Deck 9: Other Consolidated Reporting Issues

Question 1

The following information pertains to questions
Find Corp.is a joint venture in which Seek Inc.has a 20% interest.Seek uses the equity method to account for its investment but has yet to make any journal entries for 2010.The financial statements of both companies are shown below on December 31,2010. During 2010,Seek sold merchandise totaling $120,000 to Find and recorded a gross profit of 50% on these sales.At the end of 2010,Find's inventory contained $30,000 worth of merchandise purchased from Seek.Find also owed $50,000 to find at the end of 2010.
Seek shall use the proportionate consolidation method (current Canadian GAAP)to report its investment in Find Corp.for 2010.Both companies are subject to 40% tax rate.
What is the total amount of deferred taxes that would appear on Seek's Consolidated Balance Sheet as at December 31,2010?

A)$12,000
B)$8,000
C)$10,000
D)$800

Answer 1

A

Question 2

The following information pertains to questions
Find Corp.is a joint venture in which Seek Inc.has a 20% interest.Seek uses the equity method to account for its investment but has yet to make any journal entries for 2010.The financial statements of both companies are shown below on December 31,2010. During 2010,Seek sold merchandise totaling $120,000 to Find and recorded a gross profit of 50% on these sales.At the end of 2010,Find's inventory contained $30,000 worth of merchandise purchased from Seek.Find also owed $50,000 to find at the end of 2010.
Seek shall use the proportionate consolidation method (current Canadian GAAP)to report its investment in Find Corp.for 2010.Both companies are subject to 40% tax rate.
What is the amount of goodwill arising from this joint venture?

A)This figure cannot be computed with the information provided.
B)$36,000
C)$144,000
D)Nil.

Answer 2

D

Question 3

Company A and B agree to engage in a joint venture.Which of the following statements pertaining to joint ventures is correct?

A)Both parties to a joint venture must contribute an equal amount of resources to the venture.
B)The party contributing the most resources to the venture has control over the venture.
C)Both parties have joint control over the venture.
D)All joint ventures have a stated economic useful life.

Answer 3

C

Question 4

The following information pertains to questions
Find Corp.is a joint venture in which Seek Inc.has a 20% interest.Seek uses the equity method to account for its investment but has yet to make any journal entries for 2010.The financial statements of both companies are shown below on December 31,2010. During 2010,Seek sold merchandise totaling $120,000 to Find and recorded a gross profit of 50% on these sales.At the end of 2010,Find's inventory contained $30,000 worth of merchandise purchased from Seek.Find also owed $50,000 to find at the end of 2010.
Seek shall use the proportionate consolidation method (current Canadian GAAP)to report its investment in Find Corp.for 2010.Both companies are subject to 40% tax rate.
What is the total amount of intercompany receivables to be eliminated from the financial statements?

A)$50,000
B)$10,000
C)$40,000
D)Nil

Question 5

The following information pertains to questions
Find Corp.is a joint venture in which Seek Inc.has a 20% interest.Seek uses the equity method to account for its investment but has yet to make any journal entries for 2010.The financial statements of both companies are shown below on December 31,2010. During 2010,Seek sold merchandise totaling $120,000 to Find and recorded a gross profit of 50% on these sales.At the end of 2010,Find's inventory contained $30,000 worth of merchandise purchased from Seek.Find also owed $50,000 to find at the end of 2010.
Seek shall use the proportionate consolidation method (current Canadian GAAP)to report its investment in Find Corp.for 2010.Both companies are subject to 40% tax rate.
What is the total amount of sales that would appear on the Consolidated Income Statement?

A)$1,000,000
B)$880,000
C)$920,000
D)$816,000

Question 6

The following information pertains to questions
Find Corp.is a joint venture in which Seek Inc.has a 20% interest.Seek uses the equity method to account for its investment but has yet to make any journal entries for 2010.The financial statements of both companies are shown below on December 31,2010. During 2010,Seek sold merchandise totaling $120,000 to Find and recorded a gross profit of 50% on these sales.At the end of 2010,Find's inventory contained $30,000 worth of merchandise purchased from Seek.Find also owed $50,000 to find at the end of 2010.
Seek shall use the proportionate consolidation method (current Canadian GAAP)to report its investment in Find Corp.for 2010.Both companies are subject to 40% tax rate.
What is the total amount of other expenses that would appear on the Consolidated Income Statement?

A)$260,000
B)$212,000
C)$200,000
D)$248,000

Question 7

The following information pertains to questions
Find Corp.is a joint venture in which Seek Inc.has a 20% interest.Seek uses the equity method to account for its investment but has yet to make any journal entries for 2010.The financial statements of both companies are shown below on December 31,2010. During 2010,Seek sold merchandise totaling $120,000 to Find and recorded a gross profit of 50% on these sales.At the end of 2010,Find's inventory contained $30,000 worth of merchandise purchased from Seek.Find also owed $50,000 to find at the end of 2010.
Seek shall use the proportionate consolidation method (current Canadian GAAP)to report its investment in Find Corp.for 2010.Both companies are subject to 40% tax rate.
What is the total amount of cost of sales that would appear on the Consolidated Income Statement?

A)$500,000
B)$420,000
C)$398,000
D)$396,000

Question 8

The following information pertains to questions
Find Corp.is a joint venture in which Seek Inc.has a 20% interest.Seek uses the equity method to account for its investment but has yet to make any journal entries for 2010.The financial statements of both companies are shown below on December 31,2010. During 2010,Seek sold merchandise totaling $120,000 to Find and recorded a gross profit of 50% on these sales.At the end of 2010,Find's inventory contained $30,000 worth of merchandise purchased from Seek.Find also owed $50,000 to find at the end of 2010.
Seek shall use the proportionate consolidation method (current Canadian GAAP)to report its investment in Find Corp.for 2010.Both companies are subject to 40% tax rate.
What is the amount of Consolidated Net Income for 2010?

A)$218,000
B)$216,000
C)$200,000
D)$208,000

Question 9

Which of the following statements pertaining to any acquisition differential arising from a joint venture is correct?

A)There can be no acquisition differential arising from the formation of a new joint Venture.
B)The acquisition differential arising from a newly formed joint venture is allocated across the venture's identifiable net assets.
C)The acquisition differential arising from a newly formed joint venture is immediately charged to the retained earnings of each venturer on a pro-rata basis.
D)There can be no acquisition differential arising from the sale of a venturer's interest in the joint venture.

Question 10

The following information pertains to questions
Find Corp.is a joint venture in which Seek Inc.has a 20% interest.Seek uses the equity method to account for its investment but has yet to make any journal entries for 2010.The financial statements of both companies are shown below on December 31,2010. During 2010,Seek sold merchandise totaling $120,000 to Find and recorded a gross profit of 50% on these sales.At the end of 2010,Find's inventory contained $30,000 worth of merchandise purchased from Seek.Find also owed $50,000 to find at the end of 2010.
Seek shall use the proportionate consolidation method (current Canadian GAAP)to report its investment in Find Corp.for 2010.Both companies are subject to 40% tax rate.
What is the amount of Consolidated Retained Earnings for 2010?

A)$340,000
B)$368,000
C)$376,000
D)$558,000

Question 11

How are intercompany transactions handled in a joint venture?

A)They are ignored.
B)They are completely eliminated.
C)Only the venturer's share of any after tax profit is eliminated.
D)Intercompany profits are treated as an adjustment to the acquisition differential.

Question 12

The following information pertains to questions
Find Corp.is a joint venture in which Seek Inc.has a 20% interest.Seek uses the equity method to account for its investment but has yet to make any journal entries for 2010.The financial statements of both companies are shown below on December 31,2010. During 2010,Seek sold merchandise totaling $120,000 to Find and recorded a gross profit of 50% on these sales.At the end of 2010,Find's inventory contained $30,000 worth of merchandise purchased from Seek.Find also owed $50,000 to find at the end of 2010.
Seek shall use the proportionate consolidation method (current Canadian GAAP)to report its investment in Find Corp.for 2010.Both companies are subject to 40% tax rate.
What is the amount of unrealized profits in ending inventory?

A)$30,000
B)$20,000
C)$10,000
D)$3,000

Question 13

The following information pertains to questions
Find Corp.is a joint venture in which Seek Inc.has a 20% interest.Seek uses the equity method to account for its investment but has yet to make any journal entries for 2010.The financial statements of both companies are shown below on December 31,2010. During 2010,Seek sold merchandise totaling $120,000 to Find and recorded a gross profit of 50% on these sales.At the end of 2010,Find's inventory contained $30,000 worth of merchandise purchased from Seek.Find also owed $50,000 to find at the end of 2010.
Seek shall use the proportionate consolidation method (current Canadian GAAP)to report its investment in Find Corp.for 2010.Both companies are subject to 40% tax rate.
What is the amount of Consolidated Retained Earnings for 2010?

A)$340,000
B)$368,000
C)$376,000
D)$558,000

Question 14

The following information pertains to questions
Find Corp.is a joint venture in which Seek Inc.has a 20% interest.Seek uses the equity method to account for its investment but has yet to make any journal entries for 2010.The financial statements of both companies are shown below on December 31,2010. During 2010,Seek sold merchandise totaling $120,000 to Find and recorded a gross profit of 50% on these sales.At the end of 2010,Find's inventory contained $30,000 worth of merchandise purchased from Seek.Find also owed $50,000 to find at the end of 2010.
Seek shall use the proportionate consolidation method (current Canadian GAAP)to report its investment in Find Corp.for 2010.Both companies are subject to 40% tax rate.
What is the total amount of miscellaneous assets that would appear on Seek's Consolidated Balance Sheet as at December 31,2010?

A)$640,000
B)$660,000
C)$900,000
D)$840,000

Question 15

The following information pertains to questions
Find Corp.is a joint venture in which Seek Inc.has a 20% interest.Seek uses the equity method to account for its investment but has yet to make any journal entries for 2010.The financial statements of both companies are shown below on December 31,2010. During 2010,Seek sold merchandise totaling $120,000 to Find and recorded a gross profit of 50% on these sales.At the end of 2010,Find's inventory contained $30,000 worth of merchandise purchased from Seek.Find also owed $50,000 to find at the end of 2010.
Seek shall use the proportionate consolidation method (current Canadian GAAP)to report its investment in Find Corp.for 2010.Both companies are subject to 40% tax rate.
What is the total amount of intercompany profits in ending inventory?

A)$30,000
B)$20,000
C)$15,000
D)$2,000

Question 16

The primary beneficiary of a variable interest enterprise:

A)Must include the assets,liabilities,and results of the variable interest enterprise in its consolidated financial statements.
B)Can simply record income on a cash basis when dividends are received or income accrued.
C)Only recognizes a gain or loss on the sale of its interest in the variable interest enterprise.
D)Only includes the results of the variable interest enterprise if it has in excess of 50% of the voting share capital of the variable interest enterprise.

Question 17

According to the CICA Handbook and current Canadian GAAP,joint ventures should be accounted for using:

A)the Cost Method.
B)the Pooling of Interests Method.
C)the Entity Theory.
D)Proportionate Consolidation.

Question 18

The following information pertains to questions
Find Corp.is a joint venture in which Seek Inc.has a 20% interest.Seek uses the equity method to account for its investment but has yet to make any journal entries for 2010.The financial statements of both companies are shown below on December 31,2010. During 2010,Seek sold merchandise totaling $120,000 to Find and recorded a gross profit of 50% on these sales.At the end of 2010,Find's inventory contained $30,000 worth of merchandise purchased from Seek.Find also owed $50,000 to find at the end of 2010.
Seek shall use the proportionate consolidation method (current Canadian GAAP)to report its investment in Find Corp.for 2010.Both companies are subject to 40% tax rate.
What is the total amount of inventory that would appear on Seek's Consolidated Balance Sheet as at December 31,2010?

A)$132,000
B)$130,000
C)$360,000
D)$312,000

Question 19

The following information pertains to questions
Find Corp.is a joint venture in which Seek Inc.has a 20% interest.Seek uses the equity method to account for its investment but has yet to make any journal entries for 2010.The financial statements of both companies are shown below on December 31,2010. During 2010,Seek sold merchandise totaling $120,000 to Find and recorded a gross profit of 50% on these sales.At the end of 2010,Find's inventory contained $30,000 worth of merchandise purchased from Seek.Find also owed $50,000 to find at the end of 2010.
Seek shall use the proportionate consolidation method (current Canadian GAAP)to report its investment in Find Corp.for 2010.Both companies are subject to 40% tax rate.
What is the total amount of intercompany sales and purchases that must be eliminated from the financial statements?

A)$24,000
B)$20,000
C)$80,000
D)$120,000

Question 20

The primary beneficiary of the variable interest entity controls the resources of and will obtain the future benefits from the variable interest entity:

A)Those resources meet the definition of an asset and should be included on the consolidated balance sheet of the primary beneficiary.
B)A review of the legal documentation which established the variable interest entity will assist us in determining who the beneficial owners of the variable interest entity are.
C)Because the primary beneficiary normally has no voting control of the entity the question of future benefits is irrelevant.
D)None of the above applies.

Question 21

The following information pertains to questions
Find Corp.is a joint venture in which Seek Inc.has a 20% interest.Seek uses the equity method to account for its investment but has yet to make any journal entries for 2010.The financial statements of both companies are shown below on December 31,2010. During 2010,Seek sold merchandise totaling $120,000 to Find and recorded a gross profit of 50% on these sales.At the end of 2010,Find's inventory contained $30,000 worth of merchandise purchased from Seek.Find also owed $50,000 to find at the end of 2010.
Seek shall use the proportionate consolidation method (current Canadian GAAP)to report its investment in Find Corp.for 2010.Both companies are subject to 40% tax rate.
What is the amount of non-controlling interest that would appear on Seek's December 31,2010 Consolidated Balance Sheet?

A)$144,000
B)$136,000
C)$180,000
D)Nil.

Question 22

The following information pertains to questions
John Inc and Victor Inc.formed a joint venture on January 1,2010.John invested plant and equipment with a book value of $500,000 and a fair value of $800,000 for a 30% interest in the venture which was to be called Jinxtor Ltd.Victor contributed assets with a fair value of $2,000,000 (including $200,000 in cash)for its 70% stake in Jinxtor.Jinxtor reported a net income of $3,000,000 for 2010.John's plant and equipment were estimated to provide an additional 5 years of utility to Jinxtor.
What is the amount of the amortization of the unrealized gain for 2010 arising from the transfer of John's assets?

A)$18,000
B)$42,000
C)$60,000
D)Nil

Question 23

The following information pertains to questions
John Inc and Victor Inc.formed a joint venture on January 1,2010.John invested plant and equipment with a book value of $500,000 and a fair value of $800,000 for a 30% interest in the venture which was to be called Jinxtor Ltd.Victor contributed assets with a fair value of $2,000,000 (including $200,000 in cash)for its 70% stake in Jinxtor.Jinxtor reported a net income of $3,000,000 for 2010.John's plant and equipment were estimated to provide an additional 5 years of utility to Jinxtor.
Assume that the facts provided above with respect to the Jinxtor Joint Venture remain unchanged except that John receives $200,000 in return for investing its plant and equipment.What would be the recognizable gain on December 31,2010 arising from Jinxtor's investment?

A)$15,000
B)$27,000
C)$50,000
D)$14,000

Question 24

The following information pertains to questions
John Inc and Victor Inc.formed a joint venture on January 1,2010.John invested plant and equipment with a book value of $500,000 and a fair value of $800,000 for a 30% interest in the venture which was to be called Jinxtor Ltd.Victor contributed assets with a fair value of $2,000,000 (including $200,000 in cash)for its 70% stake in Jinxtor.Jinxtor reported a net income of $3,000,000 for 2010.John's plant and equipment were estimated to provide an additional 5 years of utility to Jinxtor.
At what amount would John record its initial investment in Jinxtor?

A)$740,000
B)$240,000
C)$800,000
D)$500,000

Question 25

The following information pertains to questions
John Inc and Victor Inc.formed a joint venture on January 1,2010.John invested plant and equipment with a book value of $500,000 and a fair value of $800,000 for a 30% interest in the venture which was to be called Jinxtor Ltd.Victor contributed assets with a fair value of $2,000,000 (including $200,000 in cash)for its 70% stake in Jinxtor.Jinxtor reported a net income of $3,000,000 for 2010.John's plant and equipment were estimated to provide an additional 5 years of utility to Jinxtor.
What is Victor's portion of any unrealized gain or loss arising from the transfer of John's assets to Jinxtor on January 1,2010?

A)$90,000
B)$210,000
C)$300,000
D)Nil

Question 26

The following information pertains to questions
Find Corp.is a joint venture in which Seek Inc.has a 20% interest.Seek uses the equity method to account for its investment but has yet to make any journal entries for 2010.The financial statements of both companies are shown below on December 31,2010. During 2010,Seek sold merchandise totaling $120,000 to Find and recorded a gross profit of 50% on these sales.At the end of 2010,Find's inventory contained $30,000 worth of merchandise purchased from Seek.Find also owed $50,000 to find at the end of 2010.
Seek shall use the proportionate consolidation method (current Canadian GAAP)to report its investment in Find Corp.for 2010.Both companies are subject to 40% tax rate.
What is the amount of miscellaneous liabilities that would appear on Seek's December 31,2010 Consolidated Balance Sheet?

A)$166,000
B)$176,000
C)$240,000
D)$230,000

Question 27

Under IFRS 10,when can a venturer recognize a portion of the gain on a contribution of assets to a joint operation?

A)When the venturer has transferred the significant rights and rewards of ownership to the joint arrangement.
B)When the legal documentation is signed and payment has been made by the joint arrangement to the venturer for the asset received.
C)When the asset is put in use by the joint arrangement.
D)When the asset is sold by the joint arrangement to an arm's length third party.

Question 28

The following information pertains to questions
John Inc and Victor Inc.formed a joint venture on January 1,2010.John invested plant and equipment with a book value of $500,000 and a fair value of $800,000 for a 30% interest in the venture which was to be called Jinxtor Ltd.Victor contributed assets with a fair value of $2,000,000 (including $200,000 in cash)for its 70% stake in Jinxtor.Jinxtor reported a net income of $3,000,000 for 2010.John's plant and equipment were estimated to provide an additional 5 years of utility to Jinxtor.
Assume that the facts provided above with respect to the Jinxtor joint venture remain unchanged except that John receives $200,000 in return for investing its plant and equipment.What would be the recognizable gain on January 1,2010 arising from Jinxtor's investment?

A)$75,000
B)$50,000
C)$200,000
D)$300,000

Question 29

The following information pertains to questions
John Inc and Victor Inc.formed a joint venture on January 1,2010.John invested plant and equipment with a book value of $500,000 and a fair value of $800,000 for a 30% interest in the venture which was to be called Jinxtor Ltd.Victor contributed assets with a fair value of $2,000,000 (including $200,000 in cash)for its 70% stake in Jinxtor.Jinxtor reported a net income of $3,000,000 for 2010.John's plant and equipment were estimated to provide an additional 5 years of utility to Jinxtor.
Assume that the facts provided above with respect to the Jinxtor joint venture remain unchanged except that John receives $240,000 in return for investing its plant and equipment.What would be the immediately recognizable gain arising from this transaction?

A)$142,500
B)$124,500
C)$60,000
D)$85,500

Question 30

The following information pertains to questions
John Inc and Victor Inc.formed a joint venture on January 1,2010.John invested plant and equipment with a book value of $500,000 and a fair value of $800,000 for a 30% interest in the venture which was to be called Jinxtor Ltd.Victor contributed assets with a fair value of $2,000,000 (including $200,000 in cash)for its 70% stake in Jinxtor.Jinxtor reported a net income of $3,000,000 for 2010.John's plant and equipment were estimated to provide an additional 5 years of utility to Jinxtor.
Assume that the facts provided above with respect to the Jinxtor joint venture remain unchanged except that John receives $200,000 in return for investing its plant and equipment.What would be the amount of the unrealized gain?

A)$75,000
B)$50,000
C)$135,000
D)$150,000

Question 31

Under IFRS how are unrealized gains and losses on non-monetary assets contributed to jointly controlled operations recorded assuming that they gain or loss meets the revenue recognition tests under IAS 18:

A)The amounts are included in deferred gains or losses.
B)The gain or loss must be eliminated against the underlying assets as a contra account.
C)No gain or loss can be recognized until the asset is put into use and the asset is generating revenues.
D)The gain or loss should be recorded immediately as other comprehensive income and transferred to operating income as the non-monetary asset is put into service.

Question 32

Which of the following methods is the current method used to account for intraperiod tax allocation?

A)The Income Statement Approach.
B)The Deferral Approach.
C)The Balance Sheet Approach.
D)Deferred Tax Accounting.

Question 33

On December 31,2011,XYZ Inc.has an account payable of $2,000 for operating expenses incurred during the year.These expenses are only tax deductible when paid.XYZ normally pays for its operating expenses one month after they are incurred.Assuming a 20% tax rate,these expenses shall result in:

A)a deferred tax asset of $400.
B)a deferred tax liability of $400.
C)a deferred tax asset of $2,000.
D)a deferred tax liability of $2,000.

Question 34

The following information pertains to questions
John Inc and Victor Inc.formed a joint venture on January 1,2010.John invested plant and equipment with a book value of $500,000 and a fair value of $800,000 for a 30% interest in the venture which was to be called Jinxtor Ltd.Victor contributed assets with a fair value of $2,000,000 (including $200,000 in cash)for its 70% stake in Jinxtor.Jinxtor reported a net income of $3,000,000 for 2010.John's plant and equipment were estimated to provide an additional 5 years of utility to Jinxtor.
What is John's portion of any unrealized gain or loss arising from the transfer of John's assets to Jinxtor on January 1,2010?

A)$90,000
B)$210,000
C)$300,000
D)Nil

Question 35

According to GAAP,what is the key feature of a joint arrangement?

A)One venturer has a controlling interest in the joint arrangement.
B)More than one venturer has a controlling interest in the joint arrangement.
C)Joint control,namely,no one venturer can unilaterally control the venture regardless of the size of the equity contribution.
D)The two largest equity contributors will have joint control over the venture.

Question 36

The following information pertains to questions
John Inc and Victor Inc.formed a joint venture on January 1,2010.John invested plant and equipment with a book value of $500,000 and a fair value of $800,000 for a 30% interest in the venture which was to be called Jinxtor Ltd.Victor contributed assets with a fair value of $2,000,000 (including $200,000 in cash)for its 70% stake in Jinxtor.Jinxtor reported a net income of $3,000,000 for 2010.John's plant and equipment were estimated to provide an additional 5 years of utility to Jinxtor.
Assume that the facts provided above with respect to the Jinxtor joint venture remain unchanged except that John receives $240,000 in return for investing its plant and equipment.What would be the unrealized gain arising from this transaction?

A)$ 142,500
B)$ 124,500
C)$ 60,000
D)$ 85,500

Question 37

The following information pertains to questions
John Inc and Victor Inc.formed a joint venture on January 1,2010.John invested plant and equipment with a book value of $500,000 and a fair value of $800,000 for a 30% interest in the venture which was to be called Jinxtor Ltd.Victor contributed assets with a fair value of $2,000,000 (including $200,000 in cash)for its 70% stake in Jinxtor.Jinxtor reported a net income of $3,000,000 for 2010.John's plant and equipment were estimated to provide an additional 5 years of utility to Jinxtor.
Assume that the facts provided above with respect to the Jinxtor joint venture remain unchanged except that John receives $240,000 in return for investing its plant and equipment.What would be the impact of this transaction?

A)This would result in Jinxtor owing John $40,000.
B)This would result in a return of equity to John in the amount of $30,000.
C)This would result in a return of equity to John in the amount of $40,000.
D)This would result in a return of equity to John in the amount of $12,000.

Question 38

Under the Balance Sheet approach,the differences between the carrying values of assets or liabilities and their tax bases are treated as:

A)equity reductions.
B)timing differences.
C)permanent differences.
D)temporary differences.

Question 39

The following information pertains to questions
John Inc and Victor Inc.formed a joint venture on January 1,2010.John invested plant and equipment with a book value of $500,000 and a fair value of $800,000 for a 30% interest in the venture which was to be called Jinxtor Ltd.Victor contributed assets with a fair value of $2,000,000 (including $200,000 in cash)for its 70% stake in Jinxtor.Jinxtor reported a net income of $3,000,000 for 2010.John's plant and equipment were estimated to provide an additional 5 years of utility to Jinxtor.
Assume that the facts provided above with respect to the Jinxtor joint venture remain unchanged except that John receives $240,000 in return for investing its plant and equipment.What would be the recognizable gain arising from this transaction on December 31,2010?

A)$ 24,900
B)$ 30,000
C)$ 12,450
D)$ 16,500

Question 40

On December 31,2011,XYZ Inc.has an account receivable of $2,000 for consulting fees it earned during the year.Consulting revenues are only taxable when collected.XYZ normally receives payment for the services rendered one month after the client is invoiced.Assuming a 20% tax rate,these revenues shall result in:

A)a deferred tax asset of $400.
B)a deferred tax liability of $400.
C)a deferred tax asset of $2,000.
D)a deferred tax liability of $2,000.

Question 41

The following information pertains to questions 53 through 55 inclusively.Analysis and calculations should be made under current Canadian GAAP.
Alcor and Vax Inc.formed a joint venture on January 1,2010 called Inventure Inc.Alcor and Vax each hold a 50% in the venture and share equally in any profits or losses arising from the venture.
The following statements were prepared on December 31,2010. Other Information:
During 2010,Inventure purchased $10,000 from Alcor.Alcor recorded a gross profit of $2,000 on these sales.
On December 31,2010,Inventure's inventories contained half of the merchandise purchased from Alcor.Alcor uses the Cost Method to account for its Investment in Inventure.Alcor wishes to comply with Section 3055 of the CICA Handbook.An income tax allocation rate of 20% applies.
Using only the Assets test,which of the following segment(s)would be reportable?

A)A
B)A,B,C
C)A,B,C,D
D)B,C and D

Question 42

The implied value of a VIE at acquisition under Canadian GAAP is equal to:

A)The fair value of the VIE.
B)The fair value of the non-controlling interest of the VIE.
C)The book value of the VIE.
D)Consideration paid by the primary beneficiary,plus the reported value of any previously held interests.
E)(b)& (d).

Question 43

The following information pertains to questions
ABC purchased specialized machinery on January 1,2010 for $2,500.Due to certain restrictions,only 40% of the acquisition cost of the asset is tax deductible.ABC pays tax at a rate of 20%.
What is the tax basis of this asset?

A)$1,500
B)$2,500
C)$1,000
D)$2,000

Question 44

The following information pertains to questions
ABC purchased specialized machinery on January 1,2010 for $2,500.Due to certain restrictions,only 40% of the acquisition cost of the asset is tax deductible.ABC pays tax at a rate of 20%.
What is the carrying value of this asset?

A)$1,500
B)$2,500
C)$2,875
D)$2,200

Question 45

What is the amount of the temporary difference between straight line depreciation and capital cost allowance on December 31,2011?

A)$1,500
B)$5,400
C)$3,600
D)$1,800

Question 46

According to AcG-15,a company will be required to consolidate its financial statements with those of a VIE if the VIE's owner equity is what percentage of the sponsoring company's total assets?

A)5%
B)10%
C)Less than 10%
D)20%

Question 47

What is the amount of the temporary difference between straight line depreciation and capital cost allowance on December 31,2010?

A)Nil
B)$2,000
C)$3,000
D)$1,500

Question 48

Compute the Consolidated Net Income for 2010.Do not prepare an Income Statement.

Question 49

Which of the following is not a requirement for a business component to be considered an Operating Segment under current Canadian GAAP?

A)Discrete financial information must be available.
B)Operating results are regularly reviewed by the enterprise's Chief Operating Decision Maker to make decisions about resources to be allocated to the segment and assess its performance.
C)The reportable income or loss must be at least 10% of the combined profit or loss for the combined entity.
D)It engages in business activities from which it may earn revenues and incur expenses.

Question 50

Prepare Alcor's Consolidated Balance Sheet as at December 31,2010.

Question 51

The following information pertains to questions 53 through 55 inclusively.Analysis and calculations should be made under current Canadian GAAP.
Alcor and Vax Inc.formed a joint venture on January 1,2010 called Inventure Inc.Alcor and Vax each hold a 50% in the venture and share equally in any profits or losses arising from the venture.
The following statements were prepared on December 31,2010. Other Information:
During 2010,Inventure purchased $10,000 from Alcor.Alcor recorded a gross profit of $2,000 on these sales.
On December 31,2010,Inventure's inventories contained half of the merchandise purchased from Alcor.Alcor uses the Cost Method to account for its Investment in Inventure.Alcor wishes to comply with Section 3055 of the CICA Handbook.An income tax allocation rate of 20% applies.
Using ALL of the applicable tests,which of the following segment(s)would be reportable?

A)A
B)A,B,C
C)A,B,C,D
D)B,C and D

Question 52

Compute Alcor's Consolidated Retained Earnings as at December 31,2010.

Question 53

The following information pertains to questions
ABC purchased specialized machinery on January 1,2010 for $2,500.Due to certain restrictions,only 40% of the acquisition cost of the asset is tax deductible.ABC pays tax at a rate of 20%.
What is the amount of the Deferred Tax Asset or Liability arising from the purchase of this machinery?

A)a Deferred Tax Asset of $375
B)a Deferred Tax Asset of $300
C)a Deferred Tax Liability of $375
D)a Deferred Tax Liability of $300

Question 54

Which of the following is NOT used as a quantitative threshold to determine that an operating segment is reportable under IFRS 8?

A)10% of the combined revenues of all operating segments.
B)10% of the combined assets of all operating segments.
C)10% of all expenses are traced to the segment.
D)10% or more of the absolute amount of the combined reported profit of all operating segments that did not report a loss AND 10% or more of the absolute amount of the combined reported loss of all operating segments that did report a loss.

Question 55

What is the tax basis of these assets?

A)$50,000
B)$40,000
C)$48,000
D)$42,000

Question 56

The following information pertains to questions 53 through 55 inclusively.Analysis and calculations should be made under current Canadian GAAP.
Alcor and Vax Inc.formed a joint venture on January 1,2010 called Inventure Inc.Alcor and Vax each hold a 50% in the venture and share equally in any profits or losses arising from the venture.
The following statements were prepared on December 31,2010. Other Information:
During 2010,Inventure purchased $10,000 from Alcor.Alcor recorded a gross profit of $2,000 on these sales.
On December 31,2010,Inventure's inventories contained half of the merchandise purchased from Alcor.Alcor uses the Cost Method to account for its Investment in Inventure.Alcor wishes to comply with Section 3055 of the CICA Handbook.An income tax allocation rate of 20% applies.
Using only the Revenue test,which of the following segment(s)would be reportable?

A)A
B)A,B,D
C)B,C,D
D)C and D

Question 57

What is the amount of the Deferred Tax Asset or Liability on December 31,2011?

A)a Deferred Tax Asset of $1,350
B)a Deferred Tax Asset of $1,675
C)a Deferred Tax Liability of $1,350
D)a Deferred Tax Liability of $375

Question 58

What is the amount of the Deferred Tax Asset or Liability on December 31,2010?

A)a Deferred Tax Asset of $1,500
B)a Deferred Tax Asset of $375
C)a Deferred Tax Liability of $1,500
D)a Deferred Tax Liability of $375

Question 59

The following information pertains to questions
JNG Corp has 4 segments,the details of which are shown below.All figures are in thousands of dollars.
Using only the Profit test,which of the following segment(s)would be reportable?

A)A
B)B
C)C
D)C and D

Question 60

Which of the following was often cited as a significant weakness of Section 1700 "Segmented Information" of the CICA Handbook?

A)The application of the provisions of this section was difficult to enforce.
B)The section did little to enhance the comparability of financial statements.
C)Companies in other countries were not subject to the same reporting requirements as Canadian companies.
D)Segments that were inherently different were often grouped together for reporting purposes.

Question 61

X Ltd.and Y Ltd.For a joint venture on joint venture called XY Inc.on January 1,2009.X Ltd.Invested contributed equipment with a book value of $600,000 and a fair value 0f $2,100,000 for a 50% interest in the joint venture.On December 31,2009,XY Inc.reported a net income of $612,000.The equipment transferred has an estimated useful life of 20 years.Ignore taxes.
Calculate the gain on the contribution of equipment and prepare the journal entries to record the events on January 1 and December 31,2009.Also calculate under the equity method X Ltd.'s share of net income and the amount it will recognize.

Question 62

ABC Inc.has acquired all of the voting shares of DEF Inc and is gathering the necessary data to prepare consolidated financial statements.ABC paid $1,200,000 for its investment.Details of the companies' assets and liabilities on the acquisition date are shown below:
Required:
Assuming that DEF hasn't set up Deferred Tax Asset or Liability accounts,determine the amounts that would be used to prepare the Consolidated Balance Sheet on the acquisition date.Assume a tax rate of 50%.

Question 63

ABC invested $30 million in cash in DEF Inc,which was assumed to be a VIE whose primary beneficiary is DEF ABC Inc.The balance sheet of DEF on the acquisition date January 1,2010 is shown below (all figures in millions $$):
The fair value of DEF's non-controlling interest is $55.
Required: Prepare the journal entry required for consolidation purposes on the date of acquisition assuming current Canadian GAAP.

Question 64

Analysis and calculations should be made based on current Canadian GAAP.
The following are the 2010 Income Statements of Roller Corp and Larmer Corp. Other Information:
During 2010 Larmer paid dividends of $24,000.Roller acquired its 30% stake in Roller at a cost of $400,000 and uses the cost method to account for its investment.Roller's investment in Larmer shall not be considered a control investment.
The acquisition differential amortization schedule showed the following write-off for 2010: During 2010,Larmer paid rent to Roller in the amount of $12,000,which Roller has recorded as other income.
In 2010,Roller sold Land to Larmer and recorded a profit of $10,000 on the sale.During 2010,Larmer sold the land to a third party.
Both companies are subject to a 40% tax rate.
Assuming that Larmer is NOT a joint venture and that it is also NOT a portfolio investment,prepare Roller's 2010 Income Statement in accordance with current Canadian GAAP.

Question 65

Analysis and calculations should be based on the requirements of current Canadian GAAP.
The following balance sheets have been prepared on December 31,2010 for Clarke Corp.and Jensen Inc. Additional Information:
Clarke uses the cost method to account for its 50% interest in Jensen,which it acquired on January 1,2007.On that date,Jensen's retained earnings were $20,000.The acquisition differential was fully amortized by the end of 2010.
Clarke sold Land to Jensen during 1999 and recorded a $15,000 gain on the sale.Clarke is still using this Land.Clarke's December 31,2010 inventory contained a profit of $10,000 recorded by Jensen.
Jensen borrowed $20,000 from Clarke during 2010 interest-free.Jensen has not yet repaid any of its debt to Clarke.
Both companies are subject to a tax rate of 20%.
Prepare a Balance Sheet for Clarke on December 31,2010 in accordance with current Canadian GAAP,assuming that Clarke's investment in Jensen is a control investment.

Question 66

Calculations and analysis should be based on current Canadian GAAP.
On January 1,2006,Alpha,Beta and Gamma agree to enter into a joint venture and thereby formed Find Corp.Alpha contributed 40% of the assets to the venture,which was also its stake in the venture.Presented below are the financial statements of Alpha and Find as at December 31,2010: Alpha's Investment has been accounted for using the partial equity method.No intercompany eliminations have been recorded.
Alpha supplies Find with an important component that is used by Find as it carries out its business activities.The December 31,2010 inventory of Find contains items purchase from Alpha on which Alpha recorded a gross profit of $10,000.Intercompany sales are always priced to provide the seller with a gross margin of 40% on sales.Both companies are subject to a tax rate of 40%.On December 31,2010,Find still owed $5,000 to Alpha for unpaid invoices.
Prepare Alpha's Balance Sheet as at December 31,2010.

Question 67

Globecorp International has six operating segments,the details of which are shown below.All figures shown are in thousands of dollars.Using ONLY the operating profit test,determine which of the following segments require separate disclosures.

Question 68

X Ltd.and Y Ltd.For a joint venture on joint venture called XY Inc.on January 1,2009.X Ltd.Invested contributed equipment with a book value of $600,000 and a fair value 0f $2,100,000 for a 50% interest in the joint venture.On December 31,2009,XY Inc.reported a net income of $612,000.The equipment transferred has an estimated useful life of 20 years.Ignore taxes.
The same facts apply,but in this case assume that X Ltd.Receives a 50% interest plus $390,000 in cash (which was contributed by the other joint venturer).Record the contribution of assets,the share of earnings and the realization of the gain on transfer.

Question 69

Calculations and analysis should be based on current Canadian GAAP.
On January 1,2006,Alpha,Beta and Gamma agree to enter into a joint venture and thereby formed Find Corp.Alpha contributed 40% of the assets to the venture,which was also its stake in the venture.Presented below are the financial statements of Alpha and Find as at December 31,2010: Alpha's Investment has been accounted for using the partial equity method.No intercompany eliminations have been recorded.
Alpha supplies Find with an important component that is used by Find as it carries out its business activities.The December 31,2010 inventory of Find contains items purchase from Alpha on which Alpha recorded a gross profit of $10,000.Intercompany sales are always priced to provide the seller with a gross margin of 40% on sales.Both companies are subject to a tax rate of 40%.On December 31,2010,Find still owed $5,000 to Alpha for unpaid invoices.
Prepare Alpha's Consolidated Income Statement for the year ended December 31,2010.

Question 70

Calculations and analysis should be based on current Canadian GAAP.
On January 1,2006,Alpha,Beta and Gamma agree to enter into a joint venture and thereby formed Find Corp.Alpha contributed 40% of the assets to the venture,which was also its stake in the venture.Presented below are the financial statements of Alpha and Find as at December 31,2010: Alpha's Investment has been accounted for using the partial equity method.No intercompany eliminations have been recorded.
Alpha supplies Find with an important component that is used by Find as it carries out its business activities.The December 31,2010 inventory of Find contains items purchase from Alpha on which Alpha recorded a gross profit of $10,000.Intercompany sales are always priced to provide the seller with a gross margin of 40% on sales.Both companies are subject to a tax rate of 40%.On December 31,2010,Find still owed $5,000 to Alpha for unpaid invoices.
Prepare a schedule of intercompany items as at December 31,2010.

Question 71

A Corp.and B Corp.formed a joint venture called C Corp.on January 1,2010.On that date,B Corp.invested assets with a fair value of $700,000 for its 65% stake in C Corp.A Corp.contributed machinery and equipment with a book value of $200,000 and a fair value of $800,000 as well as $400,000 in cash in return for its 35% stake in the venture.
On December 31,2010,C Corp.reported a net income of $300,000 and declared dividends in the amount of $50,000.The machinery and equipment are estimated to have an estimated useful life of 10 years.
Prepare A Corp.'s equity method journal entries for 2010,assuming that the assets donated by B Corp.included cash in the amount of $400,000.

Question 72

Analysis and calculations should be made based on current Canadian GAAP.
The following are the 2010 Income Statements of Roller Corp and Larmer Corp. Other Information:
During 2010 Larmer paid dividends of $24,000.Roller acquired its 30% stake in Roller at a cost of $400,000 and uses the cost method to account for its investment.Roller's investment in Larmer shall not be considered a control investment.
The acquisition differential amortization schedule showed the following write-off for 2010: During 2010,Larmer paid rent to Roller in the amount of $12,000,which Roller has recorded as other income.
In 2010,Roller sold Land to Larmer and recorded a profit of $10,000 on the sale.During 2010,Larmer sold the land to a third party.
Both companies are subject to a 40% tax rate.
Assuming that Larmer is a joint venture that is owned by Roller as well as several other unrelated venturers,prepare Roller's 2013 Income Statement in accordance with current Canadian GAAP.In addition,assume that Roller acquired Larmer after its initial formation,thereby validating the acquisition differentials.

Question 73

Analysis and calculations should be based on the requirements of current Canadian GAAP.
The following balance sheets have been prepared on December 31,2010 for Clarke Corp.and Jensen Inc. Additional Information:
Clarke uses the cost method to account for its 50% interest in Jensen,which it acquired on January 1,2007.On that date,Jensen's retained earnings were $20,000.The acquisition differential was fully amortized by the end of 2010.
Clarke sold Land to Jensen during 1999 and recorded a $15,000 gain on the sale.Clarke is still using this Land.Clarke's December 31,2010 inventory contained a profit of $10,000 recorded by Jensen.
Jensen borrowed $20,000 from Clarke during 2010 interest-free.Jensen has not yet repaid any of its debt to Clarke.
Both companies are subject to a tax rate of 20%.
Prepare a Balance Sheet for Clarke on December 31,2010 in accordance with current Canadian GAAP,assuming that Clarke's investment in Jensen is a significant influence investment.

Question 74

A Corp.and B Corp.formed a joint venture called C Corp.on January 1,2010.On that date,B Corp.invested assets with a fair value of $700,000 for its 65% stake in C Corp.A Corp.contributed machinery and equipment with a book value of $200,000 and a fair value of $800,000 as well as $400,000 in cash in return for its 35% stake in the venture.
On December 31,2010,C Corp.reported a net income of $300,000 and declared dividends in the amount of $50,000.The machinery and equipment are estimated to have an estimated useful life of 10 years.
Prepare A Corp.'s equity method journal entries for 2010,assuming that the assets donated by B Corp did not include cash.

Question 75

Analysis and calculations should be based on the requirements of current Canadian GAAP.
The following balance sheets have been prepared on December 31,2010 for Clarke Corp.and Jensen Inc. Additional Information:
Clarke uses the cost method to account for its 50% interest in Jensen,which it acquired on January 1,2007.On that date,Jensen's retained earnings were $20,000.The acquisition differential was fully amortized by the end of 2010.
Clarke sold Land to Jensen during 1999 and recorded a $15,000 gain on the sale.Clarke is still using this Land.Clarke's December 31,2010 inventory contained a profit of $10,000 recorded by Jensen.
Jensen borrowed $20,000 from Clarke during 2010 interest-free.Jensen has not yet repaid any of its debt to Clarke.
Both companies are subject to a tax rate of 20%.
Prepare a Balance Sheet for Clarke on December 31,2010 in accordance with current Canadian GAAP,assuming that Clarke's Investment in Jensen is a joint venture investment.