You are on page 1of 7

1.

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?
$52,500
$70,000
$75,000
$100,000


Question 2. 2. When Jones Co. acquired 75% of the common stock of Jackson
Corp., Jackson 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 non-controlling
interest at the acquisition date? (Points : 2)
$0
$7,500
$30,000
$22,500


Question 3. 3. 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 non-controlling interest shares of Float Corp. are not
actively traded.

What amount of goodwill should be attributed to Perch at the date of
acquisition?
$250,000
$0
$120,000
$170,000


Question 4. 4. Parnell Co. acquired 80% of the common stock of Franklin Corp. for
$1,600,000. The fair value of Franklin's net assets was $1,850,000, and the
book value was $1,500,000. The non-controlling interest shares of Franklin
Corp. are not actively traded.

What is the dollar amount of Franklin Corp.'s net assets that would be
represented in a consolidated balance sheet prepared at the date of acquisition?
$1,600,000
$1,480,000
$1,850,000
$1,780,000


Question 5. 5. Femur Co. acquired 70% of the voting common stock of Harbor Corp.
on January 1, 2013. During 2013, Harbor had revenues of $2,500,000 and
expenses of $2,000,000. The amortization of excess cost allocations totaled
$60,000 in 2013.

The non-controlling interest's share of the earnings of Harbor Corp. is calculated
to be what amount?
$132,000
$0
$150,000
$168,000


Question 6. 6.
Bell Company purchases 80% of Demers Company for $500,000 on January 1, 2013. Demers reported
common stock of $300,000 and retained earnings of $200,000 on that date. Equipment was undervalued
by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess
cost over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill
has not been impaired.
Demers earns income and pays dividends as follows:

2013 2014 2015
Net income $100,000 $120,000 $130,000
Dividends 40,000 50,000 60,000
Assume the equity method is applied.Compute Bell's income from Demers for the year ended December
31, 2015.
$50,400
$56,000
$98,400
$124,400





Question 7. 7. In a step acquisition, which of the following statements is false? (Points : 2)
Each investment is viewed as an individual purchase with its own cost allocations and related
amortizations.
Income from subsidiary is computed by applying a partial year for a new purchase acquired during
the year.
Income from subsidiary is computed for the entire year for a new purchase acquired during the
year.
Noncontrolling interest is computed by multiplying the book value of the subsidiary at year-end
by the new percent ownership.


Question 8. 8. Keefe, Incorporated, acquires 70% of George Company on September 1, 2013, and an
additional 10% on April 1, 2014. Annual amortization of $5,000 relates to the first acquisition and $3,000
to the second. George reports the following figures for 2014:
Revenues $500,000
Expenses 400,000
Retained earnings 1/1/14 300,000
Dividends paid 50,000
Common Stock 200,000
Without regard for this investment, Keefe earns $300,000 in net income during 2014.
What is consolidated net income for 2014?
$365,000
$370,250
$372,000
$374,000


Question 9. 9. All of the following statements regarding the sale of subsidiary shares are true except which
of the following.
The use of specific identification based on serial number is acceptable.
The use of the FIFO assumption is acceptable.
The use of the averaging assumption is acceptable.
The use of specific LIFO assumption is acceptable.


Question 10. 10. Kordel Inc. holds 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?
$375,000
$125,000
$300,000
$500,000








Question 11. 11. X-Beams Inc. owned 70% of the voting common stock of Kent Corp. During 2013, Kent
made several sales of inventory to X-Beams. The total selling price was $180,000 and the cost was
$100,000. At the end of the year, 20% of the goods were still in X-Beams' inventory. Kent's reported net
income was $300,000. What was the noncontrolling interest in Kent's net income?
$90,000
$88,560
$85,200
$77,700


Question 12. 12. Yukon Co. purchased 75% percent of the voting common stock of Ontario Corp. on
January 1, 2013. 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 which should be eliminated in the
consolidation process at the end of 2013 is
$15,000
$20,000
$32,500
$30,000


Question 13. 13. On January 1, 2013, Race Corp. purchased 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?
$37,200
$22,800
$30,900
$40,800


Question 14. 14.
Norek Corp. owned 70% of the voting common stock of Thelma Co. On January 2, 2013, 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 2013 was $119,000. What is the noncontrolling interest's share of
Thelma's net income?
$35,700
$31,800
$39,600
$26,100









Question 15. 15. Prince Corp. owned 80% of Kile Corp.'s common stock. During October 2013, Kile sold
merchandise to Prince for $140,000. At December 31, 2013, 50% of this merchandise remained in Prince's
inventory. For 2013, gross profit percentages were 30% of sales for Prince and 40% of sales for Kile. The
amount of unrealized intercompany profit in ending inventory at December 31, 2013 that should be
eliminated in the consolidation process is
$28,000
$56,000
$22,400
$42,000


Question 16. 16.
On November 8, 2013, 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?

Proportionately over a designated period of years.
When Wood Co. sells the land to a third party.
No gain can be recognized.
When Wood Co. begins using the land productively.


Question 17. 17. Which of the following statements is true regarding an intercompany sale of land?
A loss 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.


Question 18. 18. Shannon Co. owned all of the voting common stock of Chain Corp. The corporations'
balance sheets dated December 31, 2013, include the following balances for land: for Shannon--$416,000,
and for Chain--$256,000. On the original date of acquisition, the book value of Chain's land was equal to
its fair market value. On April 4, 2014, Shannon sold to Chain a parcel of land with a book value of
$65,000. The selling price was $83,000. There were no other transactions which affected the companies'
land accounts during 2014. What is the consolidated balance for land on the 2014 balance sheet?
$672,000
$690,000
$755,000
$737,000










Question 19. 19. Justings Co. owned 80% of Evana Corp. During 2013, Justings sold to Evana land with a
book value of $48,000. The selling price was $70,000. In its accounting records, Justings should
recognize a gain of $17,600.
defer recognition of the gain until Evana sells the land to a third party.
recognize a gain of $8,000.
recognize a gain of $22,000.


Question 20. 20. On January 1, 2013, Demers 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, Demers records carried the equipment at a cost of
$120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Demers reported
net income of $28,000 and $32,000 for 2013 and 2014, respectively. Compute the gain recognized by
Demers Company relating to the equipment for 2014
$36,000
$34,000
$12,000
$10,000

21. What is meant by unrealized inventory gains, and how are they treated on a
consolidation worksheet?