On January 1, 2011, Riney Co. owned 80% of the common stock of Garvin Co. On that date, Garvin's stockholders' equity accounts had the following balances:$\begin{array}{lr} \text { Common stock (\$5 par value) } & \$ 250,000 \\ \text { Additional paid-in capital } & 110,000 \\ \text { Retained earnings } & 330,000 \\ \text { Total stockholders' equity } & \$ 690,000 \\ \end{array}$The balance in Riney's Investment in Garvin Co. account was $552,000, and the noncontrolling interest was $138,000. On January 1, 2011, Garvin Co. sold 10,000 shares of previously unissued common stock for $15 per share. Riney did not acquire any of these shares. -What is the balance in Noncontrolling Interest in Garvin Co.after the sale of the 10,000 shares of common stock?

A) $138,000. B) $101,000. C) $280,000. D) $230,000. E) $168,000. A) $138,000. B) $101,000. C) $280,000. D) $230,000. E) $168,000.

Ryan Company owns 80% of Chase Company. The original balances presented for Ryan and Chase as of January 1, 2011, are as follows:Chase Company: $ \begin{array}{lr}\text { Shares outstanding } & 50,000 \\ \text { Book value } & \$ 400,000 \\ \text { Book value per share } & \$ 8\end{array} $ Ryan Company: Shares owned of Chase $ \quad\quad\quad\quad\quad 40,000 $ Book value of investment in Chase $ \quad\$ 320,000 $Assume Chase issues 30,000 additional shares common stock solely to Ryan for $12 per share. -What is the new percent ownership Ryan owns in Chase?

A) 80%. B) 87.5%. C) 90%. D) 75%. E) 82.5%. A) 80%. B) 87.5%. C) 90%. D) 75%. E) 82.5%.

Webb Company owns 90% of Jones Company. The original balances presented for Jones and Webb as of January 1, 2011 are as follows:$\begin{array}{lr} \text { Jones Company: } &\\ \text { Shares outstanding } & 100,000 \\ \text { Book value of Jones } & \$ 1,200,000 \\ \text { Book value per share } & \$ 12 \\ \text { Webb Company: } & \\ \text { Shares owned of Jones } & 90,000 \\ \text { Book value of investment } & \$1,080,000 \end{array}$Assume Jones issues 20,000 new shares of its common stock for $15 per share. Of this total, Webb acquires 18,000 shares to maintain its 90% interest in Jones. -What is the adjusted book value of Jones after the stock issuance?

A) $1,500,000. B) $1,200,000. C) $1,350,000. D) $1,080,000. E) $1,335,000. A) $1,500,000. B) $1,200,000. C) $1,350,000. D) $1,080,000. E) $1,335,000.

On January 1, 2009, Nichols Company acquired 80% of Smith Company's common stock and 40% of its non-voting, cumulative preferred stock. The consideration transferred by Nichols was $1,200,000 for the common and $124,000 for the preferred. Any excess acquisition-date fair value over book value is considered goodwill. The capital structure of Smith immediately prior to the acquisition is:$\begin{array}{ll} \text { Common stock, } \$ 10 \text { par value }(50,000 \text { shares outstanding) } & \$ 500,000 \\ \text { Preferred stock, } 6 \% \text { cumulative, } \$ 100 \text { par value, } & \\ 3,000 \text { shares outstanding } & 300,000 \\ \text { Additional paid in capital } & 200,000 \\ \text { Retained earnings } & 500,000\\ \text { Total stockholders' equity }&\$1,500,000 \end{array}$ -Determine the amount and account to be recorded for Nichols' investment in Smith.

A) $1,324,000 for Investment in Smith. B) $1,200,000 for Investment in Smith. C) $1,200,000 for Investment in Smith's Common Stock and $124,000 for Investment in Smith's Preferred Stock. D) $1,200,000 for Investment in Smith's Common Stock and $120,000 for Investment in Smith's Preferred Stock. E) $1,448,000 for Investment in Smith's Common Stock. A) $1,324,000 for Investment in Smith. B) $1,200,000 for Investment in Smith. C) $1,200,000 for Investment in Smith's Common Stock and $124,000 for Investment in Smith's Preferred Stock. D) $1,200,000 for Investment in Smith's Common Stock and $120,000 for Investment in Smith's Preferred Stock. E) $1,448,000 for Investment in Smith's Common Stock.

Webb Company owns 90% of Jones Company. The original balances presented for Jones and Webb as of January 1, 2011, are as follows:$\begin{array}{lr} \text { Jones Company: } &\\ \text { Shares outstanding } & 100,000 \\ \text { Book value of Jones } & \$ 1,200,000 \\ \text { Book value per share } & \$ 12 \\ \text { Webb Company: } & \\ \text { Shares owned of Jones } & 90,000 \\ \text { Book value of investment } & \$1,080,000 \end{array}$Jones sells 20,000 shares of previously unissued shares of its common stock to outside parties for $10 per share. -What is the new percent ownership of Webb in Jones after the stock issuance?

A) 75%. B) 90%. C) 80%. D) 64%. E) 60%. A) 75%. B) 90%. C) 80%. D) 64%. E) 60%.

Webb Company owns 90% of Jones Company. The original balances presented for Jones and Webb as of January 1, 2011, are as follows:$\begin{array}{lr} \text { Jones Company: } &\\ \text { Shares outstanding } & 100,000 \\ \text { Book value of Jones } & \$ 1,200,000 \\ \text { Book value per share } & \$ 12 \\ \text { Webb Company: } & \\ \text { Shares owned of Jones } & 90,000 \\ \text { Book value of investment } & \$1,080,000 \end{array}$Jones sells 20,000 shares of previously unissued shares of its common stock to outside parties for $10 per share. -What adjustment is needed for Webb's investment in Jones account?

A) $180,000 increase. B) $180,000 decrease. C) $30,000 increase. D) $30,000 decrease. E) No adjustment is necessary. A) $180,000 increase. B) $180,000 decrease. C) $30,000 increase. D) $30,000 decrease. E) No adjustment is necessary.

Panton,Inc.acquired 18,000 shares of Glotfelty Corp.several years ago.At the present time,Glotfelty is reporting the following stockholders' equity: $\begin{array} { | l | r | } \hline \text { Common stock, } \$ 10 \text { par value } ( 20,000 \text { shares outstanding) } & \$ 200,000 \\ \hline \text { Additional paid in capital } & 100,000 \\ \hline \text { Retained earnings } & \underline { 300,000 } \\ \hline & \underline { \$ 600,000 } \\ \hline & \\ \hline \end{array}$ Glotfelty issues 5,000 shares of previously unissued stock to the public for $27 per share.None of this stock is purchased by Panton. -Describe how this transaction would affect Panton's books.

Prior to the issuance of the new shares,

Exam 6: Variable Interest Entities,intra-Entity Debt,consolidated Cash Flo

On January 1, 2011, Riney Co. owned 80% of the common stock of Garvin Co. On that date, Garvin's stockholders' equity accounts had the following balances: Common stock ( \5 par value) \ 250,000 Additional paid-in capital 110,000 Retained earnings 330,000 Total stockholders' equity \ 690,000 The balance in Riney's Investment in Garvin Co. account was $552,000, and the noncontrolling interest was $138,000. On January 1, 2011, Garvin Co. sold 10,000 shares of previously unissued common stock for $15 per share. Riney did not acquire any of these shares. -What is the balance in Noncontrolling Interest in Garvin Co.after the sale of the 10,000 shares of common stock?

(Multiple Choice)

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Question 41

Goehring,Inc.owns 70 percent of Harry,Inc.The consolidated income statement for a year reports $40,000 Noncontrolling Interest in Harry,Inc.Income.Harry paid dividends in the amount of $100,000 for the year.What are the effects of these transactions in the consolidated statement of cash flows for the year?

(Multiple Choice)

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Question 42

Ryan Company owns 80% of Chase Company. The original balances presented for Ryan and Chase as of January 1, 2011, are as follows:Chase Company: Shares outstanding 50,000 Book value \ 400,000 Book value per share \ 8 Ryan Company: Shares owned of Chase $\quad\quad\quad\quad\quad 40,000$ Book value of investment in Chase $\quad\$ 320,000$ Assume Chase issues 30,000 additional shares common stock solely to Ryan for $12 per share. -What is the new percent ownership Ryan owns in Chase?

(Multiple Choice)

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Question 43

MacDonald,Inc.owns 80 percent of the outstanding stock of Stahl Corporation.During the current year,Stahl made $125,000 in sales to MacDonald.How does this transfer affect the consolidated statement of cash flows?

(Multiple Choice)

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Question 44

If a subsidiary reacquires its outstanding shares from outside ownership for more than book value,which of the following statements is true?

(Multiple Choice)

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Question 45

Webb Company owns 90% of Jones Company. The original balances presented for Jones and Webb as of January 1, 2011 are as follows: Jones Company: Shares outstanding 100,000 Book value of Jones \ 1,200,000 Book value per share \ 12 Webb Company: Shares owned of Jones 90,000 Book value of investment \1 ,080,000 Assume Jones issues 20,000 new shares of its common stock for $15 per share. Of this total, Webb acquires 18,000 shares to maintain its 90% interest in Jones. -What is the adjusted book value of Jones after the stock issuance?

(Multiple Choice)

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Question 46

On January 1, 2009, Nichols Company acquired 80% of Smith Company's common stock and 40% of its non-voting, cumulative preferred stock. The consideration transferred by Nichols was $1,200,000 for the common and $124,000 for the preferred. Any excess acquisition-date fair value over book value is considered goodwill. The capital structure of Smith immediately prior to the acquisition is: Common stock, \ 10 par value (50,000 shares outstanding) \ 500,000 Preferred stock, 6\% cumulative, \ 100 par value, 3,000 shares outstanding 300,000 Additional paid in capital 200,000 Retained earnings 500,000 Total stockholders' equity \1 ,500,000 -Determine the amount and account to be recorded for Nichols' investment in Smith.

(Multiple Choice)

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Question 47

Webb Company owns 90% of Jones Company. The original balances presented for Jones and Webb as of January 1, 2011, are as follows: Jones Company: Shares outstanding 100,000 Book value of Jones \ 1,200,000 Book value per share \ 12 Webb Company: Shares owned of Jones 90,000 Book value of investment \1 ,080,000 Jones sells 20,000 shares of previously unissued shares of its common stock to outside parties for $10 per share. -What is the new percent ownership of Webb in Jones after the stock issuance?

(Multiple Choice)

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Question 48

Webb Company owns 90% of Jones Company. The original balances presented for Jones and Webb as of January 1, 2011, are as follows: Jones Company: Shares outstanding 100,000 Book value of Jones \ 1,200,000 Book value per share \ 12 Webb Company: Shares owned of Jones 90,000 Book value of investment \1 ,080,000 Jones sells 20,000 shares of previously unissued shares of its common stock to outside parties for $10 per share. -What adjustment is needed for Webb's investment in Jones account?

(Multiple Choice)

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Question 49

What would differ between a statement of cash flows for a consolidated company and an unconsolidated company using the indirect method?

(Multiple Choice)

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Question 50

A parent company owns a controlling interest in a subsidiary whose stock has a book value of $27 per share.The last day of the year,the subsidiary issues new shares entirely to outside parties at $25 per share.The parent still holds control over the subsidiary.Which of the following statements is true?

(Multiple Choice)

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Question 51

Thomas Inc.had the following stockholders' equity accounts as of January 1,2011: Kuried Co.acquired all of the voting common stock of Thomas on January 1,2011,for $20,656,000.The preferred stock remained in the hands of outside parties and had a fair value of $3,060,000.A database valued at $656,000 was recognized and amortized over five years. During 2011,Thomas reported earning $630,000 in net income and paid $504,000 in total cash dividends.Kuried used the equity method to account for this investment. $\text {Preferred stock - \$ 90 par value, nonvoting and nonparticipating;}$ 9 \%cumulative dividend \2 ,700,000 Common stock - \2 5 par value 5,600,000 Retained earnings 14,000,000 -What is the amount of goodwill resulting from this acquisition?

(Essay)

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Question 52

A parent acquires all of a subsidiary's common stock and 60 percent of its preferred stock.The preferred stock has a cumulative dividend.No dividends are in arrears.How is the noncontrolling interest in the subsidiary's net income assigned?

(Multiple Choice)

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Question 53

How are intra-entity inventory transfers treated on the consolidation worksheet and how are they reflected in a consolidated statement of cash flows?

(Essay)

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Question 54

A parent company owns a 70 percent interest in a subsidiary whose stock has a book value of $27 per share.The last day of the year,the subsidiary issues new shares for $27 per share,and the parent buys its 70 percent interest in the new shares.Which of the following statements is true?

(Multiple Choice)

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Question 55

Where do dividends paid by a subsidiary to the parent company appear in a consolidated statement of cash flows?

(Multiple Choice)

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Question 56

Thomas Inc.had the following stockholders' equity accounts as of January 1,2011: Kuried Co.acquired all of the voting common stock of Thomas on January 1,2011,for $20,656,000.The preferred stock remained in the hands of outside parties and had a fair value of $3,060,000.A database valued at $656,000 was recognized and amortized over five years. During 2011,Thomas reported earning $630,000 in net income and paid $504,000 in total cash dividends.Kuried used the equity method to account for this investment. $\text {Preferred stock - \$ 90 par value, nonvoting and nonparticipating;}$ 9 \%cumulative dividend \2 ,700,000 Common stock - \2 5 par value 5,600,000 Retained earnings 14,000,000 -What was the noncontrolling interest's share of consolidated net income for the year 2011?

(Essay)

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Question 57

Ryan Company owns 80% of Chase Company. The original balances presented for Ryan and Chase as of January 1, 2011, are as follows:Chase Company: Shares outstanding 50,000 Book value \ 400,000 Book value per share \ 8 Ryan Company: Shares owned of Chase $\quad\quad\quad\quad\quad 40,000$ Book value of investment in Chase $\quad\$ 320,000$ Assume Chase issues 30,000 additional shares common stock solely to Ryan for $12 per share. -After acquiring the additional shares,what adjustment is needed for Ryan's investment in Chase account?

(Multiple Choice)

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Question 58

A company had common stock with a total par value of $18,000,000 and fair value of $62,000,000;and 7% preferred stock with a total par value of $6,000,000 and a fair value of $8,000,000.The book value of the company was $85,000,000.If 90% of this company's total equity was acquired by another,what portion of the value would be assigned to the noncontrolling interest?

(Multiple Choice)

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Question 59

Panton,Inc.acquired 18,000 shares of Glotfelty Corp.several years ago.At the present time,Glotfelty is reporting the following stockholders' equity: Common stock, \ 10 par value (20,000 shares outstanding) \ 200,000 Additional paid in capital 100,000 Retained earnings Glotfelty issues 5,000 shares of previously unissued stock to the public for $27 per share.None of this stock is purchased by Panton. -Describe how this transaction would affect Panton's books.

(Essay)

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Question 60

MacDonald,Inc.owns 80 percent of the outstanding stock of Stahl Corporation.During the current year,Stahl made $125,000 in sales to MacDonald.How does this transfer affect the consolidated statement of cash flows?

If a subsidiary reacquires its outstanding shares from outside ownership for more than book value,which of the following statements is true?

What would differ between a statement of cash flows for a consolidated company and an unconsolidated company using the indirect method?

A parent acquires all of a subsidiary's common stock and 60 percent of its preferred stock.The preferred stock has a cumulative dividend.No dividends are in arrears.How is the noncontrolling interest in the subsidiary's net income assigned?

How are intra-entity inventory transfers treated on the consolidation worksheet and how are they reflected in a consolidated statement of cash flows?

A parent company owns a 70 percent interest in a subsidiary whose stock has a book value of $27 per share.The last day of the year,the subsidiary issues new shares for $27 per share,and the parent buys its 70 percent interest in the new shares.Which of the following statements is true?

Where do dividends paid by a subsidiary to the parent company appear in a consolidated statement of cash flows?

The Equity Method of Accounting for Investments

Consolidation of Financial Information

Consolidations-Subsequent to the Date of Acquisition

Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements - Intra-Entity Asset Transactions

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Partnerships: Formation and Operations

Partnerships: Termination and Liquidation

Accounting for State and Local Governments Part 1

Accounting for State and Local Governments Part 2

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