Question 1

How is goodwill amortized?

Accepted Answer

A)  It is not amortized for reporting purposes or for tax purposes. 
B)  It is not amortized for reporting purposes, but is amortized over a 5-year life for tax purposes. 
C)  It is not amortized for tax purposes, but is amortized over a 5-year life for reporting purposes. 
D)  It is not amortized for tax purposes, but is amortized over a 15-year life for reporting purposes. 
E)  It is not amortized for reporting purposes, but is amortized over a 15-year life for tax purposes. 
A)  It is not amortized for reporting purposes or for tax purposes. 
B)  It is not amortized for reporting purposes, but is amortized over a 5-year life for tax purposes. 
C)  It is not amortized for tax purposes, but is amortized over a 5-year life for reporting purposes. 
D)  It is not amortized for tax purposes, but is amortized over a 15-year life for reporting purposes. 
E)  It is not amortized for reporting purposes, but is amortized over a 15-year life for tax purposes.

Question 2

C Co.currently owns 80% of D Co.and several other subsidiaries.C Co.is interested in gaining control of H Co.Why might C Co.allow D Co.to acquire H Co., rather than purchasing H Co.directly?

Accepted Answer

Indirect control (such as a father-son-g

Question 3

-The accrual-based net income of East Co.is calculated to be

Accepted Answer

A)  $401,100. 
B)  $510,000. 
C)  $551,000. 
D)  $573,000. 
E)  $615,000. 
A)  $401,100. 
B)  $510,000. 
C)  $551,000. 
D)  $573,000. 
E)  $615,000.

Question 4

-Which of the following statements is true?

Accepted Answer

A)  Delta and Sigma must file a consolidated income tax return, but must exclude Pi from the consolidated return. 
B)  Delta, Sigma, and Pi must file a consolidated income tax return. 
C)  Delta, Sigma, and Pi must file separate income tax returns because the ownership of Sigma and Pi is less than 100%. 
D)  Delta, Sigma, and Pi will probably not file a consolidated income tax return. 
E)  Delta, Sigma, and Pi may file separate income tax returns or a consolidated income tax return. 
A)  Delta and Sigma must file a consolidated income tax return, but must exclude Pi from the consolidated return. 
B)  Delta, Sigma, and Pi must file a consolidated income tax return. 
C)  Delta, Sigma, and Pi must file separate income tax returns because the ownership of Sigma and Pi is less than 100%. 
D)  Delta, Sigma, and Pi will probably not file a consolidated income tax return. 
E)  Delta, Sigma, and Pi may file separate income tax returns or a consolidated income tax return.

Question 5

What ownership structure is referred to as a connecting affiliation? Describe briefly or illustrate with a diagram.

Accepted Answer

A connecting affiliation exist

Question 6

What are the benefits or advantages of filing a consolidated income tax return?

Accepted Answer

When a consolidated income tax return is

Question 7

-What is Gamma's accrual-based net income for 2018?

Accepted Answer

A)  $ 76,000. 
B)  $ 80,000. 
C)  $ 96,000. 
D)  $100,000. 
E)  $104,000. 
A)  $ 76,000. 
B)  $ 80,000. 
C)  $ 96,000. 
D)  $100,000. 
E)  $104,000.

Question 8

Which of the following is not an advantage of filing a consolidated income tax return?

Accepted Answer

A)  The existence of deferred losses in ending inventory. 
B)  The ability to use net operating losses of one company to offset profits of another company. 
C)  The existence of intra-entity gross profit remaining in ending inventory. 
D)  Transfers of inventory at a transfer price above cost. 
E)  There is no difference between U.S. GAAP and tax accounting rules for dividends paid to a parent by an 85%-owned subsidiary. 
A)  The existence of deferred losses in ending inventory. 
B)  The ability to use net operating losses of one company to offset profits of another company. 
C)  The existence of intra-entity gross profit remaining in ending inventory. 
D)  Transfers of inventory at a transfer price above cost. 
E)  There is no difference between U.S. GAAP and tax accounting rules for dividends paid to a parent by an 85%-owned subsidiary.

Question 9

Dice Inc.owns 40% of the outstanding shares of Spalding Corp., an investment accounted for by the equity method.During 2018, Dice had operating income (not including income from its investment in Spalding) of $370,000.For this same period, Spalding reported net income of $160,000 and paid cash dividends of $60,000.Dice has an effective income tax rate of 35% and anticipates holding its investment in Spalding for an indefinite period.
Required:
(A.) What income tax expense journal entry would Dice Inc.record at the end of 2018?
(B.) If Dice expects to sell its interest in Spalding in the near future, how does that decision change the 2018 income tax expense journal entry?

Accepted Answer

A(.) Recording of year-end income tax
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Question 10

Assuming that separate income tax returns are being filed, what deferred income tax asset is created?

Accepted Answer

A)  $ 0. 
B)  $ 360. 
C)  $ 450. 
D)  $2,250. 
E)  $3,600. 
A)  $ 0. 
B)  $ 360. 
C)  $ 450. 
D)  $2,250. 
E)  $3,600.

Question 11

Under what conditions must a deferred income tax asset be recorded?

Accepted Answer

A deferred income tax asset is recorded

Question 12

Woods Company has one depreciable asset valued at $800,000.Because of recent losses, the company has a net operating loss carryforward of $150,000.The tax rate is 30%.The company was acquired for $1,000,000.It is more likely than not that the tax benefit will be realized.Compute the goodwill recognized for consolidated financial statements.

Accepted Answer

A)  $ 0. 
B)  $155,000. 
C)  $200,000. 
D)  $305,000. 
E)  $350,000. 
A)  $ 0. 
B)  $155,000. 
C)  $200,000. 
D)  $305,000. 
E)  $350,000.

Question 13

Evanston Co.owned 60% of Montgomery Corp.Montgomery owned 75% of Noir Inc., and Noir owned 15% of Montgomery.This pattern of ownership would be called…

Accepted Answer

A)  Mutual ownership. 
B)  Direct control. 
C)  Indirect control. 
D)  An affiliated group. 
E)  A connecting affiliation. 
A)  Mutual ownership. 
B)  Direct control. 
C)  Indirect control. 
D)  An affiliated group. 
E)  A connecting affiliation.

Question 14

-What is the net income attributable to the noncontrolling interest in Gamma for 2018?

Accepted Answer

A)  $ 0. 
B)  $ 9,600. 
C)  $10,000. 
D)  $19,200. 
E)  $20,000. 
A)  $ 0. 
B)  $ 9,600. 
C)  $10,000. 
D)  $19,200. 
E)  $20,000.

Question 15

White Company owns 60% of Cody Company. Separate tax returns are required. For 2017, White's operating income (excluding taxes and any income from Cody) was $300,000 while Cody reported a pretax income of $125,000. During the period, Cody declared total dividends of $25,000; $15,000 (60%) to White and $10,000 to the noncontrolling interest. White declared dividends of $180,000. The income tax rate for both companies is 30%.
-Compute the income tax liability of White for 2018.

Accepted Answer

A)  $93,600. 
B)  $91,350. 
C)  $94,500. 
D)  $90,900. 
E)  $90,000. 
A)  $93,600. 
B)  $91,350. 
C)  $94,500. 
D)  $90,900. 
E)  $90,000.

Question 16

Hardford Corp. held 80% of Inglestone Inc., which, in turn, owned 80% of Jade Co. Excess amortization expense was not required by any of these acquisitions. Separate net income figures (without investment income) as well as upstream intra-entity gross profits (before deferral) included in the income for the current year follow:
  
-The net income attributable to the noncontrolling interest of Jade Co.is calculated to be

Accepted Answer

A)  $36,900. 
B)  $33,600. 
C)  $42,400. 
D)  $32,300. 
E)  $39,200. 
A)  $36,900. 
B)  $33,600. 
C)  $42,400. 
D)  $32,300. 
E)  $39,200.

Question 17

Hardford Corp. held 80% of Inglestone Inc., which, in turn, owned 80% of Jade Co. Excess amortization expense was not required by any of these acquisitions. Separate net income figures (without investment income) as well as upstream intra-entity gross profits (before deferral) included in the income for the current year follow:
  
-The accrual-based net income of Jade Co.is calculated to be

Accepted Answer

A)  $193,000. 
B)  $189,000. 
C)  $196,000. 
D)  $201,000. 
E)  $144,000. 
A)  $193,000. 
B)  $189,000. 
C)  $196,000. 
D)  $201,000. 
E)  $144,000.

Question 18

-What is the amount of income tax expense that should be assigned to Boat using the percentage allocation method?

Accepted Answer

A)  $31,500 
B)  $32,750 
C)  $36,000 
D)  $32,660 
E)  $30,390 
A)  $31,500 
B)  $32,750 
C)  $36,000 
D)  $32,660 
E)  $30,390

Question 19

Under current U.S.tax law for consolidated tax returns:

Accepted Answer

A)  One entity in the group can use another entity's net operating loss carryforward to its advantage. 
B)  The parent can use the net operating loss carryforward of another entity in the group. 
C)  A net operating loss carryforward if an entity will be unusable when consolidated tax returns are prepared. 
D)  A net operating loss carryforward of an entity in the group can only be used by that entity. 
E)  Since the tax return is for all entities in one consolidated group, the net operating loss carryforward of one entity must be pro-rated to all other entities in the group. 
A)  One entity in the group can use another entity's net operating loss carryforward to its advantage. 
B)  The parent can use the net operating loss carryforward of another entity in the group. 
C)  A net operating loss carryforward if an entity will be unusable when consolidated tax returns are prepared. 
D)  A net operating loss carryforward of an entity in the group can only be used by that entity. 
E)  Since the tax return is for all entities in one consolidated group, the net operating loss carryforward of one entity must be pro-rated to all other entities in the group.

Question 20

-Compute the amount allocated to trademarks recognized in the January 1, 2018 consolidated balance sheet.

Accepted Answer

A)  $ 80,000. 
B)  $100,000. 
C)  $ 76,000. 
D)  $ 16,000. 
E)  $ -0- 
A)  $ 80,000. 
B)  $100,000. 
C)  $ 76,000. 
D)  $ 16,000. 
E)  $ -0-

Exam 7: Consolidated Financial Statements - Ownership Patterns and Income Taxes

How is goodwill amortized?

C Co.currently owns 80% of D Co.and several other subsidiaries.C Co.is interested in gaining control of H Co.Why might C Co.allow D Co.to acquire H Co., rather than purchasing H Co.directly?

-The accrual-based net income of East Co.is calculated to be

-Which of the following statements is true?

What ownership structure is referred to as a connecting affiliation? Describe briefly or illustrate with a diagram.

What are the benefits or advantages of filing a consolidated income tax return?

-What is Gamma's accrual-based net income for 2018?

Which of the following is not an advantage of filing a consolidated income tax return?

Assuming that separate income tax returns are being filed, what deferred income tax asset is created?

Under what conditions must a deferred income tax asset be recorded?

Evanston Co.owned 60% of Montgomery Corp.Montgomery owned 75% of Noir Inc., and Noir owned 15% of Montgomery.This pattern of ownership would be called…

-What is the net income attributable to the noncontrolling interest in Gamma for 2018?

-What is the amount of income tax expense that should be assigned to Boat using the percentage allocation method?

Under current U.S.tax law for consolidated tax returns:

-Compute the amount allocated to trademarks recognized in the January 1, 2018 consolidated balance sheet.

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

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

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

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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