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

Which of the following statements regarding consolidation of a VIE with its primary beneficiary is true?

How are intra-entity inventory transfers treated on the consolidation worksheet and how are they reflected in a consolidated statement of cash flows?

The accounting problems encountered in consolidated intra-entity debt transactions when the debt is acquired by an affiliate from an outside party include all of the following except:

During 2018, Parent Corporation purchased at carrying value some of the outstanding bonds of its subsidiary.How would this acquisition have been reflected in the consolidated statement of cash flows?

Where do dividends paid by a subsidiary to the parent company appear in a consolidated statement of cash flows?

On January 1, 2018, Bast Co.had a net book value of $2,100,000 as follows: Fisher Co.acquired all of the outstanding preferred shares for $148,000 and 60% of the common stock for $1,281,000.Fisher believed that one of Bast's buildings, with a twelve-year life, was undervalued on the company's financial records by $70,000. Required: What is the amount of goodwill to be recognized from this purchase?

Which of the following statements is false regarding the assignment of a gain or loss when an affiliate's debt instrument is acquired on the open market?

If a subsidiary re-acquires its outstanding shares from outside ownership for more than the noncontrolling interest valuation basis at the date of buying such treasury stock, which of the following statements is true?

Parent Corporation recently acquired some of its subsidiary's outstanding bonds at an amount which required the recognition of a loss.In what ways could the loss be allocated? Which allocation would you recommend? Why?

What are the primary sources of information that are used for preparation of a consolidated statement of cash flows?

On January 1, 2019, Cocker issued 10,000 additional shares of common stock for $21 per share.Popper did not acquire any of this newly issued stock.How would this transaction affect the additional paid-in capital of the parent company?

How will dividends be reported in consolidated statement of cash flows?

Where does the noncontrolling interest in Stage's net income appear on a consolidated statement of cash flows?

If a subsidiary issues a stock dividend, which of the following statements is true?

Which of the following statements is true for a consolidated statement of cash flows?

Johnson, Inc.owns control over Kaspar, Inc.Johnson reports sales of $400,000 during 2018 while Kaspar reports $250,000.Kaspar transferred inventory during 2018 to Johnson at a price of $50,000.On December 31, 2018, 30% of the transferred goods are still held in Johnson's inventory.Consolidated accounts receivable on January 1, 2018 was $120,000, and on December 31, 2018 is $130,000.Johnson uses the direct approach in preparing the statement of cash flows.How much is cash collected from customers in the consolidated statement of cash flows?

Which of the following statements is true concerning the acquisition of existing debt of a consolidated affiliate in the year of the debt acquisition?

A parent acquires 70% of a subsidiary's common stock and 60 percent of its preferred stock.The preferred stock is noncumulative.The current year's dividend was paid.How is the noncontrolling interest in the subsidiary's net income assigned?

Parent Corporation acquired some of its subsidiary's outstanding bonds.Why might Parent purchase the bonds, rather than the subsidiary buying its own bonds?

Campbell Inc.owned all of Gordon Corp.For 2018, Campbell reported net income (without consideration of its investment in Gordon) of $280,000 while the subsidiary reported $112,000.There are no excess amortizations associated with this consolidation.The subsidiary had bonds payable outstanding on January 1, 2018, with a book value of $297,000.The parent acquired the bonds on that date for $281,000.During 2018, Campbell reported interest income of $31,000 while Gordon reported interest expense of $29,000.What is consolidated net income for 2018?