.
B) $1,440 decrease.
C) $1,600 increase.
D) $1,600 decrease.
E) No adjustment is necessary.

Question 61

Compute Pell's investment in Demers at December 31, 2020.

A) $625,000.
B) $664,800.
C) $592,400.
D) $500,000.
E) $572,000.

Question 62

Compute the noncontrolling interest in Demers at December 31, 2020.

A) $107,000.
B) $126,000.
C) $109,200.
D) $149,600.
E) $148,200.

Question 63

Compute the noncontrolling interest in the net income of Demers at December 31, 2021.

A) $20,400.
B) $24,600.
C) $26,000.
D) $14,000.
E) $12,600.

Question 64

How much does Pell record as Income from Demers for the year ended December 31, 2021?

A) $48,000.
B) $56,000.
C) $98,400.
D) $97,000.
E) $50,400.

Question 65

Compute the noncontrolling interest in Demers at December 31, 2020.

A) $126,000.
B) $106,000.
C) $109,200.
D) $149,600.
E) $148,200.

Question 66

Compute the noncontrolling interest in Demers at December 31, 2019.

A) $135,600.
B) $137,000.
C) $112,000.
D) $100,000.
E) $118,600.

Question 67

Compute the noncontrolling interest in the net income of Demers at December 31, 2019.

A) $12,000.
B) $10,600.
C) $18,600.
D) $20,000.
E) $14,400.

Question 68

Compute the noncontrolling interest in the net income of Demers at December 31, 2019.

A) $20,000.
B) $12,000.
C) $18,600.
D) $10,600.
E) $14,400.

Question 69

Compute the noncontrolling interest in Demers at December 31, 2019.

A) $135,600.
B) $ 80,000.
C) $117,000.
D) $100,000.
E) $110,600.

Question 70

Compute Pell's investment in Demers at December 31, 2020.

A) $676,000.
B) $629,000.
C) $580,000.
D) $604,000.
E) $572,000.

Question 71

Compute Pell's investment in Demers at December 31, 2019.

A) $500,000.
B) $574,400.
C) $625,000.
D) $542,400.
E) $532,000.

Question 72

Compute the noncontrolling interest in the net income of Demers at December 31, 2021.

A) $24,600.
B) $14,000.
C) $26,000.
D) $20,400.
E) $12,600.

Question 73

Compute the noncontrolling interest in Demers at December 31, 2021.

A) $107,800.
B) $140,000.
C) $ 80,000.
D) $ 50,000.
E) $160,800.

Question 74

Compute Pell's investment in Demers at December 31, 2019.

A) $625,000.
B) $574,400.
C) $548,000.
D) $542,400.
E) $532,000.

Question 75

Compute the noncontrolling interest in Demers at December 31, 2021.

A) $107,800.
B) $140,000.
C) $165,200.
D) $160,800.
E) $146,800.

Question 76

Compute the noncontrolling interest in the net income of Demers at December 31, 2020.

A) $18,400.
B) $14,000.
C) $22,600.
D) $24,000.
E) $12,600.

Question 77

Compute Pell's investment in Demers at December 31, 2021.

A) $592,400.
B) $500,000.
C) $625,000.
D) $676,000.
E) $620,000.

Question 78

How much does Pell record as Income from Demers for the year ended December 31, 2019?

A) $32,000.
B) $74,400.
C) $73,000.
D) $42,400.
E) $41,000.

Question 79

Compute the noncontrolling interest in the net income of Demers at December 31, 2020.

A) $18,400.
B) $14,400.
C) $22,600.
D) $24,000.
E) $12,600.

Question 80

How much does Pell record as Income from Demers for the year ended December 31, 2020?

A) $90,400.
B) $40,000.
C) $89,000.
D) $50,400.
E) $56,000.