Exam 17: Understanding and Analyzing Consolidated Financial Statements

Below is the balance sheet for Andrew Company: Andrew Company Balance Sheet December 31 , 20X6 20X5 Current assets: Cash \ 380 \ 242 Accounts receivable 430 194 Inventory 238 388 Prepaid insurance 32 76 Total current assets \1 ,080 \9 00 Long-term assets: Fixed assets \ 406 \ 452 Less: Accumulated depreciation Total long-term assets \ 224 Total assets \ 1,214 \ 1,124 Current liabilities: Accounts payable \ 176 \ 152 Wages payable total current liabilities \ 214 \ 184 Long-term liabilities: Notes payable Total liabilities Owners' equity: Common stock \ 190 \ 160 Retained income 390 360 Total owners' equity \5 20 Total liabilities and owners' equity Andrew Company's prepaid insurance increased decreased) by _____.

Eliminating entries are made by the _____company to avoid double counting assets and _____.

Comparing a company's ratio with the company's own historical ratios is called an) _____.

The following information pertains to Bailey Company: Balance Sheet At December $31,20 \mathrm{X} 2$ Current assets \ 18,700 Current liabilities \ 7,600 Long-term assets 29,700 Long-term liabilities 13,250 Stockholders' equity 27,550 Total assets \ 48,400 Total assets \ 48,400 Barnum Company Income Statement For the Year Ended December $31,20 \mathrm{X} 2$ Sales \ 106,950 Less: Cost of goods sold Gross profit \ 45,150 Less: Operating expenses Operating income \ 13,450 Less other expenses: interest Income before taxes \ 12,150 Less: Income tax expense Net income \ 7,300 There were 1,000 shares of common stock outstanding with a market value of $75 as of December 31, 20X2.Dividends declared and paid was $5 per share.The return on sales for 20X2 is _____.

Trading securities are investments where there is no intention to sell in the near future.

Presented below are the balance sheets of Monty Company and Hall Company at January 1, 20X6: Hall Company Monty Company Balance Sheet Balance Sheet January 1,206 January 1,206 Cash \ 100 Cash \ 400 Net fixed assets 400 Net fixed assets 380 Total assets \ 500 Total assets \ 780 Accounts payable \ 20 Accounts payable \1 20 Long-term bonds Long-term bonds payable 220 payable 280 Stockholders' equity Stockholders' equity Total liabilities and - Total liabilities and stockholders' equity \ 500 stockholders' equity \ 780 On January 1, 20X6, Monty Company acquired 100% of the outstanding common stock of Hall Company for $260 in cash._____ is the balance of liabilities on the consolidated balance sheet immediately after the acquisition of Hall's stock.

Below is the balance sheet for Marie Company: Marie Company Balance Sheet December 31 , 20X6 20X5 Current assets: Cash \ 380 \ 242 Accounts receivable 430 194 Inventory 238 388 Prepaid insurance 32 76 Total current assets \1 ,080 \9 00 Long-term assets: Fixed assets \ 406 \ 452 Less: Accumulated depreciation Total long-term assets \ 224 Total assets \ 1,214 \ 1,124 Current liabilities: Accounts payable \ 176 \ 152 Wages payable total current liabilities \ 214 \ 184 Long-term liabilities: Notes payable Total liabilities Owners' equity: Common stock \ 190 \ 160 Retained income 390 360 Total owners' equity \5 20 Total liabilities and owners' equity Marie Company's accounts receivable increased decreased) by _____.

Rock Company acquired 10% of the voting stock of Hudson Company for $10 million.In year 1, Hudson Company reports net income of $15 million and pays cash dividends of $5 million.At the end of the year the market value of Rock Company's investment in Hudson Company is $11 million.What accounts would be affected on Rock Company's books to reflect the year-end market value and by how much?

Consolidated statements combine two or more _____ in a single presentation.

The effects of price changes in marketable securities are reported _____.

There is general agreement among most accountants that restatements in constant dollars would overcome the disadvantages of using an unstable measuring unit.

Presented below is the income statement for Tiger Company. Sales only credit sales) \ 1,606.0 Less: Cost of goods sold Gross profit \ 544.0 Less: Operating expenses 322.0 Operating income \ 222.0 Less other expense: Interest 9.6 Income before tax \ 212.4 Less: Income tax expense 85.0 Net income \ 127.4 The gross profit rate for Tiger Company is _____.

Rock Company acquired 40% of the voting stock of Hudson Company for $40 million.In year 1, Hudson Company reports net income of $15 million and pays cash dividends of $5 million.At the end of the year the market value of Rock Company's investment in Hudson Company is $44 million.What accounts would be affected on Rock Company's books at the time Hudson Company reported its earnings and by how much?

The following information pertains to Barnum Company: Balance Sheet At December $31,20 \mathrm{X} 2$ Current assets \ 18,700 Current liabilities \ 7,600 Long-term assets 29,700 Long-term liabilities 13,250 Stockholders' equity 27,550 Total assets \ 48,400 Total assets \ 48,400 Barnum Company Income Statement For the Year Ended December $31,20 \mathrm{X} 2$ Sales \ 106,950 Less: Cost of goods sold Gross profit \ 45,150 Less: Operating expenses Operating income \ 13,450 Less other expenses: interest Income before taxes \ 12,150 Less: Income tax expense Net income \ 7,300 There were 1,000 shares of common stock outstanding with a market value of $75 as of December 31, 20X2.Dividends declared and paid was $5 per share.The price-earnings ratio for 20X2 is _____.

Goodwill is recognized when _____.

Minority interest appears on the consolidated balance sheet when a company owns more than 50% but less than 100% of a subsidiary company's stock.

The following information pertains to Savage Company: Balance Sheet At December $31,20 \mathrm{X} 2$ Current assets \ 18,700 Current liabilities \ 7,600 Long-term assets 29,700 Long-term liabilities 13,250 Stockholders' equity 27,550 Total assets \ 48,400 Total assets \ 48,400 Barnum Company Income Statement For the Year Ended December $31,20 \mathrm{X} 2$ Sales \ 106,950 Less: Cost of goods sold Gross profit \ 45,150 Less: Operating expenses Operating income \ 13,450 Less other expenses: interest Income before taxes \ 12,150 Less: Income tax expense Net income \ 7,300 There were 1,000 shares of common stock outstanding with a market value of $75 as of December 31, 20X2.Dividends declared and paid was $5 per share.The current ratio for 20X2 is _____times.

When a company is acquired and becomes a subsidiary of another company, the books of the subsidiary are unaffected on the date of the acquisition.

Presented below are the balance sheets of Monty Company and Hall Company at January 1, 20X6: Hall Company Monty Company Balance Sheet Balance Sheet January 1,206 January 1,206 Cash \ 100 Cash \ 400 Net fixed assets 400 Net fixed assets 380 Total assets \ 500 Total assets \ 780 Accounts payable \ 20 Accounts payable \1 20 Long-term bonds Long-term bonds payable 220 payable 280 Stockholders' equity Stockholders' equity Total liabilities and - Total liabilities and stockholders' equity \ 500 stockholders' equity \ 780 On January 1, 20X6, Monty Company acquired 100% of the outstanding common stock of Hall Company for $260 in cash._____ is the balance of stockholders' equity on the consolidated balance sheet immediately after the acquisition of Hall's stock.

_____ is reported on the financial statements of publicly held companies in the United States.