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

Carlson, Inc.owns 80 percent of Madrid, Inc.Carlson reports net income for 2018 (without consideration of its investment in Madrid, Inc.) of $1,500,000.For the same year, Madrid reports net income of $705,000.Carlson had bonds payable outstanding on January 1, 2018 with a carrying value of $1,200,000.Madrid acquired the bonds on the open market on January 3, 2018 for $1,090,000.For the year 2018, Carlson reported interest expense on the bonds in the amount of $96,000, while Madrid reported interest income of $94,000 for the same bonds.Assuming there are no excess amortizations or other intra-entity transactions, what is Carlson's share of consolidated net income?

In reporting consolidated earnings per share when there is a wholly owned subsidiary, which of the following statements is true?

What was Kuried's balance in the Investment in Thomas Inc.account as of December 31, 2018?

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?

Where do intra-entity transfers of inventory appear in a consolidated statement of cash flows?

On January 1, 2018, Riley Corp.acquired some of the outstanding bonds of one of its subsidiaries.The bonds had a carrying value of $421,620, and Riley paid $401,937 for them.How should you account for the difference between the carrying value and the purchase price in the consolidated financial statements for 2018?

Which of the following statements is true concerning variable interest entities (VIEs)? (1.) The role of the VIE equity investors can be fairly minor. (2)) A VIE may be created specifically to benefit the business enterprise that established it with low-cost financing. (3)) VIE governing agreements often limit activities and decision-making. (4)) VIEs usually have a well-defined and limited business activity.

The consolidation entry at date of acquisition will include (referring to Smith):

Pursley, Inc.owns 70 percent of Harry Corp.The consolidated income statement for a year reports $50,000 Noncontrolling Interest in Harry Corp.'s Net Income.Harry paid dividends in the amount of $80,000 for the year.What are the effects of these transactions in the consolidated statement of cash flows for the year?

What adjustment is needed for Webb's investment in Jones account?

Regency Corp.recently acquired $500,000 of the bonds of Safire Co., one of its subsidiaries, paying more than the carrying value of the bonds.According to the most practical view of this intra-entity transaction, to whom should the loss be attributed?

Which one of the following characteristics of preferred stock would make the stock a dilutive security for purposes of calculating earnings per share?

How do outstanding subsidiary stock warrants affect the calculation of consolidated earnings per share?

Net cash flow from financing activities was:

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

What is the adjusted book value of Jones after the sale of the shares?

Parent Corporation loaned money to its subsidiary with a five-year note at the market interest rate.How would the note be accounted for in the consolidation process?

What is the controlling interest share of Thomas' net income for the year ended December 31, 2018?

What consolidation entry would be recorded in connection with these intra-entity bonds on December 31, 2019?

Rojas Co.owned 7,000 shares (70%) of the outstanding 10%, $100 par, preferred stock and 60% of the outstanding common stock of Brett Co.Assuming there are no excess amortizations or intra-entity transactions, and Brett reports net income of $780,000, what is the noncontrolling interest in the subsidiary's income?