Exam 2: Reporting Intercorporate Investments and Consolidation of Wholly Owned Subsidiaries With No Differential

On January 1, 20X7, Yang Corporation acquired 25 percent of the outstanding shares of Spiel Corporation for $100,000 cash. Spiel Company reported net income of $75,000 and paid dividends of $30,000 for both 20X7 and 20X8. The fair value of shares held by Yang was $110,000 and $105,000 on December 31, 20X7 and 20X8 respectively. -Based on the preceding information,what amount will be reported by Yang as income from its investment in Spiel for 20X8 if it used the fair value option to account for its investment in Spiel?

On January 1, 20X7, Yang Corporation acquired 25 percent of the outstanding shares of Spiel Corporation for $100,000 cash. Spiel Company reported net income of $75,000 and paid dividends of $30,000 for both 20X7 and 20X8. The fair value of shares held by Yang was $110,000 and $105,000 on December 31, 20X7 and 20X8 respectively. -Based on the preceding information,what amount will be reported by Yang as balance in investment in Spiel on December 31,20X8,if it used the fair value option to account for its investment in Spiel?

Alpha Company acquired 100 percent of the voting common shares of Gamma Corporation by issuing bonds with a par value and fair value of $200,000. Immediately prior to the acquisition, Alpha reported total assets of $600,000, liabilities of $370,000, and stockholders' equity of $230,000. At that date, Gamma reported total assets of $500,000, liabilities of $300,000, and stockholders' equity of $200,000. Included in Gamma's liabilities was an account payable to Alpha in the amount of $50,000, which Alpha included in its accounts receivable. -Based on the preceding information,what amount of total assets was reported in the consolidated balance sheet immediately after acquisition?

On January 1, 20X7, Yang Corporation acquired 25 percent of the outstanding shares of Spiel Corporation for $100,000 cash. Spiel Company reported net income of $75,000 and paid dividends of $30,000 for both 20X7 and 20X8. The fair value of shares held by Yang was $110,000 and $105,000 on December 31, 20X7 and 20X8 respectively. -Based on the preceding information,what amount will be reported by Yang as income from its investment in Spiel for 20X7 if it used the fair value option to account for its investment in Spiel?

On January 1, 20X4, Timber Company acquired 25% of Johnson Company's common stock at underlying book value of $200,000. Johnson has 80,000 shares of $10 par value, 6 percent cumulative preferred stock outstanding. No dividends are in arrears. Johnson reported net income of $270,000 for 20X4 and paid total dividends of $140,000. Timber uses the equity method to account for this investment. -Based on the preceding information,what amount would Timber Company receive as dividends from Johnson for the year?

Grant, Inc. acquired 30 percent of South Co.'s voting stock for $200,000 on January 2, 20X4. Grant's 30 percent interest in South gave Grant the ability to exercise significant influence over South's operating and financial policies. During 20X4, South earned $80,000 and paid dividends of $50,000. South reported earnings of $100,000 for the six months ended June 30, 20X5, and $200,000 for the year ended December 31, 20X5. On July 1, 20X5, Grant sold half of its stock in South for $150,000 cash. South paid dividends of $60,000 on October 1, 20X5. -In Grant's December 31,20X4,balance sheet,what should be the carrying amount of this investment?

On January 1, 20X4, Timber Company acquired 25% of Johnson Company's common stock at underlying book value of $200,000. Johnson has 80,000 shares of $10 par value, 6 percent cumulative preferred stock outstanding. No dividends are in arrears. Johnson reported net income of $270,000 for 20X4 and paid total dividends of $140,000. Timber uses the equity method to account for this investment. -Based on the preceding information,what amount would be reported by Timber Company as the balance in its investment account on December 31,20X4?

Under the equity method of accounting for a stock investment,the investment initially should be recorded at:

On January 1, 20X8, William Company acquired 30 percent of eGate Company's common stock, at underlying book value of $100,000. eGate has 100,000 shares of $2 par value, 5 percent cumulative preferred stock outstanding. No dividends are in arrears. eGate reported net income of $150,000 for 20X8 and paid total dividends of $72,000. William uses the equity method to account for this investment. -Based on the preceding information,what amount would be reported by William Company as the balance in its investment account on December 31,20X8?

On January 1, 20X8, William Company acquired 30 percent of eGate Company's common stock, at underlying book value of $100,000. eGate has 100,000 shares of $2 par value, 5 percent cumulative preferred stock outstanding. No dividends are in arrears. eGate reported net income of $150,000 for 20X8 and paid total dividends of $72,000. William uses the equity method to account for this investment. -Based on the preceding information,what amount of investment income will William Company report from its investment in eGate for the year?

What portion of the subsidiary stockholders' equity account balances should be eliminated in preparing the consolidated balance sheet?

Dear Corporation acquired 100 percent of the voting shares of Therry Inc.by issuing 10,000 new shares of $5 par value common stock with a $30 market value. Required: 1.Which company is the parent and which is the subsidiary? 2.Define a subsidiary corporation. 3.Define a parent corporation. 4.Which entity prepares consolidated worksheet? 5.Why are consolidation entries used?

On January 2,20X5,Well Co.purchased 10 percent of Rea,Inc.'s outstanding common shares for $400,000.Well is the largest single shareholder in Rea,and Well's officers are a majority on Rea's board of directors.As a result,Well is able to exercise significant influence over Rea.Rea reported net income of $500,000 for 20X5,and paid dividends of $150,000.In its December 31,20X5,balance sheet,what amount should Well report as investment in Rea?

Usually,an investment of 20 to 50 percent in another company's voting stock is reported under the:

The main guidance on equity-method reporting,found in ASC 323 and 325 requires all of the following except:

Beta Company acquired 100 percent of the voting common shares of Standard Video Corporation, its bitter rival, by issuing bonds with a par value and fair value of $150,000. Immediately prior to the acquisition, Beta reported total assets of $500,000, liabilities of $280,000, and stockholders' equity of $220,000. At that date, Standard Video reported total assets of $400,000, liabilities of $250,000, and stockholders' equity of $150,000. Included in Standard's liabilities was an account payable to Beta in the amount of $20,000, which Beta included in its accounts receivable. -Based on the preceding information,what amount of total assets was reported in the consolidated balance sheet immediately after acquisition?

The Jamestown Corporation (Jamestown)reported net income for the current year of $200,000 and paid cash dividends of $30,000.The Stadium Company (Stadium)holds 22 percent of the outstanding voting stock of Jamestown.However,another corporation holds the other 78 percent ownership and does not take Stadium's wants and wishes into consideration when making financing and operating decisions for Jamestown.What investment income should Stadium recognize for the current year?

Phips Co. purchases 100 percent of Sips Company on January 1, 20X2, when Phips' retained earnings balance is $320,000 and Sips' is $120,000. During 20X2, Sips reports $20,000 of net income and declares $8,000 of dividends. Phips reports $125,000 of separate operating earnings plus $20,000 of equity-method income from its 100 percent interest in Sips; Phips declares dividends of $35,000. -Based on the preceding information,what is the consolidated retained earnings balance on December 31,20X2?

Clocktower Corporation reported net income for the current year of $370,000 and paid cash dividends of $50,000.Slide Company holds 40 percent of the outstanding voting stock of Clocktower.However,another corporation holds the other 60 percent ownership and does not take Slide's wants and wishes into consideration when making financing and operating decisions for Clocktower.What investment income should Slide recognize for the current year?