The balance sheet for James Company is given below: \[\begin{array} { l l } \text { Cash } & \$ 242 \\ \text { Accounts Receivable } & 200 \\ \text { Inventory } & 388\\ \text { Prepaid Insurance } & 70 \\ \text { Fixed Assets } & 452 \\ \text { Accumulated Depreciation } & \text { (228) } \\ \text { Total Assets } & \$ 1,124 \end{array}\] \[\begin{array} { l l } \text { Accounts payable } & \$ 152 \\ \text { Wages payable } & 32 \\ \text { Notes payable } & 420 \\ \text { Paid-in capital } & 160 \\ \text { Retained earnings } & \underline { 360 } \\ \text { Total liabilities and stockholders' equity } & \$ 1,124 \end{array}\] If a common-size balance sheet was prepared,what would James Company report for accounts receivable?

A) 13.5% B) 17.3% C) 17.8% D) 86.3% A) 13.5% B) 17.3% C) 17.8% D) 86.3%

The Corrao Company reports the following information: $\begin{array} { l } \text {Sales for the year ended December 31,2012 }&\$106,950\\ \text {Gross profit for the year ended December 31, 2012 }&\$45,150\\ \text { Net income for the year ended December 31,2012}&\$7,300\\ \text {Total Current Assets, December 31, 2012 }&\$18,700\\ \text {Total Current Liabilities, December 31, 2012 }&\$7,600\\ \text {Total Assets, December 31, 2012 }&\$88,400\\ \text {Total Liabilities, December 31,2012 }&\$20,850\\ \text { Total common shares outstanding, December 31, 2012}&\$1,000\\ \text {Market price per share, December 31, 2012 }&\$75.00\\ \text {Dividends per share, for the year ended December 31,2012 }&\$5.00\\ \end{array}$ What is the debt-to-equity ratio at December 31,2012?

A) 15.7% B) 30.9% C) 43.1% D) 75.7% A) 15.7% B) 30.9% C) 43.1% D) 75.7%

Presented below is the balance sheet of Houser Company at January 1,2015: $\begin{array}{ll} \text { Cash } & \$ 100 \\ \text { Net Fixed Assets } & 400 \\ \text { Total Assets } & \$500 \end{array}$ $\begin{array}{ll} \text { Accounts Payable } & \$ 20 \\ \text { Long-term Bonds Payable } & 220 \\ \text { Stockholders' Equity } & \underline{260} \\ \text { Total Liabilities and Stockholders' Equity } & \$ 500 \end{array}$ The balance sheet of Maury Company at January 1,2015 is below: $\begin{array}{ll} \text { Cash } & \$ 400 \\ \text { Net Fixed Assets } &{380} \\ \text { Total Assets } &{\$ 780} \end{array}$ $\begin{array}{ll} \text { Accounts Payable } & \$ 120 \\ \text { Long-term Bonds Payable } & 280 \\ \text { Stockholders' Equity } & \underline{380} \\ \text { Total Liabilities and Stockholders' Equity } & \$ 780 \end{array}$ On January 1,2015,Maury Company acquired 100 percent of the outstanding common stock of Houser Company for $260 cash.The book value and fair value of Houser's assets and liabilities were equal.What is the amount of Total Assets on the consolidated balance sheet immediately after the acquisition of Houser Company's stock? (Assume elimination entries are completed.)

A) $0 B) $780 C) $1,020 D) $1,280 A) $0 B) $780 C) $1,020 D) $1,280

Exam 17: Understanding and Analyzing Consolidated Financial Statements

A parent company purchases 100 percent of the outstanding common stock in a subsidiary.What happens to the subsidiary the day after the purchase? Which of the following statements is FALSE?

(Multiple Choice)

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Question 41

Each year,goodwill on the consolidated balance sheet is ________.

(Multiple Choice)

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Question 42

On January 1,2012,Preview Company acquired all of the stock of a subsidiary.The following data is available: Preview Company Subsidiary Total assets \ 650 \ 400 Total liabilities \ 200 \ 190 Total stockholders' equity \ 450 \ 210 The acquisition by the Preview Company represents a 100 percent interest in the subsidiary.On January 1,2012,the fair value of the subsidiary's assets and liabilities are equal to the book value.Preview Company paid $250 for the 100 percent interest in the subsidiary.On January 1,2012,what are the total assets on the consolidated balance sheet? (Assume elimination entries are completed.)

(Multiple Choice)

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Question 43

The section of the annual report that explains major changes in the income statement,changes in liquidity and capital resources and the impact of inflation is called the ________.

(Multiple Choice)

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Question 44

The balance sheet for James Company is given below: Cash \ 242 Accounts Receivable 200 Inventory 388 Prepaid Insurance 70 Fixed Assets 452 Accumulated Depreciation (228) Total Assets \ 1,124 Accounts payable \ 152 Wages payable 32 Notes payable 420 Paid-in capital 160 Retained earnings Total liabilities and stockholders' equity \ 1,124 If a common-size balance sheet was prepared,what would James Company report for accounts receivable?

(Multiple Choice)

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Question 45

On January 1,2014,Jeff Company purchased common stock in Garcia Company for $1,000,000.Jeff Company treats the investment as available-for-sale securities.During 2014,Garcia Company earned $4,000,000 and paid dividends of $1,000,000.Assume that Jeff Company owns 10% of the outstanding shares of Garcia Company.The market value of the investment at December 31,2014 is $1,100,000.What is the balance in the Investment account at December 31,2014?

(Multiple Choice)

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Question 46

The financial ratios for a company can be evaluated using ________.

(Multiple Choice)

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Question 47

An investor holds 5% of the outstanding stock of an investee.Securities that the investor company buys only with the intent to resell them shortly are called ________.

(Multiple Choice)

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Question 48

The account "Noncontrolling Interests" as reported on a balance sheet shows ________.

(Multiple Choice)

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Question 49

Jerome Company purchased common stock in Gonzalez Company.Jerome Company treats the investment as available-for-sale securities.During the current year,Gonzalez Company earned $4,000,000 and paid dividends of $1,000,000.Assume that Jerome Company owns 10% of the outstanding shares of Gonzalez Company.Gonzalez Company's dividend will affect Jerome Company by ________.

(Multiple Choice)

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Question 50

An investor holds 5% of the outstanding stock of an investee.Securities that the investor company does not intend to sell in the near future are called ________.

(Multiple Choice)

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Question 51

Noncontrolling interests affect only the balance sheet of consolidated financial statements.

(True/False)

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Question 52

Goodwill is recognized when one company purchases another company and ________.

(Multiple Choice)

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Question 53

The Corrao Company reports the following information: Sales for the year ended December 31,2012 \1 06,950 Gross profit for the year ended December 31, 2012 \4 5,150 Net income for the year ended December 31,2012 \7 ,300 Total Current Assets, December 31, 2012 \1 8,700 Total Current Liabilities, December 31, 2012 \7 ,600 Total Assets, December 31, 2012 \8 8,400 Total Liabilities, December 31,2012 \2 0,850 Total common shares outstanding, December 31, 2012 \1 ,000 Market price per share, December 31, 2012 \7 5.00 Dividends per share, for the year ended December 31,2012 \5 .00 What is the debt-to-equity ratio at December 31,2012?

(Multiple Choice)

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Question 54

Presented below is the balance sheet of Houser Company at January 1,2015: Cash \ 100 Net Fixed Assets 400 Total Assets \5 00 Accounts Payable \ 20 Long-term Bonds Payable 220 Stockholders' Equity Total Liabilities and Stockholders' Equity \ 500 The balance sheet of Maury Company at January 1,2015 is below: Cash \ 400 Net Fixed Assets 380 Total Assets \ 780 Accounts Payable \ 120 Long-term Bonds Payable 280 Stockholders' Equity Total Liabilities and Stockholders' Equity \ 780 On January 1,2015,Maury Company acquired 100 percent of the outstanding common stock of Houser Company for $260 cash.The book value and fair value of Houser's assets and liabilities were equal.What is the amount of Total Assets on the consolidated balance sheet immediately after the acquisition of Houser Company's stock? (Assume elimination entries are completed.)

(Multiple Choice)

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Question 55

Arizona Company has 40,000 shares of its common stock outstanding.Mexico Company owns 5,000 shares of Arizona Company's stock.Which of the following methods should Mexico Company use to account for its investment in Arizona Company?

(Multiple Choice)

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Question 56

Liquidity ratios focus on whether there are sufficient current assets to satisfy current liabilities as they come due.

(True/False)

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Question 57

Martin Company purchased 10% of the outstanding shares of Winn Company.Martin Company classifies the investments as trading securities.At the end of the year,the market value of the shares increased from the prior year.The increase in market value of Winn Company's shares will affect Martin Company by ________.

(Multiple Choice)

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Question 58

Noncontrolling interests appear on a consolidated balance sheet when a parent company owns more than 50 percent but less than 100 percent of a subsidiary's common stock.

(True/False)

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Question 59

Accountants require investors without significant influence over the decisions of an investee firm to use the ________ method.

(Multiple Choice)

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Question 60

A parent company purchases 100 percent of the outstanding common stock in a subsidiary.What happens to the subsidiary the day after the purchase? Which of the following statements is FALSE?

Each year,goodwill on the consolidated balance sheet is ________.

The section of the annual report that explains major changes in the income statement,changes in liquidity and capital resources and the impact of inflation is called the ________.

The financial ratios for a company can be evaluated using ________.

An investor holds 5% of the outstanding stock of an investee.Securities that the investor company buys only with the intent to resell them shortly are called ________.

The account "Noncontrolling Interests" as reported on a balance sheet shows ________.

An investor holds 5% of the outstanding stock of an investee.Securities that the investor company does not intend to sell in the near future are called ________.

Noncontrolling interests affect only the balance sheet of consolidated financial statements.

Goodwill is recognized when one company purchases another company and ________.

Arizona Company has 40,000 shares of its common stock outstanding.Mexico Company owns 5,000 shares of Arizona Company's stock.Which of the following methods should Mexico Company use to account for its investment in Arizona Company?

Liquidity ratios focus on whether there are sufficient current assets to satisfy current liabilities as they come due.

Noncontrolling interests appear on a consolidated balance sheet when a parent company owns more than 50 percent but less than 100 percent of a subsidiary's common stock.

Accountants require investors without significant influence over the decisions of an investee firm to use the ________ method.

Managerial Accounting,the Business Organization,and Professional Ethics

Introduction to Cost Behavior and Cost Volume Profit Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus on Pricing Decisions

Relevant Information for Decision Making With a Focus on Operational Decisions

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

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