Question 1

The benefits of filing a consolidated tax return include all of the following except

Accepted Answer

A)  Intercompany profits are not taxed until realized. 
B)  Intercompany profits are deferred. 
C)  Intercompany dividends are not taxable. 
D)  Losses incurred by an affiliated company can be used to reduce taxable income earned by other members to that affiliated group. 
E)  Intercompany profits are taxed before realized, but intercompany losses are deferred. 
A)  Intercompany profits are not taxed until realized. 
B)  Intercompany profits are deferred. 
C)  Intercompany dividends are not taxable. 
D)  Losses incurred by an affiliated company can be used to reduce taxable income earned by other members to that affiliated group. 
E)  Intercompany profits are taxed before realized, but intercompany losses are deferred.

Question 2

Delta Corporation owns 90 percent of Sigma Company, and Sigma owns 90 percent of Pi, Inc., all of which are domestic corporations. Information for the three companies for the year ending December 31, 2011 follows:  
-What is the noncontrolling interest in Pi's income for 2011?

Accepted Answer

A)  $0. 
B)  $9,600. 
C)  $10,000. 
D)  $19,200. 
E)  $20,000. 
A)  $0. 
B)  $9,600. 
C)  $10,000. 
D)  $19,200. 
E)  $20,000.

Question 3

Delta Corporation owns 90 percent of Sigma Company, and Sigma owns 90 percent of Pi, Inc., all of which are domestic corporations. Information for the three companies for the year ending December 31, 2011 follows:  
-Which of the following statements is true?

Accepted Answer

A)  Delta and Sigma must file a consolidated income tax return, but must exclude Pi from the consolidated return. 
B)  Delta, Sigma, and Pi must file a consolidated income tax return. 
C)  Delta, Sigma, and Pi must file separate income tax returns because the ownership of Sigma and Pi is less than 100%. 
D)  Delta, Sigma, and Pi will probably not file a consolidated income tax return. 
E)  Delta, Sigma, and Pi may file separate income tax returns or a consolidated income tax return. 
A)  Delta and Sigma must file a consolidated income tax return, but must exclude Pi from the consolidated return. 
B)  Delta, Sigma, and Pi must file a consolidated income tax return. 
C)  Delta, Sigma, and Pi must file separate income tax returns because the ownership of Sigma and Pi is less than 100%. 
D)  Delta, Sigma, and Pi will probably not file a consolidated income tax return. 
E)  Delta, Sigma, and Pi may file separate income tax returns or a consolidated income tax return.

Question 4

Which of the following statements is true regarding a subsidiary's investment in the parent company's stock?

Accepted Answer

A)  The treasury stock approach focuses on the parent's control over its subsidiary. 
B)  For consolidation, both the parent and subsidiary must eliminate all intra-entity investments. 
C)  In consolidation, the parent's retained earnings will not be reduced by the dividends it paid to the subsidiary. 
D)  This corporate combination is known as mututal ownership. 
E)  All of the above are true statements. 
A)  The treasury stock approach focuses on the parent's control over its subsidiary. 
B)  For consolidation, both the parent and subsidiary must eliminate all intra-entity investments. 
C)  In consolidation, the parent's retained earnings will not be reduced by the dividends it paid to the subsidiary. 
D)  This corporate combination is known as mututal ownership. 
E)  All of the above are true statements.

Question 5

On January 1, 2011, a subsidiary buys 8 percent of the outstanding voting stock of its parent corporation. The payment of $350,000 exceeded book value of the acquired shares by $50,000, attributable to a copyright with a 10-year useful life. During the year, the parent reported operating income of $675,000 (excluding investment income from the subsidiary), and paid $100,000 in dividends. If the treasury stock approach is used, how is the Investment in Parent Stock reported in the consolidated balance sheet at December 31, 2011?

Accepted Answer

A)  Included in current assets. 
B)  Included in noncurrent assets. 
C)  Consolidated stockholders' equity is reduced by $350,000. 
D)  Consolidated stockholders' equity is reduced by $300,000. 
E)  There is no effect on the consolidated balance sheet, because the effects have been eliminated. 
A)  Included in current assets. 
B)  Included in noncurrent assets. 
C)  Consolidated stockholders' equity is reduced by $350,000. 
D)  Consolidated stockholders' equity is reduced by $300,000. 
E)  There is no effect on the consolidated balance sheet, because the effects have been eliminated.

Question 6

Chase Company owns 80% of Lawrence Company and 40% of Ross Company. Lawrence Company also owns 30% of Ross Company. Separate operating incomes for 2011 of Chase, Lawrence, and Ross are $450,000, $300,000, and $250,000, respectively. Each company also retains a $20,000 unrealized gain in their current income figures. Annual amortization expense of $15,000 is assigned to Chase's investment in Lawrence and another $15,000 is assigned to Lawrence's investment in Ross.
-Compute the noncontrolling interest in Ross' net income for 2011.

Accepted Answer

A)  $92,000. 
B)  $77,400. 
C)  $75,000. 
D)  $64,500. 
E)  $69,000. 
A)  $92,000. 
B)  $77,400. 
C)  $75,000. 
D)  $64,500. 
E)  $69,000.

Question 7

On January 1, 2010, Jones Company bought 15% of Whitton Company. Jones paid $150,000 for these shares, an amount that exactly equaled the proportionate book value of Whitton. On January 1, 2011, Whitton acquired 80% ownership of Jones. The following data are available concerning Whitton's acquisition of Jones:
Consideration transferred for 80% interest, January 1, 2011: $800,000
Jones' reported book value, January 1, 2011: 900,000
Excess fair value over book value (assigned to trademarks) is amortized over 20 years.
The initial value method is used by both companies.
The following information is available regarding Jones and Whitton:  
-What would be included in a consolidation worksheet entry for 2011?

Accepted Answer

A)  Debit treasury stock, $135,000. 
B)  Credit treasury stock, $135,000. 
C)  Debit treasury stock, $150,000. 
D)  Credit treasury stock, $150,000. 
E)  Debit common stock, $150,000. 
A)  Debit treasury stock, $135,000. 
B)  Credit treasury stock, $135,000. 
C)  Debit treasury stock, $150,000. 
D)  Credit treasury stock, $150,000. 
E)  Debit common stock, $150,000.

Question 8

What is this pattern of ownership called?

Accepted Answer

A)  Pyramid ownership. 
B)  A connecting affiliation. 
C)  Mutual ownership. 
D)  An indirect affiliation. 
E)  An affiliated group. 
A)  Pyramid ownership. 
B)  A connecting affiliation. 
C)  Mutual ownership. 
D)  An indirect affiliation. 
E)  An affiliated group.

Question 9

C Co. currently owns 80% of D Co. and several other subsidiaries. C Co. is interested in gaining control of H Co. Why might C Co. allow D Co. to acquire H Co., rather than purchasing H Co. directly?

Accepted Answer

Indirect control (such as a father-son-g

Question 10

Which of the following statements is true regarding the filing of income taxes for an affiliated group?

Accepted Answer

A)  Domestic subsidiaries greater than 50% ownership must file a consolidated tax return. 
B)  Domestic subsidiaries greater than 60% ownership must file a consolidated tax return. 
C)  Domestic subsidiaries greater than 80% ownership must file a consolidated tax return. 
D)  Domestic subsidiaries greater than 80% ownership may file a consolidated tax return. 
E)  Foreign subsidiaries must file a consolidated tax return. 
A)  Domestic subsidiaries greater than 50% ownership must file a consolidated tax return. 
B)  Domestic subsidiaries greater than 60% ownership must file a consolidated tax return. 
C)  Domestic subsidiaries greater than 80% ownership must file a consolidated tax return. 
D)  Domestic subsidiaries greater than 80% ownership may file a consolidated tax return. 
E)  Foreign subsidiaries must file a consolidated tax return.

Question 11

X Co. owned 80% of Y Corp., and Y Corp. owned 15% of X Co. Under the treasury stock approach, how would the dividends that are paid by X Co. to Y Corp. be handled on a consolidation worksheet?

Accepted Answer

The dividends must b

Question 12

Tower Company owns 85% of Hill Company. The two companies engaged in several intra-entity transactions. Each company's operating and dividend income for the current time period follow, as well as the effects of unrealized gains. No income tax accruals have been recognized within these totals. The tax rate for each company is 30%.  
-Using percentage allocation method, how much income tax expense is assigned to Hill?

Accepted Answer

A)  $21,000. 
B)  $24,000. 
C)  $20,400. 
D)  $17,400. 
E)  $0. 
A)  $21,000. 
B)  $24,000. 
C)  $20,400. 
D)  $17,400. 
E)  $0.

Question 13

Alpha Corporation owns 100 percent of Beta Company, and Beta owns 80 percent of Gamma, Inc., all of which are domestic corporations. Information for the three companies for the year ending December 31, 2011 follows:  
-What is Gamma's accrual-based income for 2011?

Accepted Answer

A)  $76,000. 
B)  $80,000. 
C)  $96,000. 
D)  $100,000. 
E)  $104,000. 
A)  $76,000. 
B)  $80,000. 
C)  $96,000. 
D)  $100,000. 
E)  $104,000.

Question 14

Beagle Co. owned 80% of Maroon Corp. Maroon owned 90% of Eckston Inc. Operating income totals for 2011 are shown below; these figures contained no investment income. Amortization expense was not required by any of these acquisitions. Included in Eckston's operating income was a $56,000 unrealized gain on intra-entity transfers to Maroon.  
-The accrual-based income of Beagle Co. is calculated to be

Accepted Answer

A)  $706,670. 
B)  $755,980. 
C)  $805,280. 
D)  $838,150. 
E)  $815,770. 
A)  $706,670. 
B)  $755,980. 
C)  $805,280. 
D)  $838,150. 
E)  $815,770.

Question 15

Hardford Corp. held 80% of Inglestone Inc. which, in turn, owned 80% of Jade Co. Operating income figures (without investment income) as well as unrealized upstream gains included in the income for the current year follow:  
-The noncontrolling interest in the net income of Inglestone Inc. is calculated to be

Accepted Answer

A)  $106,950. 
B)  $102,640. 
C)  $114,530. 
D)  $106,960. 
E)  $103,680. 
A)  $106,950. 
B)  $102,640. 
C)  $114,530. 
D)  $106,960. 
E)  $103,680.

Question 16

For West Corp. and consolidated subsidiaries, what total amount would have been reported for the noncontrolling interest's share of subsidiaries' net income?

Accepted Answer

A)  $165,300. 
B)  $199,300. 
C)  $191,000. 
D)  $228,000. 
E)  $153,000. 
A)  $165,300. 
B)  $199,300. 
C)  $191,000. 
D)  $228,000. 
E)  $153,000.

Question 17

How much will the consolidated group save if it decides to file a consolidated income tax return?

Accepted Answer

@#IMG-DLM& (Also computed as $

Question 18

Woods Company has one depreciable asset valued at $800,000. Because of recent losses, the company has a net operating loss carryforward of $150,000. The tax rate is 30%. The company was acquired for $1,000,000. It is likely the benefit will be realized. Compute the goodwill realized in consolidation.

Accepted Answer

A)  $0. 
B)  $155,000. 
C)  $200,000. 
D)  $305,000. 
E)  $350,000. 
A)  $0. 
B)  $155,000. 
C)  $200,000. 
D)  $305,000. 
E)  $350,000.

Question 19

River Co. owned 80% of Boat Inc. The two companies filed a consolidated income tax return and River used the initial value method to account for the investment. The following information was available from the two companies' financial statements:   Operating income included net unrealized gains, which are associated with transfers of inventories between the two companies, but it did not include dividends received from a subsidiary. The income tax rate was 30%.
-What was the amount of income tax expense that should have been assigned to Boat using the separate return method?

Accepted Answer

A)  $36,000 
B)  $31,500 
C)  $33,390 
D)  $32,750 
E)  $32,660 
A)  $36,000 
B)  $31,500 
C)  $33,390 
D)  $32,750 
E)  $32,660

Question 20

Under what conditions must a deferred income tax asset be recorded?

Accepted Answer

A deferred income tax asset is recorded

The benefits of filing a consolidated tax return include all of the following except

Delta Corporation owns 90 percent of Sigma Company, and Sigma owns 90 percent of Pi, Inc., all of which are domestic corporations. Information for the three companies for the year ending December 31, 2011 follows: -What is the noncontrolling interest in Pi's income for 2011?

Delta Corporation owns 90 percent of Sigma Company, and Sigma owns 90 percent of Pi, Inc., all of which are domestic corporations. Information for the three companies for the year ending December 31, 2011 follows: -Which of the following statements is true?

Which of the following statements is true regarding a subsidiary's investment in the parent company's stock?

What is this pattern of ownership called?

C Co. currently owns 80% of D Co. and several other subsidiaries. C Co. is interested in gaining control of H Co. Why might C Co. allow D Co. to acquire H Co., rather than purchasing H Co. directly?

Which of the following statements is true regarding the filing of income taxes for an affiliated group?

X Co. owned 80% of Y Corp., and Y Corp. owned 15% of X Co. Under the treasury stock approach, how would the dividends that are paid by X Co. to Y Corp. be handled on a consolidation worksheet?

Alpha Corporation owns 100 percent of Beta Company, and Beta owns 80 percent of Gamma, Inc., all of which are domestic corporations. Information for the three companies for the year ending December 31, 2011 follows: -What is Gamma's accrual-based income for 2011?

For West Corp. and consolidated subsidiaries, what total amount would have been reported for the noncontrolling interest's share of subsidiaries' net income?

How much will the consolidated group save if it decides to file a consolidated income tax return?

Under what conditions must a deferred income tax asset be recorded?

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

Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flo

Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Worldwide Accounting Diversity and International Standards

Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

Partnerships: Formation and Operations

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 7: Consolidated Financial Statements - Ownership Patterns and Income

The benefits of filing a consolidated tax return include all of the following except

Delta Corporation owns 90 percent of Sigma Company, and Sigma owns 90 percent of Pi, Inc., all of which are domestic corporations. Information for the three companies for the year ending December 31, 2011 follows: -What is the noncontrolling interest in Pi's income for 2011?

Delta Corporation owns 90 percent of Sigma Company, and Sigma owns 90 percent of Pi, Inc., all of which are domestic corporations. Information for the three companies for the year ending December 31, 2011 follows: -Which of the following statements is true?

Which of the following statements is true regarding a subsidiary's investment in the parent company's stock?

What is this pattern of ownership called?

C Co. currently owns 80% of D Co. and several other subsidiaries. C Co. is interested in gaining control of H Co. Why might C Co. allow D Co. to acquire H Co., rather than purchasing H Co. directly?

Which of the following statements is true regarding the filing of income taxes for an affiliated group?

X Co. owned 80% of Y Corp., and Y Corp. owned 15% of X Co. Under the treasury stock approach, how would the dividends that are paid by X Co. to Y Corp. be handled on a consolidation worksheet?

Alpha Corporation owns 100 percent of Beta Company, and Beta owns 80 percent of Gamma, Inc., all of which are domestic corporations. Information for the three companies for the year ending December 31, 2011 follows: -What is Gamma's accrual-based income for 2011?

For West Corp. and consolidated subsidiaries, what total amount would have been reported for the noncontrolling interest's share of subsidiaries' net income?

How much will the consolidated group save if it decides to file a consolidated income tax return?

Under what conditions must a deferred income tax asset be recorded?

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

Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flo

Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Worldwide Accounting Diversity and International Standards

Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

Partnerships: Formation and Operations

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