Exam 10: Additional Consolidation Reporting Issues

Polar 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.Polar acquired 60 percent of Snow 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 Snow's book value.Snow reported net income of $30,000,paid dividends of $20,000 in 20X2,and is included in Polar's consolidated statements.Polar paid dividends of $40,000 in 20X2.The indirect method is used in computing cash flows from operations. -Based on the information provided,what amount was reported as dividends paid in the cash flow from financing activities section of the consolidated statement of cash flows?

Plywood Corporation's consolidated cash flow statement for the year ended December 31,20X8,reported operating cash inflows of $160,000,financing cash outflows of $90,000,and investing cash outflows $55,000,and an ending cash balance of $75,000.Plywood acquired 75 percent of Sawdust Company's common stock on July 1,20X6,at book value.At that date,the fair value of the noncontrolling interest was equal to 25 percent of Sawdust Company's book value.Sawdust reported net income of $20,000,paid dividends of $8,000 in 20X8,and is included in Plywood's consolidated statements.Plywood paid dividends of $25,000 in 20X8.The indirect method is used in computing cash flow from operations. -Based on the information provided,what amount was reported as dividends paid in the cash flow from financing activities section of the consolidated statement of cash flows?

Pappas Company owns 85 percent of Sunny Company's stock and 80 percent of Sibble Company'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: Pappas Company 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 consolidated net income will be reported for the year 20X9?

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?

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 received from customers during the year?

Power 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.Power owns 80 percent of Setwork 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 Setwork Corporation's book value.The following information is available: Consolidated net income for 20X9 was $160,000. Setwork reported net income of $50,000 for 20X9. Power paid dividends of $30,000 in 20X9. Setwork paid dividends of $10,000 in 20X9. Power 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 Power 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. Power 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 Power and Setwork during 20X9 were $180,000. Consolidated inventory increased by $36,000 during 20X9. There were no intercompany transfers between Power and Setwork in 20X9 or prior years except for Setwork's payment of dividends.Power 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?

Power 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.Power owns 80 percent of Setwork 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 Setwork Corporation's book value.The following information is available: Consolidated net income for 20X9 was $160,000. Setwork reported net income of $50,000 for 20X9. Power paid dividends of $30,000 in 20X9. Setwork paid dividends of $10,000 in 20X9. Power 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 Power 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. Power 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 Power and Setwork during 20X9 were $180,000. Consolidated inventory increased by $36,000 during 20X9. There were no intercompany transfers between Power and Setwork in 20X9 or prior years except for Setwork's payment of dividends.Power 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 provided by operating activities for 20X9?

Plush Corporation holds 80 percent of Scratch Company's voting common shares,acquired at book values,but none of its preferred shares.At the date of acquisition,the fair value of the noncontrolling interest was equal to 20 percent of the book value of Scratch Company.Summary balance sheets for the companies on December 31,20X8,are as follows: Neither of the preferred issues is convertible.Plush's preferred pays a 8 percent annual dividend,and Scratch's preferred pays a 12 percent dividend.Scratch reported net income of $30,000 and paid a total of $10,000 of dividends in 20X8.Plush reported income from its separate operations of $70,000 and paid total dividends of $25,000 in 20X8. -Based on the preceding information,what is the consolidated earnings per share for 20X8?

Company P holds 70 percent of the voting shares of Company S.During 20X8,Company S sold land with a book value of $125,000 to Company P for $150,000.Company P continues to hold the land at the end of the year.The companies file separate tax returns and are subject to a 40 percent tax rate.Assume that Company P uses the fully adjusted equity method in accounting for its investment in Company S. -Use the information given,but also assume that Company P holds the land at the end of 20X9.The consolidating entry relating to the intercorporate sale of land to be entered in the consolidation worksheet prepared at the end of 20X9 will include:

Power Corporation owns 75 percent of Transmitter Company's common stock.At the date of acquisition the fair value of the noncontrolling interest was equal to the book value of Transmitter Company's common stock.The following balance sheet data are presented for December 31,20X8: Transmitter reported net income of $90,000 in 20X8 and paid dividends of $30,000.Its bonds have an annual interest rate of 10 percent and are convertible into 12,000 common shares.Its preferred shares pay a 12 percent annual dividend and convert into 5,000 shares of common stock.In addition,Transmitter has warrants outstanding for 12,000 shares of common stock at $15 per share.The 20X8 average price of Transmitter common shares was $25. Power reported income of $180,000 from its own operations for 20X8 and paid dividends of $40,000.Its 9 percent bonds convert into 8,000 shares of its common stock.The companies file separate tax returns and are subject to income taxes of 40 percent. Required: Compute basic and diluted earnings per share for the consolidated entity for 20X8.

Pappas Company owns 85 percent of Sunny Company's stock and 80 percent of Sibble Company'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: Pappas Company 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 Pappas Company?

Which of the following observations concerning the comparisons between the direct and indirect approaches of presenting a cash flow statement is true?

Plywood Corporation's consolidated cash flow statement for the year ended December 31,20X8,reported operating cash inflows of $160,000,financing cash outflows of $90,000,and investing cash outflows $55,000,and an ending cash balance of $75,000.Plywood acquired 75 percent of Sawdust Company's common stock on July 1,20X6,at book value.At that date,the fair value of the noncontrolling interest was equal to 25 percent of Sawdust Company's book value.Sawdust reported net income of $20,000,paid dividends of $8,000 in 20X8,and is included in Plywood's consolidated statements.Plywood paid dividends of $25,000 in 20X8.The indirect method is used in computing cash flow from operations. -Based on the information provided,what was the consolidated cash balance at January 1,20X8?

Pappas Company owns 85 percent of Sunny Company's stock and 80 percent of Sibble Company'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: Pappas Company 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 Sibble?

Pure 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: Pure 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 Pure 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?

Pony Corporation acquired 90 percent of Saddle 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,Saddle reported the following stockholders' equity balances: Saddle 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.Pony reported retained earnings of $250,000 on January 1,20X8,and had 20X8 income of $120,000 from its separate operations.Pony paid dividends of $50,000 on December 31,20X8.Pony accounts for its investment in Saddle Corporation using the fully adjusted equity method. -Based on the information provided,what is the balance of Pony's investment in Saddle Corporation as of December 31,20X8?

On July 1,20X8,Pair Logic Corporation acquires 75 percent of Systems Inc.common stock for its underlying book value.At the time of acquisition,the fair value of the noncontrolling interest is equal to its proportionate share of book value of Systems.On January 1,20X8 Systems reported common stock of $100,000 and retained earnings of $130,000.For the year 20X8,Systems reports the following items: Pair Logic uses the equity method in accounting for this investment. -Based on the preceding information,what is the fair value of the noncontrolling interest at the time of acquisition?

Pony Corporation acquired 90 percent of Saddle 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,Saddle reported the following stockholders' equity balances: Saddle 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.Pony reported retained earnings of $250,000 on January 1,20X8,and had 20X8 income of $120,000 from its separate operations.Pony paid dividends of $50,000 on December 31,20X8.Pony accounts for its investment in Saddle 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 20X8?

Pure 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: Pure 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?