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

Parent Corporation acquired some of its subsidiary's bonds on the open bond market.The remaining life of the bonds was eight years, and Parent expected to hold the bonds for the full eight years.How would the acquisition of the bonds affect the consolidation process?

MacDonald, Inc.owns 80 percent of the outstanding stock of Stahl Corporation.During the current year, Stahl made $125,000 in sales to MacDonald.How does this transfer affect the consolidated statement of cash flows?

Vontkins Inc.owned all of Quasimota Co.The subsidiary had bonds payable outstanding on January 1, 2017, with a book value of $265,000.The parent acquired the bonds on that date for $288,000.Subsequently, Vontkins reported interest income of $25,000 in 2017 while Quasimota reported interest expense of $29,000.Consolidated financial statements were prepared for 2018.What adjustment would be required for the retained earnings balance as of January 1, 2018?

Skipen Corp.had the following stockholders' equity accounts: SHAPE \* MERGEFORMAT The preferred stock was participating and is therefore considered to be equity.Vestin Corp.acquired 90% of this common stock for $2,250,000 and 70% of the preferred stock for $1,120,000.All of the subsidiary's assets and liabilities were determined to have fair values equal to their carrying amounts except for land, which is undervalued by $130,000. Required: What amount was attributed to goodwill on the date of acquisition?

When a company has preferred stock in its capital structure, what amount should be used to calculate noncontrolling interest in the preferred stock of the subsidiary when the company is acquired as a subsidiary of another company?

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

Net cash flow from operating activities was:

After acquiring the additional shares, what adjustment is needed for Webb's investment in Jones account?

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

A company had common stock with a total par value of $18,000,000 and fair value of $62,000,000; and 7% preferred stock with a total par value of $6,000,000 and a fair value of $8,000,000.The book value of the company was $85,000,000.Assuming ninety percent (90%) of the company's total equity is acquired, what amount must be attributed to the noncontrolling interest?

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?

All of the following are examples of variable interests except:

Tray Co.reported current earnings of $560,000 while paying $56,000 in cash dividends.Sparrish Co.earned $140,000 in net income and distributed $14,000 in dividends.Tray held a 70% interest in Sparrish for several years, an investment that it originally acquired by transferring consideration equal to the book value of the underlying net assets.Tray used the initial value method to account for these shares. On January 1, 2018, Sparrish acquired in the open market $70,000 of Tray's 8% bonds.The bonds had originally been issued several years ago at a price that would yield a 10% effective interest rate.On the date of the bond purchase, the book value of the bonds payable was $67,600.Sparrish paid $65,200 based on a 12% effective interest rate over the remaining life of the bonds. What is the noncontrolling interest's share of the subsidiary's net income?

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?

Prepare all consolidation entries for 2018.

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:

On January 1, 2019, Cocker issued 10,000 additional shares of common stock for $35 per share.Popper acquired 8,000 of these shares.How would this transaction affect the additional paid-in capital of the parent company?

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

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

Parent Corporation had just purchased some of its subsidiary's outstanding bonds on the open market.What items related to these bonds will have to be accounted for in the consolidation process?