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

Pepper Company acquired 60 percent of the common stock of Safton Corporation on December 31,20X9.On the date of acquisition,Pepper held land with a book value of $200,000 and a fair value of $350,000;Safton held land with a book value of $300,000 and fair value of $300,000.At what amount would land be reported in a consolidated balance sheet prepared immediately after the combination?

ASC 805 is 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 3,20X9,Pleat Company acquired 80 percent of Stitch Corporation's common stock for $344,000 in cash.At the acquisition date,the book values and fair values of Stitch'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 Stitch.The stockholders' equity accounts of the two companies at the acquisition date are: Noncontrolling interest was assigned income of $11,000 in Pleat's consolidated income statement for 20X9. -Based on the preceding information,what amount will be assigned to the noncontrolling interest on January 3,20X9,in the consolidated balance sheet?

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?

On January 3,20X9,Pine Company acquired 75 percent of Sap Company's outstanding common stock for cash.The fair value of the noncontrolling interest was equal to a proportionate share of the book value of Sap Company's net assets at the date of acquisition.Selected balance sheet data at December 31,20X9,are as follows: -Based on the preceding information,what amount will Pine Company report as common stock outstanding in its consolidated balance sheet at December 31,20X9?

On January 1,20X8,Potter Corporation acquired 90 percent of Shoemaker 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 Shoemaker at that date.Potter uses the fully adjusted equity method in accounting for its ownership of Shoemaker.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?

On January 1,20X5,Playa Company acquires 90 percent ownership in Seaside Corporation for $180,000.The fair value of the noncontrolling interest at that time is determined to be $20,000.Seaside reports net assets with a book value of $200,000 and fair value of $200,000.Playa Company reports net assets with a book value of $480,000 and a fair value of $525,000 at that time,excluding its investment in Seaside.What will be the amount of consolidated net assets that would be reported immediately after the combination?

Which of the following usually does not represent a variable interest?

On January 1,20X9,Peanuts Corporation acquired 80 percent of Schulz Corporation's voting common stock.On that date,Peanuts had equipment with a book value of $50,000 and a fair value of $200,000.Schulz's buildings and equipment had a book value of $300,000 and a fair value of $300,000 at the time of acquisition.What will be the amount at which buildings and equipment will be reported in consolidated statements immediately following the acquisition?

On January 3,20X9,Pleat Company acquired 80 percent of Stitch Corporation's common stock for $344,000 in cash.At the acquisition date,the book values and fair values of Stitch'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 Stitch.The stockholders' equity accounts of the two companies at the acquisition date are: Noncontrolling interest was assigned income of $11,000 in Pleat'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?

Peta Corporation and its subsidiary reported consolidated net income of $320,000 for the year ended December 31,20X8.Peta 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 Peta for the year?

On January 1,20X8,Peta Company acquired 85 percent of Star 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 Star 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,Pine Company acquired 75 percent of Sap Company's outstanding common stock for cash.The fair value of the noncontrolling interest was equal to a proportionate share of the book value of Sap Company's net assets at the date of acquisition.Selected balance sheet data at December 31,20X9,are as follows: -Based on the preceding information,what amount should be reported as noncontrolling interest in net assets in Pine Company's December 31,20X9,consolidated balance sheet?

In which of the following cases would consolidation be inappropriate?

On January 1,20X6,Power Company acquired 80 percent of Strong Company's outstanding stock for cash.The fair value of the noncontrolling interest was equal to a proportionate share of the book value of Strong Company's net assets at the date of acquisition.Selected balance sheet data at December 31,20X6 are as follows: -Based on the preceding information,what amount should be reported as noncontrolling interest in net assets in Power Company's December 31,20X6,consolidated balance sheet?

Which of the following statements are true relative to US GAAP and IFRS consolidation rules?

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 noncontrolling interest? b.Why must it be reported in the financial statements as an element of equity rather than a liability?

On January 2,20X2,Piranha Company acquired 70 percent of Salmon Corporation's common stock for $420,000 cash.At the acquisition date,the book values and fair values of Salmon' assets and liabilities were equal,and the fair value of the noncontrolling interest was equal to 30 percent of the total book value of Salmon.The stockholders' equity accounts of the two companies at the acquisition date are as follows: Noncontrolling interest was assigned income of $15,000 in Piranha's consolidated income statement for 20X2. -Based on the preceding information,what will be the amount of net income reported by Salmon Corporation in 20X2?

Maple Corporation and its subsidiary reported consolidated net income of $380,000 for the year ended December 31,20X5.Maple owns 75% of the common shares of its subsidiary,acquired at book value.Noncontrolling interest was assigned income of $25,000 in the consolidated income statement for 20X5.What is the amount of separate operating income reported by Maple for the year?

On January 1,20X6,Power Company acquired 80 percent of Strong Company's outstanding stock for cash.The fair value of the noncontrolling interest was equal to a proportionate share of the book value of Strong Company's net assets at the date of acquisition.Selected balance sheet data at December 31,20X6 are as follows: -Based on the preceding information,what amount will Power Company report as common stock outstanding in its consolidated balance sheet at December 31,20X6?