Exam 6: Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues

Rojas Co.owned 7,000 shares (70%) of the outstanding 10%, $100 par, preferred stock and 60% of the outstanding common stock of Brett Co.Assuming there are no excess amortizations or intra-entity transactions, and Brett reports net income of $780,000, what is the noncontrolling interest in the subsidiary's income?

On January 1, 2019, Cocker issued 10,000 additional shares of common stock for $35 per share.Popper acquired 8,000 of these shares.How would this transaction affect the additional paid-in capital of the parent company?

Prepare Panton's journal entry to recognize the impact of this transaction.

A parent acquires all of a subsidiary's common stock and 60 percent of its preferred stock.The preferred stock has a cumulative dividend.No dividends are in arrears.How is the noncontrolling interest in the subsidiary's net income assigned?

What would Knight Co.report as consolidated basic earnings per share (rounded)?

The consolidation entry at date of acquisition will include (referring to Smith):

Compute the goodwill recognized in consolidation.

Describe how this transaction would affect Panton's books.

Where do dividends paid to the noncontrolling interest of a subsidiary appear on a consolidated statement of cash flows?

What is the adjusted book value of Jones after the stock issuance?

Using the indirect method, where does the decrease in accounts payable appear in a consolidated statement of cash flows?

Which of the following characteristics is not indicative of an enterprise qualifying as a primary beneficiary with a controlling financial interest in a variable interest entity?

Where do intra-entity transfers of inventory appear in a consolidated statement of cash flows?

Jet Corp.acquired all of the outstanding shares of Nittle Inc.on January 1, 2016, for $644,000 in cash.Of this consideration transferred, $42,000 was attributed to equipment with a ten-year remaining useful life.Goodwill of $56,000 had also been identified.Jet applied the partial equity method so that income would be accrued each period based solely on the earnings reported by the subsidiary. On January 1, 2019, Jet reported $280,000 in bonds outstanding with a book value of $263,200.Nittle purchased half of these bonds on the open market for $135,800. During 2019, Jet began to sell merchandise to Nittle.During that year, inventory costing $112,000 was transferred at a price of $140,000.All but $14,000 (at Jet's selling price) of these goods were resold to outside parties by year's end.Nittle still owed $50,400 for inventory shipped from Jet during December. The following financial figures were for the two companies for the year ended December 31, 2019. Required: Prepare a consolidation worksheet for the year ended December 31, 2019.

What is the adjusted book value of Jones after the sale of the shares?

Which of the following statements is true concerning variable interest entities (VIEs)? (1.) The role of the VIE equity investors can be fairly minor. (2)) A VIE may be created specifically to benefit the business enterprise that established it with low-cost financing. (3)) VIE governing agreements often limit activities and decision-making. (4)) VIEs usually have a well-defined and limited business activity.

What was Kuried's balance in the Investment in Thomas Inc.account as of December 31, 2018?

Which of the following is not a factor that indicates a business enterprise that establishes a variable interest entity (VIE) should consolidate such VIE with its own financial statements?

Parker owned all of Odom Inc.Although the Investment in Odom Inc.account had a balance of $834,000, the subsidiary's 12,000 shares had an underlying book value of only $56 per share.On January 1, 2018, Odom issued 3,000 new shares to the public for $70 per share.How does this transaction affect the Investment in Odom Inc.account?

When a company has preferred stock in its capital structure, what amount should be used to calculate noncontrolling interest in the preferred stock of the subsidiary when the company is acquired as a subsidiary of another company?