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

Question 1

On July 1,20X9,Playa Corporation paid $340,000 for all of Seashore Company's outstanding common stock.On that date,the costs and fair values of Seashore's recorded assets and liabilities were as follows:

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.

Answer 1

C

Question 2

On October 1,20X3,Pole Corporation paid $450,000 for all of Stick Company's outstanding common stock.On that date,the book values and fair values of Stick'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.

Answer 2

C

Question 3

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

Answer 3

D

Question 4

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 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 follows:
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

Question 6

On October 1,20X3,Pole Corporation paid $450,000 for all of Stick Company's outstanding common stock.On that date,the book values and fair values of Stick'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.

Question 7

On December 31,20X9,Pluto Company acquired 100 percent of Saturn Corporation's common stock for $300,000.Balance sheet information for Saturn just prior to the acquisition is given here:
At the date of the business combination,Saturn'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 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,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 9

On July 1,20X9,Playa Corporation paid $340,000 for all of Seashore Company's outstanding common stock.On that date,the costs and fair values of Seashore'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 after this business combination?

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

Question 10

On December 31,20X9,Pluto Company acquired 100 percent of Saturn Corporation's common stock for $300,000.Balance sheet information for Saturn just prior to the acquisition is given here:
At the date of the business combination,Saturn'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 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 follows:
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 12

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 13

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 follows:
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 14

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 follows:
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 15

On December 31,20X9,Pluto Company acquired 100 percent of Saturn Corporation's common stock for $300,000.Balance sheet information for Saturn just prior to the acquisition is given here:
At the date of the business combination,Saturn'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 Saturn Corporation in the consolidated balance sheet immediately following the acquisition?

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

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 follows:
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 stockholders' 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 17

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 follows:
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 18

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 follows:
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

Question 19

Pirate Corporation acquired 100 percent of Ship 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 20

Pirate Corporation acquired 100 percent of Ship 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 Pirate and Ship will reflect goodwill in the amount of:

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

Question 21

Paris,Inc.holds 100 percent of the common stock of Stockholm Company,an investment acquired for $520,000.Immediately following the combination,Paris's net assets have a book value of $900,000 and a fair value of $1,050,000.The book and fair value of Stockholm'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 22

Pail,Inc.holds 100 percent of the common stock of Shovel Company,an investment acquired for $680,000.Immediately following the combination,Pail'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 Shovel'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 23

On January 1,20X8,Patriot 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.Patriot used the equity method in accounting for its investment in Stryder.Analysis of receivables and payables revealed that Stryder owed Patriot $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 24

Pail,Inc.holds 100 percent of the common stock of Shovel Company,an investment acquired for $680,000.Immediately following the combination,Pail'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 Shovel'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 Pail's investment in Shovel stock be reported in the consolidated balance sheet?

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

Question 25

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 26

On January 1,20X8,Patriot 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.Patriot used the equity method in accounting for its investment in Stryder.Analysis of receivables and payables revealed that Stryder owed Patriot $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 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 goodwill will be reported in the consolidated balance sheet prepared immediately after the business combination?

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

Question 28

Pail,Inc.holds 100 percent of the common stock of Shovel Company,an investment acquired for $680,000.Immediately following the combination,Pail'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 Shovel'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 29

On January 1,20X8,Patriot 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.Patriot used the equity method in accounting for its investment in Stryder.Analysis of receivables and payables revealed that Stryder owed Patriot $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 30

On January 1,20X8,Patriot 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.Patriot used the equity method in accounting for its investment in Stryder.Analysis of receivables and payables revealed that Stryder owed Patriot $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 31

On January 1,20X8,Patriot 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.Patriot used the equity method in accounting for its investment in Stryder.Analysis of receivables and payables revealed that Stryder owed Patriot $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 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 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 33

On December 31,20X8,Polaris Corporation acquired 100 percent ownership of Star Corporation.On that date,Star 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 Star'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 34

On December 31,20X8,Polaris Corporation acquired 100 percent ownership of Star Corporation.On that date,Star 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 Star'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 35

On December 31,20X1,Pine Corporation acquired 100 percent ownership of Sap Corporation.On that date,Sap 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 Sap'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 36

On January 1,20X8,Patriot 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.Patriot used the equity method in accounting for its investment in Stryder.Analysis of receivables and payables revealed that Stryder owed Patriot $10,000 on December 31,20X8.
Based on the information provided,the annual amortization of the differential assigned to buildings and equipment is:

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

Question 37

On December 31,20X8,Polaris Corporation acquired 100 percent ownership of Star Corporation.On that date,Star 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 Star'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 38

Paris,Inc.holds 100 percent of the common stock of Stockholm Company,an investment acquired for $520,000.Immediately following the combination,Paris's net assets have a book value of $900,000 and a fair value of $1,050,000.The book and fair value of Stockholm'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 Paris's investment in Stockholm stock be reported in a consolidated balance?

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

Question 39

Perimeter,Inc.acquired 30 percent of South Co.'s (South)voting stock for $200,000 on January 1,20X1.Perimeter's 30 percent interest in South gave Perimeter 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 Perimeter recognize in 20X1 as a result of this investment?

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

Question 40

Paris,Inc.holds 100 percent of the common stock of Stockholm Company,an investment acquired for $520,000.Immediately following the combination,Paris's net assets have a book value of $900,000 and a fair value of $1,050,000.The book and fair value of Stockholm'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 41

Company P acquires 100 percent of the voting shares of Company S for $275,000 on December 31,20X8.The fair value of the net assets of Company P at the date of acquisition was $300,000.This is an example of a(n):

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

Question 42

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 43

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

Additional Information:
On January 1,20X5 the fair market value of Slice'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 Slice's depreciable assets of $33,000.
Pizza used the equity method in accounting for its investment in Slice.
Detailed analysis of receivables and payables showed that Slice owed Pizza $10,000 on December 31,20X5.
Required:
a.Give all journal entries recorded by Pizza with regard to its investment in Slice 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.

Question 44

On December 31,20X1,Pine Corporation acquired 100 percent ownership of Sap Corporation.On that date,Sap 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 Sap'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

Puzzle Corporation acquired 100 percent of the common stock of Solver 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 46

Plant Company acquired all of Sprout 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:
Sprout 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,Sprout owed Plant $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 47

Pop Company obtained 100 percent of Snap 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.Snap 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.Snap had also developed a customer list with an estimated fair value of $10,000 and a remaining life of 10 years.Pop Company uses the equity-method to account for its investment in Snap.During 20X6 Pop and Snap reported the following:

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

Question 48

Plant Company acquired all of Sprout 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:
Sprout 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,Sprout owed Plant $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

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 50

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 51

Plant Company acquired all of Sprout 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:
Sprout 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,Sprout owed Plant $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 52

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 53

Plant Company acquired all of Sprout 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:
Sprout 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,Sprout owed Plant $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 54

On January 1,20X8,Piano Company acquired all of Song Corporation's voting shares for $280,000 cash.On December 31,20X9,Song owed Piano $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 55

On December 31,20X1,Pine Corporation acquired 100 percent ownership of Sap Corporation.On that date,Sap 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 Sap'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 56

Plant Company acquired all of Sprout 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:
Sprout 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,Sprout owed Plant $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 57

On January 1,20X9,Paradox 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.Paradox 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 58

On January 1,20X9,Paradox 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.Paradox 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