Deck 5: Consolidated Financial Statements - Intercompany Asset Transactions

Question 1

On November 8,2009,Power Corp.sold land to Wood Co. ,its wholly owned subsidiary.The land cost $61,500 and was sold to Wood for $89,000.From the perspective of the combination,when is the gain on the sale of the land realized?

A)Proportionately over a designated period of years.
B)When Wood Co.sells the land to a third party.
C)No gain can be recognized.
D)As Wood uses the land.
E)When Wood Co.begins using the land productively.

Answer 1

B

Question 2

On January 1,2009,Race Corp.acquired 80% of the voting common stock of Gallow Inc.During the year,Race sold to Gallow for $450,000 goods which cost $330,000.Gallow still owned 15% of the goods at year-end.Gallow's reported net income was $204,000,and Race's net income was $806,000.Race decided to use the equity method to account for this investment.What was the noncontrolling interest's share of consolidated net income?

A)$37,200.
B)$22,800.
C)$30,900.
D)$32,900.
E)$40,800.

Answer 2

E

Question 3

Gentry Inc.acquired 100% of Gaspard Farms on January 5,2009.During 2009,Gentry sold Gaspard Farms for $625,000 goods which had cost $425,000.Gaspard Farms still owned 12% of the goods at the end of the year.In 2010,Gentry sold goods with a cost of $800,000 to Gaspard Farms for $1,000,000,and Gaspard Farms still owned 10% of the goods at year-end.For 2010,cost of goods sold was $1,200,000 for Gaspard Farms and $5,400,000 for Gentry.What was consolidated cost of goods sold for 2010?

A)$6,600,000.
B)$6,596,000.
C)$5,620,000.
D)$5,596,000.
E)$5,625,000.

Answer 3

D

Question 4

X-Beams Inc.owned 70% of the voting common stock of Kent Corp.During 2009,Kent made several sales of inventory to X-Beams.The total selling price was $180,000 and the cost was $100,000.At the end of the year,20% of the goods were still in X-Beams' inventory.Kent's reported net income was $300,000.What was the noncontrolling interest in Kent's net income?

A)$90,000.
B)$85,200.
C)$54,000.
D)$94,800.
E)$86,640.

Question 5

Justings Co.owned 80% of Evana Corp.During 2009,Justings sold to Evana land with a book value of $48,000.The selling price was $70,000.In its accounting records,Justings should

A)not recognize a gain on the sale of the land since it was made to a related party.
B)recognize a gain of $17,600.
C)defer recognition of the gain until Evana sells the land to a third party.
D)recognize a gain of $8,000.
E)recognize a gain of $22,000.

Question 6

Prince Corp.owned 80% of Kile Corp.'s common stock.During October 2009,Kile sold merchandise to Prince for $140,000.At December 31,2009,50% of this merchandise remained in Prince's inventory.For 2009,gross profit percentages were 30% of sales for Prince and 40% of sales for Kile.The amount of unrealized intercompany profit in ending inventory at December 31,2009 that should be eliminated in the consolidation process is

A)$28,000.
B)$56,000.
C)$22,400.
D)$21,000.
E)$42,000.

Question 7

REFERENCE: Ref.05_01
Pot Co.holds 90% of the common stock of Skillet Co.During 2009,Pot reported sales of $1,120,000 and cost of goods sold of $840,000.For this same period,Skillet had sales of $420,000 and cost of goods sold of $252,000.Also during 2009,Pot sold merchandise to Skillet for $140,000.The subsidiary still possesses 40% of this inventory at the end of 2009.Pot had established the transfer price based on its normal markup.
What are consolidated sales and cost of goods sold?

A)$1,400,000 and $952,000.
B)$1,400,000 and $966,000.
C)$1,540,000 and $1,078,000.
D)$1,400,000 and $1,022,000.
E)$1,540,000 and $1,092,000.

Question 8

Edgar Co.acquired 60% of Kindall Co.on January 1,2009.During 2009,Edgar made several sales of inventory to Kindall.The cost and selling price of the goods were $140,000 and $200,000,respectively.Kindall still owned one-fourth of the goods at the end of 2009.Consolidated cost of goods sold for 2009 was $2,140,000.How would consolidated cost of goods sold have differed if the inventory transfers had been for the same amount and cost,but from Kindall to Edgar?

A)Consolidated cost of goods sold would have been $2,140,000.
B)Consolidated cost of goods sold would have been $2,175,000.
C)The effect on consolidated cost of goods sold cannot be predicted from the information provided.
D)Consolidated cost of goods sold would have been reduced because of the noncontrolling interest in the subsidiary.
E)Consolidated cost of goods sold would have been higher because of the noncontrolling interest in the subsidiary.

Question 9

Webb Co.acquired 100% of Rand Inc.on January 5,2009.During 2009,Webb sold Rand for $2,400,000 goods that cost $1,800,000.Rand still owned 40% of the goods at the end of the year.Cost of goods sold was $10,800,000 for Webb and $6,400,000 for Rand.What was consolidated cost of goods sold?

A)$17,200,000.
B)$15,040,000.
C)$14,800,000.
D)$16,960,000.
E)$14,560,000.

Question 10

REFERENCE: Ref.05_01
Pot Co.holds 90% of the common stock of Skillet Co.During 2009,Pot reported sales of $1,120,000 and cost of goods sold of $840,000.For this same period,Skillet had sales of $420,000 and cost of goods sold of $252,000.Also during 2009,Pot sold merchandise to Skillet for $140,000.The subsidiary still possesses 40% of this inventory at the end of 2009.Pot had established the transfer price based on its normal markup.
Dalton Corp.owned 70% of the outstanding common stock of Shrugs Inc.On January 1,2007,Dalton acquired a building with a ten-year life for $420,000.No salvage value was anticipated and the building was to be depreciated on the straight-line basis.On January 1,2009,Dalton sold this building to Shrugs for $392,000.At that time,the building had a remaining life of eight years but still no expected salvage value.In preparing financial statements for 2009,how does this transfer affect the calculation of Dalton's share of consolidated net income?

A)Consolidated net income must be reduced by $44,800.
B)Consolidated net income must be reduced by $50,400.
C)Consolidated net income must be reduced by $49,000.
D)Consolidated net income must be reduced by $56,000.
E)Consolidated net income must be reduced by $53,200.

Question 11

Clemente Co.owned all of the voting common stock of Snider Co.On January 2,2009,Clemente sold some equipment to Snider for $125,000.The equipment had cost $140,000.At the time of the sale,the balance in accumulated depreciation was $40,000.The equipment had a remaining useful life of five years and a $0 salvage value.Straight-line depreciation is used by both Clemente and Snider.At what amount should the equipment (net of depreciation)be included on the consolidated balance sheet dated December 31,2009?

A)$100,000.
B)$95,000.
C)$75,000.
D)$80,000.
E)$85,000.

Question 12

REFERENCE: Ref.05_02
On January 1,2009,Pride,Inc.bought 80% of the outstanding voting common stock of Strong Corp.for $364,000.Of this payment,$28,000 was allocated to equipment (with a five-year life)that had been undervalued on Strong's books by $35,000.Any remaining excess was attributable to goodwill which has not been impaired.
As of December 31,2009,before preparing the consolidated worksheet,the financial statements appeared as follows:
During 2009,Pride bought inventory for $112,000 and sold it to Strong for $140,000.Only half of this purchase had been paid for by Strong by the end of the year.60% of these goods were still in the company's possession on December 31.
What is the total of consolidated revenues?

A)$700,000.
B)$644,000.
C)$588,000.
D)$560,000.
E)$840,000.

Question 13

Bauerly Co.owned 70% of the voting common stock of Devin Co.During 2009,Devin made frequent sales of inventory to Bauerly.There were unrealized gains of $40,000 in the beginning inventory,and $25,000 at the end of the year.Devin reported net income of $137,000 for 2009.Bauerly decided to use the equity method to account for the investment.What is the noncontrolling interest's share of Devin's net income for 2009?

A)$41,100.
B)$33,600.
C)$21,600.
D)$45,600.
E)$36,600.

Question 14

On January 1,2009,Payton Co.sold equipment to its subsidiary,Starker Corp. ,for $115,000.The equipment had cost $125,000,and the balance in accumulated depreciation was $45,000.The equipment had an estimated remaining useful life of eight years and $0 salvage value.Both companies use straight-line depreciation.On their separate 2009 income statements,Payton and Starker reported depreciation expense of $84,000 and $60,000,respectively.The amount of depreciation expense on the consolidated income statement for 2009 would have been

A)$144,000.
B)$148,375.
C)$109,000.
D)$134,000.
E)$139,625.

Question 15

Yukon Co.acquired 75% percent of the voting common stock of Ontario Corp.on January 1,2009.During the year,Yukon made sales of inventory to Ontario.The inventory cost Yukon $260,000 and was sold to Ontario for $390,000.Ontario still had $60,000 of the goods in its inventory at the end of the year.The amount of unrealized intercompany profit that should be eliminated in the consolidation process at the end of 2009 is

A)$15,000.
B)$20,000.
C)$32,500.
D)$30,000.
E)$110,000.

Question 16

Chain Co.owned all of the voting common stock of Shannon Corp.The corporations' balance sheets dated December 31,2009,include the following balances for land: for Chain--$416,000,and for Shannon--$256,000.On the original date of acquisition,the book value of Shannon's land was equal to its fair value.On April 4,2010,Chain sold to Shannon a parcel of land with a book value of $65,000.The selling price was $83,000.There were no other transactions which affected the companies' land accounts during 2010.What is the consolidated balance for land on the 2010 balance sheet?

A)$672,000.
B)$690,000.
C)$755,000.
D)$737,000.
E)$654,000.

Question 17

REFERENCE: Ref.05_01
Pot Co.holds 90% of the common stock of Skillet Co.During 2009,Pot reported sales of $1,120,000 and cost of goods sold of $840,000.For this same period,Skillet had sales of $420,000 and cost of goods sold of $252,000.Also during 2009,Pot sold merchandise to Skillet for $140,000.The subsidiary still possesses 40% of this inventory at the end of 2009.Pot had established the transfer price based on its normal markup.
Assuming that the transfers were from Skillet Co.to Pot Co. ,what are consolidated sales and cost of goods sold?

A)$1,400,000 and $952,000.
B)$1,400,000 and $966,000.
C)$1,540,000 and $1,078,000.
D)$1,400,000 and $974,400.
E)$1,540,000 and $1,092,000.

Question 18

Gibson Corp.owned a 90% interest in Sparis Co.Sparis frequently made sales of inventory to Gibson.The sales,which include a markup over cost of 25%,were $420,000 in 2009 and $500,000 in 2010.At the end of each year,Gibson still owned 30% of the goods.Net income for Sparis was $912,000 during 2010.What was the noncontrolling interest's share of Sparis' net income for 2010?

A)$85,680.
B)$90,600.
C)$90,720.
D)$91,680.
E)$91,800.

Question 19

During 2009,Von Co.sold inventory to its wholly-owned subsidiary,Lord Co.The inventory cost $30,000 and was sold to Lord for $44,000.From the perspective of the combination,when is the $14,000 gain realized?

A)When the goods are sold to a third party by Lord.
B)When Lord pays Von for the goods.
C)When Von sold the goods to Lord.
D)When the goods are used by Lord.
E)No gain can be recognized since the transaction was between related parties.

Question 20

Norek Corp.owned 70% of the voting common stock of Thelma Co.On January 2,2009,Thelma sold a parcel of land to Norek.The land had a book value of $32,000 and was sold to Norek for $45,000.Thelma's reported net income for 2009 was $119,000.What is the noncontrolling interest's share of Thelma's net income?

A)$35,700.
B)$31,800.
C)$39,600.
D)$22,200.
E)$26,100.

Question 21

REFERENCE: Ref.05_02
On January 1,2009,Pride,Inc.bought 80% of the outstanding voting common stock of Strong Corp.for $364,000.Of this payment,$28,000 was allocated to equipment (with a five-year life)that had been undervalued on Strong's books by $35,000.Any remaining excess was attributable to goodwill which has not been impaired.
As of December 31,2009,before preparing the consolidated worksheet,the financial statements appeared as follows:
During 2009,Pride bought inventory for $112,000 and sold it to Strong for $140,000.Only half of this purchase had been paid for by Strong by the end of the year.60% of these goods were still in the company's possession on December 31.
What is the total of consolidated operating expenses?

A)$42,000.
B)$47,600.
C)$53,200.
D)$48,000.
E)$36,400.

Question 22

Parent sold land to its subsidiary for a gain in 2007.The subsidiary sold the land externally for a gain in 2010.Which of the following statements is true?

A)A gain will be reported on the consolidated income statement in 2007.
B)A gain will be reported on the consolidated income statement in 2010.
C)No gain will be reported on the 2010 consolidated income statement.
D)Only the parent company will report a gain in 2010.
E)The subsidiary will report a gain in 2007.

Question 23

REFERENCE: Ref.05_03
Strickland Company sells inventory to its parent,Carter Company,at a profit during 2009.Select the correct answer.
With regard to the intercompany sale,which of the following choices would be a debit entry in the consolidated worksheet for 2010?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment Strickland Company.
E)Additional paid-in capital.

Question 24

REFERENCE: Ref.05_02
On January 1,2009,Pride,Inc.bought 80% of the outstanding voting common stock of Strong Corp.for $364,000.Of this payment,$28,000 was allocated to equipment (with a five-year life)that had been undervalued on Strong's books by $35,000.Any remaining excess was attributable to goodwill which has not been impaired.
As of December 31,2009,before preparing the consolidated worksheet,the financial statements appeared as follows:
During 2009,Pride bought inventory for $112,000 and sold it to Strong for $140,000.Only half of this purchase had been paid for by Strong by the end of the year.60% of these goods were still in the company's possession on December 31.
What is the consolidated total for equipment (net)at December 31,2009?

A)$952,000.
B)$1,058,400.
C)$1,069,600.
D)$1,064,000.
E)$1,066,800.

Question 25

REFERENCE: Ref.05_03
Strickland Company sells inventory to its parent,Carter Company,at a profit during 2009.Select the correct answer.
With regard to the intercompany sale,which of the following choices would be a debit entry in the consolidated worksheet for 2009?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment Strickland Company.
E)Additional paid-in capital.

Question 26

REFERENCE: Ref.05_04
Walsh Company sells inventory to its subsidiary,Fisher Company,at a profit during 2009.Walsh uses the equity method to account for its investment in Fisher.
With regard to the intercompany sale,which of the following choices would be a credit entry in the consolidated worksheet for 2009?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment Fisher Company.
E)Additional paid-in capital.

Question 27

An intercompany sale took place whereby the book value exceeded the transfer price of a depreciable asset.Which statement is true for the year following the sale?

A)A worksheet entry is made with a debit to retained earnings for an upstream transfer.
B)A worksheet entry is made with a credit to retained earnings for an upstream transfer.
C)A worksheet entry is made with a debit to retained earnings for a downstream transfer.
D)A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer.
E)No worksheet entry is necessary.

Question 28

REFERENCE: Ref.05_03
Strickland Company sells inventory to its parent,Carter Company,at a profit during 2009.Select the correct answer.
With regard to the intercompany sale,which of the following choices would be a credit entry in the consolidated worksheet for 2010?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment Strickland Company.
E)Additional paid-in capital.

Question 29

REFERENCE: Ref.05_02
On January 1,2009,Pride,Inc.bought 80% of the outstanding voting common stock of Strong Corp.for $364,000.Of this payment,$28,000 was allocated to equipment (with a five-year life)that had been undervalued on Strong's books by $35,000.Any remaining excess was attributable to goodwill which has not been impaired.
As of December 31,2009,before preparing the consolidated worksheet,the financial statements appeared as follows:
During 2009,Pride bought inventory for $112,000 and sold it to Strong for $140,000.Only half of this purchase had been paid for by Strong by the end of the year.60% of these goods were still in the company's possession on December 31.
What is the consolidated total for inventory at December 31,2009?

A)$336,000.
B)$280,000.
C)$364,000.
D)$347,200.
E)$349,300.

Question 30

REFERENCE: Ref.05_04
Walsh Company sells inventory to its subsidiary,Fisher Company,at a profit during 2009.Walsh uses the equity method to account for its investment in Fisher.
With regard to the intercompany sale,which of the following choices would be a credit entry in the consolidated worksheet for 20010?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment Fisher Company.
E)Additional paid-in capital.

Question 31

REFERENCE: Ref.05_04
Walsh Company sells inventory to its subsidiary,Fisher Company,at a profit during 2009.Walsh uses the equity method to account for its investment in Fisher.
With regard to the intercompany sale,which of the following choices would be a debit entry in the consolidated worksheet for 2010?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment in Fisher Company.
E)Additional paid-in capital.

Question 32

REFERENCE: Ref.05_02
On January 1,2009,Pride,Inc.bought 80% of the outstanding voting common stock of Strong Corp.for $364,000.Of this payment,$28,000 was allocated to equipment (with a five-year life)that had been undervalued on Strong's books by $35,000.Any remaining excess was attributable to goodwill which has not been impaired.
As of December 31,2009,before preparing the consolidated worksheet,the financial statements appeared as follows:
During 2009,Pride bought inventory for $112,000 and sold it to Strong for $140,000.Only half of this purchase had been paid for by Strong by the end of the year.60% of these goods were still in the company's possession on December 31.
What is the total of consolidated cost of goods sold?

A)$196,000.
B)$212,800.
C)$184,800.
D)$203,000.
E)$168,000.

Question 33

REFERENCE: Ref.05_03
Strickland Company sells inventory to its parent,Carter Company,at a profit during 2009.Select the correct answer.
With regard to the intercompany sale,which of the following choices would be a credit entry in the consolidated worksheet for 2009?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment Strickland Company.
E)Additional paid-in capital.

Question 34

When comparing the difference between an upstream and downstream transfer of inventory,and using the initial value method,which of the following statements is true?

A)Income from subsidiary will be lower by the amount of the ending inventory profit multiplied by the noncontrolling interest percentage for downstream transfers.
B)Income from subsidiary will be higher by the amount of the ending inventory profit multiplied by the noncontrolling interest percentage for downstream transfers.
C)Income from subsidiary will be reduced for downstream ending inventory profit but not for upstream profit,before the effect of the noncontrolling interest.
D)Income from subsidiary will be reduced for upstream ending inventory profit but not for downstream profit,before the effect of the noncontrolling interest.
E)Income from subsidiary will be the same for upstream and downstream profit.

Question 35

Which of the following statements is true regarding inventory transfers between a parent and its subsidiary,using the initial value method?

A)The sale of merchandise between a parent and its subsidiary represents an arm's-length transaction and thus provides the basis for the recognition of profit on such transfers.
B)Profits on upstream transfers associated with the parent's ending inventory are subtracted from subsidiary net income for the current year in the calculation of parent's income from subsidiary.These year-end deferrals are then added to next year's subsidiary net income in the calculation of parent's income from subsidiary.This procedure is inappropriate because all the intercompany transactions unsold at year-end may not be sold in the next year.
C)Profits on upstream transfers associated with the parent's ending inventory are subtracted from subsidiary net income for the current year in the calculation of parent's income from subsidiary.These year-end deferrals are then added to next year's subsidiary net income in the calculation of parent's income from subsidiary.This procedure is appropriate even if all the intercompany transactions unsold at year-end may not be sold in the next year.
D)Merchandise transfers from a parent to its subsidiary that have not been sold to unaffiliated parties should be included in consolidated inventory at their transfer price.
E)Noncontrolling interest in subsidiary's net income should not be reduced for upstream or downstream ending inventory profits.

Question 36

REFERENCE: Ref.05_04
Walsh Company sells inventory to its subsidiary,Fisher Company,at a profit during 2009.Walsh uses the equity method to account for its investment in Fisher.
With regard to the intercompany sale,which of the following choices would be a debit entry in the consolidated worksheet for 2009?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment Fisher Company.
E)Additional paid-in capital.

Question 37

Which of the following statements is true regarding an intercompany sale of land?

A)A loss is always recognized but a gain is eliminated on a consolidated income statement.
B)A loss and a gain are always eliminated on a consolidated income statement.
C)A loss and a gain are always recognized on a consolidated income statement.
D)A gain is always recognized but a loss is eliminated on a consolidated income statement.
E)A gain or loss is eliminated by adjusting stockholders' equity through comprehensive income.

Question 38

REFERENCE: Ref.05_02
On January 1,2009,Pride,Inc.bought 80% of the outstanding voting common stock of Strong Corp.for $364,000.Of this payment,$28,000 was allocated to equipment (with a five-year life)that had been undervalued on Strong's books by $35,000.Any remaining excess was attributable to goodwill which has not been impaired.
As of December 31,2009,before preparing the consolidated worksheet,the financial statements appeared as follows:
During 2009,Pride bought inventory for $112,000 and sold it to Strong for $140,000.Only half of this purchase had been paid for by Strong by the end of the year.60% of these goods were still in the company's possession on December 31.
What is the consolidated total of noncontrolling interest appearing on the balance sheet?

A)$100,800.
B)$97,440.
C)$93,800.
D)$98,840.
E)$101,900.

Question 39

When comparing the difference between an upstream and downstream transfer of inventory,and using the initial value method,which of the following statements is true?

A)Income from subsidiary will be lower by the amount of the beginning inventory profits multiplied by the noncontrolling interest percentage for upstream transfers.
B)Income from subsidiary will be higher by the amount of the beginning inventory profits multiplied by the noncontrolling interest percentage for upstream transfers.
C)Income from subsidiary will be reduced for downstream ending inventory profits but not for upstream profits,before the noncontrolling interest.
D)Income from subsidiary will be reduced for upstream ending inventory profits but not for downstream profits,before the noncontrolling interest.
E)Income from subsidiary will be the same for upstream and downstream profits.

Question 40

An intercompany sale took place whereby the transfer price exceeded the book value of a depreciable asset.Which statement is true for the year following the sale?

A)A worksheet entry is made with a debit to gain for a downstream transfer.
B)A worksheet entry is made with a debit to gain for an upstream transfer.
C)A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer when the parent uses the equity method.
D)A worksheet entry is made with a debit to retained earnings for a downstream transfer.
E)No worksheet entry is necessary.

Question 41

REFERENCE: Ref.05_08
On January 1,2009,Smeder Company,an 80% owned subsidiary of Collins,Inc. ,transferred equipment with a 10-year life (six of which remain with no salvage value)to Collins in exchange for $84,000 cash.At the date of transfer,Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000.Straight-line depreciation is used.Smeder reported net income of $28,000 and $32,000 for 2009 and 2010,respectively.
Compute Collins' share of Smeder's net income for 2009.

A)$12,400.
B)$14,400.
C)$11,200.
D)$12,800.
E)$18,000.

Question 42

REFERENCE: Ref.05_05
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,sells inventory to Posito at a 25% profit on selling price.The following data are available pertaining to intercompany purchases.Gargiulo was acquired on January 1,2009.
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.

Compute the noncontrolling interest in Gargiulo's net income for 2011.

A)$9,400.
B)$9,375.
C)$9,425.
D)$9,325.
E)$8,485.

Question 43

REFERENCE: Ref.05_05
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,sells inventory to Posito at a 25% profit on selling price.The following data are available pertaining to intercompany purchases.Gargiulo was acquired on January 1,2009.
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.

Compute the income from Gargiulo reported on Posito's books for 2010.

A)$76,500.
B)$77,130.
C)$75,870.
D)$75,600.
E)$75,800.

Question 44

REFERENCE: Ref.05_08
On January 1,2009,Smeder Company,an 80% owned subsidiary of Collins,Inc. ,transferred equipment with a 10-year life (six of which remain with no salvage value)to Collins in exchange for $84,000 cash.At the date of transfer,Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000.Straight-line depreciation is used.Smeder reported net income of $28,000 and $32,000 for 2009 and 2010,respectively.
Compute the gain recognized by Smeder Company relating to the equipment for 2009.

A)$36,000.
B)$34,000.
C)$12,000.
D)$10,000.
E)$0.

Question 45

REFERENCE: Ref.05_07
On April 1,2009 Wilson Company,a 90% owned subsidiary of Simon Company,bought equipment from Simon for $68,250.On January 1,2009,Simon realized that the useful life of the equipment was longer than originally anticipated,at ten remaining years.The equipment had an original cost to Simon of $80,000 and a book value of $50,000 with a 10-year remaining life as of January 1,2009.
The following data are available pertaining to Wilson's income and dividends:

Compute the amortization of gain for 2009 for consolidation purposes.

A)$1,950.
B)$1,825.
C)$1,500.
D)$2,000.
E)$5,250.

Question 46

REFERENCE: Ref.05_06
Patti Company holds 80% of the common stock of Shannon,Inc.In the current year,Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000.For the same period,Shannon has sales of $200,000 and cost of goods sold of $160,000.During the year,Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup.At the end of the year,Shannon still possesses 30 percent of this inventory.
Compute consolidated cost of goods sold.

A)$7,500,000.
B)$7,600,000.
C)$7,615,000.
D)$7,604,500.
E)$7,660,000.

Question 47

REFERENCE: Ref.05_07
On April 1,2009 Wilson Company,a 90% owned subsidiary of Simon Company,bought equipment from Simon for $68,250.On January 1,2009,Simon realized that the useful life of the equipment was longer than originally anticipated,at ten remaining years.The equipment had an original cost to Simon of $80,000 and a book value of $50,000 with a 10-year remaining life as of January 1,2009.
The following data are available pertaining to Wilson's income and dividends:

Compute Simon's share of income from Wilson for consolidation for 2010.

A)$108,000
B)$110,000.
C)$106,000.
D)$109,825.
E)$109,800.

Question 48

Which of the following statements is true concerning an intercompany transfer of a depreciable asset?

A)Noncontrolling interest in subsidiary's net income is never affected by a gain on the transfer.
B)Noncontrolling interest in subsidiary's net income is always affected by a gain on the transfer.
C)Noncontrolling interest in subsidiary's net income is affected by a downstream gain only.
D)Noncontrolling interest in subsidiary's net income is affected only when the transfer is upstream.
E)Noncontrolling interest in subsidiary's net income is increased by an upstream gain in the year of transfer.

Question 49

REFERENCE: Ref.05_07
On April 1,2009 Wilson Company,a 90% owned subsidiary of Simon Company,bought equipment from Simon for $68,250.On January 1,2009,Simon realized that the useful life of the equipment was longer than originally anticipated,at ten remaining years.The equipment had an original cost to Simon of $80,000 and a book value of $50,000 with a 10-year remaining life as of January 1,2009.
The following data are available pertaining to Wilson's income and dividends:

Compute the gain on transfer of equipment reported by Simon for 2009.

A)$19,500.
B)$18,250.
C)$11,750.
D)$38,250.
E)$37,500.

Question 50

REFERENCE: Ref.05_07
On April 1,2009 Wilson Company,a 90% owned subsidiary of Simon Company,bought equipment from Simon for $68,250.On January 1,2009,Simon realized that the useful life of the equipment was longer than originally anticipated,at ten remaining years.The equipment had an original cost to Simon of $80,000 and a book value of $50,000 with a 10-year remaining life as of January 1,2009.
The following data are available pertaining to Wilson's income and dividends:

Compute the amortization of gain for 2011 for consolidation purposes.

A)$1,925.
B)$1,825.
C)$2,000.
D)$1,500.
E)$7,000.

Question 51

REFERENCE: Ref.05_07
On April 1,2009 Wilson Company,a 90% owned subsidiary of Simon Company,bought equipment from Simon for $68,250.On January 1,2009,Simon realized that the useful life of the equipment was longer than originally anticipated,at ten remaining years.The equipment had an original cost to Simon of $80,000 and a book value of $50,000 with a 10-year remaining life as of January 1,2009.
The following data are available pertaining to Wilson's income and dividends:

Compute the amortization of gain for 2010 for consolidation purposes.

A)$1,950.
B)$1,825.
C)$2,000.
D)$1,500.
E)$7,000.

Question 52

REFERENCE: Ref.05_05
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,sells inventory to Posito at a 25% profit on selling price.The following data are available pertaining to intercompany purchases.Gargiulo was acquired on January 1,2009.
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.

Compute the income from Gargiulo reported on Posito's books for 2009.

A)$63,000.
B)$62,730.
C)$63,270.
D)$70,000.
E)$62,700.

Question 53

REFERENCE: Ref.05_05
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,sells inventory to Posito at a 25% profit on selling price.The following data are available pertaining to intercompany purchases.Gargiulo was acquired on January 1,2009.
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.

Compute the income from Gargiulo reported on Posito's books for 2011.

A)$84,600.
B)$84,375.
C)$83,925.
D)$84,825.
E)$84,850.

Question 54

REFERENCE: Ref.05_07
On April 1,2009 Wilson Company,a 90% owned subsidiary of Simon Company,bought equipment from Simon for $68,250.On January 1,2009,Simon realized that the useful life of the equipment was longer than originally anticipated,at ten remaining years.The equipment had an original cost to Simon of $80,000 and a book value of $50,000 with a 10-year remaining life as of January 1,2009.
The following data are available pertaining to Wilson's income and dividends:

Compute Simon's share of income from Wilson for consolidation for 2009.

A)$72,000.
B)$90,000.
C)$73,575.
D)$73,800.
E)$72,500.

Question 55

REFERENCE: Ref.05_06
Patti Company holds 80% of the common stock of Shannon,Inc.In the current year,Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000.For the same period,Shannon has sales of $200,000 and cost of goods sold of $160,000.During the year,Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup.At the end of the year,Shannon still possesses 30 percent of this inventory.
Assume the same information,except Shannon sold inventory to Patti.Compute consolidated sales.

A)$10,000,000.
B)$10,126,000.
C)$10,140,000.
D)$10,200,000.
E)$10,260,000.

Question 56

REFERENCE: Ref.05_05
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,sells inventory to Posito at a 25% profit on selling price.The following data are available pertaining to intercompany purchases.Gargiulo was acquired on January 1,2009.
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.

Compute the noncontrolling interest in Gargiulo's net income for 2009.

A)$6,970.
B)$7,000.
C)$7,030.
D)$6,270.
E)$6,230.

Question 57

REFERENCE: Ref.05_05
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,sells inventory to Posito at a 25% profit on selling price.The following data are available pertaining to intercompany purchases.Gargiulo was acquired on January 1,2009.
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.

Compute the noncontrolling interest in Gargiulo's net income for 20010.

A)$8,500.
B)$8,570.
C)$8,430.
D)$8,400.
E)$7,580.

Question 58

An intercompany sale took place whereby the transfer price was less than the book value of a depreciable asset.Which statement is true for the year following the sale?

A)A worksheet entry is made with a debit to investment in subsidiary for an upstream transfer.
B)A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer.
C)A worksheet entry is made with a credit to investment in subsidiary for a downstream transfer when the parent uses the equity method.
D)A worksheet entry is made with a debit to retained earnings for an upstream transfer.
E)No worksheet entry is necessary.

Question 59

REFERENCE: Ref.05_07
On April 1,2009 Wilson Company,a 90% owned subsidiary of Simon Company,bought equipment from Simon for $68,250.On January 1,2009,Simon realized that the useful life of the equipment was longer than originally anticipated,at ten remaining years.The equipment had an original cost to Simon of $80,000 and a book value of $50,000 with a 10-year remaining life as of January 1,2009.
The following data are available pertaining to Wilson's income and dividends:

Compute Simon's share of income from Wilson for consolidation for 2011.

A)$118,825.
B)$115,000.
C)$117,000.
D)$119,000.
E)$118,800.

Question 60

REFERENCE: Ref.05_06
Patti Company holds 80% of the common stock of Shannon,Inc.In the current year,Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000.For the same period,Shannon has sales of $200,000 and cost of goods sold of $160,000.During the year,Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup.At the end of the year,Shannon still possesses 30 percent of this inventory.
Compute consolidated sales.

A)$10,000,000.
B)$10,126,000.
C)$10,140,000.
D)$10,200,000.
E)$10,260,000.

Question 61

REFERENCE: Ref.05_10
Stark Company,a 90% owned subsidiary of Parker,Inc. ,sold land to Parker on May 1,2009,for $80,000.the land originally cost Stark $85,000.Stark reported net income of $200,000,$180,000,and $220,000 for 2009,2010,and 2011,respectively.Parker sold the land it purchased from Stark in 2009 for $92,000 in 2011.
Compute the gain or loss on the intercompany sale of land.

A)$80,000 gain.
B)$80,000 loss.
C)$5,000 gain.
D)$5,000 loss.
E)$85,000 loss.

Question 62

REFERENCE: Ref.05_10
Stark Company,a 90% owned subsidiary of Parker,Inc. ,sold land to Parker on May 1,2009,for $80,000.the land originally cost Stark $85,000.Stark reported net income of $200,000,$180,000,and $220,000 for 2009,2010,and 2011,respectively.Parker sold the land it purchased from Stark in 2009 for $92,000 in 2011.
Which of the following will be included in a consolidation entry for 2009?

A)Debit loss for $5,000.
B)Credit loss for $5,000.
C)Credit land for $5,000.
D)Debit gain for $5,000.
E)Credit gain for $5,000.

Question 63

REFERENCE: Ref.05_11
Pepe,Incorporated acquired 60% of Devin Company on January 1,2009.On that date Devin sold equipment to Pepe for $45,000.The equipment had a cost of $120,000 and accumulated depreciation of $66,000 with a remaining life of 9 years.Devin reported net income of $300,000 and $325,000 for 2009 and 2010,respectively.Pepe uses the equity method to account for its investment in Devin.
What is the consolidated gain or loss on equipment for 2009?

A)$0.
B)$9,000 gain.
C)$9,000 loss.
D)$21,000 gain.
E)$21,000 loss.

Question 64

REFERENCE: Ref.05_11
Pepe,Incorporated acquired 60% of Devin Company on January 1,2009.On that date Devin sold equipment to Pepe for $45,000.The equipment had a cost of $120,000 and accumulated depreciation of $66,000 with a remaining life of 9 years.Devin reported net income of $300,000 and $325,000 for 2009 and 2010,respectively.Pepe uses the equity method to account for its investment in Devin.
Compute the income from Devin reported on Pepe's books for 2009.

A)$174,600.
B)$184,800.
C)$172,000.
D)$171,000.
E)$180,600.

Question 65

REFERENCE: Ref.05_10
Stark Company,a 90% owned subsidiary of Parker,Inc. ,sold land to Parker on May 1,2009,for $80,000.the land originally cost Stark $85,000.Stark reported net income of $200,000,$180,000,and $220,000 for 2009,2010,and 2011,respectively.Parker sold the land it purchased from Stark in 2009 for $92,000 in 2011.
Compute Parker's reported gain or loss relating to the land for 2011.

A)$12,000 gain.
B)$5,000 loss.
C)$12,000 loss.
D)$7,000 gain.
E)$7,000 loss.

Question 66

REFERENCE: Ref.05_10
Stark Company,a 90% owned subsidiary of Parker,Inc. ,sold land to Parker on May 1,2009,for $80,000.the land originally cost Stark $85,000.Stark reported net income of $200,000,$180,000,and $220,000 for 2009,2010,and 2011,respectively.Parker sold the land it purchased from Stark in 2009 for $92,000 in 2011.
Compute the consolidated gain or loss relating to the land for 2011.

A)$5,000 loss.
B)$7,000 gain.
C)$12,000 gain.
D)$7,000 loss.
E)$12,000 loss.

Question 67

REFERENCE: Ref.05_09
Stiller Company,an 80% owned subsidiary of Leo Company,purchased land from Leo on March 1,2009,for $75,000.The land originally cost Leo $60,000.Stiller reported net income of $125,000 and $140,000 for 2009 and 2010,respectively.Leo uses the equity method to account for its investment.
Compute the gain or loss on the intercompany sale of land.

A)$15,000 loss.
B)$15,000 gain.
C)$50,000 loss.
D)$50,000 gain.
E)$65,000 gain.

Question 68

REFERENCE: Ref.05_10
Stark Company,a 90% owned subsidiary of Parker,Inc. ,sold land to Parker on May 1,2009,for $80,000.the land originally cost Stark $85,000.Stark reported net income of $200,000,$180,000,and $220,000 for 2009,2010,and 2011,respectively.Parker sold the land it purchased from Stark in 2009 for $92,000 in 2011.
Compute income from Stark reported on Parker's books for 2010.

A)$185,000.
B)$157,500.
C)$166,500.
D)$162,000.
E)$180,000.

Question 69

REFERENCE: Ref.05_09
Stiller Company,an 80% owned subsidiary of Leo Company,purchased land from Leo on March 1,2009,for $75,000.The land originally cost Leo $60,000.Stiller reported net income of $125,000 and $140,000 for 2009 and 2010,respectively.Leo uses the equity method to account for its investment.
Compute income from Stiller on Leo's books for 2009.

A)$110,000
B)$100,000.
C)$125,000.
D)$85,000.
E)$88,000.

Question 70

REFERENCE: Ref.05_10
Stark Company,a 90% owned subsidiary of Parker,Inc. ,sold land to Parker on May 1,2009,for $80,000.the land originally cost Stark $85,000.Stark reported net income of $200,000,$180,000,and $220,000 for 2009,2010,and 2011,respectively.Parker sold the land it purchased from Stark in 2009 for $92,000 in 2011.
Compute Stark's reported gain or loss relating to the land for 2011.

A)$5,000 loss.
B)$5,000 gain.
C)$7,000 loss.
D)$7,000 gain.
E)$0.

Question 71

REFERENCE: Ref.05_09
Stiller Company,an 80% owned subsidiary of Leo Company,purchased land from Leo on March 1,2009,for $75,000.The land originally cost Leo $60,000.Stiller reported net income of $125,000 and $140,000 for 2009 and 2010,respectively.Leo uses the equity method to account for its investment.
Compute income from Stiller on Leo's books for 2010.

A)$140,000.
B)$97,000.
C)$125,000.
D)$100,000.
E)$112,000.

Question 72

REFERENCE: Ref.05_09
Stiller Company,an 80% owned subsidiary of Leo Company,purchased land from Leo on March 1,2009,for $75,000.The land originally cost Leo $60,000.Stiller reported net income of $125,000 and $140,000 for 2009 and 2010,respectively.Leo uses the equity method to account for its investment.
On a consolidation worksheet,what adjustment would be made for 2009 regarding the land transfer?

A)Debit gain for $50,000.
B)Credit gain for $50,000.
C)Debit land for $15,000.
D)Credit land for $15,000.
E)Credit gain for $15,000.

Question 73

REFERENCE: Ref.05_10
Stark Company,a 90% owned subsidiary of Parker,Inc. ,sold land to Parker on May 1,2009,for $80,000.the land originally cost Stark $85,000.Stark reported net income of $200,000,$180,000,and $220,000 for 2009,2010,and 2011,respectively.Parker sold the land it purchased from Stark in 2009 for $92,000 in 2011.
Compute income from Stark reported on Parker's books for 2011.

A)$204,300.
B)$202,500.
C)$193,500.
D)$191,700.
E)$225,000.

Question 74

REFERENCE: Ref.05_10
Stark Company,a 90% owned subsidiary of Parker,Inc. ,sold land to Parker on May 1,2009,for $80,000.the land originally cost Stark $85,000.Stark reported net income of $200,000,$180,000,and $220,000 for 2009,2010,and 2011,respectively.Parker sold the land it purchased from Stark in 2009 for $92,000 in 2011.
Which of the following will be included in a consolidation entry for 2010?

A)Debit retained earnings for $5,000.
B)Credit retained earnings for $5,000.
C)Debit investment in subsidiary for $5,000.
D)Credit investment in subsidiary for $5,000.
E)Credit land for $5,000.

Question 75

REFERENCE: Ref.05_11
Pepe,Incorporated acquired 60% of Devin Company on January 1,2009.On that date Devin sold equipment to Pepe for $45,000.The equipment had a cost of $120,000 and accumulated depreciation of $66,000 with a remaining life of 9 years.Devin reported net income of $300,000 and $325,000 for 2009 and 2010,respectively.Pepe uses the equity method to account for its investment in Devin.
What is the gain or loss on equipment reported by Devin for 2009?

A)$54,000 gain.
B)$21,000 loss.
C)$21,000 gain.
D)$9,000 loss.
E)$9,000 gain.

Question 76

REFERENCE: Ref.05_10
Stark Company,a 90% owned subsidiary of Parker,Inc. ,sold land to Parker on May 1,2009,for $80,000.the land originally cost Stark $85,000.Stark reported net income of $200,000,$180,000,and $220,000 for 2009,2010,and 2011,respectively.Parker sold the land it purchased from Stark in 2009 for $92,000 in 2011.
Compute income from Stark reported on Parker's books for 2009.

A)$205,000.
B)$200,000.
C)$180,000.
D)$175,500.
E)$184,500.

Question 77

For consolidation purposes,what net debit or credit will be made in 2009 relating to the equipment transfer?

A)Debit accumulated depreciation,$46,000.
B)Debit accumulated depreciation,$48,000.
C)Credit accumulated depreciation,$48,000.
D)Credit accumulated depreciation,$46,000.
E)Debit accumulated depreciation,$2,000.

Question 78

REFERENCE: Ref.05_08
On January 1,2009,Smeder Company,an 80% owned subsidiary of Collins,Inc. ,transferred equipment with a 10-year life (six of which remain with no salvage value)to Collins in exchange for $84,000 cash.At the date of transfer,Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000.Straight-line depreciation is used.Smeder reported net income of $28,000 and $32,000 for 2009 and 2010,respectively.
Compute Collins' share of Smeder's net income for 2010.

A)$27,600.
B)$23,600.
C)$27,200.
D)$24,000.
E)$34,000.

Question 79

REFERENCE: Ref.05_09
Stiller Company,an 80% owned subsidiary of Leo Company,purchased land from Leo on March 1,2009,for $75,000.The land originally cost Leo $60,000.Stiller reported net income of $125,000 and $140,000 for 2009 and 2010,respectively.Leo uses the equity method to account for its investment.
On a consolidation worksheet,having used the equity method,what adjustment would be made for 2010 regarding the land transfer?

A)Debit retained earnings for $15,000.
B)Credit retained earnings for $15,000.
C)Debit retained earnings for $50,000.
D)Credit retained earnings for $50,000.
E)Debit investment in Stiller for $15,000.

Question 80

What is the net effect on consolidated net income in 2009,before allocation to controlling and noncontrolling interests,due to the equipment transfer?

A)Increase $2,000.
B)Decrease $12,000.
C)Decrease $10,000.
D)Decrease $14,000.
E)Increase $10,000.