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

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%.
-On a consolidated income statement, what is the net income attributable to the noncontrolling interest?

Accepted Answer

A)  $ 9,800. 
B)  $13,692. 
C)  $10,836. 
D)  $12,460. 
E)  $11,214. 
A)  $ 9,800. 
B)  $13,692. 
C)  $10,836. 
D)  $12,460. 
E)  $11,214.

Question 3

What term is used to describe a parent and subsidiaries that are eligible to file a consolidated income tax return?

Accepted Answer

The term affiliated

Question 4

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 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 5

When indirect control is present, which of the following statements is true?

Accepted Answer

A)  At least one company within the consolidated entity holds a parent and a subsidiary relationship. 
B)  The parent company owns a percent of subsidiary and subsidiary owns a percent of the parent. 
C)  Consolidated financial statements are required for only one subsidiary. 
D)  Recognition of income for an indirectly owned subsidiary is ignored. 
E)  Only dividend income is recognized for an indirectly owned subsidiary. 
A)  At least one company within the consolidated entity holds a parent and a subsidiary relationship. 
B)  The parent company owns a percent of subsidiary and subsidiary owns a percent of the parent. 
C)  Consolidated financial statements are required for only one subsidiary. 
D)  Recognition of income for an indirectly owned subsidiary is ignored. 
E)  Only dividend income is recognized for an indirectly owned subsidiary.

Question 6

On January 1, 2017, Mace Co. acquired 75% of Lance Co.'s outstanding common stock. On the same date, Lance acquired an 80% interest in Curle Co. Both of these investments were acquired when book value was equal to fair value of identifiable net assets acquired. Both of these investments were accounted using the initial value method. Only Mace declared dividends in any year. Mace declared dividends each year equal to 40% of its separate net income before the calculation of any of its investment income. Separate net income totals for 2017, not including investment income for any company, were as follows:
   Following are the 2018 financial statements for these three companies. Curle made numerous transfers of inventory to Lance since the takeover: $112,000 (2017) and $140,000 (2018). These transfers included the same markup applicable to Curle's outside sales. In each of these years, Lance held 20% of the inventory it bought from Curle and then sold that inventory to outsiders in the following year.
An effective income tax rate of 45% was applicable to all companies.
  
-Required:
Determine the accrual-based net income of Mace Co for the year 2018.

Accepted Answer

The answer of On January 1, 2017, Mace Co. acquired...

Question 7

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

Accepted Answer

A deferred income tax asset is recorded

Question 8

-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-

Question 9

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
-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 10

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
 @#IMG-DLM&

Question 11

In a father-son-grandson combination, which of the following statements is true?

Accepted Answer

A)  Companies that are solely in subsidiary positions must have their accrual-based net income computed first in the consolidation process. 
B)  Father-son-grandson configurations never require consolidation unless one company owns 100% of at least one other member of the combined group. 
C)  The order of the computation of accrual-based net income is not important in the consolidation process. 
D)  The parent must have its accrual-based net income computed first in the consolidation process. 
E)  None of these answer choices are correct. 
A)  Companies that are solely in subsidiary positions must have their accrual-based net income computed first in the consolidation process. 
B)  Father-son-grandson configurations never require consolidation unless one company owns 100% of at least one other member of the combined group. 
C)  The order of the computation of accrual-based net income is not important in the consolidation process. 
D)  The parent must have its accrual-based net income computed first in the consolidation process. 
E)  None of these answer choices are correct.

Question 12

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

Accepted Answer

When a consolidated income tax return is

Question 13

-Compute the net income attributable to the noncontrolling interest for 2018.

Accepted Answer

A)  $11,000. 
B)  $10,800. 
C)  $ 9,000. 
D)  $ 8,200. 
E)  $ 7,200. 
A)  $11,000. 
B)  $10,800. 
C)  $ 9,000. 
D)  $ 8,200. 
E)  $ 7,200.

Question 14

Which of the following statements is true regarding goodwill?

Accepted Answer

A)  For accounting purposes, goodwill may be amortized over a period not to exceed 40 years. 
B)  For accounting purposes, goodwill may be amortized over a period not to exceed 20 years. 
C)  For tax purposes, goodwill amortization cannot be deductible. 
D)  For tax purposes, goodwill amortization may be deductible over a 20-year period. 
E)  For tax purposes, goodwill amortization may be deductible over a 15-year period. 
A)  For accounting purposes, goodwill may be amortized over a period not to exceed 40 years. 
B)  For accounting purposes, goodwill may be amortized over a period not to exceed 20 years. 
C)  For tax purposes, goodwill amortization cannot be deductible. 
D)  For tax purposes, goodwill amortization may be deductible over a 20-year period. 
E)  For tax purposes, goodwill amortization may be deductible over a 15-year period.

Question 15

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 the net income attributable to the noncontrolling interest in Ross for 2018.

Accepted Answer

A)  $92,000. 
B)  $77,400. 
C)  $75,000. 
D)  $64,500. 
E)  $69,000. 
A)  $92,000. 
B)  $77,400. 
C)  $75,000. 
D)  $64,500. 
E)  $69,000.

Question 16

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

Accepted Answer

A connecting affiliation exist

Question 17

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%.
-On January 1, 2018, a subsidiary bought 10% of the outstanding shares of its parent company.Although the total book value and fair value of the parent's net assets were $5.5 million, the consideration transferred for these shares was $590,000.During 2018, the parent reported separate net income of $714,000, before including investment income, while dividends declared were $196,000.How were these shares reported at December 31, 2018?

Accepted Answer

A)  The investment was recorded for $641,800 at the end of 2018 and then eliminated for consolidation purposes. 
B)  Consolidated stockholders' equity was reduced by $641,800. 
C)  The investment was recorded for $590,000 at the end of 2018 and then eliminated for consolidation purposes. 
D)  Consolidated stockholders' equity was reduced by $639,800. 
E)  Consolidated stockholders' equity was reduced by $590,000. 
A)  The investment was recorded for $641,800 at the end of 2018 and then eliminated for consolidation purposes. 
B)  Consolidated stockholders' equity was reduced by $641,800. 
C)  The investment was recorded for $590,000 at the end of 2018 and then eliminated for consolidation purposes. 
D)  Consolidated stockholders' equity was reduced by $639,800. 
E)  Consolidated stockholders' equity was reduced by $590,000.

Question 18

Use the following to answer questions 1 - 3:
Buckette Co. owned 60% of Shuvelle Corp. and 40% of Tayle Corp., and Shuvelle owned 35% of Tayle.
-When Buckette prepares consolidated financial statements, it should include

Accepted Answer

A)  Shuvelle but not Tayle. 
B)  Tayle but not Shuvelle. 
C)  Either Shuvelle or Tayle. 
D)  Shuvelle and Tayle. 
E)  Neither Shuvelle nor Tayle. 
A)  Shuvelle but not Tayle. 
B)  Tayle but not Shuvelle. 
C)  Either Shuvelle or Tayle. 
D)  Shuvelle and Tayle. 
E)  Neither Shuvelle nor Tayle.

Question 19

Which of the following statements is false concerning a father-son-grandson configuration?

Accepted Answer

A)  This type of ownership pattern does not significantly alter the worksheet process. 
B)  Most worksheet entries are simply made twice. 
C)  The doubling of entries may seem overwhelming. 
D)  The individual consolidation procedures remain unaffected. 
E)  Consolidated financial statements are required for only the father and son companies. 
A)  This type of ownership pattern does not significantly alter the worksheet process. 
B)  Most worksheet entries are simply made twice. 
C)  The doubling of entries may seem overwhelming. 
D)  The individual consolidation procedures remain unaffected. 
E)  Consolidated financial statements are required for only the father and son companies.

Question 20

T Corp.owns several subsidiaries that are eligible for inclusion on a consolidated income tax return, but T Corp.decided that each company in the group will file a separate return.Under what conditions would there be minimal advantage in filing a consolidated income tax return?

Accepted Answer

There might be fewer disadvantages to fi

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

How is goodwill amortized?

What term is used to describe a parent and subsidiaries that are eligible to file a consolidated income tax return?

When indirect control is present, which of the following statements is true?

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

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

In a father-son-grandson combination, which of the following statements is true?

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

-Compute the net income attributable to the noncontrolling interest for 2018.

Which of the following statements is true regarding goodwill?

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

Use the following to answer questions 1 - 3: Buckette Co. owned 60% of Shuvelle Corp. and 40% of Tayle Corp., and Shuvelle owned 35% of Tayle. -When Buckette prepares consolidated financial statements, it should include

Which of the following statements is false concerning a father-son-grandson configuration?

T Corp.owns several subsidiaries that are eligible for inclusion on a consolidated income tax return, but T Corp.decided that each company in the group will file a separate return.Under what conditions would there be minimal advantage in filing a consolidated income tax return?

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

Filters