Exam 2: Reporting Intercorporate Investments and Consolidation of Wholly Owned Subsidiaries With No Differential

Parent Company purchased 100 percent of Son Inc.on January 1,20X2 for $420,000.Son reported earnings of $82,000 and declared dividends of $4,000 during 20X2. -Based on the preceding information and assuming Parent carries its investment in Son at cost,what is the balance in Parent's Investment in Son account on December 31,20X2,prior to consolidation?

Pone Company purchased 100 percent of Sone Inc.on January 1,20X9 for $625,000.Sone reported earnings of $76,000 and declared dividends of $8,000 during 20X9. -Based on the preceding information and assuming Pone carries its investment in Sone at cost,what is the balance in Pone's Investment in Sone account on December 31,20X9,prior to consolidation?

Phips Co.purchases 100 percent of Sips Company on January 1,20X2,when Phips' retained earnings balance is $320,000 and Sips' is $120,000.During 20X2,Sips reports $20,000 of net income and declares $8,000 of dividends.Phips reports $125,000 of separate operating earnings plus $20,000 of equity-method income from its 100 percent interest in Sips;Phips declares dividends of $35,000. -Based on the preceding information,what is Phips' post-closing retained earnings balance on December 31,20X2?

Usually,an investment of 20 to 50 percent in another company's voting stock is reported under the:

On January 1,20X4,Pony Company acquired 25% of Stallion Company's common stock at underlying book value of $200,000.Stallion has 80,000 shares of $10 par value,6 percent cumulative preferred stock outstanding.No dividends are in arrears.Stallion reported net income of $270,000 for 20X4 and paid total dividends of $140,000.Pony uses the equity method to account for this investment. -Based on the preceding information,what amount of investment income will Pony Company report from its investment in Stallion for the year?

If instead,Poke could not exercise significant influence over the investee,by what amount will Poke's 20X7 income increase due to its investment in Shove?

If Push Company owned 51 percent of the outstanding common stock of Shove Company,which method would be appropriate for financial reporting purposes?

On January 1,20X4,Pony Company acquired 25% of Stallion Company's common stock at underlying book value of $200,000.Stallion has 80,000 shares of $10 par value,6 percent cumulative preferred stock outstanding.No dividends are in arrears.Stallion reported net income of $270,000 for 20X4 and paid total dividends of $140,000.Pony uses the equity method to account for this investment. -Based on the preceding information,what amount would Pony Company receive as dividends from Stallion for the year?

Prime Company acquired 100 percent of the voting common shares of Standard Video Corporation,its bitter rival,by issuing bonds with a par value and fair value of $150,000.Immediately prior to the acquisition,Prime reported total assets of $500,000,liabilities of $280,000,and stockholders' equity of $220,000.At that date,Standard Video reported total assets of $400,000,liabilities of $250,000,and stockholders' equity of $150,000.Included in Standard's liabilities was an account payable to Prime in the amount of $20,000,which Prime included in its accounts receivable. -Based on the preceding information,what amount of stockholders' equity was reported in the consolidated balance sheet immediately after acquisition?

On January 1,20X4,Plimsol Company acquired 100 percent of Shipping Corporation's voting shares,at underlying book value.Plimsol accounts for its investment in Shipping at cost.Shipping's retained earnings was $75,000 on the date of acquisition.On December 31,20X4,the trial balance data for the two companies are as follows: -Based on the information provided,what amount of total stockholders' equity will be reported in the consolidated balance sheet prepared on December 31,20X4?

Pone Company purchased 100 percent of Sone Inc.on January 1,20X9 for $625,000.Sone reported earnings of $76,000 and declared dividends of $8,000 during 20X9. -Based on the preceding information and assuming Pone uses the equity method to account for its investment in Sone,what is the balance in Pone's Investment in Sone account on December 31,20X9,prior to consolidation?

On January 1,20X4,Plimsol Company acquired 100 percent of Shipping Corporation's voting shares,at underlying book value.Plimsol accounts for its investment in Shipping at cost.Shipping's retained earnings was $75,000 on the date of acquisition.On December 31,20X4,the trial balance data for the two companies are as follows: -Based on the information provided,what amount of total liabilities will be reported in the consolidated balance sheet prepared on December 31,20X4?

In the absence of other evidence,common stock ownership of between 20 and 50 percent is viewed as indicating that the investor is able to exercise significant influence over the investee.What are some of the other factors that could constitute evidence of the ability to exercise significant influence?

On January 1,20X8,Pullman Company acquired 30 percent of Skate Company's common stock,at underlying book value of $100,000.Skate has 100,000 shares of $2 par value,5 percent cumulative preferred stock outstanding.No dividends are in arrears.Skate reported net income of $150,000 for 20X8 and paid total dividends of $72,000.Pullman uses the equity method to account for this investment. -Based on the preceding information,what amount would be reported by Pullman Company as the balance in its investment account on December 31,20X8?

On January 1,20X7,Plimsol Company acquired 100 percent of Shipping Corporation's voting shares,at underlying book value.Plimsol uses the cost method in accounting for its investment in Shipping.Shipping's reported retained earnings of $75,000 on the date of acquisition.The trial balances for Plimsol Company and Shipping Corporation as of December 31,20X8,follow: Required: 1.Provide all consolidating entries required to prepare a full set of consolidated statements for 20X8. 2.Prepare a three-part consolidation worksheet in good form as of December 31,20X8.

On January 1,20X9 Pathlon Company acquired 30 percent of the common stock of Sopteron Corporation,at underlying book value.For the same year,Sopteron reported net income of $55,000,which includes a gain from discontinued operations of $40,000.It did not pay any dividends during the year.By what amount would Pathlon's investment in Sopteron Corporation increase for the year,if Pathlon used the equity method?

On July 1,20X4,Pillow Corp.obtained significant influence over Sleep Co.through the purchase of 3,000 shares of Sleep's 10,000 outstanding shares of common stock for $20 per share.On December 15,20X4,Sleep paid $40,000 in dividends to its common stockholders.Sleep's net income for the year ended December 31,20X4,was $120,000,earned evenly throughout the year.In its 20X4 income statement,what amount of income from this investment should Pillow report?

On January 1,20X7,Poke Corporation acquired 25 percent of the outstanding shares of Shove Corporation for $100,000 cash.Shove Company reported net income of $75,000 and paid dividends of $30,000 for both 20X7 and 20X8.The fair value of shares held by Poke was $110,000 and $105,000 on December 31,20X7 and 20X8 respectively. -Based on the preceding information,what amount will be reported by Poke as income from its investment in Shove for 20X8,if it used the equity method of accounting?

Which of the following observations is NOT consistent with the accounting for investments in equity securities where there is no significant influence?

Parent Co.purchases 100 percent of Son Company on January 1,20X1,when Parent's retained earnings balance is $520,000 and Son's is $150,000.During 20X1,Son reports $15,000 of net income and declares $6,000 of dividends.Parent reports $105,000 of separate operating earnings plus $15,000 of equity-method income from its 100 percent interest in Son;Parent declares dividends of $40,000. -Based on the preceding information,what is Son's post-closing retained earnings balance on December 31,20X1?