Question 1

_____ A parent could justifiably not consolidate a subsidiary that is:

Accepted Answer

A)  Reporting substantial operating losses. 
B)  A bank of a parent company that is not a bank. 
C)  Newly formed and has not yet become profitable. 
D)  Does not distribute any of its earnings to its parent. 
E)  None of the above. 
A)  Reporting substantial operating losses. 
B)  A bank of a parent company that is not a bank. 
C)  Newly formed and has not yet become profitable. 
D)  Does not distribute any of its earnings to its parent. 
E)  None of the above. E

Question 2

_____ Parco, a publicly owned company, could properly not consolidate Sarco, which is controlled by means of

Accepted Answer

A)  (1) A majority voting interest and (2) is unable to distribute dividends because of severe and long-term currency transfer restrictions imposed by a foreign government. 
B)  (1) A majority voting interest and (2) has emerged from bankruptcy reorganization proceedings (thus is no longer in bankruptcy). 
C)  Other than a majority voting interest. 
D)  (1) A majority voting interest and (2) has total assets and earnings that are less than 10% of the Parco's total assets and earnings, respectively. 
E)  None of the above. 
A)  (1) A majority voting interest and (2) is unable to distribute dividends because of severe and long-term currency transfer restrictions imposed by a foreign government. 
B)  (1) A majority voting interest and (2) has emerged from bankruptcy reorganization proceedings (thus is no longer in bankruptcy). 
C)  Other than a majority voting interest. 
D)  (1) A majority voting interest and (2) has total assets and earnings that are less than 10% of the Parco's total assets and earnings, respectively. 
E)  None of the above. A

Question 3

The relationship between a newly created legal entity and the entity that created and owns 100% of the outstanding common stock of the newly created legal entity is called a(n) ________________________________________ relationship.

Accepted Answer

parent-subsidiary

Question 4

Transactions between a parent and its subsidiaries must be eliminated in consolidation exactly as if the transactions had not occurred.

Accepted Answer

A) True 
 B)False

Question 5

A subsidiary can be consolidated even if it has a different year-end than its parent company.

Accepted Answer

A) True 
 B)False

Question 6

_____ A parent need not consolidate a subsidiary if

Accepted Answer

A)  The subsidiary is economically independent of the parent. 
B)  More than 50% of the subsidiary's sales are to the parent. 
C)  The subsidiary's total assets are less than 10% of total consolidated assets. 
D)  The parent allows the subsidiary to operate freely and independently (a decentralized management philosophy). 
E)  None of the above. 
A)  The subsidiary is economically independent of the parent. 
B)  More than 50% of the subsidiary's sales are to the parent. 
C)  The subsidiary's total assets are less than 10% of total consolidated assets. 
D)  The parent allows the subsidiary to operate freely and independently (a decentralized management philosophy). 
E)  None of the above.

Question 7

In consolidation, all ___________________________________ account balances are eliminated.

Accepted Answer

The answer of In consolidation, all ___________________________________ account balances are...

Question 8

Consolidated statements are prepared using a(n) _____________________________.

Accepted Answer

The answer of Consolidated statements are prepared using a(n) _____________________________....

Question 9

_____ A valid reason for not consolidating a subsidiary is

Accepted Answer

A)  The subsidiary is an insurance subsidiary of a manufacturing company parent. 
B)  The parent does not take an active role in the management of the subsidiary's operations. 
C)  The subsidiary is entering the third month of a prolonged and bitter strike by its union employees. 
D)  The subsidiary is located in a foreign country. 
E)  None of the above. 
A)  The subsidiary is an insurance subsidiary of a manufacturing company parent. 
B)  The parent does not take an active role in the management of the subsidiary's operations. 
C)  The subsidiary is entering the third month of a prolonged and bitter strike by its union employees. 
D)  The subsidiary is located in a foreign country. 
E)  None of the above.

Question 10

Earnings of overseas branches are taxed in the United States when the earnings are remitted.

Accepted Answer

A) True 
 B)False

Question 11

_____ Which of the following would explain why the Investment in Branch account is less than the Home Office Capital account?

Accepted Answer

A)  A cash transfer to the branch is in transit. 
B)  A cash transfer to the home office is in transit. 
C)  An inventory shipment to the branch (at cost) is in transit. 
D)  A home office has received and deposited a remittance from a branch customer but has not yet notified the branch. 
E)  None of the above. 
A)  A cash transfer to the branch is in transit. 
B)  A cash transfer to the home office is in transit. 
C)  An inventory shipment to the branch (at cost) is in transit. 
D)  A home office has received and deposited a remittance from a branch customer but has not yet notified the branch. 
E)  None of the above.

Question 12

If branch fixed assets are recorded on the home office's books, depreciation expense would not be charged to branch operations.

Accepted Answer

A) True 
 B)False

Question 13

In parent-subsidiary relationships, accounts having a debit balance on one set of books and a credit balance on the other set of books are commonly referred to as the __________________________________ accounts.

Accepted Answer

The answer of In parent-subsidiary relationships, accounts having a debit...

Question 14

A foreign subsidiary that is prohibited from paying dividends because of currency exchange restrictions imposed by the foreign government of the country in which it is located may still be consolidated.

Accepted Answer

A) True 
 B)False

Question 15

The result of FAS 94 (issued in 1988) was to eliminate the _____________________________________________ exception allowed under ARB No. 51.

Accepted Answer

The answer of The result of FAS 94 (issued in...

Question 16

A parent need not consolidate a created subsidiary that the parent is in the process of trying to sell.

Accepted Answer

A) True 
 B)False

Question 17

In the aggregated format of presenting consolidated statements, the subsidiary's assets and liabilities cannot be identified.

Accepted Answer

A) True 
 B)False

Question 18

A transfer of inventory from a home office to a branch is called a(n)_____________ ___________________________ inventory transfer.

Accepted Answer

The answer of A transfer of inventory from a home...

Question 19

In general, foreign consolidation rules for the major trading partners of the United States are more lenient than U.S. consolidation rules.

Accepted Answer

A) True 
 B)False

Question 20

The entries made in consolidation are commonly called ________________________ entries.

Accepted Answer

The answer of The entries made in consolidation are commonly...

Exam 1: Wholly Owned Subsidiaries: at Date of Creation

_____ A parent could justifiably not consolidate a subsidiary that is:

_____ Parco, a publicly owned company, could properly not consolidate Sarco, which is controlled by means of

The relationship between a newly created legal entity and the entity that created and owns 100% of the outstanding common stock of the newly created legal entity is called a(n) ________________________________________ relationship.

Transactions between a parent and its subsidiaries must be eliminated in consolidation exactly as if the transactions had not occurred.

A subsidiary can be consolidated even if it has a different year-end than its parent company.

_____ A parent need not consolidate a subsidiary if

In consolidation, all ___________________________________ account balances are eliminated.

Consolidated statements are prepared using a(n) _____________________________.

_____ A valid reason for not consolidating a subsidiary is

Earnings of overseas branches are taxed in the United States when the earnings are remitted.

_____ Which of the following would explain why the Investment in Branch account is less than the Home Office Capital account?

If branch fixed assets are recorded on the home office's books, depreciation expense would not be charged to branch operations.

In parent-subsidiary relationships, accounts having a debit balance on one set of books and a credit balance on the other set of books are commonly referred to as the __________________________________ accounts.

A foreign subsidiary that is prohibited from paying dividends because of currency exchange restrictions imposed by the foreign government of the country in which it is located may still be consolidated.

The result of FAS 94 (issued in 1988) was to eliminate the _____________________________________________ exception allowed under ARB No. 51.

A parent need not consolidate a created subsidiary that the parent is in the process of trying to sell.

In the aggregated format of presenting consolidated statements, the subsidiary's assets and liabilities cannot be identified.

A transfer of inventory from a home office to a branch is called a(n)_____________ ___________________________ inventory transfer.

In general, foreign consolidation rules for the major trading partners of the United States are more lenient than U.S. consolidation rules.

The entries made in consolidation are commonly called ________________________ entries.

Wholly Owned Subsidiaries: Postcreation Periods

Partially Owned Created Subsidiaries & Variable Interest Entities

Introduction to Business Combinations

The Purchase Method: at Date of Acquisition-100 Ownership

The Purchase Method: Postacquisition Periods and Partial Ownerships

New Basis of Accounting

Introduction to Intercompany Transactions

Intercompany Inventory Transfers

Intercompany Fixed Asset Transfers & Bond Holdings

Changes in a Parents Ownership Interest, Statement of Cash Flows, & Earnings Per Share

Reporting Segment and Related Information

International Accounting Standards & Translating Foreign Currency Transactions

Using Derivatives to Manage Foreign Currency Exposures

Translating Foreign Currency Statements: The Current Rate Method

Translating Foreign Currency Statements: The Temporal Method and the Functional Currency Concept

Interim Period Reporting

Securities and Exchange Commission Reporting

Bankruptcy Reorganizations and Liquidations

Partnerships: Formation and Operation

Partnerships: Changes in Ownership

Partnerships: Liquidations

Estates and Trusts

Governmental Accounting: Basic Principles and the General Fund

Governmental Accounting: The Special-Purpose Funds and Special General Ledger

Not-For-Profit Organizations: Introduction and Private Npos

Filters

A transfer of inventory from a home office to a branch is called a(n)_ _______________ inventory transfer.