Question 1

What is preacquisition income?

Accepted Answer

When a company acquires control of a sub

Question 2

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:  
Assume the EQUITY METHOD is applied.
Compute Pell's income from Demers for the year ended December 31, 2014.

Accepted Answer

A)  $74,400. 
B)  $73,000. 
C)  $42,400. 
D)  $41,000. 
E)  $80,000. 
A)  $74,400. 
B)  $73,000. 
C)  $42,400. 
D)  $41,000. 
E)  $80,000.

Question 3

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following:   Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
In consolidation at December 31, 2015, what adjustment is necessary for Hogan's Equipment account?

Accepted Answer

A)  $2,000 increase. 
B)  $2,000 decrease. 
C)  $1,800 increase. 
D)  $1,800 decrease. 
E)  No adjustment is necessary. 
A)  $2,000 increase. 
B)  $2,000 decrease. 
C)  $1,800 increase. 
D)  $1,800 decrease. 
E)  No adjustment is necessary.

Question 4

On January 1, 2015, John Doe Enterprises (JDE) acquired a 55% interest in Bubba Manufacturing, Inc. (BMI). JDE paid for the transaction with $3 million cash and 500,000 shares of JDE common stock (par value $1.00 per share). At the time of the acquisition, BMI's book value was $16,970,000.
On January 1, JDE stock had a market value of $14.90 per share and there was no control premium in this transaction. Any consideration transferred over book value is assigned to goodwill. BMI had the following balances on January 1, 2015.   
For internal reporting purposes, JDE employed the equity method to account for this investment.
The following account balances are for the year ending December 31, 2015 for both companies.   
Required:
Prepare a consolidation worksheet for this business combination. Assume goodwill has been reviewed and there is no goodwill impairment.

Accepted Answer

Consolidation Worksh

Question 5

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:  
Assume the PARTIAL EQUITY method is applied.
Compute Pell's investment in Demers at December 31, 2014.

Accepted Answer

A)  $625,000. 
B)  $574,400. 
C)  $548,000. 
D)  $542,400. 
E)  $532,000. 
A)  $625,000. 
B)  $574,400. 
C)  $548,000. 
D)  $542,400. 
E)  $532,000.

Question 6

Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1, 2014. For 2014, Kailey reported revenues of $810,000 and expenses of $630,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000.
What is the amount of net income to the controlling interest for 2014?

Accepted Answer

A)  $31,000. 
B)  $33,000. 
C)  $55,000. 
D)  $60,000. 
E)  $39,000. 
A)  $31,000. 
B)  $33,000. 
C)  $55,000. 
D)  $60,000. 
E)  $39,000.

Question 7

Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2014 when Park's book value was $560,000. The Royce stock was not actively traded. On the date of acquisition, Park had equipment (with a ten-year life) that was undervalued in the financial records by $140,000. One year later, the following selected figures were reported by the two companies. Additionally, no dividends have been paid.   What is consolidated net income for 2015 attributable to Royce's controlling interest?

Accepted Answer

A)  $686,000. 
B)  $560,000. 
C)  $644,000. 
D)  $635,600. 
E)  $691,600. 
A)  $686,000. 
B)  $560,000. 
C)  $644,000. 
D)  $635,600. 
E)  $691,600.

Question 8

When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000.
What amount should have been reported for the land in a consolidated balance sheet, assuming the investment was obtained prior to the date the purchase method of accounting for new business combinations was discontinued?

Accepted Answer

A)  $70,000. 
B)  $75,000. 
C)  $85,000. 
D)  $92,500. 
E)  $100,000. 
A)  $70,000. 
B)  $75,000. 
C)  $85,000. 
D)  $92,500. 
E)  $100,000.

Question 9

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:  
Assume the INITIAL VALUE is applied.
Compute Pell's investment in Demers at December 31, 2014.

Accepted Answer

A)  $500,000. 
B)  $574,400. 
C)  $625,000. 
D)  $542,400. 
E)  $532,000. 
A)  $500,000. 
B)  $574,400. 
C)  $625,000. 
D)  $542,400. 
E)  $532,000.

Question 10

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following:   Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
In consolidation at December 31, 2014, what adjustment is necessary for Hogan's Buildings account?

Accepted Answer

A)  $1,620 increase. 
B)  $1,620 decrease. 
C)  $1,800 increase. 
D)  $1,800 decrease. 
E)  No adjustment is necessary. 
A)  $1,620 increase. 
B)  $1,620 decrease. 
C)  $1,800 increase. 
D)  $1,800 decrease. 
E)  No adjustment is necessary.

Question 11

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:  
Assume the PARTIAL EQUITY method is applied.
Compute Pell's investment in Demers at December 31, 2016.

Accepted Answer

A)  $780,000. 
B)  $660,000. 
C)  $785,000. 
D)  $676,000. 
E)  $620,000. 
A)  $780,000. 
B)  $660,000. 
C)  $785,000. 
D)  $676,000. 
E)  $620,000.

Question 12

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:  
Assume the INITIAL VALUE is applied.
Compute the non-controlling interest in Demers at December 31, 2015.

Accepted Answer

A)  $126,000. 
B)  $106,000. 
C)  $109,200. 
D)  $149,600. 
E)  $148,200. 
A)  $126,000. 
B)  $106,000. 
C)  $109,200. 
D)  $149,600. 
E)  $148,200.

Question 13

On January 1, 2015, Elva Corp. paid $750,000 for 80% of Fenton Co. when the book value of Fenton's net assets was $800,000. Fenton owned a building with a fair value of $150,000 and a book value of $120,000.
Required:
At what amount would the building appear on a consolidated balance sheet prepared immediately after the combination, under the acquisition method of accounting for business combinations?

Accepted Answer

The answer of On January 1, 2015, Elva Corp. paid...

Question 14

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:  
Assume the EQUITY METHOD is applied.
Compute the non-controlling interest in Demers at December 31, 2015.

Accepted Answer

A)  $107,000. 
B)  $126,000. 
C)  $109,200. 
D)  $149,600. 
E)  $148,200. 
A)  $107,000. 
B)  $126,000. 
C)  $109,200. 
D)  $149,600. 
E)  $148,200.

Question 15

How does a parent company account for the sale of a portion of an investment in a subsidiary?

Accepted Answer

If control is maintained after the sale,

Question 16

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded.
What is the total amount of goodwill recognized at the date of acquisition?

Accepted Answer

A)  $150,000. 
B)  $250,000. 
C)  $0. 
D)  $120,000. 
E)  $170,000. 
A)  $150,000. 
B)  $250,000. 
C)  $0. 
D)  $120,000. 
E)  $170,000.

Question 17

How would you determine the amount of goodwill to be recognized at date of acquisition when there is a non-controlling interest present?

Accepted Answer

The non-controlling interest fair value

Question 18

When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000.
What amount should have been reported for the land in a consolidated balance sheet at the acquisition date?

Accepted Answer

A)  $52,500. 
B)  $70,000. 
C)  $75,000. 
D)  $92,500. 
E)  $100,000. 
A)  $52,500. 
B)  $70,000. 
C)  $75,000. 
D)  $92,500. 
E)  $100,000.

Question 19

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:  
Assume the EQUITY METHOD is applied.
Compute Pell's income from Demers for the year ended December 31, 2015.

Accepted Answer

A)  $90,400. 
B)  $89,000. 
C)  $50,400. 
D)  $56,000. 
E)  $96,000. 
A)  $90,400. 
B)  $89,000. 
C)  $50,400. 
D)  $56,000. 
E)  $96,000.

Question 20

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded.
What is the dollar amount of Float Corp.'s net assets that would be represented in a consolidated balance sheet prepared at the date of acquisition?

Accepted Answer

A)  $1,600,000. 
B)  $1,480,000. 
C)  $1,200,000. 
D)  $1,780,000. 
E)  $1,850,000. 
A)  $1,600,000. 
B)  $1,480,000. 
C)  $1,200,000. 
D)  $1,780,000. 
E)  $1,850,000.

What is preacquisition income?

How does a parent company account for the sale of a portion of an investment in a subsidiary?

How would you determine the amount of goodwill to be recognized at date of acquisition when there is a non-controlling interest present?

When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000. What amount should have been reported for the land in a consolidated balance sheet at the acquisition date?

The Equity Method of Accounting for Investments

Consolidation of Financial Information

Consolidations - Subsequent to the Date of Acquisition

Consolidated Financial Statements Intra-Entity Asset Transactions

Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues

Consolidated Financial Statements - Ownership Patterns and Income Taxes

Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Worldwide Accounting Diversity and International Accounting Standards

Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

Partnerships: Formation and Operation

Partnerships: Termination and Liquidation

Accounting for State and Local Governments

Accounting for State and Local Governments

Accounting and Reporting for Private Not-For-Profit Organizations

Accounting for Estates and Trusts

Filters

Exam 4: Consolidated Financial Statements and Outside Ownership

What is preacquisition income?

How does a parent company account for the sale of a portion of an investment in a subsidiary?

How would you determine the amount of goodwill to be recognized at date of acquisition when there is a non-controlling interest present?

When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000. What amount should have been reported for the land in a consolidated balance sheet at the acquisition date?

The Equity Method of Accounting for Investments

Consolidation of Financial Information

Consolidations - Subsequent to the Date of Acquisition

Consolidated Financial Statements Intra-Entity Asset Transactions

Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues

Consolidated Financial Statements - Ownership Patterns and Income Taxes

Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Worldwide Accounting Diversity and International Accounting Standards

Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

Partnerships: Formation and Operation

Partnerships: Termination and Liquidation

Accounting for State and Local Governments

Accounting for State and Local Governments

Accounting and Reporting for Private Not-For-Profit Organizations

Accounting for Estates and Trusts

Filters