Exam 3: The Reporting Entity and Consolidation of Less-Than-Wholly-Owned Subsidiaries With No Differential

On January 3,20X9,Redding Company acquired 80 percent of Frazer Corporation's common stock for $344,000 in cash.At the acquisition date,the book values and fair values of Frazer's assets and liabilities were equal,and the fair value of the noncontrolling interest was equal to 20 percent of the total book value of Frazer.The stockholders' equity accounts of the two companies at the acquisition date are: Noncontrolling interest was assigned income of $11,000 in Redding's consolidated income statement for 20X9. -Based on the preceding information,what is the total stockholders' equity in the consolidated balance sheet as of January 3,20X9?

Princeton Company acquired 75 percent of the common stock of Sheffield Corporation on December 31,20X9.On the date of acquisition,Princeton held land with a book value of $150,000 and a fair value of $300,000;Sheffield held land with a book value of $100,000 and fair value of $500,000.Using the entity theory,at what amount would land be reported in a consolidated balance sheet prepared immediately after the combination?

Small-Town Retail owns 70 percent of Supplier Corporation's common stock.For the current financial year,Small-Town and Supplier reported sales of $450,000 and $300,000 and expenses of $290,000 and $240,000,respectively. -Based on the preceding information,what is the amount of net income to be reported in the consolidated income statement for the year under the proprietary theory approach?

Goodwill under the parent theory:

Zeta Corporation and its subsidiary reported consolidated net income of $320,000 for the year ended December 31,20X8.Zeta owns 80 percent of the common shares of its subsidiary,acquired at book value.Noncontrolling interest was assigned income of $30,000 in the consolidated income statement for 20X8.What is the amount of separate operating income reported by Zeta for the year?

On January 1,20X8,Wilhelm Corporation acquired 90 percent of Kaiser Company's voting stock,at underlying book value.The fair value of the noncontrolling interest was equal to 10 percent of the book value of Kaiser at that date.Wilhelm uses the equity method in accounting for its ownership of Kaiser.On December 31,20X9,the trial balances of the two companies are as follows: -Based on the preceding information,what amount would be reported as total liabilities in the consolidated balance sheet at December 31,20X9?

In reading a set of consolidated financial statements you are surprised to see the term noncontrolling interest not reported under the Liability section of the Balance Sheet. Required: a.What is a non-controlling interest? b.Why must it be reported in the financial statements as an element of equity rather than a liability?

On January 1,20X9,Heathcliff Corporation acquired 80 percent of Garfield Corporation's voting common stock.Garfield's buildings and equipment had a book value of $300,000 and a fair value of $350,000 at the time of acquisition. -Based on the preceding information,what will be the amount at which Garfield's buildings and equipment will be reported in consolidated statements using the current accounting practice?

On January 1,20X8,Wilhelm Corporation acquired 90 percent of Kaiser Company's voting stock,at underlying book value.The fair value of the noncontrolling interest was equal to 10 percent of the book value of Kaiser at that date.Wilhelm uses the equity method in accounting for its ownership of Kaiser.On December 31,20X9,the trial balances of the two companies are as follows: -Based on the preceding information,what amount would be reported as total stockholder's equity in the consolidated balance sheet at December 31,20X9?

On January 1,20X9,Gold Rush Company acquires 80 percent ownership in California Corporation for $200,000.The fair value of the noncontrolling interest at that time is determined to be $50,000.It reports net assets with a book value of $200,000 and fair value of $230,000.Gold Rush Company reports net assets with a book value of $600,000 and a fair value of $650,000 at that time,excluding its investment in California.What will be the amount of goodwill that would be reported immediately after the combination under current accounting practice?

Consolidated financial statements tend to be most useful for:

Company Pea owns 90 percent of Company Essone which in turn owns 80 percent of Company Esstwo.Company Esstwo owns 100 percent of Company Essthree.Consolidated financial statements should be prepared to report the financial status and results of operations for:

Consolidated financial statements are required by GAAP in certain circumstances.This information can be very useful to stockholders and creditors.Yet,there are limitations to these financial statements for which the users must be aware.What are at least three (3)limitations of consolidated financial statements?

Xing Corporation owns 80 percent of the voting common shares of Adams Corporation.Noncontrolling interest was assigned $24,000 of income in the 20X9 consolidated income statement.What amount of net income did Adams Corporation report for the year?

On January 1,20X8,Wilhelm Corporation acquired 90 percent of Kaiser Company's voting stock,at underlying book value.The fair value of the noncontrolling interest was equal to 10 percent of the book value of Kaiser at that date.Wilhelm uses the equity method in accounting for its ownership of Kaiser.On December 31,20X9,the trial balances of the two companies are as follows: -Based on the preceding information,what amount would be reported as noncontrolling interest in the consolidated balance sheet at December 31,20X9?

Quid Corporation acquired 60 percent of Pro Company's common stock on December 31,20X4.Goodwill (attributable to Quid's acquisition of Pro shares)of $150,000 was calculated under the proprietary theory approach.What is the amount of goodwill that should be reported under entity theory approach?

On January 1,20X9,Heathcliff Corporation acquired 80 percent of Garfield Corporation's voting common stock.Garfield's buildings and equipment had a book value of $300,000 and a fair value of $350,000 at the time of acquisition. -Based on the preceding information,what will be the amount at which Garfield's buildings and equipment will be reported in consolidated statements using the parent company approach?

The FASB issued Interpretation No.46 R related to the Consolidation of Variable Interest Entities.Describe what a Variable Interest Entity is and discuss why the FASB has difficulty in prescribing when these entities are consolidated.

On January 1,20X8,Zeta Company acquired 85 percent of Theta Company's common stock for $100,000 cash.The fair value of the noncontrolling interest was determined to be 15 percent of the book value of Theta at that date.What portion of the retained earnings reported in the consolidated balance sheet prepared immediately after the business combination is assigned to the noncontrolling interest?

On January 3,20X9,Redding Company acquired 80 percent of Frazer Corporation's common stock for $344,000 in cash.At the acquisition date,the book values and fair values of Frazer's assets and liabilities were equal,and the fair value of the noncontrolling interest was equal to 20 percent of the total book value of Frazer.The stockholders' equity accounts of the two companies at the acquisition date are: Noncontrolling interest was assigned income of $11,000 in Redding's consolidated income statement for 20X9. -Based on the preceding information,what will be the amount of net income reported by Frazer Corporation in 20X9?