Question 1

Which of the following conditions will allow two companies to file a consolidated income tax return?

Accepted Answer

A)  One company owns less than 50 percent of the other company's voting stock but has the ability to significantly influence the other company. 
B)  One company holds 50 percent of the other company's voting stock. 
C)  One company holds 75 percent of the other company's voting stock 
D)  One company holds 83 percent of the other company's voting stock. 
E)  None of the above. 
A)  One company owns less than 50 percent of the other company's voting stock but has the ability to significantly influence the other company. 
B)  One company holds 50 percent of the other company's voting stock. 
C)  One company holds 75 percent of the other company's voting stock 
D)  One company holds 83 percent of the other company's voting stock. 
E)  None of the above.

Question 2

River Co. owns 80% of Boat Inc. The two companies file a consolidated income tax return and River uses the initial value method to account for the investment. The following information is available from the two companies' financial statements:
   The income tax rate was 30%.
-What is the amount of taxable income reported on the consolidated income tax return?

Accepted Answer

A)  $720,000. 
B)  $625,000. 
C)  $621,000. 
D)  $665,000. 
E)  $655,000. 
A)  $720,000. 
B)  $625,000. 
C)  $621,000. 
D)  $665,000. 
E)  $655,000.

Question 3

Required:
Prepare a schedule to show consolidated net income.

Accepted Answer

The answer of Required:
Prepare a schedule to show consolidated net...

Question 4

Use the following to answer questions 68 - 74:
-What is Pi's accrual-based net income for 2018?

Accepted Answer

A)  $152,000. 
B)  $ 16,000. 
C)  $192,000. 
D)  $200,000. 
E)  $208,000. 
A)  $152,000. 
B)  $ 16,000. 
C)  $192,000. 
D)  $200,000. 
E)  $208,000.

Question 5

Which of the following statements is true regarding the filing of income taxes for an affiliated group?

Accepted Answer

A)  Domestic subsidiaries greater than 50% ownership must file a consolidated tax return. 
B)  Domestic subsidiaries greater than 60% ownership must file a consolidated tax return. 
C)  Domestic subsidiaries greater than 80% ownership must file a consolidated tax return. 
D)  Domestic subsidiaries greater than 80% ownership may file a consolidated tax return. 
E)  Foreign subsidiaries must file a consolidated tax return. 
A)  Domestic subsidiaries greater than 50% ownership must file a consolidated tax return. 
B)  Domestic subsidiaries greater than 60% ownership must file a consolidated tax return. 
C)  Domestic subsidiaries greater than 80% ownership must file a consolidated tax return. 
D)  Domestic subsidiaries greater than 80% ownership may file a consolidated tax return. 
E)  Foreign subsidiaries must file a consolidated tax return.

Question 6

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 Inglestone Inc.is calculated to be

Accepted Answer

A)  $106,950. 
B)  $102,640. 
C)  $114,530. 
D)  $106,960. 
E)  $103,680. 
A)  $106,950. 
B)  $102,640. 
C)  $114,530. 
D)  $106,960. 
E)  $103,680.

Question 7

Strong Company has had poor operating results in recent years and has a $160,000 net operating loss carryforward.Leader Corp.pays $700,000 to acquire Strong and is optimistic about its future profitability potential.The book value and fair value of Strong's identifiable net assets is $500,000 at date of acquisition.Strong's tax rate is 30% and Leader's tax rate is 40%.What is goodwill resulting from this business acquisition?

Accepted Answer

A)  $ 40,000. 
B)  $ 88,000. 
C)  $104,000. 
D)  $152,000. 
E)  $248,000. 
A)  $ 40,000. 
B)  $ 88,000. 
C)  $104,000. 
D)  $152,000. 
E)  $248,000.

Question 8

Alpha Corporation owns 100 percent of Beta Company, and Beta owns 80 percent of Gamma, Inc., all of which are domestic corporations. There were no excess allocation values at the date of acquisition of the subsidiaries. Information for the three companies for the year ending December 31, 2018 follows:
  
-Which of the following statements is true?

Accepted Answer

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

Question 9

What is net income attributable to the controlling interest of Paris?

Accepted Answer

A)  $232,500. 
B)  $225,000. 
C)  $224,500. 
D)  $226,000. 
E)  $233,500. 
A)  $232,500. 
B)  $225,000. 
C)  $224,500. 
D)  $226,000. 
E)  $233,500.

Question 10

River Co. owns 80% of Boat Inc. The two companies file a consolidated income tax return and River uses the initial value method to account for the investment. The following information is available from the two companies' financial statements:
   The income tax rate was 30%.
-What was the net income attributable to the noncontrolling interest, assuming that the separate return method was used to assign the income tax expense?

Accepted Answer

A)  $16,800 
B)  $14,450 
C)  $14,700 
D)  $17,450 
E)  $13,800 
A)  $16,800 
B)  $14,450 
C)  $14,700 
D)  $17,450 
E)  $13,800

Question 11

Chase Company owns 80% of Lawrence Company and 40% of Ross Company. Lawrence Company also owns 30% of Ross Company. Separate company net incomes for 2018 of Chase, Lawrence, and Ross are $450,000, $300,000, and $250,000, respectively. Each company also defers a $20,000 intra-entity gain in its current income figures. Excess annual amortization expense of $15,000 is assigned to Chase's investment in Lawrence and another $15,000 is assigned to Lawrence's investment in Ross.
-Compute Lawrence's accrual-based net income for 2018.

Accepted Answer

A)  $354,000. 
B)  $329,500. 
C)  $334,000. 
D)  $265,000. 
E)  $344,500. 
A)  $354,000. 
B)  $329,500. 
C)  $334,000. 
D)  $265,000. 
E)  $344,500.

Question 12

What ownership pattern is referred to as mutual ownership? Describe briefly or illustrate with a diagram.

Accepted Answer

Mutual ownership exists when a

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

Chase Company owns 80% of Lawrence Company and 40% of Ross Company. Lawrence Company also owns 30% of Ross Company. Separate company net incomes for 2018 of Chase, Lawrence, and Ross are $450,000, $300,000, and $250,000, respectively. Each company also defers a $20,000 intra-entity gain in its current income figures. Excess annual amortization expense of $15,000 is assigned to Chase's investment in Lawrence and another $15,000 is assigned to Lawrence's investment in Ross.
-Compute Chase's accrual-based net income for 2018.

Accepted Answer

A)  $746,000. 
B)  $719,000. 
C)  $779,600. 
D)  $774,200. 
E)  $758,100. 
A)  $746,000. 
B)  $719,000. 
C)  $779,600. 
D)  $774,200. 
E)  $758,100.

Question 15

Alpha Corporation owns 100 percent of Beta Company, and Beta owns 80 percent of Gamma, Inc., all of which are domestic corporations. There were no excess allocation values at the date of acquisition of the subsidiaries. Information for the three companies for the year ending December 31, 2018 follows:
  
-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 16

What configuration of corporate ownership is described as a father-son-grandson relationship?

Accepted Answer

A father-son-grandson relation

Question 17

Tower Company owns 85% of Hill Company. The two companies engaged in several intra-entity transactions. There were no excess fair-value amortization amounts to account for. Each company's income before income tax and dividend income for the current time period follow, as well as the effects of intra-entity gross profits on remaining inventory which are included in the separate net income amounts. No income tax accruals have been recognized within these totals. The tax rate for each company is 30%.
  
-Compute accrual-based consolidated income before income tax.

Accepted Answer

A)  $280,000. 
B)  $245,000. 
C)  $200,000. 
D)  $255,200. 
E)  $290,200. 
A)  $280,000. 
B)  $245,000. 
C)  $200,000. 
D)  $255,200. 
E)  $290,200.

Question 18

Pear, Inc.owns 80 percent of Apple Corporation.During the current year, Apple reported operating income before tax of $400,000 and paid a dividend of $120,000.The income tax rate for each company is 40 percent and separate tax returns are prepared.What deferred income tax liability arising this year must be recognized in the consolidated balance sheet?

Accepted Answer

A)  $ 0. 
B)  $ 7,680. 
C)  $17,920. 
D)  $38,400. 
E)  $51,200. 
A)  $ 0. 
B)  $ 7,680. 
C)  $17,920. 
D)  $38,400. 
E)  $51,200.

Question 19

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 20

Required:
Using the treasury stock approach, prepare a schedule to show what is reported as the net income attributable to the noncontrolling interest in Luvyn.

Accepted Answer

The answer of Required:
Using the treasury stock approach, prepare a...

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

Which of the following conditions will allow two companies to file a consolidated income tax return?

Required: Prepare a schedule to show consolidated net income.

Use the following to answer questions 68 - 74: -What is Pi's accrual-based net income for 2018?

Which of the following statements is true regarding the filing of income taxes for an affiliated group?

What is net income attributable to the controlling interest of Paris?

What ownership pattern is referred to as mutual ownership? Describe briefly or illustrate with a diagram.

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 configuration of corporate ownership is described as a father-son-grandson relationship?

Required: Using the treasury stock approach, prepare a schedule to show what is reported as the net income attributable to the noncontrolling interest in Luvyn.

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

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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