Exam 10: Additional Consolidation Reporting Issues

New Life Corporation has just finished preparing a consolidated balance sheet, income statement, and statement of changes in retained earnings for 20X9. The following items are proposed for inclusion in the consolidated cash flow statement: New Life holds 75 percent of the voting stock of Shane Pharmaceuticals, acquired at book value on June 21, 20X6. On the date of the acquisition, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Shane. -Based on the preceding information,what was the change in cash balance for the consolidated entity for 20X9?

Catalyst Corporation acquired 90 percent of Trigger Corporation's common stock on September 30, 20X8 for $225,000. At that date, the fair value of the noncontrolling interest was $25,000. On January 1, 20X8, Trigger reported the following stockholders' equity balances: Trigger reported net income of $80,000 in 20X8, earned uniformly throughout the year, and declared and paid dividends of $10,000 on June 30 and $30,000 on December 31, 20X8. Catalyst reported retained earnings of $250,000 on January 1, 20X8, and had 20X8 income of $120,000 from its separate operations. Catalyst paid dividends of $50,000 on December 31, 20X8. Catalyst accounts for its investment in Trigger Corporation using the fully adjusted equity method. -Based on the information provided,what is the balance of Catalyst's investment in Trigger Corporation as of December 31,20X8?

Company A owns 85 percent of Company B's stock and 80 percent of Company C's stock. All acquisitions were made at book value. The fair values of noncontrolling interests at the time of acquisition were equal to the proportionate share of the book values of the companies. The companies file a consolidated tax return each year and in 20X9 paid a total tax of $112,000. Each company is involved in a number of intercompany inventory transfers each period. Information on the companies' activities for 20X9 is as follows: Company A does not record income tax expense on income from subsidiaries because a consolidated tax return is filed. -Based on the information provided,what amount of income tax expense should be assigned to Company C?

The following information comes from Torveson Company's accounting records for 20X5: -Based on the preceding information,what amount will be reported by the company as cash received from customers during the year?

Solar Corporation holds 70 percent of Lunar Company's voting common shares, acquired at book value, but none of its preferred shares. At the date of acquisition, the fair value of the noncontrolling interest was equal to 30 percent of the book value of Lunar Company. Summary balance sheets for the companies on December 31, 20X5, are as follows: Neither of the preferred issues is convertible. Solar's preferred pays a 9 percent annual dividend, and Lunar's preferred pays a 10 percent dividend. Lunar reported net income of $40,000 and paid a total of $15,000 of dividends in 20X5. Solar reported income from its separate operations of $80,000 and paid total dividends of $45,000 in 20X5. -Based on the preceding information,what is the consolidated earnings per share for 20X5?

New Life Corporation has just finished preparing a consolidated balance sheet, income statement, and statement of changes in retained earnings for 20X9. The following items are proposed for inclusion in the consolidated cash flow statement: New Life holds 75 percent of the voting stock of Shane Pharmaceuticals, acquired at book value on June 21, 20X6. On the date of the acquisition, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Shane. -Based on the preceding information,what amount will be reported in the consolidated cash flow statement as net cash used in financing activities for 20X9?

Ceafoam Corporation acquired 80 percent of Trump Corporation's common stock on March 31, 20X4 for $360,000. At that date, the fair value of the noncontrolling interest was $90,000. On January 1, 20X4, Trump reported the following stockholders' equity balances: Trump reported net income of $100,000 in 20X4, earned uniformly throughout the year, and declared and paid dividends of $40,000 on December 31, 20X4. Ceafoam reported retained earnings of $500,000 on January 1, 20X8, and had 20X4 income of $200,000 from its separate operations. Ceafoam paid dividends of $50,000 on December 31, 20X4. Ceafoam accounts for its investment in Trump Corporation using the fully adjusted equity method. -Based on the information provided,what is the consolidated income to the controlling interest reported for the year 20X4?

Tower Corporation's controller has just finished preparing a consolidated balance sheet, income statement, and statement of changes in retained earnings for the year ended December 31, 20X9. Tower owns 80 percent of Network Corporation's stock, which it acquired at underlying book value on November 1, 20X6. At that date, the fair value of the noncontrolling interest was equal to 20 percent of Network Corporation's book value. The following information is available: Consolidated net income for 20X9 was $160,000. Network reported net income of $50,000 for 20X9. Tower paid dividends of $30,000 in 20X9. Network paid dividends of $10,000 in 20X9. Tower issued common stock on February, 18, 20X9, for a total of $100,000. Consolidated wages payable decreased by $6,000 in 20X9. Consolidated depreciation expense for the year was $15,000. Consolidated accounts receivable decreased by $20,000 in 20X9. Bonds payable of Tower with a book value of $102,000 were retired for $100,000 on December 31, 20X9. Consolidated amortization expense on patents was $10,000 for 20X9. Tower sold land that it had purchased for $75,000 to a nonaffiliate for $80,000 on June 10, 20X9. Consolidated accounts payable decreased by $7,000 during 20X9. Total purchases of equipment by Tower and Network during 20X9 were $180,000. Consolidated inventory increased by $36,000 during 20X9. There were no intercompany transfers between Tower and Network in 20X9 or prior years except for Network's payment of dividends. Tower uses the indirect method in preparing its cash flow statement. -Based on the preceding information,what amount will be reported in the consolidated cash flow statement as net cash used in investing activities for 20X9?

Flyer Corporation holds 90 percent of Kite Company's common shares but none of its preferred shares. On the date of acquisition, the fair value of the noncontrolling interest was equal to 10 percent of the book value of Kite Company. Summary balance sheets for the companies on December 31, 20X8, are as follows: Flyer's preferred pays a 8 percent annual dividend, and Kite's preferred pays a 10 percent dividend. Kite's preferred shares can be converted into 20,000 shares of common stock at any time. Kite reported net income of $35,000 and paid a total of $10,000 of dividends in 20X8. Flyer reported income from its separate operations of $80,000 and paid total dividends of $25,000 in 20X8. -Based on the information provided,what is the diluted earnings per share for the consolidated entity for 20X8?

Ceafoam Corporation acquired 80 percent of Trump Corporation's common stock on March 31, 20X4 for $360,000. At that date, the fair value of the noncontrolling interest was $90,000. On January 1, 20X4, Trump reported the following stockholders' equity balances: Trump reported net income of $100,000 in 20X4, earned uniformly throughout the year, and declared and paid dividends of $40,000 on December 31, 20X4. Ceafoam reported retained earnings of $500,000 on January 1, 20X8, and had 20X4 income of $200,000 from its separate operations. Ceafoam paid dividends of $50,000 on December 31, 20X4. Ceafoam accounts for its investment in Trump Corporation using the fully adjusted equity method. -Based on the information provided,what is the amount of consolidated retained earnings as of December 31,20X4?

Solar Corporation holds 70 percent of Lunar Company's voting common shares, acquired at book value, but none of its preferred shares. At the date of acquisition, the fair value of the noncontrolling interest was equal to 30 percent of the book value of Lunar Company. Summary balance sheets for the companies on December 31, 20X5, are as follows: Neither of the preferred issues is convertible. Solar's preferred pays a 9 percent annual dividend, and Lunar's preferred pays a 10 percent dividend. Lunar reported net income of $40,000 and paid a total of $15,000 of dividends in 20X5. Solar reported income from its separate operations of $80,000 and paid total dividends of $45,000 in 20X5. -Based on the preceding information,what is the amount of earnings available to common shareholders reported in the consolidated financial statements for the year?

Tower Corporation's controller has just finished preparing a consolidated balance sheet, income statement, and statement of changes in retained earnings for the year ended December 31, 20X9. Tower owns 80 percent of Network Corporation's stock, which it acquired at underlying book value on November 1, 20X6. At that date, the fair value of the noncontrolling interest was equal to 20 percent of Network Corporation's book value. The following information is available: Consolidated net income for 20X9 was $160,000. Network reported net income of $50,000 for 20X9. Tower paid dividends of $30,000 in 20X9. Network paid dividends of $10,000 in 20X9. Tower issued common stock on February, 18, 20X9, for a total of $100,000. Consolidated wages payable decreased by $6,000 in 20X9. Consolidated depreciation expense for the year was $15,000. Consolidated accounts receivable decreased by $20,000 in 20X9. Bonds payable of Tower with a book value of $102,000 were retired for $100,000 on December 31, 20X9. Consolidated amortization expense on patents was $10,000 for 20X9. Tower sold land that it had purchased for $75,000 to a nonaffiliate for $80,000 on June 10, 20X9. Consolidated accounts payable decreased by $7,000 during 20X9. Total purchases of equipment by Tower and Network during 20X9 were $180,000. Consolidated inventory increased by $36,000 during 20X9. There were no intercompany transfers between Tower and Network in 20X9 or prior years except for Network's payment of dividends. Tower uses the indirect method in preparing its cash flow statement. -Based on the preceding information,what amount will be reported in the consolidated cash flow statement as net cash used in financing activities for 20X9?

On January 1, 20X8, Gulfstream Corporation acquired 40 percent of the voting shares of Hunter Company for $65,000. Hunter reported net income of $45,000 and paid dividends of $10,000 in 20X8. Gulfstream reported operating income of $50,000 for the year. There is 80 percent exemption of intercompany dividends and the effective tax rate is 35 percent. Assume that the equity method is being used. -Based on the preceding information,what would Gulfstream report as income tax expense for the year?

Sigma Company develops and markets organic food products to natural foods retailers. The following information is available for the company for the year 20X8: -Based on the preceding information,what amount will be reported by the company as cash flows from operating activities for 20X8?

The following information comes from Torveson Company's accounting records for 20X5: -Based on the preceding information,what amount will be reported by the company as cash payments to suppliers for 20X5?

Winter Corporation's consolidated cash flow statement for the year ended December 31, 20X2, reported operating cash inflows of $100,000, financing cash inflows of $30,000, investing cash outflows of $120,000, and an ending cash balance of $50,000. Winter acquired 60 percent of Snowboard Company's common stock on April 1, 20X0 at book value. At that date, the fair value of the noncontrolling interest was equal to 40 percent of Snowboard's book value. Snowboard reported net income of $30,000, paid dividends of $20,000 in 20X2, and is included in Winter's consolidated statements. Winter paid dividends of $40,000 in 20X2. The indirect method is used in computing cash flows from operations. -Dividends paid to noncontrolling shareholders: I.are reported as a cash outflow in the consolidated cash flow statement. II.represent funds that are no longer available to the consolidated entity. III.are reported in the consolidated retained earnings statement.

New Life Corporation has just finished preparing a consolidated balance sheet, income statement, and statement of changes in retained earnings for 20X9. The following items are proposed for inclusion in the consolidated cash flow statement: New Life holds 75 percent of the voting stock of Shane Pharmaceuticals, acquired at book value on June 21, 20X6. On the date of the acquisition, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Shane. -Based on the preceding information,assuming that New Life uses the direct method of computing cash flows from operating activities,what amount will be reported by the company as cash received from customers during the year?

Denver Corporation owns 25 percent of the voting shares of Alamos Corporation. In 20X8, Alamos reported net income of $120,000 and paid dividends of $30,000. Denver uses the equity method to account for this investment. Denver reported taxable income of $160,000 on its separate operations and has an effective tax rate of 40 percent. There is an 80 percent exemption on intercompany dividends. -Based on the preceding information,income taxes payable for Denver for the year 20X8 will be: