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.
2. 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. $70,000.
C. $75,000.
D. $92,500.
E. $100,000.
3. 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 total amount of excess land allocation at the acquisition date?
A. $0.
B. $30,000.
C. $22,500.
D. $25,000.
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?
A. $0.
B. $30,000.
C. $22,500.
D. $7,500.
E. $17,500.
6. 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, assuming the investment was obtained prior to the date the purchase method of accounting for new business combinations was discontinued?
A. $70,000.
B. $75,000.
C. $85,000.
D. $92,500.
E. $100,000.
7. 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 is the total amount of goodwill recognized at the date of acquisition?
A. $150,000.
B. $250,000.
C. $0.
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 the non-controlling interest at the date of acquisition? A. $0. B. $20,000. C. $30,000. D. $100,000. E. $120,000.
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 non-controlling interest shares of Float Corp. are not actively traded.
What is the dollar amount of non-controlling 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.
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 non-controlling 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. $150,000.
C. $280,000.
D. $350,000.
E. $370,000.
13. Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2014. During 2014, Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of excess cost allocations totaled $60,000 in 2014.
The non-controlling interest's share of the earnings of Harbor Corp. is calculated to be A. $132,000. B. $150,000. C. $168,000. D. $160,000. E. $0.
For 2014, Kailey reported revenues of $810,000 and expenses of $630,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000.
In consolidation, the total amount of expenses related to Kailey, and to Denber's acquisition of Kailey, for 2014 is determined to be
A. $153,750.
B. $161,250.
C. $205,000.
D. $210,000.
E. $215,000.
16. Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1, 2014. For 2014, Kailey reported revenues of $810,000 and expenses of $630,000, all
reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000.
What is the effect of including Kailey in consolidated net income for 2014?
A. $31,000.
B. $33,000.
C. $55,000.
D. $60,000.
18. Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1, 2014. For 2014, Kailey reported revenues of $810,000 and expenses of $630,000, all
reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000.
What is the amount of the non-controlling interest's share of Kailey's income for 2014? A. $22,000. B. $24,000. C. $48,000. D. $66,000. E. $72,000.
19. MacHeath Inc. bought 60% of the outstanding common stock of Nomes Inc. in an acquisition business combination 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.
acquisition, Park had equipment (with a ten-year life) that was undervalued in the financial records by $140,000. One year later, the following selected figures were reported by the two companies. Additionally, no dividends have been paid.
What is consolidated net income for 2015 attributable to Royce's controlling interest?
A. $686,000.
B. $560,000.
C. $644,000.
D. $635,600.
What is the non-controlling interest's share of the subsidiary's net income for the year ended December 31, 2015 and what is the ending balance of the non-controlling interest in the subsidiary at December 31, 2015?
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.
What is the consolidated balance of the Equipment account at December 31, 2015? A. $644,400. B. $784,000. C. $719,600. D. $770,000. E. $775,600.
On January 2, 2014, 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, 2014. 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, 2014?
A. $127,000.
B. $129,800.
C. $143,800.
D. $148,000.
On January 2, 2014, 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, 2014. 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 noncurrent assets at January 2, 2014?
A. $195,000.
B. $192,200.
C. $186,600.
D. $181,000.
On January 2, 2014, 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, 2014. The excess
consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill.
What are the total consolidated current liabilities at January 2, 2014?
A. $53,200.
B. $56,000.
C. $64,400.
D. $42,000.
On January 2, 2014, 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, 2014. 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, 2014?
A. $112,000.
B. $133,000.
C. $168,000.
D. $182,000.
E. $203,000.
28. In measuring non-controlling interest at the date of acquisition, which of the following would not be indicative of the value attributed to the non-controlling 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.
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 needs to be recognized on the parent's books.
31. 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 exceed controlling interest in consolidated net
income when fair value of depreciable assets acquired exceeds book value of depreciable assets.
C. 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.
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.
32. 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 remeasurement event. E. Preacquisition earnings are not included in the consolidated income statement.
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.
35. 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 deducted from consolidated revenues and expenses. 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 ignored in the consolidated income statement. 36. 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.
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.
39. Jax Company uses the acquisition method for accounting for its investment in Saxton Company. Jax 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.
All net income is earned evenly throughout the year.
What is the controlling interest in consolidated net income for 2015?
A. $380,000.
B. $375,200.
C. $375,800.
D. $376,000.
E. $400,000.
41. McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, 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:
Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
The acquisition value attributable to the non-controlling interest at January 1, 2014 is: A. $23,400. B. $24,000. C. $24,900. D. $26,000. E. $20,000.
In consolidation at January 1, 2014, 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.
43. McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, 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:
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, 2014, 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.
In consolidation at December 31, 2015, 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.
45. McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, 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:
Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
In consolidation at January 1, 2014, 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.
In consolidation at December 31, 2014, 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.
47. McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, 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:
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, 2015, 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.
In consolidation at January 1, 2014, 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.
49. McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, 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:
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, 2014, 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.
In consolidation at December 31, 2015, 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.
51. McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, 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:
Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
In consolidation at January 1, 2014, 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.
In consolidation at December 31, 2014, 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.
53. McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, 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:
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, 2015, 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.
Compute Pell's investment account balance in Demers at December 31, 2014. A. $580,000. B. $574,400. C. $548,000. D. $542,400. E. $541,000.
55. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the EQUITY METHOD is applied.
Compute Pell's investment account balance in Demers at December 31, 2015.
A. $577,200.
B. $604,000.
C. $592,800.
D. $632,800.
Compute Pell's investment account balance in Demers at December 31, 2016. A. $639,000. B. $643,200. C. $763,200. D. $676,000. E. $620,000.
57. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the EQUITY METHOD is applied.
Compute Pell's income from Demers for the year ended December 31, 2014.
A. $74,400.
B. $73,000.
C. $42,400.
D. $41,000.
Compute Pell's income from Demers for the year ended December 31, 2015. A. $90,400. B. $89,000. C. $50,400. D. $56,000. E. $96,000.
59. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the EQUITY METHOD is applied.
Compute Pell's income from Demers for the year ended December 31, 2016.
A. $50,400.
B. $56,000.
C. $98,400.
D. $97,000.
Compute the non-controlling interest in the net income of Demers at December 31, 2014. A. $20,000. B. $12,000. C. $18,600. D. $10,600. E. $14,400.
61. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the EQUITY METHOD is applied.
Compute the non-controlling interest in the net income of Demers at December 31, 2015. A. $18,400. B. $14,400. C. $22,600. D. $24,000. E. $12,600.
Compute the non-controlling interest in the net income of Demers at December 31, 2016. A. $20,400. B. $24,600. C. $26,000. D. $14,000. E. $12,600.
63. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the EQUITY METHOD is applied.
Compute the non-controlling interest in Demers at December 31, 2014.
A. $135,600.
B. $137,000.
C. $112,000.
D. $100,000.
Compute the non-controlling interest in Demers at December 31, 2015. A. $107,000. B. $126,000. C. $109,200. D. $149,600. E. $148,200.
65. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the EQUITY METHOD is applied.
Compute the non-controlling interest in Demers at December 31, 2016.
A. $107,800.
B. $140,000.
C. $165,200.
D. $160,800.
Compute Pell's investment in Demers at December 31, 2014. A. $500,000. B. $574,400. C. $625,000. D. $542,400. E. $532,000.
67. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the INITIAL VALUE is applied.
Compute Pell's investment in Demers at December 31, 2015.
A. $625,000.
B. $664,800.
C. $592,400.
D. $500,000.
Compute Pell's investment in Demers at December 31, 2016. A. $592,400. B. $500,000. C. $625,000. D. $676,000. E. $620,000.
69. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the INITIAL VALUE is applied.
How much does Pell record as Income from Demers for the year ended December 31, 2014? A. $32,000. B. $74,400. C. $73,000. D. $42,400. E. $41,000.
How much does Pell record as Income from Demers for the year ended December 31, 2015? A. $90,400. B. $40,000. C. $89,000. D. $50,400. E. $56,000.
71. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the INITIAL VALUE is applied.
How much does Pell record as Income from Demers for the year ended December 31, 2016? A. $48,000. B. $56,000. C. $98,400. D. $97,000. E. $50,400.
Compute the non-controlling interest in the net income of Demers at December 31, 2014. A. $12,000. B. $10,600. C. $18,600. D. $20,000. E. $14,400.
73. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the INITIAL VALUE is applied.
Compute the non-controlling interest in the net income of Demers at December 31, 2015. A. $18,400. B. $14,000. C. $22,600. D. $24,000. E. $12,600.
Compute the non-controlling interest in the net income of Demers at December 31, 2016. A. $24,600. B. $14,000. C. $26,000. D. $20,400. E. $12,600.
75. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the INITIAL VALUE is applied.
Compute the non-controlling interest in Demers at December 31, 2014.
A. $135,600.
B. $80,000.
C. $117,000.
D. $100,000.
Compute the non-controlling interest in Demers at December 31, 2015. A. $126,000. B. $106,000. C. $109,200. D. $149,600. E. $148,200.
77. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the INITIAL VALUE is applied.
Compute the non-controlling interest in Demers at December 31, 2016.
A. $107,800.
B. $140,000.
C. $80,000.
D. $50,000.
Compute Pell's investment in Demers at December 31, 2014. A. $625,000. B. $574,400. C. $548,000. D. $542,400. E. $532,000.
79. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the PARTIAL EQUITY method is applied.
Compute Pell's investment in Demers at December 31, 2015.
A. $676,000.
B. $629,000.
C. $580,000.
D. $604,000.
Compute Pell's investment in Demers at December 31, 2016. A. $780,000. B. $660,000. C. $785,000. D. $676,000. E. $620,000.
81. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the PARTIAL EQUITY method is applied.
How much does Pell record as Income from Demers for the year ended December 31, 2014? A. $80,000. B. $74,400. C. $73,000. D. $42,400. E. $41,000.
How much does Pell record as income from Demers for the year ended December 31, 2015? A. $90,400. B. $89,000. C. $50,400. D. $96,000. E. $56,000.
83. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the PARTIAL EQUITY method is applied.
How much does Pell record as income from Demers for the year ended December 31, 2016? A. $98,400. B. $56,000. C. $104,000. D. $97,000. E. $50,400.
Compute the non-controlling interest in the net income of Demers at December 31, 2014. A. $20,000. B. $12,000. C. $18,600. D. $10,600. E. $14,400.
85. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the PARTIAL EQUITY method is applied.
Compute the non-controlling interest in the net income of Demers at December 31, 2015. A. $18,400. B. $14,000. C. $22,600. D. $24,000. E. $12,600.
Compute the non-controlling interest in the net income of Demers at December 31, 2016. A. $20,400. B. $26,000. C. $24,600. D. $14,000. E. $12,600.
87. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the PARTIAL EQUITY method is applied.
Compute the non-controlling interest in Demers at December 31, 2014.
A. $135,600.
B. $114,000.
C. $112,000.
D. $100,000.
Compute the non-controlling interest in Demers at December 31, 2015. A. $124,000. B. $126,000. C. $109,200. D. $149,600. E. $148,200.
89. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 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 consideration
transferred 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:
Assume the PARTIAL EQUITY method is applied.
Compute the non-controlling interest in Demers at December 31, 2016.
A. $107,800.
B. $140,000.
C. $80,000.
D. $160,800.
goodwill of $200,000 at that date. During 2015 an analysis of the fair value of Roxy's assets determined an impairment of goodwill in the amount of $50,000.
What journal entry would be made by Parsons regarding the impairment of goodwill? A. Journal entry A. B. Journal entry B. C. Journal entry C. D. Journal entry D. E. Journal entry E.
92. In comparing U.S. GAAP and international financial reporting standards (IFRS) with regard to a basis for measurement of a non-controlling interest, which of the following is true?
A. U.S. GAAP requires acquisition-date fair value measurement and IFRS requires the acquiree's identifiable net asset fair value measurement.
B. U.S. GAAP and IFRS both require acquisition-date fair value measurement. C. U.S. GAAP and IFRS both require the acquiree's identifiable net asset fair value
measurement.
D. U.S. GAAP requires acquisition-date fair value measurement, but IFRS allows an option for acquisition-date fair value measurement.
94. What is preacquisition income?
95. Beta Corp. owns less than one hundred percent of the voting common stock of Shedds Co. Under what conditions will Beta be required to prepare consolidated financial statements?
98. How is a non-controlling interest in the net income of an entity reported in the income statement?
99. One company buys a controlling interest in another company on April 1. How should the preacquisition subsidiary revenues and expenses be handled in the consolidated balances for the year of acquisition?
101 .
How does a parent company account for the sale of a portion of an investment in a subsidiary?
Short Answer Questions
102
. Alonzo Co. acquired 60% of Beazley Corp. by paying $240,000 cash. There is no active trading market for Beazley Corp. At the time of the acquisition, the book value of Beazley's net assets was $300,000.
Required:
What amount should have been assigned to the non-controlling interest immediately after the combination?
104
. On January 1, 2015, Elva Corp. paid $750,000 for 80% of Fenton Co. when the book value of Fenton's net assets was $800,000. Fenton owned a building with a fair value of $150,000 and a book value of $120,000.
Required:
At what amount would the building appear on a consolidated balance sheet prepared immediately after the combination, under the acquisition method of accounting for business combinations?
106 .
Caldwell Inc. acquired 65% of Club Corp. for $2,600,000. Club owned a building and equipment with ten-year useful lives. The book value of these assets was $830,000, and the fair value was $950,000. For Club's other assets and liabilities, book value was equal to fair value. The total fair value of Club's net assets was $3,500,000. Using the acquisition method, determine the amount of goodwill associated with Caldwell's purchase of Club.
108 .
On January 1, 2014, Glenville Co. acquired an 80% interest in Acron Corp. for $500,000. There is no active trading market for Acron's stock. The fair value of Acron's net assets was $600,000 and Glenville accounts for its interest using the acquisition method.
Determine the amount of goodwill to be recognized in this acquisition.
109
. On January 1, 2014, Glenville Co. acquired an 80% interest in Acron Corp. for $500,000. There is no active trading market for Acron's stock. The fair value of Acron's net assets was $600,000 and Glenville accounts for its interest using the acquisition method.
Determine the value assigned to the non-controlling interest as of the date of the acquisition.
111
. On January 1, 2014, Jannison Inc. acquired 90% of Techron Co. by paying $477,000 cash. There is no active trading market for Techron stock. Techron Co. reported a Common Stock account balance of $140,000 and Retained Earnings of $280,000 at that date. The fair value of Techron Co. was appraised at $530,000. The total annual amortization was $11,000 as a result of this transaction. The subsidiary earned $98,000 in 2014 and $126,000 in 2015 with dividend payments of $42,000 each year. Without regard for this investment, Jannison had income of $308,000 in 2014 and $364,000 in 2015. Use the economic unit concept to account for this acquisition. Prepare a proper presentation of consolidated net income for 2015.
113
. On January 1, 2013, Vacker Co. acquired 70% of Carper Inc. by paying $650,000. Thisincluded a $20,000 control premium. Carper reported common stock on that date of $420,000 with retained earnings of $252,000. A building was undervalued in the company's financial records by $28,000. This building had a ten-year remaining life. Copyrights of $80,000 were to be recognized and amortized over 20 years.
Carper earned income and paid cash dividends as follows:
On December 31, 2015, Vacker owed $30,800 to Carper. There have been no changes in Carper's common stock account since the acquisition.
Required:
If the equity method had been applied by Vacker for this acquisition, what were the consolidation entries needed as of December 31, 2015?
For internal reporting purposes, JDE employed the equity method to account for this investment.
Prepare a schedule to determine goodwill, and the amortization and allocation amounts.
For internal reporting purposes, JDE employed the equity method to account for this investment.
The following account balances are for the year ending December 31, 2015 for both companies.
Without regard for this investment, McLaughlin earns $480,000 in net income ($840,000 revenues less $360,000 expenses; incurred evenly through the year) during 2015.
Required: Prepare a schedule of consolidated net income and apportionment to non-controlling and non-controlling interests for 2015.
value of the controlling interest and the fair value of the non-controlling interest. _____ 6. When control of a subsidiary is acquired on a date other than the first day of a fiscal year, excess amortization expenses are pro-rated to include only the post-acquisition period.
_____ 7. For a mid-year acquisition following an equity method investment of the same company, the consolidated income statement will report consolidated revenues and expenses for the entire year.
_____ 8. In a step acquisition where the parent previously held a non-controlling interest in the acquired firm, the parent remeasures the prior interest to fair value. _____ 9. When a parent has control over a subsidiary with less than 100 percent ownership, and thereafter increases its ownership, the parent remeasures the prior interest to 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.
AACSB: Reflective thinking AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 2 Medium Learning Objective: 04-02 Describe the valuation principles underlying the acquisition method of accounting for the noncontrolling interest. Topic: Consolidated Financial Reporting in the Presence of a Noncontrolling Interest 2. 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. $70,000. C. $75,000. D. $92,500. E. $100,000. $100,000 FV of Land at Acquisition AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 1 Easy Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. Topic: Consolidated Financial Statements and Outside Ownership
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 1 Easy Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. Topic: Consolidated Financial Statements and Outside Ownership Topic: Partial Ownership Consolidations (Acquisition Method) 4. 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. $0. B. $30,000. C. $22,500. D. $25,000. E. $17,500. FV - BV ($30,000) × .75 = $22,500 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest.
FV - BV ($30,000) × .25 = $7,500
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. Topic: Consolidated Financial Statements and Outside Ownership Topic: Partial Ownership Consolidations (Acquisition Method) 6. 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, assuming the investment was obtained prior to the date the purchase method of accounting for new business combinations was discontinued?
A. $70,000. B. $75,000. C. $85,000. D. $92,500. E. $100,000. BV $70,000 + FV Controlling Differential ($30,000 × .75) = $92,500 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination.
FV $1,850,000 - FV of Stock at Purchase Price for 100% ($1,600,000/.80) $2,000,000 = ($150,000) Goodwill
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-03 Allocate goodwill acquired in a business combination across the controlling and noncontrolling interests. Topic: Allocating Acquired Goodwill to the Controlling and Noncontrolling Interests 8. 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?
A. $150,000.
B. $250,000.
C. $0.
D. $120,000.
E. $170,000.
(Purchase Price for 80%) $1,600,000 - (FV $1,850,000 × .80 = $1,480,000) = $120,000
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-03 Allocate goodwill acquired in a business combination across the controlling and noncontrolling interests.
$150,000 Goodwill × .20 = $30,000 to Non-Controlling Interest
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-03 Allocate goodwill acquired in a business combination across the controlling and noncontrolling interests. Topic: Allocating Acquired Goodwill to the Controlling and Noncontrolling Interests 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 non-controlling interest shares of Float Corp. are not actively traded.
What is the dollar amount of non-controlling 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.
FV of Stock at Purchase Price for 100% ($1,600,000/.80) $2,000,000 × .20 = $400,000
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included
FV of Assets Acquired = $1,850,000
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. Topic: Consolidated Financial Statements and Outside Ownership 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 non-controlling 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. $150,000. C. $280,000. D. $350,000. E. $370,000. FV $1,850,000 - BV $1,500,000 = $350,000 × .80 = $280,000 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination.
E. $0.
Revenue $2,500,000 - Expenses $2,000,000 = $500,000 - $60,000 = $440,000 × . 30 = $132,000
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-04 Demonstrate the computation and allocation of consolidated net income in the presence of a noncontrolling interest. Topic: Allocating Consolidated Net Income to the Parent and Noncontrollig Interest 14. Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1,
2014. During 2014, Harbor had revenues of $2,500,000 and expenses of
$2,000,000. The amortization of excess cost allocations totaled $60,000 in 2014. What is the effect of including Harbor in consolidated net income for 2014?
A. $350,000. B. $308,000. C. $500,000. D. $440,000. E. $290,000. Revenue $2,500,000 - Expenses $2,000,000 = $500,000 - $60,000 = $440,000 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-04 Demonstrate the computation and allocation of consolidated net income in the presence of a noncontrolling interest. Topic: Allocating Consolidated Net Income to the Parent and Noncontrollig Interest
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-08 Understand the impact on consolidated financial statements of a midyear acquisition. Topic: Revenue and Expense Reporting for Midyear Acquisitions 16. Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1,
2014. For 2014, Kailey reported revenues of $810,000 and expenses of $630,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000.
What is the effect of including Kailey in consolidated net income for 2014?
A. $31,000.
B. $33,000.
C. $55,000.
D. $60,000.
E. $39,000.
Revenue $810,000 - Expenses $630,000 = Income $180,000 × 4/12 = $60,000 - Annual Amortization ($15,000 × 4/12) = $55,000
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-08 Understand the impact on consolidated financial statements of a midyear acquisition. Topic: Revenue and Expense Reporting for Midyear Acquisitions
Revenue $810,000 - Expenses $630,000 = Income $180,000 × 4/12 = $60,000 - Annual Amortization ($15,000 × 4/12) = $55,000 × .60 = $33,000
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-08 Understand the impact on consolidated financial statements of a midyear acquisition. Topic: Revenue and Expense Reporting for Midyear Acquisitions 18. Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1,
2014. For 2014, Kailey reported revenues of $810,000 and expenses of $630,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000.
What is the amount of the non-controlling interest's share of Kailey's income for 2014? A. $22,000. B. $24,000. C. $48,000. D. $66,000. E. $72,000.
Total Income for September-December = $55,000 - Controlling Interest Portion $33,000 = $22,000
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-08 Understand the impact on consolidated financial statements of a midyear
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. Topic: Consolidated Financial Statements and Outside Ownership 20. 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. $125,000 C. $300,000 D. $500,000 E. $0
BV & FV of the Existing Receivable $500,000
AACSB: Reflective thinking AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 1 Easy Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. Topic: Partial Ownership Consolidations (Acquisition Method)
What is consolidated net income for 2015 attributable to Royce's controlling interest? A. $686,000. B. $560,000. C. $644,000. D. $635,600. E. $691,600.
[Parent's Income ($1,260,000 - $700,000 = $560,000)] + [Sub's Income ($560,000 - $420,000) × .60 = $84,000] - [Excess Equipment Amortization for 2015
($140,000/10) × .60 = $8,400] = $635,600
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-04 Demonstrate the computation and allocation of consolidated net income in the presence of a noncontrolling interest. Topic: Allocating Consolidated Net Income to the Parent and Noncontrollig Interest
What is the non-controlling interest's share of the subsidiary's net income for the year ended December 31, 2015 and what is the ending balance of the non-controlling interest in the subsidiary at December 31, 2015?
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.
[Sub's Income ($560,000 - $420,000) × .40 = $56,000] - [Excess Equipment Amortization for 2015 ($140,000/10) × .40 = $5,600] = $50,400
Controlling Interest at Acquisition (FV $700,000 × .40) = $280,000] + [Non-Controlling Interest 2015 Income $56,000] - [Excess Equipment Amortization ($140,000/10) × .40] = $330,400
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-04 Demonstrate the computation and allocation of consolidated net income in the presence of a noncontrolling interest. Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. Topic: Allocating Consolidated Net Income to the Parent and Noncontrollig Interest Topic: Partial Ownership Consolidations (Acquisition Method)
What is the consolidated balance of the Equipment account at December 31, 2015? A. $644,400. B. $784,000. C. $719,600. D. $770,000. E. $775,600.
[Parent's Equipment $364,000] + [Sub's Equipment $280,000] + [Excess Amortization Remaining $140,000 - $14,000] = $770,000
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. Topic: Partial Ownership Consolidations (Acquisition Method)
On January 2, 2014, 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, 2014. 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, 2014?
A. $127,000.
B. $129,800.
C. $143,800.
D. $148,000.
E. $135,400.
[Parent's Current Assets $99,000] + [Sub's Current Assets $28,000] + [Excess Consideration to Inventory ($105,000 - $70,000 = $35,000 × .60) $21,000] = $148,000
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. Topic: Consolidated Financial Statements and Outside Ownership
On January 2, 2014, 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, 2014. 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 noncurrent assets at January 2, 2014?
A. $195,000.
B. $192,200.
C. $186,600.
D. $181,000.
E. $169,800.
[Parent's Non-Current Assets $125,000] + [Sub's Non-Current Assets $56,000] + [Excess Consideration to Goodwill ($105,000 - $70,000 = $35,000 × .40) $14,000] = $195,000
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. Topic: Consolidated Financial Statements and Outside Ownership
On January 2, 2014, 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, 2014. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill.
What are the total consolidated current liabilities at January 2, 2014?
A. $53,200.
B. $56,000.
C. $64,400.
D. $42,000.
E. $70,000.
[Parent's Current Liabilities $42,000] + [Sub's Current Liabilities $14,000] + [Current Portion of Acquisition Loan ($84,000/10) = $8,400] = $64,400
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. Topic: Consolidated Financial Statements and Outside Ownership
On January 2, 2014, 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, 2014. 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, 2014?
A. $112,000.
B. $133,000.
C. $168,000.
D. $182,000.
E. $203,000.
Parent's Equity $112,000 + Non-Controlling Interest $21,000 = $133,000
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-06 Identify appropriate placements for the components of the noncontrolling interest in consolidated financial statements. Topic: Consolidated Financial Statements
AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 2 Medium Learning Objective: 04-02 Describe the valuation principles underlying the acquisition method of accounting for the noncontrolling interest. Topic: Consolidated Financial Reporting in the Presence of a Noncontrolling Interest 29. When a parent uses the 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 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 will not be recorded on the parent's books.
AACSB: Reflective thinking AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. Topic: Partial Ownership Consolidations (Acquisition Method) 30. When a parent uses the initial value method throughout the year to account for its
investment in an acquired subsidiary, which of the following statements is true before making adjustments 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.
equal.
B. 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.
C. 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.
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.
AACSB: Reflective thinking AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. Topic: Partial Ownership Consolidations (Acquisition Method) 32. 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 remeasurement event.
E. Preacquisition earnings are not included in the consolidated income statement. AACSB: Reflective thinking AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation
AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 04-09 Understand the impact on consolidated financial statements when a step acquisition has taken place. Topic: Step Acquisitions 34. 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.
AACSB: Reflective thinking AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 04-08 Understand the impact on consolidated financial statements of a midyear acquisition. Topic: Revenue and Expense Reporting for Midyear Acquisitions
AACSB: Reflective thinking AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 2 Medium Learning Objective: 04-08 Understand the impact on consolidated financial statements of a midyear acquisition. Topic: Revenue and Expense Reporting for Midyear Acquisitions 36. 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.
AACSB: Reflective thinking AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 2 Medium Learning Objective: 04-10 Record the sale of a subsidiary (or a portion of its shares). Topic: Parent Company Sales of Subsidiary Stock-Acquisition Method 176
