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1. Under the initial value method, when accounting for an investment in a subsidiary, A) Dividends received are ignored.

B) The investment account remains at initial value. C) The investment account is adjusted to fair value at year-end. D) Dividends received by the subsidiary decrease the investment account. E) Income reported by the subsidiary increases the investment account. 0.0/2.0 Points Earned: Correct Answer(s): B

2. On January 1, 2010, Cale Corp. paid $1,020,000 to acquire Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to account for the investment. The following information is available for Kaltop's assets, liabilities, and stockholders' equity accounts: Book Value Fair Value Current assets $120,000 $120,000 Land 72,000 192,000 Buildings (20-year life) 240,000 268,000 Equipment (10-year life) 540,000 516,000 Current liabilities 24,000 24,000 Long-term liabilities 120,000 120,000 Common stock 228,000 Additional paid-in-capital 384,000 Retained earnings 216,000

Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000 during the year. At the end of 2010, the consolidation entry to eliminate Cale's accrual of Kaltop's earnings would include a credit to Investment in Kaltop Co. for A) $127,000 B) $0 C) $126,000 D) $76,400 E) $124,400 2.0/2.0 Points Earned: Correct Answer(s): A

3. How does the partial equity method differ from the equity method? A) In the treatment of dividends. B) In the total liabilities reported on the consolidated balance sheet. C) In the total assets reported on the consolidated balance sheet. D) Under the partial equity method, the balance in the investment account is not decreased by amortization on allocations made in the acquisition of the subsidiary. E) Under the partial equity method, subsidiary income does not increase the balance in the parent's investment account. 2.0/2.0 Points Earned: Correct Answer(s): D

4.

One company acquires another company in a combination accounted for as an acquisition. The acquiring company decides to apply the initial value method in accounting for the combination. What is one reason the acquiring company might have made this decision? A) It is the only internal reporting method allowed by generally accepted accounting principles. B) It is relatively easy to apply. C) When the initial method is used, no worksheet entries are required in the consolidation process. D) Operating results on the parent's financial records reflect consolidated totals. E) It is the only method allowed by the SEC. 2.0/2.0 Points Earned: Correct Answer(s): B

5. Push-down accounting is concerned with the A) impact of the purchase on the separate financial statements of the parent. B) recognition of dividends received from the subsidiary. C) impact of the purchase on the subsidiary's financial statements. D) recognition of goodwill by the parent. E) correct consolidation of the financial statements. 2.0/2.0 Points Earned: Correct Answer(s): C

7.

Goehler, Inc. acquires all of the voting stock of Kenneth, Inc. on January 4, 2010, at an amount in excess of Kenneth's fair value. On that date, Kenneth has equipment with a book value of $90,000 and a fair value of $120,000 (10-year remaining life). Goehler has equipment with a book value of $800,000 and a fair value of $1,200,000 (10-year remaining life). On December 31, 2011, Goehler has equipment with a book value of $975,000 but a fair value of $1,350,000 and Kenneth has equipment with a book value of $105,000 but a fair value of $125,000. If Goehler applies the equity method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2011? A) $1,100,000. B) $1,104,000. C) $1,475,000. D) $1,080,000. E) $1,468,000. 2.0/2.0 Points Earned: Correct Answer(s): B

8. 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 in the presentation of consolidated financial statements? A) Preacquisition earnings are ignored in the consolidated income statement. B) Preacquisition earnings are added to consolidated revenues and expenses. C) Preacquisition earnings are deducted from the beginning consolidated stockholders' equity. D) Preacquisition earnings are added to the beginning consolidated stockholders' equity.

E) Preacquisition earnings are deducted from consolidated revenues and expenses. 2.0/2.0 Points Earned: Correct Answer(s): A

9. McGuire company acquired 90 percent of Hogan Company on January 1, 2010, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Book Value Fair Value Buildings (10-year life) $10,000 $8,000 Equipment (4-year life) 14,000 18,000 Land 5,000 12,000 Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years. In consolidation at December 31, 2010, what adjustment is necessary for Hogan's Buildings account? A) $1,800 decrease B) No adjustment is necessary C) $1,800 increase D) $1,620 decrease E) $1,620 increase 2.0/2.0 Points Earned: Correct Answer(s): A

10.

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The noncontrolling interest shares of Float Corp. are not actively traded. 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) $400,000. C) $300,000. D) $0. E) $370,000. 0.0/2.0 Points Earned: Correct Answer(s): B

11. Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2010. During 2010, Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of excess cost allocations totaled $60,000 in 2010. What is the effect of including Harbor in consolidated net income for 2010? A) $308,000. B) $290,000. C) $440,000. D) $350,000. E) $500,000. 2.0/2.0 Points Earned: Correct Answer(s): C

12. 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 recognized from date of acquisition to year-end. B) Income from subsidiary is not recognized until there is an entire year of consolidated operations. C) No goodwill can be recognized. D) Excess cost over acquisition value is recognized at the beginning of the fiscal year. E) Income from subsidiary is recognized for the entire year. 2.0/2.0 Points Earned: Correct Answer(s): A

13. When a parent uses the partial equity method throughout the year to account for its investment in an acquired subsidiary, which of the following statements is false before making adjustments on the consolidated worksheet? A) Parent company net income will equal controlling interest in consolidated net income when initial value, book value, and fair value of the investment are equal. B) Parent company net income will be less than controlling interest in consolidated net income when fair value of net assets acquired exceeds book value of net assets acquired. C) Parent company net income will exceed controlling interest in consolidated net income when fair value of depreciable assets acquired exceeds book value of depreciable assets. D) Goodwill will be recognized if acquisition value exceeds fair value of net assets acquired.

E) Subsidiary net assets are valued at their book values before consolidating entries are made. 2.0/2.0 Points Earned: Correct Answer(s): B

14. All of the following statements regarding the sale of subsidiary shares are true except which of the following? A) The parent company must determine whether consolidation is still appropriate for the remaining shares owned. 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 use of specific identification based on serial number is acceptable. 2.0/2.0 Points Earned: Correct Answer(s): D

15. On January 1, 2010, Smeder Company, an 80% owned subsidiary of Collins, Inc., transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2010 and 2011, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.What is the net effect on consolidated net income in 2010 due to the equipment transfer?

A) Increase $10,000 B) Decrease $12,000 C) Increase $2,000 D) Decrease $14,000 E) Decrease $10,000 2.0/2.0 Points Earned: Correct Answer(s): E

16. Strickland Company sells inventory to its parent, Carter Company, at a profit during 2010. One-third of the inventory is sold by Carter in 2010. In the consolidation worksheet for 2011, assuming Carter uses the initial value method of accounting for its investment in Strickland, which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A) Sales. B) Investment in Strickland Company. C) Retained earnings. D) Cost of goods sold. E) Inventory. 2.0/2.0 Points Earned: Correct Answer(s): C

17. Strickland Company sells inventory to its parent, Carter Company, at a profit during 2010. One-third of the inventory is sold by Carter in 2010. In the consolidation worksheet for 2010, which of the

following choices would be a credit entry to eliminate the intraentity transfer of inventory? A) Inventory. B) Investment in Strickland Company. C) Cost of goods sold. D) Retained earnings. E) Sales. 2.0/2.0 Points Earned: Correct Answer(s): C

18. Pot Co. holds 90% of the common stock of Skillet Co. During 2011, Pot reported sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of $420,000 and cost of goods sold of $252,000. The reported sales did not include any intra-entity sales. In addition to the reported amounts, there were intra-entity sales from Pot to Skillet in the amount of $140,000. There were no sales from Skillet to Pot. Intra-entity sales had the same markup as sales to outsiders. Skillet still had 40% of the intra-entity sales as inventory at the end of 2011. What are consolidated sales and cost of goods sold for 2011? A) $1,400,000 and $1,022,000. B) $1,540,000 and $1,078,000. C) $1,400,000 and $1,071,000. D) $1,400,000 and $966,000. E) $1,540,000 and $1,092,000. 0.0/2.0 Points Earned: Correct Answer(s): C

19. Strickland Company sells inventory to its parent, Carter Company, at a profit during 2010. One-third of the inventory is sold by Carter in 2010. In the consolidation worksheet for 2010, which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A) Inventory. B) Cost of goods sold. C) Sales. D) Investment in Strickland Company. E) Retained earnings. 0.0/2.0 Points Earned: Correct Answer(s): B

20. On November 8, 2011, Power Corp. sold land to Wood Co., its wholly owned subsidiary. The land cost $61,500 and was sold to Wood for $89,000. From the perspective of the combination, when is the gain on the sale of the land realized? A) As Wood uses the land. B) When Wood Co. sells the land to a third party. C) Proportionately over a designated period of years. D) No gain can be recognized. E) When Wood Co. begins using the land productively. 2.0/2.0 Points Earned: Correct Answer(s): B

21.

Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2010. One-third of the inventory is sold by Walsh uses the equity method to account for its investment in Fisher. In the consolidation worksheet for 2010, which of the following choices would be a credit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A) Retained earnings. B) Cost of goods sold. C) Sales. D) Inventory. E) Investment in Fisher Company. 0.0/2.0 Points Earned: Correct Answer(s): D

1. Beatty, Inc. acquires 100% of the voting stock of Gataux Company on January 1, 2010 for $500,000 cash. A contingent payment of $12,000 will be paid on April 1, 2011 if Gataux generates cash flows from operations of $26,500 or more in the next year. Beatty estimates that there is a 30% probability that Gataux will generate at least $26,500 next year, and uses an interest rate of 4% to incorporate the time value of money. The fair value of $12,000 at 4%, using a probability weighted approach, is $3,461. What will Beatty record as its Investment in Gataux on January 1, 2010? A) $503,461. B) $512,000. C) $515,461. D) $526,500. E) $500,000.

2.0/2.0 Points Earned: Correct Answer(s): A

2. Under the partial equity method, the parent recognizes income when A) dividends are received from the investee. B) the related expense has been incurred. C) it is earned by the subsidiary. D) the related contract is signed by the subsidiary. E) dividends are declared by the investee. 2.0/2.0 Points Earned: Correct Answer(s): C

3. Velway Corp. acquired Joker Inc. on January 1, 2010. The parent paid more than the fair value of the subsidiary's net assets. On that date, Velway had equipment with a book value of $500,000 and a fair value of $640,000. Joker had equipment with a book value of $400,000 and a fair value of $470,000. Joker decided to use pushdown accounting. Immediately after the acquisition, what Equipment amount would appear on Joker's separate balance sheet and on Velway's consolidated balance sheet, respectively? A) $470,000 and $900,000 B) $470,000 and $1,040,000 C) $470,000 and $970,000 D) $400,000 and $900,000 E) $400,000 and $970,000 2.0/2.0 Points Earned:

Correct Answer(s): C

4. Hoyt Corporation agreed to the following terms in order to acquire the net assets of Brown Company on January 1, 2011: (1.) To issue 400 shares of common stock ($10 par) with a fair value of $45 per share. (2.) To assume Brown's liabilities which have a fair value of $1,500. On the date of acquisition, the consideration transferred for Hoyt's acquisition of Brown would be A) $18,000 B) $16,500 C) $18,500 D) $20,000 E) $19,500 2.0/2.0 Points Earned: Correct Answer(s): E

5. Consolidated net income using the equity method for an acquisition combination is computed as follows: A) All of these are true B) Parent company's income from its own operations plus the equity from subsidiary's income recorded by the parent. C) Parent's revenues less expenses for its own operations plus the equity from subsidiary's income recorded by parent. D) Combined revenues less combined expenses less equity in

subsidiary's income less amortization of fair-value allocations in excess of book value. E) Parent's reported net income. 2.0/2.0 Points Earned: Correct Answer(s): C

6. All of the following are acceptable methods to account for a majority-owned investment in subsidiary except A) The equity method. B) The partial equity method. C) The initial value method. D) Book value method. E) The fair-value method. 2.0/2.0 Points Earned: Correct Answer(s): E

7. Cashen Co. paid $2,400,000 to acquire all of the common stock of Janex Corp. on January 1, 2010. Janex's reported earnings for 2010 totaled $432,000, and it paid $120,000 in dividends during the year. The amortization of allocations related to the investment was $24,000. Cashen's net income, not including the investment, was $3,180,000, and it paid dividends of $900,000. What is the amount of consolidated net income for the year 2010? A) $3,420,000. B) $3,180,000. C) $3,300,000.

D) $3,588,000. E) $3,612,000. 2.0/2.0 Points Earned: Correct Answer(s): D

8. On January 1, 2010, Palk Corp. and Spraz Corp. had condensed balance sheets as follows: Palk Corp Spraz Corp Current assets $99,000 $ 28,000 Noncurrent assets 125,000 56,000 Total assets $224,000 $ 84,000 Current liabilities $42,000 $ 14,000 Long-term debt 70,000 Stockholders equity 112,000 70,000 Total liabilities and stockholders equity $224,000 $ 84,000 On January 2, 2010, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2010. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill. What is consolidated current assets at January 2, 2010? A) $129,800 B) $143,800 C) $135,400 D) $148,000 E) $127,000

0.0/2.0 Points Earned: Correct Answer(s): D

9. McGuire company acquired 90 percent of Hogan Company on January 1, 2010, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Book Value Fair Value Buildings (10-year life) $10,000 $8,000 Equipment (4-year life) 14,000 18,000 Land 5,000 12,000 Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years. In consolidation at December 31, 2011, what adjustment is necessary for Hogan's Equipment account? A) $1,800 increase B) No adjustment is necessary C) $2,000 increase D) $1,800 decrease E) $2,000 decrease 2.0/2.0 Points Earned: Correct Answer(s): C

10.

McGuire company acquired 90 percent of Hogan Company on January 1, 2010, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Book Value Fair Value Buildings (10-year life) $10,000 $8,000 Equipment (4-year life) 14,000 18,000 Land 5,000 12,000 Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years. In consolidation at December 31, 2010, what adjustment is necessary for Hogan's Buildings account? A) $1,800 increase B) $1,620 increase C) No adjustment is necessary D) $1,800 decrease E) $1,620 decrease 2.0/2.0 Points Earned: Correct Answer(s): D

11. 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 this debt should be eliminated? A) $375,000. B) $300,000. C) $500,000.

D) $0. E) $125,000. 2.0/2.0 Points Earned: Correct Answer(s): C

12. Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The noncontrolling interest shares of Float Corp. are not actively traded. What is the dollar amount of fair value over book value differences attributed to Perch at the date of acquisition? A) $120,000. B) $370,000. C) $280,000. D) $150,000. E) $350,000. 2.0/2.0 Points Earned: Correct Answer(s): C

13. When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000. What amount should have been reported for the land in a consolidated balance sheet at the acquisition date? A) $52,500. B) $75,000. C) $100,000.

D) $92,500. E) $70,000. 2.0/2.0 Points Earned: Correct Answer(s): C

14. Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2010. During 2010, Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of excess cost allocations totaled $60,000 in 2010. The noncontrolling interest's share of the earnings of Harbor Corp. is calculated to be A) $0. B) $132,000. C) $160,000. D) $168,000. E) $150,000. 2.0/2.0 Points Earned: Correct Answer(s): B

15. Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2010, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2010 and 2011, respectively. Leo uses the equity method to account for its investment. Compute income from Stiller on Leo's books for 2011. A) $125,000. B) $140,000. C) $112,000.

D) $97,000. E) $100,000. 2.0/2.0 Points Earned: Correct Answer(s): C

16. Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012, respectively. Parker sold the land it purchased from Stark in 2010 for $92,000 in 2012. Compute income from Stark reported on Parker's books for 2012. A) $202,500. B) $204,300. C) $193,500. D) $198,000. E) $191,700. 2.0/2.0 Points Earned: Correct Answer(s): C

17. Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012, respectively. Parker sold the land it purchased from Stark in 2010 for $92,000 in 2012. Which of the following will be included in a consolidation entry for 2010?

A) Debit loss for $5,000. B) Credit loss for $5,000. C) Debit gain for $5,000. D) Credit gain for $5,000. E) Credit land for $5,000. 2.0/2.0 Points Earned: Correct Answer(s): B

18. On January 1, 2011, 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 noncontrolling interest's share of consolidated net income? A) $30,900. B) $40,800. C) $3,600. D) $32,900. E) $22,800. 2.0/2.0 Points Earned: Correct Answer(s): B

19. Webb Co. acquired 100% of Rand Inc. on January 5, 20011. During 2011, Webb sold goods to Rand for $2,400,000 that cost Webb $1,800,000. Rand still owned 40% of the goods at the end of

the year. Cost of goods sold was $10,800,000 for Webb and $6,400,000 for Rand. What was consolidated cost of goods sold? A) $14,800,000. B) $14,560,000. C) $15,040,000. D) $16,960,000. E) $17,200,000. 2.0/2.0 Points Earned: Correct Answer(s): C

20. Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2010. One-third of the inventory is sold by Walsh uses the equity method to account for its investment in Fisher. In the consolidation worksheet for 2011, which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A) Investment in Fisher Company. B) Cost of goods sold. C) Retained earnings. D) Sales. E) Inventory. 0.0/2.0 Points Earned: Correct Answer(s): A

21. Pepe, Incorporated acquired 60% of Devin Company on January 1, 2010. On that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of $120,000 and accumulated depreciation of

$66,000 with a remaining life of 9 years. Devin reported net income of $300,000 and $325,000 for 2010 and 2011, respectively. Pepe uses the equity method to account for its investment in Devin. Compute the noncontrolling interest in the net income of Devin for 2011. A) $130,000. B) $129,600. C) $122,000. D) $126,800. E) $130,000. 2.0/2.0 Points Earned: Correct Answer(s): B

2. Beatty, Inc. acquires 100% of the voting stock of Gataux Company on January 1, 2010 for $500,000 cash. A contingent payment of $12,000 will be paid on April 1, 2011 if Gataux generates cash flows from operations of $26,500 or more in the next year. Beatty estimates that there is a 30% probability that Gataux will generate at least $26,500 next year, and uses an interest rate of 4% to incorporate the time value of money. The fair value of $12,000 at 4%, using a probability weighted approach, is $3,461. When recording consideration transferred for the acquisition of Gataux on January 1, 2010, Beatty will record a contingent performance obligation in the amount of: A) $12,000. B) $692.20. C) $15,200.

D) $3,040. E) $3,461. 2.0/2.0 Points Earned: Correct Answer(s): E

3. On January 1, 2010, Franel Co. acquired all of the common stock of Hurlem Corp. For 2010, Hurlem earned net income of $360,000 and paid dividends of $190,000. Amortization of the patent allocation that was included in the acquisition was $6,000. How much difference would there have been in Franel's income with regard to the effect of the investment, between using the equity method or using the partial equity method of internal recordkeeping? A) $170,000. B) $174,000. C) $164,000. D) $354,000. E) $6,000. 2.0/2.0 Points Earned: Correct Answer(s): E

4. Beatty, Inc. acquires 100% of the voting stock of Gataux Company on January 1, 2010 for $500,000 cash. A contingent payment of $12,000 will be paid on April 1, 2011 if Gataux generates cash flows from operations of $26,500 or more in the next year. Beatty estimates that there is a 30% probability that Gataux will generate at least $26,500 next year, and uses an interest rate of 4% to

incorporate the time value of money. The fair value of $12,000 at 4%, using a probability weighted approach, is $3,461. Assuming Gataux generates cash flow from operations of $27,200 in 2010, how will Beatty record the $12,000 payment of cash on April 1, 2011 in satisfaction of its contingent obligation? A) Debit Goodwill $27,200, credit Contingent performance obligation $15,200, and Credit Cash $12,000. B) Debit Contingent performance obligation $3,461, debit Loss from revaluation of contingent performance obligation $8,539, and Credit Cash $12,000. C) Debit Contingent performance obligation $3,461, debit Goodwill $8,539, and Credit Cash $12,000. D) Debit Goodwill and Credit Cash, $12,000. E) No entry. 2.0/2.0 Points Earned: Correct Answer(s): B

5. Jans Inc. acquired all of the outstanding common stock of Tysk Corp. on January 1, 2009, for $372,000. Equipment with a tenyear life was undervalued on Tysk's financial records by $46,000. Tysk also owned an unrecorded customer list with an assessed fair value of $67,000 and an estimated remaining life of five years. Tysk earned reported net income of $180,000 in 2009 and $216,000 in 2010. Dividends of $70,000 were paid in each of these two years. Selected account balances as of December 31, 2011, for the two companies follow.

Jans Revenues

Tysk $1,080,000 $840,000

Expenses 480,000 Investment income not given Retained earnings, 1/1/11 840,000 Dividends paid 132,000

600,000 0 600,000 70,000

If the equity method had been applied, what would be the Investment in Tysk Corp. account balance within the records of Jans at the end of 2011? A) $774,150 B) $372,000 C) $844,150 D) $744,000 E) $612,100 2.0/2.0 Points Earned: Correct Answer(s): D

6. Under the partial equity method of accounting for an investment, A) Dividends received are recorded as revenue. B) Dividends received increase the investment account. C) Amortization of the excess of fair value allocations over book value is ignored in regard to the investment account. D) The investment account remains at initial value. E) The allocations for excess fair value allocations over book value of net assets at date of acquisition are applied over their useful lives to reduce the investment account. 2.0/2.0 Points Earned: Correct Answer(s): C

7. On January 1, 2010, Cale Corp. paid $1,020,000 to acquire Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to account for the investment. The following information is available for Kaltop's assets, liabilities, and stockholders' equity accounts: Book Value Fair Value Current assets $120,000 $120,000 Land 72,000 192,000 Buildings (20-year life) 240,000 268,000 Equipment (10-year life) 540,000 516,000 Current liabilities 24,000 24,000 Long-term liabilities 120,000 120,000 Common stock 228,000 Additional paid-in-capital 384,000 Retained earnings 216,000 Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000 during the year. At the end of 2010, the consolidation entry to eliminate Cale's accrual of Kaltop's earnings would include a credit to Investment in Kaltop Co. for A) $76,400 B) $0 C) $127,000 D) $126,000 E) $124,400 2.0/2.0 Points Earned: Correct Answer(s): C

8.

When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000. What is the amount of excess land allocation attributed to the noncontrolling interest at the acquisition date? A) $0. B) $22,500. C) $7,500. D) $17,500. E) $30,000. 0.0/2.0 Points Earned: Correct Answer(s): C

9. When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000. What is the amount of excess land allocation attributed to the controlling interest at the acquisition date? A) $17,500. B) $25,000. C) $30,000. D) $0. E) $22,500. 2.0/2.0 Points Earned: Correct Answer(s): E

10. Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The noncontrolling interest

shares of Float Corp. are not actively traded. 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) $0. C) $300,000. D) $400,000. E) $370,000. 2.0/2.0 Points Earned: Correct Answer(s): D

11. Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The noncontrolling interest shares of Float Corp. are not actively traded. What amount of goodwill should be attributed to Perch at the date of acquisition? A) $150,000. B) $250,000. C) $0. D) $170,000. E) $120,000. 2.0/2.0 Points Earned: Correct Answer(s): E 13. Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The noncontrolling interest shares of Float Corp. are not actively traded. 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) $1,200,000. B) $1,780,000. C) $1,480,000. D) $1,600,000. E) $1,850,000. 2.0/2.0 Points Earned: Correct Answer(s): E

15. Yukon Co. acquired 75% percent of the voting common stock of Ontario Corp. on January 1, 2011. During the year, Yukon made sales of inventory to Ontario. The inventory cost Yukon $260,000 and was sold to Ontario for $390,000. Ontario still had $60,000 of the goods in its inventory at the end of the year. The amount of unrealized intercompany profit that should be eliminated in the consolidation process at the end of 2011 is A) $20,000. B) $15,000. C) $110,000. D) $32,500. E) $30,000. 2.0/2.0 Points Earned: Correct Answer(s): A

16. Norek Corp. owned 70% of the voting common stock of Thelma Co. On January 2, 2010, Thelma sold a parcel of land to Norek. The land had a book value of $32,000 and was sold to Norek for $45,000. Thelma's reported net income for 2010 was $119,000. What is the noncontrolling interest's share of Thelma's net income? A) $35,700. B) $26,100. C) $31,800. D) $39,600. E) $22,200. 2.0/2.0 Points Earned: Correct Answer(s): C

17. Webb Co. acquired 100% of Rand Inc. on January 5, 20011. During 2011, Webb sold goods to Rand for $2,400,000 that cost Webb $1,800,000. Rand still owned 40% of the goods at the end of the year. Cost of goods sold was $10,800,000 for Webb and $6,400,000 for Rand. What was consolidated cost of goods sold? A) $14,560,000. B) $14,800,000. C) $17,200,000. D) $16,960,000. E) $15,040,000. 2.0/2.0 Points Earned: Correct Answer(s): E

18.

An intra-entity sale took place whereby the book value exceeded the transfer price of a depreciable asset. Which statement is true for the year following the sale? A) No worksheet entry is necessary. B) A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer. C) A worksheet entry is made with a debit to retained earnings for a downstream transfer. D) A worksheet entry is made with a debit to retained earnings for an upstream transfer. E) A worksheet entry is made with a credit to retained earnings for an upstream transfer. 2.0/2.0 Points Earned: Correct Answer(s): E

19. Patti Company owns 80% of the common stock of Shannon, Inc. In the current year, Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000. For the same period, Shannon has sales of $200,000 and cost of goods sold of $160,000. During the year, Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup. At the end of the year, Shannon still possesses 30 percent of this inventory. Assume the same information, except Shannon sold inventory to Patti. Compute consolidated sales. A) $10,126,000. B) $10,260,000. C) $10,200,000. D) $10,140,000. E) $10,000,000. 2.0/2.0 Points Earned: Correct Answer(s): D

20. Clemente Co. owned all of the voting common stock of Snider Co. On January 2, 2010, Clemente sold equipment to Snider for $125,000. The equipment had cost Clemente $140,000. At the time of the sale, the balance in accumulated depreciation was $40,000. The equipment had a remaining useful life of five years and a $0 salvage value. Straight-line depreciation is used by both Clemente and Snider. At what amount should the equipment (net of depreciation) be included in the consolidated balance sheet dated December 31, 2011? A) $110,000. B) $105,000. C) $90,000. D) $60,000. E) $100,000. 0.0/2.0 Points Earned: Correct Answer(s): D

21. On January 1, 2010, Smeder Company, an 80% owned subsidiary of Collins, Inc., transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2010 and 2011, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.Compute Collins' share of Smeder's net income for 2011.

A) $23,600 B) $27,200 C) $24,000 D) $34,000 E) $27,600 2.0/2.0 Points Earned: Correct Answer(s): B

1. Under the partial equity method, the parent recognizes income when A) it is earned by the subsidiary. B) dividends are declared by the investee. C) the related expense has been incurred. D) dividends are received from the investee. E) the related contract is signed by the subsidiary. 2.0/2.0 Points Earned: Correct Answer(s): A

2. Kaye Company acquired 100% of Fiore Company on January 1, 2011. Kaye paid $1,000 excess consideration over book value which is being amortized at $20 per year. Fiore reported net income of $400 in 2011 and paid dividends of $100. Assume the initial value method is applied. How much will Kaye's income increase or decrease as a result of Fiore's operations? A) $210 increase. B) $300 increase. C) $100 increase.

D) $380 increase. E) $400 increase. 2.0/2.0 Points Earned: Correct Answer(s): C

3. On January 1, 2010, Cale Corp. paid $1,020,000 to acquire Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to account for the investment. The following information is available for Kaltop's assets, liabilities, and stockholders' equity accounts: Book Value Fair Value Current assets $120,000 $120,000 Land 72,000 192,000 Buildings (20-year life) 240,000 268,000 Equipment (10-year life) 540,000 516,000 Current liabilities 24,000 24,000 Long-term liabilities 120,000 120,000 Common stock 228,000 Additional paid-in-capital 384,000 Retained earnings 216,000 Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000 during the year. The 2010 total amortization of allocations is calculated to be A) $(1,000) B) $6,400 C) $4,000 D) $3,800 E) $(2,400) 2.0/2.0 Points Earned:

Correct Answer(s): A

4. On January 1, 2010, Cale Corp. paid $1,020,000 to acquire Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to account for the investment. The following information is available for Kaltop's assets, liabilities, and stockholders' equity accounts: Book Value Fair Value Current assets $120,000 $120,000 Land 72,000 192,000 Buildings (20-year life) 240,000 268,000 Equipment (10-year life) 540,000 516,000 Current liabilities 24,000 24,000 Long-term liabilities 120,000 120,000 Common stock 228,000 Additional paid-in-capital 384,000 Retained earnings 216,000 Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000 during the year. At the end of 2010, the consolidation entry to eliminate Cale's accrual of Kaltop's earnings would include a credit to Investment in Kaltop Co. for A) $76,400 B) $127,000 C) $0 D) $126,000 E) $124,400 2.0/2.0 Points Earned: Correct Answer(s): B

5. Beatty, Inc. acquires 100% of the voting stock of Gataux Company on January 1, 2010 for $500,000 cash. A contingent payment of $12,000 will be paid on April 1, 2011 if Gataux generates cash flows from operations of $26,500 or more in the next year. Beatty estimates that there is a 30% probability that Gataux will generate at least $26,500 next year, and uses an interest rate of 4% to incorporate the time value of money. The fair value of $12,000 at 4%, using a probability weighted approach, is $3,461. When recording consideration transferred for the acquisition of Gataux on January 1, 2010, Beatty will record a contingent performance obligation in the amount of: A) $692.20. B) $12,000. C) $15,200. D) $3,040. E) $3,461. 2.0/2.0 Points Earned: Correct Answer(s): E

6. Which of the following will result in the recognition of an impairment loss on goodwill? A) The fair value of the entity declines significantly. B) Both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying values. C) Goodwill amortization is to be recognized annually on a systematic and rational basis. D) The fair value of a reporting unit falls below the original consideration transferred for the acquisition.

E) The entity is investigated by the SEC and its reputation has been severely damaged. 2.0/2.0 Points Earned: Correct Answer(s): B

7. Prince Company acquires Duchess, Inc. on January 1, 2009. The consideration transferred exceeds the fair value of Duchess' net assets. On that date, Prince has a building with a book value of $1,200,000 and a fair value of $1,500,000. Duchess has a building with a book value of $400,000 and fair value of $500,000. If pushdown accounting is used, what amounts in the Building account appear in Duchess' separate balance sheet and in the consolidated balance sheet immediately after acquisition? A) $500,000 and $2,000,000. B) $500,000 and $1,600,000. C) $500,000 and $1,700,000. D) $400,000 and $1,600,000. E) $400,000 and $1,700,000. 2.0/2.0 Points Earned: Correct Answer(s): C

8. On January 1, 2010, Palk Corp. and Spraz Corp. had condensed balance sheets as follows: Palk Corp Spraz Corp Current assets $99,000 $ 28,000 Noncurrent assets 125,000 56,000 Total assets $224,000 $ 84,000

Current liabilities $42,000 $ 14,000 Long-term debt 70,000 Stockholders equity 112,000 70,000 Total liabilities and stockholders equity $224,000 $ 84,000 On January 2, 2010, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2010. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill. What is consolidated stockholders' equity at January 2, 2010? A) $203,000 B) $182,000 C) $112,000 D) $133,000 E) $168,000 0.0/2.0 Points Earned: Correct Answer(s): D

9. 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 carrying value is recorded as a realized gain or loss. B) If control continues, the difference between selling price and acquisition value is recorded as a realized 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 an adjustment to retained earnings. E) If control continues, the difference between selling price and acquisition value is an unrealized gain or loss. 2.0/2.0 Points Earned: Correct Answer(s): C

10. 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) noncontrolling interest, at fair value. C) liabilities assumed, at book value. D) goodwill or a gain from bargain purchase. E) none of these choices is correct. 0.0/2.0 Points Earned: Correct Answer(s): C

11. McGuire company acquired 90 percent of Hogan Company on January 1, 2010, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Book Value Buildings (10-year life) $10,000 Fair Value $8,000

Equipment (4-year life) 14,000 18,000 Land 5,000 12,000 Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years. In consolidation at December 31, 2011, what adjustment is necessary for Hogan's Equipment account? A) $2,000 increase B) $1,800 increase C) $2,000 decrease D) $1,800 decrease E) No adjustment is necessary 2.0/2.0 Points Earned: Correct Answer(s): A

12. Which of the following statements is false regarding multiple acquisitions of a subsidiary's existing common stock? A) The book value of the subsidiary will increase. B) A step acquisition resulting in control may result in a parent recognizing a gain on revaluation. C) The parent's percent ownership in subsidiary will increase. D) Noncontrolling interest in subsidiary's net income will decrease. E) The parent recognizes a larger percent of subsidiary income. 2.0/2.0 Points Earned: Correct Answer(s): A

13.

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The noncontrolling interest shares of Float Corp. are not actively traded. What is the dollar amount of noncontrolling interest that should appear in a consolidated balance sheet prepared at the date of acquisition? A) $300,000. B) $400,000. C) $370,000. D) $350,000. E) $0. 2.0/2.0 Points Earned: Correct Answer(s): B

14. When a subsidiary is acquired sometime after the first day of the fiscal year, which of the following statements is true? A) No goodwill can be recognized. B) Income from subsidiary is not recognized until there is an entire year of consolidated operations. C) Excess cost over acquisition value is recognized at the beginning of the fiscal year. D) Income from subsidiary is recognized for the entire year. E) Income from subsidiary is recognized from date of acquisition to year-end. 2.0/2.0 Points Earned: Correct Answer(s): E

15.

On November 8, 2011, Power Corp. sold land to Wood Co., its wholly owned subsidiary. The land cost $61,500 and was sold to Wood for $89,000. From the perspective of the combination, when is the gain on the sale of the land realized? A) When Wood Co. sells the land to a third party. B) No gain can be recognized. C) As Wood uses the land. D) When Wood Co. begins using the land productively. E) Proportionately over a designated period of years. 2.0/2.0 Points Earned: Correct Answer(s): A

16. Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2010. One-third of the inventory is sold by Walsh uses the equity method to account for its investment in Fisher. In the consolidation worksheet for 2011, which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A) Retained earnings. B) Investment in Fisher Company. C) Sales. D) Inventory. E) Cost of goods sold. 2.0/2.0 Points Earned: Correct Answer(s): B

17.

On January 1, 2010, Smeder Company, an 80% owned subsidiary of Collins, Inc., transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2010 and 2011, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.Compute Collins' share of Smeder's net income for 2011. A) $23,600 B) $27,200 C) $24,000 D) $27,600 E) $34,000 2.0/2.0 Points Earned: Correct Answer(s): B

18. Norek Corp. owned 70% of the voting common stock of Thelma Co. On January 2, 2010, Thelma sold a parcel of land to Norek. The land had a book value of $32,000 and was sold to Norek for $45,000. Thelma's reported net income for 2010 was $119,000. What is the noncontrolling interest's share of Thelma's net income? A) $39,600. B) $35,700. C) $26,100. D) $31,800. E) $22,200. 2.0/2.0 Points Earned: Correct Answer(s): D

19. Strickland Company sells inventory to its parent, Carter Company, at a profit during 2010. One-third of the inventory is sold by Carter in 2010. In the consolidation worksheet for 2010, which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales? A) Sales. B) Cost of goods sold. C) Inventory. D) Investment in Strickland Company. E) Retained earnings. 0.0/2.0 Points Earned: Correct Answer(s): B

20. Yukon Co. acquired 75% percent of the voting common stock of Ontario Corp. on January 1, 2011. During the year, Yukon made sales of inventory to Ontario. The inventory cost Yukon $260,000 and was sold to Ontario for $390,000. Ontario still had $60,000 of the goods in its inventory at the end of the year. The amount of unrealized intercompany profit that should be eliminated in the consolidation process at the end of 2011 is A) $32,500. B) $20,000. C) $30,000. D) $110,000. E) $15,000. 2.0/2.0 Points Earned:

Correct Answer(s): B

21. Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012, respectively. Parker sold the land it purchased from Stark in 2010 for $92,000 in 2012. Compute income from Stark reported on Parker's books for 2012. A) $202,500. B) $193,500. C) $204,300. D) $198,000. E) $191,700. 2.0/2.0 Points Earned: Correct Answer(s): B

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