Exam 10: Additional Consolidation Reporting Issues

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 flows from operating activities for 20X5?

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 amount of earnings available to common shareholders reported in the consolidated financial statements for 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 was the change in cash balance for the consolidated entity for 20X9?

Peacoat Corporation acquired 80 percent of Sweater 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,Sweater reported the following stockholders' equity balances: Sweater 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.Peacoat reported retained earnings of $500,000 on January 1,20X8,and had 20X4 income of $200,000 from its separate operations.Peacoat paid dividends of $50,000 on December 31,20X4.Peacoat accounts for its investment in Sweater Corporation using the fully adjusted equity method. -Based on the information provided,what is the consolidated net income reported for the year 20X4?

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 amount of consolidated retained earnings as of December 31,20X8?

Ponte Corporation owns 25 percent of the voting shares of Scala Corporation.In 20X8,Scala reported net income of $120,000 and paid dividends of $30,000.Ponte uses the equity method to account for this investment.Ponte 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 tax expense for Ponte for the year 20X8 will be:

Peacoat Corporation acquired 80 percent of Sweater 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,Sweater reported the following stockholders' equity balances: Sweater 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.Peacoat reported retained earnings of $500,000 on January 1,20X8,and had 20X4 income of $200,000 from its separate operations.Peacoat paid dividends of $50,000 on December 31,20X4.Peacoat accounts for its investment in Sweater Corporation using the fully adjusted equity method. -Based on the information provided,what is the balance of Peacoat's investment in Sweater Corporation as of December 31,20X4?

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 net income reported for the year 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 book value of shares acquired by Pair Logic on July 1,20X8?

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 amount will be reported in the consolidated cash flow statement as net cash used in financing activities for 20X9?

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 amount will be reported in the consolidated cash flow statement as net cash used in investing activities for 20X9?

Ponte Corporation owns 25 percent of the voting shares of Scala Corporation.In 20X8,Scala reported net income of $120,000 and paid dividends of $30,000.Ponte uses the equity method to account for this investment.Ponte 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 Ponte for the year 20X8 will be:

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.