Deck 4: Consolidation of Wholly Owned Subsidiaries Acquired at More Than Book Value

Question 1

Pace Corporation acquired 100 percent of Spin Company's common stock on January 1, 20X9. Balance sheet data for the two companies immediately following the acquisition follow:
At the date of the business combination, the book values of Spin's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, and land, which had a fair value of $50,000. The fair value of land for Pace Corporation was estimated at $80,000 immediately prior to the acquisition.

Based on the preceding information,what amount of liabilities will be reported in the consolidated balance sheet prepared immediately after the business combination?

A) $615,000
B) $406,000
C) $300,000
D) $265,000

Answer 1

B

Question 2

On October 1, 20X3, Green Corporation paid $450,000 for all of Yellow Company's outstanding common stock. On that date, the book values and fair values of Yellow's recorded assets and liabilities were as follows:

Based on the preceding information,the differential implicit in this acquisition is

A) $0
B) $45,000
C) $65,000
D) $110,000

Answer 2

D

Question 3

Pace Corporation acquired 100 percent of Spin Company's common stock on January 1, 20X9. Balance sheet data for the two companies immediately following the acquisition follow:
At the date of the business combination, the book values of Spin's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, and land, which had a fair value of $50,000. The fair value of land for Pace Corporation was estimated at $80,000 immediately prior to the acquisition.

Based on the preceding information,what amount of total assets will appear in the consolidated balance sheet prepared immediately after the business combination?

A) $756,000
B) $735,000
C) $750,000
D) $642,000

Answer 3

A

Question 4

Paccu Corporation acquired 100 percent of Sallee Company's common stock on January 1, 20X7. Balance sheet data for the two companies immediately following the acquisition follow:
At the date of the business combination, the book values of Sallee's assets and liabilities approximated fair value except for inventory, which had a fair value of $55,000, and land, which had a fair value of $65,000. The fair value of land for Paccu Corporation was estimated at $90,000 immediately prior to the acquisition.
Based on the preceding information,at what amount should the land be reported in the consolidated balance sheet prepared immediately after the business combination?

A) $135,000
B) $140,000
C) $150,000
D) $155,000

Question 5

Pace Corporation acquired 100 percent of Spin Company's common stock on January 1, 20X9. Balance sheet data for the two companies immediately following the acquisition follow:
At the date of the business combination, the book values of Spin's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, and land, which had a fair value of $50,000. The fair value of land for Pace Corporation was estimated at $80,000 immediately prior to the acquisition.

Based on the preceding information,what is the differential associated with the acquisition?

A) $15,000
B) $21,000
C) $6,000
D) $10,000

Question 6

Pace Corporation acquired 100 percent of Spin Company's common stock on January 1, 20X9. Balance sheet data for the two companies immediately following the acquisition follow:
At the date of the business combination, the book values of Spin's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, and land, which had a fair value of $50,000. The fair value of land for Pace Corporation was estimated at $80,000 immediately prior to the acquisition.

Based on the preceding information,what amount of total stockholder's equity will be reported in the consolidated balance sheet prepared immediately after the business combination?

A) $300,000
B) $479,000
C) $315,000
D) $350,000

Question 7

Pace Corporation acquired 100 percent of Spin Company's common stock on January 1, 20X9. Balance sheet data for the two companies immediately following the acquisition follow:
At the date of the business combination, the book values of Spin's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, and land, which had a fair value of $50,000. The fair value of land for Pace Corporation was estimated at $80,000 immediately prior to the acquisition.

Based on the preceding information,what amount of goodwill will be reported in the consolidated balance sheet prepared immediately after the business combination?

A) $0
B) $21,000
C) $6,000
D) $15,000

Question 8

Paccu Corporation acquired 100 percent of Sallee Company's common stock on January 1, 20X7. Balance sheet data for the two companies immediately following the acquisition follow:
At the date of the business combination, the book values of Sallee's assets and liabilities approximated fair value except for inventory, which had a fair value of $55,000, and land, which had a fair value of $65,000. The fair value of land for Paccu Corporation was estimated at $90,000 immediately prior to the acquisition.
Based on the preceding information,what is the differential associated with the acquisition?

A) $15,000
B) $20,000
C) $22,000
D) $37,000

Question 9

Tanner Company,a subsidiary acquired for cash,owned equipment with a fair value higher than the book value as of the date of combination.A consolidated balance sheet prepared immediately after the acquisition would include this difference in:

A) goodwill.
B) retained earnings.
C) deferred charges.
D) equipment.

Question 10

On December 31, 20X9, Add-On Company acquired 100 percent of Venus Corporation's common stock for $300,000. Balance sheet information Venus just prior to the acquisition is given here:
At the date of the business combination, Venus's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, land which had a fair value of $125,000, and buildings and equipment (net), which had a fair value of $250,000.

Based on the information provided,what amount of goodwill will be included in the consolidated balance sheet immediately following the acquisition?

A) $30,000
B) $15,000
C) $85,000
D) $45,000

Question 11

Pace Corporation acquired 100 percent of Spin Company's common stock on January 1, 20X9. Balance sheet data for the two companies immediately following the acquisition follow:
At the date of the business combination, the book values of Spin's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, and land, which had a fair value of $50,000. The fair value of land for Pace Corporation was estimated at $80,000 immediately prior to the acquisition.

Based on the preceding information,at what amount should total land be reported in the consolidated balance sheet prepared immediately after the business combination?

A) $130,000
B) $105,000
C) $115,000
D) $120,000

Question 12

Based on the preceding information,what amount should be allocated to goodwill in the consolidated balance sheet,prepared after this business combination?

A) $0
B) $25,000
C) $70,000
D) $45,000

Question 13

Based on the preceding information,the differential reflected in a consolidation worksheet to prepare a consolidated balance sheet immediately after the business combination is:

A) $0.
B) $25,000.
C) $70,000.
D) $45,000.

Question 14

Enya Corporation acquired 100 percent of Celtic Corporation's common stock on January 1, 20X9. Summarized balance sheet information for the two companies immediately after the combination is provided:

Based on the information provided,the consolidated balance sheet of Enya and Celtic will reflect goodwill in the amount of:

A) $0.
B) $58,000.
C) $22,000.
D) $36,000.

Question 15

On October 1, 20X3, Green Corporation paid $450,000 for all of Yellow Company's outstanding common stock. On that date, the book values and fair values of Yellow's recorded assets and liabilities were as follows:

Based on the preceding information,what amount should be allocated to goodwill in the consolidated balance sheet prepared immediately after the combination?

A) $110,000
B) $65,000
C) $45,000
D) $0

Question 16

Pace Corporation acquired 100 percent of Spin Company's common stock on January 1, 20X9. Balance sheet data for the two companies immediately following the acquisition follow:
At the date of the business combination, the book values of Spin's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, and land, which had a fair value of $50,000. The fair value of land for Pace Corporation was estimated at $80,000 immediately prior to the acquisition.

Based on the preceding information,what amount of retained earnings will be reported in the consolidated balance sheet prepared immediately after the business combination?

A) $300,000
B) $409,000
C) $259,000
D) $191,000

Question 17

On December 31, 20X9, Add-On Company acquired 100 percent of Venus Corporation's common stock for $300,000. Balance sheet information Venus just prior to the acquisition is given here:
At the date of the business combination, Venus's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, land which had a fair value of $125,000, and buildings and equipment (net), which had a fair value of $250,000.

Based on the information provided,what amount will be included as investment in Venus Corporation in the consolidated balance sheet immediately following the acquisition?

A) $0
B) $395,000
C) $255,000
D) $300,000

Question 18

Paccu Corporation acquired 100 percent of Sallee Company's common stock on January 1, 20X7. Balance sheet data for the two companies immediately following the acquisition follow:
At the date of the business combination, the book values of Sallee's assets and liabilities approximated fair value except for inventory, which had a fair value of $55,000, and land, which had a fair value of $65,000. The fair value of land for Paccu Corporation was estimated at $90,000 immediately prior to the acquisition.
Based on the preceding information,what amount of total assets will appear in the consolidated balance sheet prepared immediately after the business combination?

A) $745,000
B) $805,000
C) $830,000
D) $842,000

Question 19

On December 31, 20X9, Add-On Company acquired 100 percent of Venus Corporation's common stock for $300,000. Balance sheet information Venus just prior to the acquisition is given here:
At the date of the business combination, Venus's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, land which had a fair value of $125,000, and buildings and equipment (net), which had a fair value of $250,000.

Based on the information provided,what amount of inventory will be included in the consolidated balance sheet immediately following the acquisition?

A) $60,000
B) $75,000
C) $15,000
D) $45,000

Question 20

Enya Corporation acquired 100 percent of Celtic Corporation's common stock on January 1, 20X9. Summarized balance sheet information for the two companies immediately after the combination is provided:

Based on the preceding information,the amount of differential associated with the acquisition is:

A) $0.
B) $58,000.
C) $22,000.
D) $36,000.

Question 21

On January 1, 20X8, Chariot Company acquired 100 percent of Stryder Company for $220,000 cash. The trial balances for the two companies on December 31, 20X8, included the following amounts:
On the acquisition date, Stryder reported net assets with a book value of $170,000. A total of $10,000 of the acquisition price is applied to goodwill, which was not impaired in 20X8. Stryder's depreciable assets had an estimated economic life of 10 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment. Chariot used the equity method in accounting for its investment in Stryder. Analysis of receivables and payables revealed that Stryder owed Chariot $10,000 on December 31, 20X8.

Based on the information provided,what amount of net income will be reported in the consolidated financial statements for the year?

A) $226,000
B) $55,000
C) $230,000
D) $171,000

Question 22

The Greenpath Corporation's (Greenpath)balance sheet shows assets of $800,000 and liabilities of $300,000.In addition,the company has an unrecorded intangible asset with a value of $100,000 and a 10-year useful life.On January 1,20X1,the Montana Corporation acquires 30% of Greenpath's outstanding stock for $290,000.In 20X1,Greenpath reported net income of $90,000 and paid dividends of $20,000.In 20X2,Greenpath reported net income of $110,000 and paid dividends of $50,000.If the equity method is being applied to this investment,what is the reported balance for the investment account at the end of 20X2?

A) $311,000
B) $302,000
C) $323,000 D $317,500

Question 23

Berlin, Inc. holds 100 percent of the common stock of Sea Company, an investment acquired for $520,000. Immediately following the combination, Berlin's net assets have a book value of $900,000 and a fair value of $1,050,000. The book and fair value of Sea's net assets on the date of combination are $350,000 and $425,000, respectively. Immediately following the combination, a consolidated balance sheet is prepared.
Based on the information given above,what will be the amount of net assets reported in the consolidated balance sheet?

A) $1,420,000
B) $1,325,000
C) $1,250,000
D) $900,000

Question 24

Grant,Inc.(Grant)acquired 30% of South Co.'s (South)voting stock for $200,000 on January 1,20X1.Grant's 30% interest in South gave Grant the ability to exercise significant influence over South's operating and financial policies.On that date,South reported assets of $500,000 and liabilities of $100,000.South had equipment with a book value of $60,000 that was actually worth $160,000.The equipment had a remaining useful life of five years.During 20X1,South reported net income of $80,000 and paid dividends of $50,000.What amount of income should Grant recognize in 20X1 as a result of this investment?

A) $18,000
B) $4,000
C) $15,000
D) $16,750

Question 25

On January 1, 20X8, Chariot Company acquired 100 percent of Stryder Company for $220,000 cash. The trial balances for the two companies on December 31, 20X8, included the following amounts:
On the acquisition date, Stryder reported net assets with a book value of $170,000. A total of $10,000 of the acquisition price is applied to goodwill, which was not impaired in 20X8. Stryder's depreciable assets had an estimated economic life of 10 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment. Chariot used the equity method in accounting for its investment in Stryder. Analysis of receivables and payables revealed that Stryder owed Chariot $10,000 on December 31, 20X8.

Based on the information provided,what amount of total assets will be reported in the consolidated balance sheet for the year?

A) $895,000
B) $801,000
C) $723,000
D) $1,111,000

Question 26

Paccu Corporation acquired 100 percent of Sallee Company's common stock on January 1, 20X7. Balance sheet data for the two companies immediately following the acquisition follow:
At the date of the business combination, the book values of Sallee's assets and liabilities approximated fair value except for inventory, which had a fair value of $55,000, and land, which had a fair value of $65,000. The fair value of land for Paccu Corporation was estimated at $90,000 immediately prior to the acquisition.
Based on the preceding information,what amount of retained earnings will be reported in the consolidated balance sheet prepared immediately after the business combination?

A) $200,000
B) $212,000
C) $350,000
D) $488,000

Question 27

Paccu Corporation acquired 100 percent of Sallee Company's common stock on January 1, 20X7. Balance sheet data for the two companies immediately following the acquisition follow:
At the date of the business combination, the book values of Sallee's assets and liabilities approximated fair value except for inventory, which had a fair value of $55,000, and land, which had a fair value of $65,000. The fair value of land for Paccu Corporation was estimated at $90,000 immediately prior to the acquisition.
Based on the preceding information,what amount of liabilities will be reported in the consolidated balance sheet prepared immediately after the business combination?

A) $300,000
B) $320,000
C) $417,000
D) $745,000

Question 28

On January 1, 20X8, Chariot Company acquired 100 percent of Stryder Company for $220,000 cash. The trial balances for the two companies on December 31, 20X8, included the following amounts:
On the acquisition date, Stryder reported net assets with a book value of $170,000. A total of $10,000 of the acquisition price is applied to goodwill, which was not impaired in 20X8. Stryder's depreciable assets had an estimated economic life of 10 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment. Chariot used the equity method in accounting for its investment in Stryder. Analysis of receivables and payables revealed that Stryder owed Chariot $10,000 on December 31, 20X8.

Based on the information provided,the amount of differential assigned to buildings and equipment that is amortized for the year is:

A) $5,000.
B) $4,000.
C) $10,000.
D) $3,600.

Question 29

Paccu Corporation acquired 100 percent of Sallee Company's common stock on January 1, 20X7. Balance sheet data for the two companies immediately following the acquisition follow:
At the date of the business combination, the book values of Sallee's assets and liabilities approximated fair value except for inventory, which had a fair value of $55,000, and land, which had a fair value of $65,000. The fair value of land for Paccu Corporation was estimated at $90,000 immediately prior to the acquisition.
Based on the preceding information,what amount of total stockholders' equity will be reported in the consolidated balance sheet prepared immediately after the business combination?

A) $213,000
B) $350,000
C) $425,000
D) $638,000

Question 30

On January 1, 20X8, Chariot Company acquired 100 percent of Stryder Company for $220,000 cash. The trial balances for the two companies on December 31, 20X8, included the following amounts:
On the acquisition date, Stryder reported net assets with a book value of $170,000. A total of $10,000 of the acquisition price is applied to goodwill, which was not impaired in 20X8. Stryder's depreciable assets had an estimated economic life of 10 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment. Chariot used the equity method in accounting for its investment in Stryder. Analysis of receivables and payables revealed that Stryder owed Chariot $10,000 on December 31, 20X8.

Based on the information provided,the differential associated with this acquisition is:

A) $36,000.
B) $40,000.
C) $10,000.
D) $50,000.

Question 31

On January 1, 20X8, Chariot Company acquired 100 percent of Stryder Company for $220,000 cash. The trial balances for the two companies on December 31, 20X8, included the following amounts:
On the acquisition date, Stryder reported net assets with a book value of $170,000. A total of $10,000 of the acquisition price is applied to goodwill, which was not impaired in 20X8. Stryder's depreciable assets had an estimated economic life of 10 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment. Chariot used the equity method in accounting for its investment in Stryder. Analysis of receivables and payables revealed that Stryder owed Chariot $10,000 on December 31, 20X8.

Based on the information provided,the beginning differential assigned to buildings and equipment is:

A) $50,000.
B) $40,000.
C) $10,000.
D) $36,000.

Question 32

Paccu Corporation acquired 100 percent of Sallee Company's common stock on January 1, 20X7. Balance sheet data for the two companies immediately following the acquisition follow:
At the date of the business combination, the book values of Sallee's assets and liabilities approximated fair value except for inventory, which had a fair value of $55,000, and land, which had a fair value of $65,000. The fair value of land for Paccu Corporation was estimated at $90,000 immediately prior to the acquisition.
Based on the preceding information,what amount of goodwill will be reported in the consolidated balance sheet prepared immediately after the business combinations?

A) $37,000
B) $22,000
C) $15,000
D) $0,000

Question 33

West, Inc. holds 100 percent of the common stock of Coast Company, an investment acquired for $680,000. Immediately following the combination, West's net assets have a book value of $1,150,000 and a fair value of $1,390,000. The book value and the fair value of Coast's net assets on the date of combination are $400,000 and $550,000, respectively. Immediately following the combination, a consolidated balance sheet is prepared.
Based on the information given above,what will be the amount of net assets reported in the consolidated balance sheet,prepared immediately following the combination?

A) $1,150,000
B) $1,550,000
C) $1,700,000
D) $1,830,000

Question 34

Park Co.uses the equity method to account for its January 1,20X5,purchase of Tun Inc.'s common stock.On January 1,20X5,the fair values of Tun's depreciable assets and land exceeded their carrying amounts.How do these excesses of fair values over carrying amounts affect Park's reported year-end Earnings from Investment in Tun for 20X5?

Question 35

West, Inc. holds 100 percent of the common stock of Coast Company, an investment acquired for $680,000. Immediately following the combination, West's net assets have a book value of $1,150,000 and a fair value of $1,390,000. The book value and the fair value of Coast's net assets on the date of combination are $400,000 and $550,000, respectively. Immediately following the combination, a consolidated balance sheet is prepared.
Based on the information given above,goodwill will be reported in the consolidated balance sheet in the amount of:

A) $240,000.
B) $130,000.
C) $150,000.
D) $270,000.

Question 36

On January 1,20X1,Big Company (Big)bought 30% of the outstanding stock of Little Company (Little)for $110,000 which provided Big with the ability to significantly influence the decisions of Little.Little reported assets of $400,000 and liabilities of $100,000 on that date.As part of its analysis before buying these shares,Big determined that Little owned a patent that had not been recorded despite having a remaining useful life of five years and a value of $20,000.During 20X1,Little reported net income of $70,000 and paid cash dividends of $30,000.What investment income should Big report for 20X1?

A) $9,000
B) $19,800
C) $17,000
D) $21,000

Question 37

West, Inc. holds 100 percent of the common stock of Coast Company, an investment acquired for $680,000. Immediately following the combination, West's net assets have a book value of $1,150,000 and a fair value of $1,390,000. The book value and the fair value of Coast's net assets on the date of combination are $400,000 and $550,000, respectively. Immediately following the combination, a consolidated balance sheet is prepared.
Based on the information given above,at what amount will West's investment in Coast stock be reported in the consolidated balance sheet?

A) $0
B) $400,000
C) $440,000
D) $480,000

Question 38

Berlin, Inc. holds 100 percent of the common stock of Sea Company, an investment acquired for $520,000. Immediately following the combination, Berlin's net assets have a book value of $900,000 and a fair value of $1,050,000. The book and fair value of Sea's net assets on the date of combination are $350,000 and $425,000, respectively. Immediately following the combination, a consolidated balance sheet is prepared.
Based on the information given above,goodwill will be reported at what amount in a consolidated balance sheet?

A) $170,000
B) $150,000
C) $95,000
D) $75,000

Question 39

An investor uses the equity method to account for its 30% investment in common stock of an investee.Amortization of the investor's share of the excess of fair value over book value of depreciable assets should be reported in the investor's income statement as part of

A) Amortization of goodwill.
B) Other expense.
C) Depreciation expense.
D) Income from investee.

Question 40

On January 1, 20X8, Chariot Company acquired 100 percent of Stryder Company for $220,000 cash. The trial balances for the two companies on December 31, 20X8, included the following amounts:
On the acquisition date, Stryder reported net assets with a book value of $170,000. A total of $10,000 of the acquisition price is applied to goodwill, which was not impaired in 20X8. Stryder's depreciable assets had an estimated economic life of 10 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment. Chariot used the equity method in accounting for its investment in Stryder. Analysis of receivables and payables revealed that Stryder owed Chariot $10,000 on December 31, 20X8.

Based on the information provided,what amount of retained earnings will be reported in the consolidated financial statements for the year?

A) $331,000
B) $110,000
C) $441,000
D) $456,000

Question 41

On December 31, 20X1, Oak Corporation acquired 100 percent ownership of Cherry Corporation. On that date, Cherry reported assets and liabilities with books values of $450,000 and $200,000, respectively, common stock outstanding of $150,000, and retained earnings of $100,000. The book values and fair values of Cherry's assets and liabilities were identical except for land which had increased in value by $15,000 and inventories which had decreased by $5,000.
Based on the preceding information,what amount of differential is implicit in the acquisition if the acquisition price was $280,000?

A) $10,000
B) $20,000
C) $25,000
D) $30,000

Question 42

Lea Company acquired all of Tenzing Corporation's stock on January 1, 20X6 for $150,000 cash. On December 31, 20X8, the trial balances of the two companies were as follows:
Tenzing Corporation reported retained earnings of $75,000 at the date of acquisition. The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of five years from the date of acquisition. At December 31, 20X8, Tenzing owed Lea $4,000 for services provided.

Based on the preceding information,what amount will be reported for total accounts payable in the consolidated balance sheet for the year 20X8?

A) $56,000
B) $46,000
C) $60,000
D) $42,000

Question 43

On December 31, 20X1, Oak Corporation acquired 100 percent ownership of Cherry Corporation. On that date, Cherry reported assets and liabilities with books values of $450,000 and $200,000, respectively, common stock outstanding of $150,000, and retained earnings of $100,000. The book values and fair values of Cherry's assets and liabilities were identical except for land which had increased in value by $15,000 and inventories which had decreased by $5,000.
Company X acquires 100 percent of the voting shares of Company Y for $275,000 on December 31,20X8.The fair value of the net assets of Company X at the date of acquisition was $300,000.This is an example of a(n):

A) positive differential.
B) bargain purchase.
C) extraordinary loss.
D) revaluation adjustment.

Question 44

On December 31, 20X1, Oak Corporation acquired 100 percent ownership of Cherry Corporation. On that date, Cherry reported assets and liabilities with books values of $450,000 and $200,000, respectively, common stock outstanding of $150,000, and retained earnings of $100,000. The book values and fair values of Cherry's assets and liabilities were identical except for land which had increased in value by $15,000 and inventories which had decreased by $5,000.
Based on the preceding information,what amount of goodwill will be reported in the consolidated balance sheet on the acquisition date if the acquisition price was $240,000?

A) $35,000
B) $30,000
C) $20,000
D) $0

Question 45

On December 31, 20X1, Oak Corporation acquired 100 percent ownership of Cherry Corporation. On that date, Cherry reported assets and liabilities with books values of $450,000 and $200,000, respectively, common stock outstanding of $150,000, and retained earnings of $100,000. The book values and fair values of Cherry's assets and liabilities were identical except for land which had increased in value by $15,000 and inventories which had decreased by $5,000.
Based on the preceding information,what amount of goodwill will be reported in the consolidated balance sheet on the acquisition date if the acquisition price was $280,000?

A) $10,000
B) $20,000
C) $30,000
D) $35,000

Question 46

On December 31, 20X8, Mercury Corporation acquired 100 percent ownership of Saturn Corporation. On that date, Saturn reported assets and liabilities with book values of $300,000 and $100,000, respectively, common stock outstanding of $50,000, and retained earnings of $150,000. The book values and fair values of Saturn's assets and liabilities were identical except for land which had increased in value by $10,000 and inventories which had decreased by $5,000.
Based on the preceding information,what amount of goodwill will be reported if the acquisition price was $240,000?

A) $0
B) $40,000
C) $15,000
D) $35,000

Question 47

Berlin, Inc. holds 100 percent of the common stock of Sea Company, an investment acquired for $520,000. Immediately following the combination, Berlin's net assets have a book value of $900,000 and a fair value of $1,050,000. The book and fair value of Sea's net assets on the date of combination are $350,000 and $425,000, respectively. Immediately following the combination, a consolidated balance sheet is prepared.
When a parent company uses the equity method to account for investments,the controlling interest in consolidated net income includes all of the following except:

A) The parent's income from its own operations.
B) The parent company's share of income from consolidated subsidiaries.
C) The non-controlling interest's share of income from consolidated subsidiaries.
D) Differential adjustments

Question 48

Lea Company acquired all of Tenzing Corporation's stock on January 1, 20X6 for $150,000 cash. On December 31, 20X8, the trial balances of the two companies were as follows:
Tenzing Corporation reported retained earnings of $75,000 at the date of acquisition. The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of five years from the date of acquisition. At December 31, 20X8, Tenzing owed Lea $4,000 for services provided.

Based on the preceding information,what amount of total liabilities will be reported in the consolidated balance sheet for 20X8?

A) $225,000
B) $221,000
C) $217,000
D) $137,000

Question 49

Lea Company acquired all of Tenzing Corporation's stock on January 1, 20X6 for $150,000 cash. On December 31, 20X8, the trial balances of the two companies were as follows:
Tenzing Corporation reported retained earnings of $75,000 at the date of acquisition. The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of five years from the date of acquisition. At December 31, 20X8, Tenzing owed Lea $4,000 for services provided.

Based on the preceding information,what amount will be reported as total assets in the consolidated balance sheet for 20X8?

A) $666,000
B) $747,000
C) $651,000
D) $946,000

Question 50

Lea Company acquired all of Tenzing Corporation's stock on January 1, 20X6 for $150,000 cash. On December 31, 20X8, the trial balances of the two companies were as follows:
Tenzing Corporation reported retained earnings of $75,000 at the date of acquisition. The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of five years from the date of acquisition. At December 31, 20X8, Tenzing owed Lea $4,000 for services provided.

Based on the preceding information,all of the following are consolidating entries required on December 31,20X8,to prepare consolidated financial statements,except:

A) Option A
B) Option B
C) Option C
D) Option D

Question 51

Berlin, Inc. holds 100 percent of the common stock of Sea Company, an investment acquired for $520,000. Immediately following the combination, Berlin's net assets have a book value of $900,000 and a fair value of $1,050,000. The book and fair value of Sea's net assets on the date of combination are $350,000 and $425,000, respectively. Immediately following the combination, a consolidated balance sheet is prepared.
Based on the information given above,at what amount will Berlin's investment in Sea stock be reported in a consolidated balance?

A) $520,000
B) $170,000
C) $95,000
D) $0

Question 52

On January 1,20X8,Blake Company acquired all of Frost Corporation's voting shares for $280,000 cash.On December 31,20X9,Frost owed Blake $5,000 for services provided during the year.When consolidated financial statements are prepared for 20X9,which entry is needed to eliminate intercompany receivables and payables in the consolidation worksheet?

A) Option A
B) Option B
C) Option C
D) Option D

Question 53

Lea Company acquired all of Tenzing Corporation's stock on January 1, 20X6 for $150,000 cash. On December 31, 20X8, the trial balances of the two companies were as follows:
Tenzing Corporation reported retained earnings of $75,000 at the date of acquisition. The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of five years from the date of acquisition. At December 31, 20X8, Tenzing owed Lea $4,000 for services provided.

Based on the preceding information,what amount of total retained earnings will be reported in the consolidated balance sheet for the year 20X8?

A) $330,000
B) $450,000
C) $430,000
D) $370,000

Question 54

On December 31, 20X8, Mercury Corporation acquired 100 percent ownership of Saturn Corporation. On that date, Saturn reported assets and liabilities with book values of $300,000 and $100,000, respectively, common stock outstanding of $50,000, and retained earnings of $150,000. The book values and fair values of Saturn's assets and liabilities were identical except for land which had increased in value by $10,000 and inventories which had decreased by $5,000.
Based on the preceding information,what amount of differential will appear in the consolidating entries required to prepare a consolidated balance sheet immediately after the business combination,if the acquisition price was $240,000?

A) $0
B) $40,000
C) $25,000
D) $5,000

Question 55

On January 1, 20X9, Wilton Company acquired all of Sirius Company's common shares, for $365,000 cash. On that date, Sirius's balance sheet appeared as follows:
The fair values of all of Sirius's assets and liabilities were equal to their book values except for inventory that had a fair value of $85,000, land that had a fair value of $60,000, and buildings and equipment that had a fair value of $250,000. Buildings and equipment have a remaining useful life of 10 years with zero salvage value. Wilton Company decided to employ push-down accounting for the acquisition. Subsequent to the combination, Sirius continued to operate as a separate company.

Based on the preceding information,what amount will be present in the revaluation capital account,when consolidating entries are prepared?

A) $0
B) $65,000
C) $60,000
D) $15,000

Question 56

On January 1, 20X9, Wilton Company acquired all of Sirius Company's common shares, for $365,000 cash. On that date, Sirius's balance sheet appeared as follows:
The fair values of all of Sirius's assets and liabilities were equal to their book values except for inventory that had a fair value of $85,000, land that had a fair value of $60,000, and buildings and equipment that had a fair value of $250,000. Buildings and equipment have a remaining useful life of 10 years with zero salvage value. Wilton Company decided to employ push-down accounting for the acquisition. Subsequent to the combination, Sirius continued to operate as a separate company.

Based on the preceding information,what amount of differential will arise in the consolidation process?

A) $0
B) $5,000
C) $15,000
D) $65,000

Question 57

Which of the following observations is NOT consistent with the use of push-down accounting?

A) The revaluation capital account is part of the subsidiary's stockholders' equity.
B) No differential arises in the consolidation process.
C) Revaluation Capital account is eliminated in preparing consolidated statements.
D) Consolidating entries related to the differential are needed in the worksheets.

Question 58

On December 31, 20X8, Mercury Corporation acquired 100 percent ownership of Saturn Corporation. On that date, Saturn reported assets and liabilities with book values of $300,000 and $100,000, respectively, common stock outstanding of $50,000, and retained earnings of $150,000. The book values and fair values of Saturn's assets and liabilities were identical except for land which had increased in value by $10,000 and inventories which had decreased by $5,000.
Based on the preceding information,what amount of goodwill will be reported if the acquisition price was $195,000?

A) $0
B) $40,000
C) $15,000
D) $35,000

Question 59

Consolidated financial statements are being prepared for Behemoth Corporation and its two wholly-owned subsidiaries that have intercompany loans of $50,000 and intercompany profits of $100,000.How much of these intercompany loans and profits should be eliminated?

A) intercompany loans - $0; intercompany profits - $0
B) intercompany loans - $50,000; intercompany profits - $0
C) intercompany loans - $50,000; intercompany profits - $100,000
D) intercompany loans - $0; intercompany profits - $100,000

Question 60

Which term refers to the practice of revaluing an acquired subsidiary's assets and liabilities to their fair values directly on that subsidiary's books at the date of acquisition?

A) Fair value accounting
B) Push-down accounting
C) Fully adjusted method
D) Reciprocal ownership

Question 61

Silver Corporation acquired 100 percent of Bronze Company on January 1,20X5,for $350,000.Following are selected account balances from Silver and Bronze Corporation as of December 31,20X5:

Additional Information:
1.On January 1,20X5 the fair market value of Bronze's assets equaled their book value with the exception of Plant Assets (with an estimated economic life of 6 years)which had a fair market value in excess in Bronze's depreciable assets of $33,000.
2.Silver used the equity-method in accounting for its investment in Bronze.
3.Detailed analysis of receivables and payables showed that Bronze owed Silver $10,000 on December 31,20X5.
Required:
a.Give all journal entries recorded by Silver with regard to its investment in Bronze during 20X5.
b.Give all consolidating entries needed to prepare a full set of consolidated financial statements for 20X5.
c.Prepare a three-part consolidation worksheet as of December 31,20X5.
Problem 66 (continued)

Question 62

Top Company obtained 100 percent of Bottom Company's common stock on January 1,20X6 by issuing 12,500 shares of its own common stock,which had a $5 par value and a $15 fair value on that date.Bottom reported a net book value of $150,000 and its shares had a $20 per share fair value on that date.However,some of its plant assets (with a 5-year remaining life)were undervalued by $20,000 in the company's accounting records.Bottom had also developed a customer list with an estimated fair value of $10,000 and a remaining life of 10 years.Top Company uses the equity-method to account for its investment in Bottom.During 20X6 Top and Bottom reported the following:

Required:
Prepare each of the journal entries listed below related to Top's investment in Bottom.
1.Top's acquisition of Bottom.
2.Top's share of Bottom's 20X6 income.
3.Top's share of Bottom's 20X6 dividend income.
4.Top's amortization of excess acquisition price.

Question 63

Lea Company acquired all of Tenzing Corporation's stock on January 1,20X6 for $150,000 cash.On December 31,20X7,the balance sheets of the two companies showed the following amounts:
Tenzing Corporation reported retained earnings of $75,000 at the date of acquisition.The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of five years from the date of acquisition.
Required:
1)Give the appropriate consolidating entry or entries needed to prepare a consolidated balance sheet as of December 31,20X7.
2)Prepare a consolidated balance sheet worksheet as of December 31,20X7.

Problem 65 (continued):

Question 64

Which of the following is true? When companies employ push-down accounting:

A) the subsidiary revalues assets and liabilities to their fair values as of the acquisition date.
B) a special account called Revaluation Capital will appear in the consolidated balance sheet.
C) all consolidation entries are made on the books of the subsidiary rather than in consolidated worksheets.
D) the subsidiary is not substantially wholly owned by the parent.

Question 65

Dish Corporation acquired 100 percent of the common stock of Toll Company by issuing 10,000 shares of $10 par common stock with a market value of $60 per share.Summarized balance sheet data for the two companies immediately preceding the acquisition are as follows:
Required: Determine the dollar amounts to be presented in the consolidated balance sheet for (1)total assets,(2)total liabilities,and (3)total stockholders' equity.

Question 66

Paco Company acquired 100 percent of the stock of Garland Corp.on December 31,20X8.The stockholder's equity section of Garland's balance sheet at that date is as follows:

Paco financed the acquisition by using $880,000 cash and giving a note payable for $400,000.Book value approximated fair value for all of Garland's assets and liabilities except for buildings which had a fair value $60,000 more than its book value and a remaining useful life of 10 years.Any remaining differential was related to goodwill.Paco has an account payable to Garland in the amount of $30,000.
Required:
1)Present all consolidating entries needed to prepare a consolidated balance sheet immediately following the acquisition.
2)What additional consolidating entry must be prepared at December 31,20X9?
Problem 64 (continued):

Question 67

On December 31,20X9,Thessaly Corporation acquired all of Ionian Company's common shares,for $570,000 cash.On that date,Ionian's balance sheet appeared as follows:
The fair values of all of Ionian's assets and liabilities were equal to their book values except for the following:


In recording this acquisition,push-down accounting was used.
Required:
1)Record the acquisition of Ionian's stock on Thessaly's books on December 31,20X9.
2)Record any entries that would be made on December 31,20X9,on Ionian's books related to the business combination.
3)Present all consolidating entries that would appear in the worksheet to prepare a consolidated balance sheet immediately after the combination.
Problem 67 (continued):