Question 1

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

Accepted Answer

A)  $4.00. 
B)  $. 4.71 
C)  $8.71. 
D)  $5.89. 
E)  $6.37. 
A)  $4.00. 
B)  $. 4.71 
C)  $8.71. 
D)  $5.89. 
E)  $6.37.

Question 2

Compute the noncontrolling interest in Smith at date of acquisition.

Accepted Answer

A)  $486,000. 
B)  $480,000. 
C)  $300,000. 
D)  $150,000. 
E)  $120,000. 
A)  $486,000. 
B)  $480,000. 
C)  $300,000. 
D)  $150,000. 
E)  $120,000.

Question 3

Vontkins Inc.owned all of Quasimota Co.The subsidiary had bonds payable outstanding on January 1, 2017, with a book value of $265,000.The parent acquired the bonds on that date for $288,000.Subsequently, Vontkins reported interest income of $25,000 in 2017 while Quasimota reported interest expense of $29,000.Consolidated financial statements were prepared for 2018.What adjustment would be required for the retained earnings balance as of January 1, 2018?

Accepted Answer

A)  Reduction of $27,000. 
B)  Reduction of $4,000. 
C)  Reduction of $19,000. 
D)  Reduction of $30,000. 
E)  Reduction of $20,000. 
A)  Reduction of $27,000. 
B)  Reduction of $4,000. 
C)  Reduction of $19,000. 
D)  Reduction of $30,000. 
E)  Reduction of $20,000.

Question 4

Net cash flow from financing activities was:

Accepted Answer

A)  $(28,000). 
B)  $(35,000). 
C)  $(13,000). 
D)  $(63,000). 
E)  $(61,000). 
A)  $(28,000). 
B)  $(35,000). 
C)  $(13,000). 
D)  $(63,000). 
E)  $(61,000).

Question 5

Which of the following variable interests entitles a holder to residual profits, losses, and dividends?

Accepted Answer

A)  Participation rights 
B)  Lease residual value guarantees 
C)  Common stock 
D)  Asset purchase options 
E)  Subordinated debt instruments 
A)  Participation rights 
B)  Lease residual value guarantees 
C)  Common stock 
D)  Asset purchase options 
E)  Subordinated debt instruments

Question 6

MacDonald, Inc.owns 80 percent of the outstanding stock of Stahl Corporation.During the current year, Stahl made $125,000 in sales to MacDonald.How does this transfer affect the consolidated statement of cash flows?

Accepted Answer

A)  Include 80 percent as a decrease in the investing section. 
B)  Include 100 percent as a decrease in the investing section. 
C)  Include 80 percent as a decrease in the operating section. 
D)  Include 100 percent as an increase in the operating section. 
E)  Not reported in the consolidated statement of cash flows. 
A)  Include 80 percent as a decrease in the investing section. 
B)  Include 100 percent as a decrease in the investing section. 
C)  Include 80 percent as a decrease in the operating section. 
D)  Include 100 percent as an increase in the operating section. 
E)  Not reported in the consolidated statement of cash flows.

Question 7

With respect to Nichols' investment in Smith, determine the amount to be recorded and identify which account should be adjusted to reflect such amount.

Accepted Answer

A)  $1,324,000 for Investment in Smith. 
B)  $1,200,000 for Investment in Smith. 
C)  $1,200,000 for Investment in Smith's Common Stock and $124,000 for Investment in Smith's Preferred Stock. 
D)  $1,200,000 for Investment in Smith's Common Stock and $120,000 for Investment in Smith's Preferred Stock. 
E)  $1,448,000 for Investment in Smith's Common Stock. 
A)  $1,324,000 for Investment in Smith. 
B)  $1,200,000 for Investment in Smith. 
C)  $1,200,000 for Investment in Smith's Common Stock and $124,000 for Investment in Smith's Preferred Stock. 
D)  $1,200,000 for Investment in Smith's Common Stock and $120,000 for Investment in Smith's Preferred Stock. 
E)  $1,448,000 for Investment in Smith's Common Stock.

Question 8

Parent Corporation acquired some of its subsidiary's bonds on the open bond market.The remaining life of the bonds was eight years, and Parent expected to hold the bonds for the full eight years.How would the acquisition of the bonds affect the consolidation process?

Accepted Answer

In the consolidation process, the bonds

Question 9

How is the loss on sale of land reported on the consolidated statement of cash flows?

Accepted Answer

A)  $20,000 added to net income as an operating activity. 
B)  $20,000 deducted from net income as an operating activity. 
C)  $15,000 deducted from net income as an operating activity. 
D)  $5,000 added to net income as an operating activity. 
E)  $5,000 deducted from net income as an operating activity. 
A)  $20,000 added to net income as an operating activity. 
B)  $20,000 deducted from net income as an operating activity. 
C)  $15,000 deducted from net income as an operating activity. 
D)  $5,000 added to net income as an operating activity. 
E)  $5,000 deducted from net income as an operating activity.

Question 10

When Ryan's new percent ownership is rounded to a whole number, what adjustment is needed for Ryan's investment in Chase account?

Accepted Answer

A)  $16,000 decrease. 
B)  $60,000 decrease. 
C)  $46,000 increase. 
D)  $46,000 decrease. 
E)  No adjustment is necessary. 
A)  $16,000 decrease. 
B)  $60,000 decrease. 
C)  $46,000 increase. 
D)  $46,000 decrease. 
E)  No adjustment is necessary.

Question 11

If Smith's net income is $100,000 in the year following the acquisition,

Accepted Answer

A)  The portion allocated to the common stock (residual amount) is $92,800. 
B)  $10,800 preferred stock dividend will be subtracted from net income attributed to common stock in arriving at noncontrolling interest in consolidated income. 
C)  The noncontrolling interest in consolidated net income is $27,200. 
D)  The preferred stock dividend will be ignored in noncontrolling interest in consolidated net income because Nichols owns the noncontrolling interest of preferred stock. 
E)  The noncontrolling interest in consolidated net income is $30,800. 
A)  The portion allocated to the common stock (residual amount) is $92,800. 
B)  $10,800 preferred stock dividend will be subtracted from net income attributed to common stock in arriving at noncontrolling interest in consolidated income. 
C)  The noncontrolling interest in consolidated net income is $27,200. 
D)  The preferred stock dividend will be ignored in noncontrolling interest in consolidated net income because Nichols owns the noncontrolling interest of preferred stock. 
E)  The noncontrolling interest in consolidated net income is $30,800.

Question 12

Cadion Co.owned a controlling interest in Knieval Inc.Cadion reported sales of $420,000 during 2018 while Knieval reported $280,000.Inventory costing $28,000 was transferred from Knieval to Cadion (upstream) during the year for $56,000.Of this amount, twenty-five percent was still in ending inventory at year's end.Total receivables on the consolidated balance sheet were $112,000 at the first of the year and $154,000 at year-end.No intra-entity debt existed at the beginning or ending of the year.Using the direct approach, what is the consolidated amount of cash collected by the business from its customers?

Accepted Answer

A)  $602,000. 
B)  $644,000. 
C)  $686,000. 
D)  $714,000. 
E)  $592,000. 
A)  $602,000. 
B)  $644,000. 
C)  $686,000. 
D)  $714,000. 
E)  $592,000.

Question 13

How is the amount of excess acquisition-date fair value over book value recognized in a consolidated statement of cash flows assuming the indirect method is used?

Accepted Answer

A)  It is ignored. 
B)  $6,000 subtracted from net income. 
C)  $4,800 subtracted from net income. 
D)  $6,000 added to net income. 
E)  $4,800 added to net income. 
A)  It is ignored. 
B)  $6,000 subtracted from net income. 
C)  $4,800 subtracted from net income. 
D)  $6,000 added to net income. 
E)  $4,800 added to net income.

Question 14

What is the balance in Riney's "Investment in Garvin Co.Account" following the sale of the 10,000 shares of common stock?

Accepted Answer

A)  $552,000. 
B)  $560,000. 
C)  $460,000. 
D)  $404,000. 
E)  $672,000. 
A)  $552,000. 
B)  $560,000. 
C)  $460,000. 
D)  $404,000. 
E)  $672,000.

Question 15

Skipen Corp.had the following stockholders' equity accounts:
SHAPE \* MERGEFORMAT
     The preferred stock was participating and is therefore considered to be equity.Vestin Corp.acquired 90% of this common stock for $2,250,000 and 70% of the preferred stock for $1,120,000.All of the subsidiary's assets and liabilities were determined to have fair values equal to their carrying amounts except for land, which is undervalued by $130,000.
Required:
What amount was attributed to goodwill on the date of acquisition?

Accepted Answer

The answer of Skipen Corp.had the following stockholders' equity accounts:
SHAPE...

Question 16

A parent company owns a 70 percent interest in a subsidiary whose stock has a valuation basis of $27 per share.On the last day of the year, the subsidiary issues new shares for $27 per share, and the parent buys its 70 percent interest in the new shares.Which of the following statements is true?

Accepted Answer

A)  Since the sale was made at the end of the year, the parent's investment account is not affected. 
B)  Since the shares were sold for the same per share amount as the the adjusted subsidiary value per share, the parent's investment account must be increased. 
C)  Since the shares were sold for the same per share amount as the the adjusted subsidiary value per share, the parent's investment account must be decreased. 
D)  Since the shares were sold for the same per share amount as the the adjusted subsidiary value per share, and the parent bought 70 percent of the shares, the parent's investment account is not affected except for the total acquisition amount for the new shares. 
E)  None of these answer choices are correct. 
A)  Since the sale was made at the end of the year, the parent's investment account is not affected. 
B)  Since the shares were sold for the same per share amount as the the adjusted subsidiary value per share, the parent's investment account must be increased. 
C)  Since the shares were sold for the same per share amount as the the adjusted subsidiary value per share, the parent's investment account must be decreased. 
D)  Since the shares were sold for the same per share amount as the the adjusted subsidiary value per share, and the parent bought 70 percent of the shares, the parent's investment account is not affected except for the total acquisition amount for the new shares. 
E)  None of these answer choices are correct.

Question 17

Goehring, Inc.owns 70 percent of Harry Corp.The consolidated income statement for a year reports $40,000 Noncontrolling Interest in Harry Corp.'s Net Income.Harry paid dividends in the amount of $100,000 for the year.What are the effects of these transactions in the consolidated statement of cash flows for the year?

Accepted Answer

A)  Increase in the financing section of $70,000, and decrease in the operating section of $30,000. 
B)  Increase in the operating section of $70,000, and decrease in the financing section of $30,000. 
C)  Increase in the operating section of $70,000. 
D)  Decrease in the financing section of $30,000. 
E)  No effects. 
A)  Increase in the financing section of $70,000, and decrease in the operating section of $30,000. 
B)  Increase in the operating section of $70,000, and decrease in the financing section of $30,000. 
C)  Increase in the operating section of $70,000. 
D)  Decrease in the financing section of $30,000. 
E)  No effects.

Question 18

A subsidiary issues new shares of common stock.If the parent acquires all of these shares at an amount greater than book value, which of the following statements is true?

Accepted Answer

A)  The investment in subsidiary will decrease. 
B)  Additional paid-in capital will decrease. 
C)  Retained earnings will increase. 
D)  The investment in subsidiary will increase. 
E)  No adjustment will be necessary. 
A)  The investment in subsidiary will decrease. 
B)  Additional paid-in capital will decrease. 
C)  Retained earnings will increase. 
D)  The investment in subsidiary will increase. 
E)  No adjustment will be necessary.

Question 19

If new bonds are issued from a parent to its subsidiary, which of the following statements is false?

Accepted Answer

A)  Any premium or discount on bonds payable is exactly offset by a premium or discount on bond investment. 
B)  There will be $0 net gain or loss on the bond transaction. 
C)  Interest expense needs to be eliminated on the consolidated income statement. 
D)  Interest revenue needs to be eliminated on the consolidated income statement. 
E)  A net gain or loss on the bond transaction will be reported. 
A)  Any premium or discount on bonds payable is exactly offset by a premium or discount on bond investment. 
B)  There will be $0 net gain or loss on the bond transaction. 
C)  Interest expense needs to be eliminated on the consolidated income statement. 
D)  Interest revenue needs to be eliminated on the consolidated income statement. 
E)  A net gain or loss on the bond transaction will be reported.

Question 20

With respect to the acquisition-date consolidation worksheet, which of the following is accurate?

Accepted Answer

A)  The value of the noncontrolling interest is $40,000. 
B)  The total of all adjustments and eliminations equal $3,136,000. 
C)  The consolidated total long-term debt equals $3,688,000. 
D)  The total consolidated assets equal $9,794,000. 
E)  The total liabilities and equity on a consolidated basis equals $5,614,000. 
A)  The value of the noncontrolling interest is $40,000. 
B)  The total of all adjustments and eliminations equal $3,136,000. 
C)  The consolidated total long-term debt equals $3,688,000. 
D)  The total consolidated assets equal $9,794,000. 
E)  The total liabilities and equity on a consolidated basis equals $5,614,000.

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

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

Compute the noncontrolling interest in Smith at date of acquisition.

Net cash flow from financing activities was:

Which of the following variable interests entitles a holder to residual profits, losses, and dividends?

MacDonald, Inc.owns 80 percent of the outstanding stock of Stahl Corporation.During the current year, Stahl made $125,000 in sales to MacDonald.How does this transfer affect the consolidated statement of cash flows?

With respect to Nichols' investment in Smith, determine the amount to be recorded and identify which account should be adjusted to reflect such amount.

Parent Corporation acquired some of its subsidiary's bonds on the open bond market.The remaining life of the bonds was eight years, and Parent expected to hold the bonds for the full eight years.How would the acquisition of the bonds affect the consolidation process?

How is the loss on sale of land reported on the consolidated statement of cash flows?

When Ryan's new percent ownership is rounded to a whole number, what adjustment is needed for Ryan's investment in Chase account?

If Smith's net income is $100,000 in the year following the acquisition,

How is the amount of excess acquisition-date fair value over book value recognized in a consolidated statement of cash flows assuming the indirect method is used?

What is the balance in Riney's "Investment in Garvin Co.Account" following the sale of the 10,000 shares of common stock?

A parent company owns a 70 percent interest in a subsidiary whose stock has a valuation basis of $27 per share.On the last day of the year, the subsidiary issues new shares for $27 per share, and the parent buys its 70 percent interest in the new shares.Which of the following statements is true?

A subsidiary issues new shares of common stock.If the parent acquires all of these shares at an amount greater than book value, which of the following statements is true?

If new bonds are issued from a parent to its subsidiary, which of the following statements is false?

With respect to the acquisition-date consolidation worksheet, which of the following is accurate?

The Equity Method of Accounting for Investments

A: the Equity Method of Accounting for Investments

Consolidation of Financial Information

A: Consolidation of Financial Information

Consolidations - Subsequent to the Date of Acquisition

A: Consolidations - Subsequent to the Date of Acquisition

Consolidated Financial Statements and Outside Ownership

A: Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements Intra-Entity Asset Transactions

A: Consolidated Financial Statements Intra-Entity Asset Transactions

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

Consolidated Financial Statements - Ownership Patterns and Income Taxes

A: Consolidated Financial Statements - Ownership Patterns and Income Taxes

Segment and Interim Reporting

A: Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

A: Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

A: Translation of Foreign Currency Financial Statements

Worldwide Accounting Diversity and International Accounting Standards

A: Worldwide Accounting Diversity and International Accounting Standards

Financial Reporting and the Securities and Exchange Commission

A: Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

A: Accounting for Legal Reorganizations and Liquidations

Partnerships: Formation and Operation

A: Partnerships: Formation and Operation

Partnerships: Termination and Liquidation

A: Partnerships: Termination and Liquidation

Accounting for State and Local Governments, Part I

A: Accounting for State and Local Governments, Part I

Accounting for State and Local Governments, Part II

A: Accounting for State and Local Governments, Part II

Accounting for Not-For-Profit Entities

A: Accounting for Not-For-Profit Entities

Accounting for Estates and Trusts

A: Accounting for Estates and Trusts

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