Ryan Company owns 80% of Chase Company. The original balances presented for Ryan and Chase as of January 1, 2011 are as follows: $\begin{array}{l} \text { Chase Company: }\\ \begin{array}{lr} \text { Shares outstanding } & 50,000 \\ \text { Book value } & \$ 400,000 \\ \text { Book value per share } & \$ 8\\\\\text { Ryan Company: }\\\text { Shares owned of Chase } & 40,000 \\ \text { Book value of investment in Chase } & \$ 320,000 \end{array} \end{array}$ Assume Chase reacquired 8,000 shares of its common stock from outsiders at $10 per share. -What should the adjusted book value of Chase be after the treasury shares were purchased?

A) $400,000. B) $480,000. C) $320,000. D) $336,000. E) $464,000. A) $400,000. B) $480,000. C) $320,000. D) $336,000. E) $464,000. C

Ryan Company owns 80% of Chase Company. The original balances presented for Ryan and Chase as of January 1, 2011, are as follows: $\begin{array}{l} \text { Chase Company: }\\ \begin{array}{lr} \text { Shares outstanding } & 50,000 \\ \text { Book value } & \$ 400,000 \\ \text { Book value per share } & \$ 8\\\\\text { Ryan Company: }\\\text { Shares owned of Chase } & 40,000 \\ \text { Book value of investment in Chase } & \$ 320,000 \end{array} \end{array}$ 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%.

Panton, Inc. acquired 18,000 shares of Glotfelty Corp. several years ago. At the present time, Glotfelty is reporting the following stockholders' equity: $\begin{array}{|l|r|} \hline \text { Common stock, } \$ 10 \text { par value (20,000 shares outstanding) } & \$ 200,000 \\ \hline \text { Additional paid in capital } & 100,000 \\ \hline \text { Retained earnings } & \underline{300,000} \\ \hline & \underline{\$ 600,000} \\\hline\\ \hline \end{array}$ Glotfelty issues 5,000 shares of previously unissued stock to the public for $40 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,

Panton, Inc. acquired 18,000 shares of Glotfelty Corp. several years ago. At the present time, Glotfelty is reporting the following stockholders' equity: $\begin{array}{|l|r|} \hline \text { Common stock, } \$ 10 \text { par value (20,000 shares outstanding) } & \$ 200,000 \\ \hline \text { Additional paid in capital } & 100,000 \\ \hline \text { Retained earnings } & \underline{300,000} \\ \hline & \underline{\$ 600,000} \\\hline\\ \hline \end{array}$ Glotfelty issues 5,000 shares of previously unissued stock to the public for $40 per share. None of this stock is purchased by Panton. -Prepare Panton's journal entry to recognize the impact of this transaction.

The answer of Panton, Inc. acquired 18,000 shares of Glotfelty...

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: $\begin{array}{lr} \text { Common stock ( } \$ 5 \text { par value) } & \$ 250,000 \\ \text { Additional paid-in capital } & 110,000 \\ \text { Retained earnings } & 330,000\\\text { Total stockholders' equity }&\$690,000 \end{array}$ 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 Investment in Garvin Co. after the sale of the 10,000 shares of common stock?

A) $552,000. B) $560,000. C) $460,000. D) $404,000. E) $672,000. A) $552,000. B) $560,000. C) $460,000. D) $404,000. E) $672,000.

Anderson, Inc. has owned 70% of its subsidiary, Arthur Corp., for several years. The consolidated balance sheets of Anderson, Inc. and Arthur Corp. are presented below: $\begin{array}{lrr}&2011&2010\\ \text { Cash } & \$ 8,000 & \$ 26,000 \\ \text { Accounts Receivable (net) } & 75,000 & 54,000 \\ \text { Inventory } & 100,000 & 89,000 \\ \text { Plant \& Equipment (net) } & 156,000 & 170,000 \\ \text { Copvright } & 16,000 & 18,000\\&\$355,000&\$357,000\\\\\text { Accounts payable } & \$ 60,000 & \$ 51,000 \\ \text { Long-term Debt } & 0 & 35,000 \\ \text { Noncontrolling interest } & 27,000 & 25,000 \\ \text { Common stock, \$1 par } & 100,000 & 100,000 \\ \text { Retained earnings } & 168,000 & 146,000\\&\$355,000&\$357,000 \end{array}$ Additional information for 2011: - The combination occurred using the acquisition method. Consolidated net income was $\$ 50,000$. The noncontrolling interest share of consolidated net income of Arthur was $\$ 3,200$. - Arthur paid $\$ 4,000$ in dividends. - There were no disposals of plant \& equipment or copyright this year. -Net cash flow from financing activities was:

A) $(28,000). B) $(35,000). C) $(13,000). D) $(63,000). E) $(61,000). A) $(28,000). B) $(35,000). C) $(13,000). D) $(63,000). E) $(61,000).

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

A) $608,000. B) $720,000. C) $680,000. D) $760,000. E) $400,000. A) $608,000. B) $720,000. C) $680,000. D) $760,000. E) $400,000.

Exam 6: Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flo

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 40,000 Book value of investment in Chase \ 320,000 Assume Chase reacquired 8,000 shares of its common stock from outsiders at $10 per share. -What should the adjusted book value of Chase be after the treasury shares were purchased?

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Question 1

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Parent Corporation had just purchased some of its subsidiary's outstanding bonds on the open market. What items related to these bonds will have to be accounted for in the consolidation process?

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Question 2

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For each period that the parent owns the bonds, the bonds must be eliminated on the consolidation worksheet. Eliminating the bonds requires the elimination of the parent's investment account, the portion of the bonds payable that the parent acquired, interest expense of the issuer, and interest income of the investor. In the year in which the parent acquired the bonds, a gain or loss must have been recognized. Over the life of the bonds, retained earnings must be debited or credited for the amount or the gain or loss, as adjusted by the previous years' difference between interest expense and interest income.

If newly issued debt is issued from a parent to its subsidiary, which of the following statements is false?

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Question 3

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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 40,000 Book value of investment in Chase \ 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?

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Question 4

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 \ 600,000 Glotfelty issues 5,000 shares of previously unissued stock to the public for $27 per share. None of this stock is purchased by Panton. -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 \ 600,000 Glotfelty issues 5,000 shares of previously unissued stock to Panton for $35 per share. Required: Describe how this transaction would affect Panton's books.

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Question 5

How would consolidated earnings per share be calculated if the subsidiary has no convertible securities or warrants?

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Question 6

Knight Co. owned 80% of the common stock of Stoop Co. Stoop had 50,000 shares of $5 par value common stock and 2,000 shares of preferred stock outstanding. Each preferred share received an annual per share dividend of $10 and is convertible into four shares of common stock. Knight did not own any of Stoop's preferred stock. Stoop also had 600 bonds outstanding, each of which is convertible into ten shares of common stock. Stoop's annual after-tax interest expense for the bonds was $22,000. Knight did not own any of Stoop's bonds. Stoop reported income of $300,000 for 2011. -Tray Co. reported current earnings of $560,000 while paying $56,000 in cash dividends. Sparrish Co. earned $140,000 in net income and distributed $14,000 in dividends. Tray held a 70% interest in Sparrish for several years, an investment that it originally acquired by transferring consideration equal to the book value of the underlying net assets. Tray used the initial value method to account for these shares. On January 1, 2011, Sparrish acquired in the open market $70,000 of Tray's 8% bonds. The bonds had originally been issued several years ago at 92, reflecting a 10% effective interest rate. On the date of the bond purchase, the book value of the bonds payable was $67,600. Sparrish paid $65,200 based on a 12% effective interest rate over the remaining life of the bonds. What is the noncontrolling interest's share of the subsidiary's net income?

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Question 7

Which of the following statements is true concerning variable interest entities (VIEs)? 1) The role of the VIE equity investors can be fairly minor. 2) A VIE may be created specifically to benefit its sponsoring firm with low-cost financing. 3) VIE governing agreements often limit activities and decision making. 4) VIEs usually have a well-defined and limited business activity.

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Question 8

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 $40 per share. None of this stock is purchased by Panton. -Describe how this transaction would affect Panton's books.

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Question 9

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 $40 per share. None of this stock is purchased by Panton. -Prepare Panton's journal entry to recognize the impact of this transaction.

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Question 10

How do intra-entity sales of inventory affect the preparation of a consolidated statement of cash flows?

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Question 11

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

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Question 12

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 \6 90,000 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 Investment in Garvin Co. after the sale of the 10,000 shares of common stock?

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Question 13

Anderson, Inc. has owned 70% of its subsidiary, Arthur Corp., for several years. The consolidated balance sheets of Anderson, Inc. and Arthur Corp. are presented below: 2011 2010 Cash \ 8,000 \ 26,000 Accounts Receivable (net) 75,000 54,000 Inventory 100,000 89,000 Plant \& Equipment (net) 156,000 170,000 Copvright 16,000 18,000 \3 55,000 \3 57,000 Accounts payable \ 60,000 \ 51,000 Long-term Debt 0 35,000 Noncontrolling interest 27,000 25,000 Common stock, \1 par 100,000 100,000 Retained earnings 168,000 146,000 \3 55,000 \3 57,000 Additional information for 2011: - The combination occurred using the acquisition method. Consolidated net income was $\$ 50,000$ . The noncontrolling interest share of consolidated net income of Arthur was $\$ 3,200$ . - Arthur paid $\$ 4,000$ in dividends. - There were no disposals of plant \& equipment or copyright this year. -Net cash flow from financing activities was:

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Question 14

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 15

Skipen Corp. had the following stockholders' equity accounts: Preferred stock ( 8\% cumulative dividend) \ 700,000 Common stock 1,050,000 Additional paid-in capital 420,000 Retained earnings 1,330,000 Total \3 ,500,000 The preferred stock was participating and is therefore considered to be equity. Vestin Corp. acquired 90% of this common stock for $2,250,000 and 70% of the preferred stock for $1,120,000. All of the subsidiary's assets and liabilities were determined to have fair values equal to their book values except for land which is undervalued by $130,000. Required: What amount was attributed to goodwill on the date of acquisition?

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Question 16

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 40,000 Book value of investment in Chase \ 320,000 Assume Chase issues 30,000 additional shares common stock solely to Ryan for $12 per share. -What is the adjusted book value of Chase Company after the issuance of the shares?

(Multiple Choice)

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Question 17

The following information has been taken from the consolidation worksheet of Graham Company and its 80% owned subsidiary, Stage Company. (1.) Graham reports a loss on sale of land of $5,000. The land cost Graham $20,000. (2.) Noncontrolling interest in Stage's net income was $30,000. (3.) Graham paid dividends of $15,000. (4.) Stage paid dividends of $10,000. (5.) Excess acquisition-date fair value over book value was expensed by $6,000. (6.) Consolidated accounts receivable decreased by $8,000. (7.) Consolidated accounts payable decreased by $7,000. -How is the loss on sale of land reported on the consolidated statement of cash flows?

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Question 18

Wolff Corporation owns 70 percent of the outstanding stock of Donald, Inc. During the current year, Donald made $75,000 in sales to Wolff. How does this transfer affect the consolidated statement of cash flows?

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Question 19

Which of the following statements is false concerning variable interest entities (VIEs)?

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Question 20

Showing 1 - 20 of 115

Parent Corporation had just purchased some of its subsidiary's outstanding bonds on the open market. What items related to these bonds will have to be accounted for in the consolidation process?

If newly issued debt is issued from a parent to its subsidiary, which of the following statements is false?

How would consolidated earnings per share be calculated if the subsidiary has no convertible securities or warrants?

How do intra-entity sales of inventory affect the preparation of a consolidated statement of cash flows?

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

Wolff Corporation owns 70 percent of the outstanding stock of Donald, Inc. During the current year, Donald made $75,000 in sales to Wolff. How does this transfer affect the consolidated statement of cash flows?

Which of the following statements is false concerning variable interest entities (VIEs)?

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

Consolidated Financial Statements - Ownership Patterns and Income

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

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