Question 1

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

Accepted Answer

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

Question 2

The total acquisition-date fair value of an acquired firm is the sum of the fair value of the controlling interest and the fair value of the noncontrolling interest

Accepted Answer

A) True 
 B)False

Question 3

McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This amount is reflective of Hogan's total acquisition-date 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, 2020, what adjustment is necessary for Hogan's Land account?

Accepted Answer

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

Question 4

Prevatt, Inc. owns 80% of Franklin Company. During the current year, a portion of the investment in Franklin is sold. Prior to recording the sale, Prevatt adjusts the carrying value of its investment. What is the purpose of the adjustment?

Accepted Answer

If control is maintained after the sale,

Question 5

On January 1, 2019, 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.

Accepted Answer

The answer of On January 1, 2019, Glenville Co. acquired...

Question 6

Dodd Co. acquired 75% of the common stock of Wallace Corp. for $1,800,000. The fair value of Wallace's net assets was $2,100,000, and the book value was $1,900,000. The noncontrolling interest shares of Wallace Corp. are not actively traded.What amount of goodwill should be attributed to the noncontrolling interest at the date of acquisition?

Accepted Answer

A)  $0. 
B)  $25,000. 
C)  $50,000. 
D)  $75,000. 
E)  $175,000. 
A)  $0. 
B)  $25,000. 
C)  $50,000. 
D)  $75,000. 
E)  $175,000.

Question 7

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

Accepted Answer

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

Question 8

Brady, Inc., a calendar-year corporation, acquires 85% of Austin Company on September 1, 2019, and an additional 10% on January 1, 2020. Total annual amortization of $8,000 relates to the first acquisition. Austin reports the following figures for 2020:   Without regard for this investment, Brady independently earns $375,000 in net income during 2020.All net income is earned evenly throughout the year.What is the controlling interest in consolidated net income for 2020?

Accepted Answer

A)  $464,250. 
B)  $474,450. 
C)  $481,250. 
D)  $492,000. 
E)  $500,000. 
A)  $464,250. 
B)  $474,450. 
C)  $481,250. 
D)  $492,000. 
E)  $500,000.

Question 9

When Valley Co. acquired 80% of the common stock of Coleman Corp., Coleman owned land with a book value of $75,000 and a fair value of $125,000.What is the amount of excess land allocation attributed to the controlling interest at the acquisition date?

Accepted Answer

A)  $0. 
B)  $12,500. 
C)  $40,000. 
D)  $50,000. 
E)  $60,000. 
A)  $0. 
B)  $12,500. 
C)  $40,000. 
D)  $50,000. 
E)  $60,000.

Question 10

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. 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 noncontrolling interest in Demers at December 31, 2019.

Accepted Answer

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

Question 11

A parent will recognize a gain or loss if it sells a portion of its investment in a subsidiary and maintains control after the sale.

Accepted Answer

A) True 
 B)False

Question 12

McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This amount is reflective of Hogan's total acquisition-date 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, 2019, what adjustment is necessary for Hogan's Land account?

Accepted Answer

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

Question 13

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.

Accepted Answer

A) True 
 B)False

Question 14

McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This amount is reflective of Hogan's total acquisition-date 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, 2019, what net adjustment is necessary for Hogan's Patent account?

Accepted Answer

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

Question 15

Parsons Company acquired 90% of Roxy Company several years ago for which the consideration transferred included an amount paid for goodwill of $200,000 at that date. During 2020 an analysis of the fair value of Roxy's assets determined an impairment of goodwill in the amount of $50,000.At what amount would consolidated goodwill be reported for 2020?

Accepted Answer

A)  $150,000. 
B)  $200,000. 
C)  $50,000. 
D)  $0. 
E)  $135,000. 
A)  $150,000. 
B)  $200,000. 
C)  $50,000. 
D)  $0. 
E)  $135,000.

Question 16

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

Accepted Answer

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

Question 17

What is pre-acquisition income?

Accepted Answer

When a company acquires control of a sub

Question 18

LaFevor Co. acquired 70% of the common stock of Dean Corp. on August 1, 2022. For 2022, Dean reported revenues of $960,000 and expenses of $780,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $21,000.What is the amount of the noncontrolling interest's share of Dean's income for 2022?

Accepted Answer

A)  $15,900. 
B)  $19,875. 
C)  $46,375. 
D)  $47,700. 
E)  $54,000. 
A)  $15,900. 
B)  $19,875. 
C)  $46,375. 
D)  $47,700. 
E)  $54,000.

Question 19

McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This amount is reflective of Hogan's total acquisition-date 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, 2020, what adjustment is necessary for Hogan's Equipment account?

Accepted Answer

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

Question 20

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. 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 noncontrolling interest in the net income of Demers at December 31, 2019.

Accepted Answer

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

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

The total acquisition-date fair value of an acquired firm is the sum of the fair value of the controlling interest and the fair value of the noncontrolling interest

Prevatt, Inc. owns 80% of Franklin Company. During the current year, a portion of the investment in Franklin is sold. Prior to recording the sale, Prevatt adjusts the carrying value of its investment. What is the purpose of the adjustment?

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

When Valley Co. acquired 80% of the common stock of Coleman Corp., Coleman owned land with a book value of $75,000 and a fair value of $125,000.What is the amount of excess land allocation attributed to the controlling interest at the acquisition date?

A parent will recognize a gain or loss if it sells a portion of its investment in a subsidiary and maintains control after the sale.

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.

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

What is pre-acquisition income?

Accounting for Estates and Trusts

Accounting and Reporting for Private Not-For-Profit Organizations

Accounting for State and Local Governments, Part II

Accounting for State and Local Governments, Part I

Partnerships: Termination and Liquidation

Partnerships: Formation and Operation

Accounting for Legal Reorganizations and Liquidations

Financial Reporting and the Securities and Exchange Commission

Worldwide Accounting Diversity and International Accounting Standards

Translation of Foreign Currency Financial Statements

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Segment and Interim Reporting

Consolidated Financial Statements - Ownership Patterns and Income Taxes

Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues

Consolidated Financial Statements Intra-Entity Asset Transactions

Consolidations - Subsequent to the Date of Acquisition

Consolidation of Financial Information

The Equity Method of Accounting for Investments

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Exam 4: Consolidated Financial Statements and Outside Ownership

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

The total acquisition-date fair value of an acquired firm is the sum of the fair value of the controlling interest and the fair value of the noncontrolling interest

Prevatt, Inc. owns 80% of Franklin Company. During the current year, a portion of the investment in Franklin is sold. Prior to recording the sale, Prevatt adjusts the carrying value of its investment. What is the purpose of the adjustment?

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

When Valley Co. acquired 80% of the common stock of Coleman Corp., Coleman owned land with a book value of $75,000 and a fair value of $125,000.What is the amount of excess land allocation attributed to the controlling interest at the acquisition date?

A parent will recognize a gain or loss if it sells a portion of its investment in a subsidiary and maintains control after the sale.

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.

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

What is pre-acquisition income?

Accounting for Estates and Trusts

Accounting and Reporting for Private Not-For-Profit Organizations

Accounting for State and Local Governments, Part II

Accounting for State and Local Governments, Part I

Partnerships: Termination and Liquidation

Partnerships: Formation and Operation

Accounting for Legal Reorganizations and Liquidations

Financial Reporting and the Securities and Exchange Commission

Worldwide Accounting Diversity and International Accounting Standards

Translation of Foreign Currency Financial Statements

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Segment and Interim Reporting

Consolidated Financial Statements - Ownership Patterns and Income Taxes

Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues

Consolidated Financial Statements Intra-Entity Asset Transactions

Consolidations - Subsequent to the Date of Acquisition

Consolidation of Financial Information

The Equity Method of Accounting for Investments

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