Deck 7: A Intercompany Profits in Depreciable Assets B Intercompany Bondholdings

Question 1

Jay Inc. owns 80% of Tesla Inc. and uses the cost method to account for its investment. The 2020 income statements of both companies are shown below. On January 1, 2020, Tesla sold equipment to Jay at a profit of $3,000. The equipment had a remaining useful life of twenty years on that date. Both companies are subject to an effective tax rate of 40%.
The amount of Miscellaneous Revenues/Losses appearing on Jay's 2020 Consolidated Income Statement would be:

A) $47,000.
B) $47,600.
C) $50,000.
D) $53,000.

Answer 1

D

Question 2

Jay Inc. owns 80% of Tesla Inc. and uses the cost method to account for its investment. The 2020 income statements of both companies are shown below. On January 1, 2020, Tesla sold equipment to Jay at a profit of $3,000. The equipment had a remaining useful life of twenty years on that date. Both companies are subject to an effective tax rate of 40%.
The amount of income tax expense appearing on Jay's 2020 Consolidated Income Statement would be:

A) $24,860.
B) $25,040.
C) $26,000.
D) $34,880.

Answer 2

A

Question 3

On January 1, 2019, King Corp. acquired 80% of Kong Corp. for $500,000. King uses the cost method to account for its investment.
On January 1, 2019, Kong's retained earnings and common shares were $350,000 and $110,000, respectively.
Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
 Inventory had a fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2019.
 A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
The Financial Statements of King Corp. and Kong Corp. for the year ended December 31, 2020 are shown below:
Income Statements
Retained Earnings Statements
Balance Sheets
Other Information:
 King sold a tract of Land to Kong at a profit of $10,000 during 2020. This land is still the property of Kong Corp.
 On January 1, 2020, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
 On January 1, 2020, King's inventories contained items purchased during 2019 from Kong for $10,000. This entire inventory was sold to outsiders during 2020. Also during 2020, King sold inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
 There was a goodwill impairment loss of $4,000 during 2020.
 Both companies are subject to an effective tax rate of 40%
 Both companies use straight line amortization.
What would be the journal entry to record the dividends declared by King Corp during the year?
A.

B.

C.

D. No entry requireD.

Answer 3

not answered

Question 4

Rin owns 90% of Stempy Inc. On January 1, 2019, the investment in Stempy account had a balance of $350,000 and Stempy's common shares and retained earnings on that date were valued at $200,000 and $100,889 respectively. Moreover, the assets to which the unamortized acquisition differential relates had a remaining life of 10 years on that date. Rin uses the equity method to account for its investment in Stempy. The tax rate for both companies is zero.
Rin sold depreciable assets to Stempy on January 1, 2019 at an after-tax gain of $10,000. On January 1, 2020, Stempy sold depreciable assets to Rin at an after-tax gain of $20,000. Both assets are being depreciated over 10 years.
Stempy's Net Income and Dividends for 2019 and 2020 are shown below.
$$\begin{array} { | l | r | r| } \hline & \mathbf { 2 0 1 9 } & \mathbf { 2 0 2 0 } \\\hline \text { Net Incorne } & \mathbf { \$ 8 0 , 0 0 0 } & \mathbf { \$ 1 2 0 , 0 0 0 } \\\hline \text { Dividends } & \mathbf { \$ 2 0 , 0 0 0 } & \mathbf { \$ 3 0 } , \mathbf { 0 0 0 } \\\hline\end{array}$$ How much intercompany (after-tax) profit was realized during 2020 on Stempy's 2020 sale of assets to Rin?

A) $18,000
B) $1,000
C) $2,000
D) $1,800.

Question 5

Duff Inc. owns 75% of Paddy Corp. and uses the Equity Method to account for its investment. Paddy purchased $120,000 face value of Duff's 12% par value bonds on January 1, 2020 for $100,000, when Duff's bond liability consisted of $240,000 par of 12% bonds maturing on January 1, 2030.
There was an unamortized bond discount of $20,000 attached to the bonds on that date. Interest payment dates are June 30 and December 31 each year. Straight line amortization is used.
Both companies have a December 31 year end. Intercompany bond gains and losses are to be allocated to each company.
During 2020, Paddy earned a net income of $80,000 and paid dividends of $20,000.
What was the pre-tax gain or loss to Paddy Inc. on the intercompany purchase of the bonds?

A) $20,000 loss
B) Nil
C) $20,000 gain
D) $40,000 loss

Question 6

Jay Inc. owns 80% of Tesla Inc. and uses the cost method to account for its investment. The 2020 income statements of both companies are shown below. On January 1, 2020, Tesla sold equipment to Jay at a profit of $3,000. The equipment had a remaining useful life of twenty years on that date. Both companies are subject to an effective tax rate of 40%.
The amount of depreciation expense appearing on Jay's 2020 Consolidated Income Statement would be:

A) $15,000.
B) $34,850.
C) $34,880.
D) $35,000.

Question 7

Duff Inc. owns 75% of Paddy Corp. and uses the Equity Method to account for its investment. Paddy purchased $120,000 face value of Duff's 12% par value bonds on January 1, 2020 for $100,000, when Duff's bond liability consisted of $240,000 par of 12% bonds maturing on January 1, 2030.
There was an unamortized bond discount of $20,000 attached to the bonds on that date. Interest payment dates are June 30 and December 31 each year. Straight line amortization is used.
Both companies have a December 31 year end. Intercompany bond gains and losses are to be allocated to each company.
During 2020, Paddy earned a net income of $80,000 and paid dividends of $20,000.
What amount of interest expense, excluding amortization of the bond discount, (if any) would have to be eliminated in 2020 as a result of the intercompany sale of the bonds?

A) None
B) $12,000
C) $12,200
D) $14,400

Question 8

Rin owns 90% of Stempy Inc. On January 1, 2019, the investment in Stempy account had a balance of $350,000 and Stempy's common shares and retained earnings on that date were valued at $200,000 and $100,889 respectively. Moreover, the assets to which the unamortized acquisition differential relates had a remaining life of 10 years on that date. Rin uses the equity method to account for its investment in Stempy. Rin sold depreciable assets to Stempy on January 1, 2019 at an after-tax gain of $10,000. On January 1, 2020, Stempy sold depreciable assets to Rin at an after-tax gain of $20,000. Both assets are being depreciated over 10 years.
The tax rate for both companies is zero.
Stempy's Net Income and Dividends for 2019 and 2020 are shown below.
$$\begin{array} { | l | r | r| } \hline & \mathbf { 2 0 1 9 } & \mathbf { 2 0 2 0 } \\\hline \text { Net Incorne } & \mathbf { \$ 8 0 , 0 0 0 } & \mathbf { \$ 1 2 0 , 0 0 0 } \\\hline \text { Dividends } & \mathbf { \$ 2 0 , 0 0 0 } & \mathbf { \$ 3 0 } , \mathbf { 0 0 0 } \\\hline\end{array}$$ What is the amount of the amortization of the acquisition differential during 2020?

A) $7,200
B) $8,800
C) $10,000
D) $80,000

Question 9

On January 1, 2019, King Corp. acquired 80% of Kong Corp. for $500,000. King uses the cost method to account for its investment. On January 1, 2019, Kong's retained earnings and common shares were $350,000 and $110,000, respectively.
Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2019.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
The Financial Statements of King Corp. and Kong Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp. } & \text { Kong Corp. } \\\hline \text { Sales } & \$ 500,000 & \$ 300,000 \\\hline \text { Other Revenues } & \$ 300,000 & \$ 120,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 400,000 & \$ 240,000 \\\hline \text { Depreciation Expense } & \$ 20,000 & \$ 10,000 \\\hline \text { Other Expenses } & \$ 80,000 & \$ 40,000 \\\hline \text { Income Tax Expense } & \$ 120,000 & \$ 52,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\ \hline\end{array}$ Retained Earnings Statements
$$\begin{array} { | l | r | r | } \hline & \text { King Carp. } & \text { Kong Corp. } \\\hline \text { Balarice, Jaruary } 1,2020 & \$ 250,000 & \$ 350,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline \text { Less: Dividends } & \mathbf {( \$ 30 , 0 0 0 ) } & \$ 3 8,000 ) \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline\end{array}$$ Balance Sheets
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Cash } & \$ 50,000 & \$ 25,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$ 250,000 \\\hline \text { Inventory } & \$ 50,000 & \$ 250,000 \\\hline \text { Investment in Kong Corp. } & \$ 500,000 & \\\hline \text { Land } & & \$ 25,000 \\\hline \text { Equipment } & \$ 400,000 & \$ 200,000 \\\hline \text { Accumulated Depreciation } & (\$ 250,000) & (\$ 150,000) \\\hline \text { Total Assets } & \$ 850,000 & \$ 600,000 \\\hline \text { Current Liabilities } & \$ 320,000 & \$ 62,000 \\\hline \text { Dividends Payable } & \$ 30,000 & \$ 38,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 110,000 \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline \text { Total Liabilities and Equity } & \$ 850,000 & \$ 600,000 \\\hline\end{array}$ Other Information:
? King sold a tract of Land to Kong at a profit of $10,000 during 2020. This land is still the property of Kong Corp.
? On January 1, 2020, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
? On January 1, 2020, King's inventories contained items purchased during 2019 from Kong for $10,000. This entire inventory was sold to outsiders during 2020. Also during 2020, King sold inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $4,000 during 2020.
? Both companies are subject to an effective tax rate of 40%
? Both companies use straight line amortization.
What is the amount of goodwill arising from this business combination on the acquisition date?

A) Nil
B) $72,000
C) $130,000
D) $220,000

Question 10

Duff Inc. owns 75% of Paddy Corp. and uses the Equity Method to account for its investment. Paddy purchased $120,000 face value of Duff's 12% par value bonds on January 1, 2020 for $100,000, when Duff's bond liability consisted of $240,000 par of 12% bonds maturing on January 1, 2030.
There was an unamortized bond discount of $20,000 attached to the bonds on that date. Interest payment dates are June 30 and December 31 each year. Straight line amortization is used.
Both companies have a December 31 year end. Intercompany bond gains and losses are to be allocated to each company.
During 2020, Paddy earned a net income of $80,000 and paid dividends of $20,000.
What was the pre-tax gain or loss to Duff Inc. on the intercompany sale of the bonds?

A) $20,000 loss
B) $10,000 loss
C) Nil
D) $10,000 gain

Question 11

Rin owns 90% of Stempy Inc. On January 1, 2019, the investment in Stempy account had a balance of $350,000 and Stempy's common shares and retained earnings on that date were valued at $200,000 and $100,889 respectively. Moreover, the assets to which the unamortized acquisition differential relates had a remaining life of 10 years on that date. Rin uses the equity method to account for its investment in Stempy. The tax rate for both companies is zero.
Rin sold depreciable assets to Stempy on January 1, 2019 at an after-tax gain of $10,000. On January 1, 2020, Stempy sold depreciable assets to Rin at an after-tax gain of $20,000. Both assets are being depreciated over 10 years.
Stempy's Net Income and Dividends for 2019 and 2020 are shown below.
$$\begin{array} { | l | r | r| } \hline & \mathbf { 2 0 1 9 } & \mathbf { 2 0 2 0 } \\\hline \text { Net Incorne } & \mathbf { \$ 8 0 , 0 0 0 } & \mathbf { \$ 1 2 0 , 0 0 0 } \\\hline \text { Dividends } & \mathbf { \$ 2 0 , 0 0 0 } & \mathbf { \$ 3 0 } , \mathbf { 0 0 0 } \\\hline\end{array}$$ What is the total amount of unrealized profit (after-tax) remaining at the end of 2020?

A) Nil
B) $26,000
C) $23,400
D) $30,000

Question 12

Duff Inc. owns 75% of Paddy Corp. and uses the Equity Method to account for its investment. Paddy purchased $120,000 face value of Duff's 12% par value bonds on January 1, 2020 for $100,000, when Duff's bond liability consisted of $240,000 par of 12% bonds maturing on January 1, 2030.
There was an unamortized bond discount of $20,000 attached to the bonds on that date. Interest payment dates are June 30 and December 31 each year. Straight line amortization is used.
Both companies have a December 31 year end. Intercompany bond gains and losses are to be allocated to each company.
During 2020, Paddy earned a net income of $80,000 and paid dividends of $20,000.
What amount would be shown on Duff's 2020 Consolidated Statement of Financial Position under bonds payable?

A) $110,000
B) $111,000
C) $112,000
D) $220,000Bond discount amortization = $20,000/10 years = $2,000 per year$20,000 - $2,000 = $18,000 (Dec. 31/20).

Question 13

Duff Inc. owns 75% of Paddy Corp. and uses the Equity Method to account for its investment. Paddy purchased $120,000 face value of Duff's 12% par value bonds on January 1, 2020 for $100,000, when Duff's bond liability consisted of $240,000 par of 12% bonds maturing on January 1, 2030.
There was an unamortized bond discount of $20,000 attached to the bonds on that date. Interest payment dates are June 30 and December 31 each year. Straight line amortization is used.
Both companies have a December 31 year end. Intercompany bond gains and losses are to be allocated to each company.
During 2020, Paddy earned a net income of $80,000 and paid dividends of $20,000.
What would be the pre-tax gain or loss to the combined entity on the intercompany sale of the bonds?

A) $20,000 loss
B) $10,000 loss
C) Nil
D) $10,000 gain

Question 14

Rin owns 90% of Stempy Inc. On January 1, 2019, the investment in Stempy account had a balance of $350,000 and Stempy's common shares and retained earnings on that date were valued at $200,000 and $100,889 respectively. Moreover, the assets to which the unamortized acquisition differential relates had a remaining life of 10 years on that date. Rin uses the equity method to account for its investment in Stempy. The tax rate for both companies is zero.
Rin sold depreciable assets to Stempy on January 1, 2019 at an after-tax gain of $10,000. On January 1, 2020, Stempy sold depreciable assets to Rin at an after-tax gain of $20,000. Both assets are being depreciated over 10 years.
The tax rate for both companies is zero.
Stempy's Net Income and Dividends for 2019 and 2020 are shown below.
$$\begin{array} { | l | r | r| } \hline & \mathbf { 2 0 1 9 } & \mathbf { 2 0 2 0 } \\\hline \text { Net Incorne } & \mathbf { \$ 8 0 , 0 0 0 } & \mathbf { \$ 1 2 0 , 0 0 0 } \\\hline \text { Dividends } & \mathbf { \$ 2 0 , 0 0 0 } & \mathbf { \$ 3 0 } , \mathbf { 0 0 0 } \\\hline\end{array}$$ What is the balance in the Investment in Stempy account at the end of 2020?

A) $300,000
B) $350,000
C) $444,960
D) $469,000

Question 15

Jay Inc. owns 80% of Tesla Inc. and uses the cost method to account for its investment. The 2020 income statements of both companies are shown below. $$\begin{array} { | l | r | r | } \hline & \text { Jay } & \text { Tes1a } \\\hline \text { Gross Profit } & \$ 100,000 & \$ 50,000 \\\hline \text { Miscellareous } & \$ 30,000 & \$ 20,000 \\\text { Reverues/Losses } & & \\\hline \text { Depreciation Expense } & \$ 20,000 & \$ 15,000 \\\hline \text { Income Tax Expense } & \$ 20,000 & \$ 6,000 \\\hline \text { Net Income } & \$ 30,000 & \$ 9,000 \\\hline\end{array}$$ On January 1, 2020, Tesla sold equipment to Jay at a profit of $3,000. The equipment had a remaining useful life of twenty years on that date. Both companies are subject to an effective tax rate of 40%.
The amount of gross profit appearing on Jay's 2020 Consolidated Income Statement would be:

A) $147,000.
B) $147,600.
C) $150,000.
D) $153,000.

Question 16

Jay Inc. owns 80% of Tesla Inc. and uses the cost method to account for its investment. The 2020 income statements of both companies are shown below. On January 1, 2020, Tesla sold equipment to Jay at a profit of $3,000. The equipment had a remaining useful life of twenty years on that date. Both companies are subject to an effective tax rate of 40%.
The amount of non-controlling interest in Jay's 2020 Consolidated Net Income would be:

A) nil.
B) $1,458.
C) $1,800.
D) $1,818.

Question 17

Jay Inc. owns 80% of Tesla Inc. and uses the cost method to account for its investment. The 2020 income statements of both companies are shown below. On January 1, 2020, Tesla sold equipment to Jay at a profit of $3,000. The equipment had a remaining useful life of twenty years on that date. Both companies are subject to an effective tax rate of 40%.
The amount of deferred taxes appearing on Jay's 2020 Consolidated Statement of Financial Position would be:

A) nil.
B) $1,000.
C) $1,140.
D) $2,550.

Question 18

Jay Inc. owns 80% of Tesla Inc. and uses the cost method to account for its investment. The 2020 income statements of both companies are shown below. On January 1, 2020, Tesla sold equipment to Jay at a profit of $3,000. The equipment had a remaining useful life of twenty years on that date. Both companies are subject to an effective tax rate of 40%.
The controlling interest (attributable to the shareholders of Jay) in Jay's 2020 Consolidated Net Income would be:

A) $30,000.
B) $35,832.
C) $36,000.
D) $37,200.

Question 19

Rin owns 90% of Stempy Inc. On January 1, 2019, the investment in Stempy account had a balance of $350,000 and Stempy's common shares and retained earnings on that date were valued at $200,000 and $100,889 respectively. Moreover, the assets to which the unamortized acquisition differential relates had a remaining life of 10 years on that date. Rin uses the equity method to account for its investment in Stempy. The tax rate for both companies is zero.
Rin sold depreciable assets to Stempy on January 1, 2019 at an after-tax gain of $10,000. On January 1, 2020, Stempy sold depreciable assets to Rin at an after-tax gain of $20,000. Both assets are being depreciated over 10 years.
Stempy's Net Income and Dividends for 2019 and 2020 are shown below.
$$\begin{array} { | l | r | r| } \hline & \mathbf { 2 0 1 9 } & \mathbf { 2 0 2 0 } \\\hline \text { Net Incorne } & \mathbf { \$ 8 0 , 0 0 0 } & \mathbf { \$ 1 2 0 , 0 0 0 } \\\hline \text { Dividends } & \mathbf { \$ 2 0 , 0 0 0 } & \mathbf { \$ 3 0 } , \mathbf { 0 0 0 } \\\hline\end{array}$$ What is the total amount of unrealized profit (after-tax) remaining at the end of 2019?

A) $8,100
B) $2,000
C) $9,000
D) $10,000

Question 20

Rin owns 90% of Stempy Inc. On January 1, 2019, the investment in Stempy account had a balance of $350,000 and Stempy's common shares and retained earnings on that date were valued at $200,000 and $100,889 respectively. Moreover, the assets to which the unamortized acquisition differential relates had a remaining life of 10 years on that date. Rin uses the equity method to account for its investment in Stempy. Rin sold depreciable assets to Stempy on January 1, 2019 at an after-tax gain of $10,000. On January 1, 2020, Stempy sold depreciable assets to Rin at an after-tax gain of $20,000. Both assets are being depreciated over 10 years.
The tax rate for both companies is zero.
Stempy's Net Income and Dividends for 2019 and 2020 are shown below.
$$\begin{array} { | l | r | r| } \hline & \mathbf { 2 0 1 9 } & \mathbf { 2 0 2 0 } \\\hline \text { Net Incorne } & \mathbf { \$ 8 0 , 0 0 0 } & \mathbf { \$ 1 2 0 , 0 0 0 } \\\hline \text { Dividends } & \mathbf { \$ 2 0 , 0 0 0 } & \mathbf { \$ 3 0 } , \mathbf { 0 0 0 } \\\hline\end{array}$$ How much intercompany (after-tax) profit was realized during 2020 from Rin's 2019 sale of assets to Stempy?

A) $9,000
B) $1,000
C) $2,000
D) $900

Question 21

On January 1, 2019, King Corp. acquired 80% of Kong Corp. for $500,000. King uses the cost method to account for its investment. On January 1, 2019, Kong's retained earnings and common shares were $350,000 and $110,000, respectively.
Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2019.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
The Financial Statements of King Corp. and Kong Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp. } \\\hline \text { Sales } & \$ 500,000 & \$ 300,000 \\\hline \text { Other Revenues } & \$ 300,000 & \$ 120,000 \\\hline \text { Less: Expenses } & & \$ 240,000 \\\hline \text { Cost of Goods Sold } & \$ 400,000 & \$ 240,000 \\\hline \text { Depreciation Expense } & \$ 20,000 & \$ 10,000 \\\hline \text { Other Expenses } & \$ 80,000 & \$ 40,000 \\\hline \text { Income Tax Expense } & \$ 120,000 & \$ 52,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 250,000 & \$ 350,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline \text { Less: Dividends } & (\$ 30,000) &( \$ 38,000) \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline\end{array}$ Balance Sheets
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Cash } & \$ 50,000 & \$ 25,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$ 250,000 \\\hline \text { Inventory } & \$ 50,000 & \$ 250,000 \\\hline \text { Investment in Kong Corp. } & \$ 500,000 & \\\hline \text { Land } & & \$ 25,000 \\\hline \text { Equipment } & \$ 400,000 & \$ 200,000 \\\hline \text { Accumulated Depreciation } & (\$ 250,000) & (\$ 150,000) \\\hline \text { Total Assets } & \$ 850,000 & \$ 600,000 \\\hline \text { Current Liabilities } & \$ 320,000 & \$ 62,000 \\\hline \text { Dividends Payable } & \$ 30,000 & \$ 38,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 110,000 \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline \text { Total Liabilities and Equity } & \$ 850,000 & \$ 600,000 \\\hline\end{array}$ Other Information:
? King sold a tract of Land to Kong at a profit of $10,000 during 2020. This land is still the property of Kong Corp.
? On January 1, 2020, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
? On January 1, 2020, King's inventories contained items purchased during 2019 from Kong for $10,000. This entire inventory was sold to outsiders during 2020. Also during 2020, King sold inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $4,000 during 2020.
? Both companies are subject to an effective tax rate of 40%
? Both companies use straight line amortization.
What amount of sales revenue would appear on King's Consolidated Income Statement for the year ended December 31, 2020?

A) $750,000
B) $790,000
C) $800,000
D) $810,000

Question 22

On January 1, 2019, King Corp. acquired 80% of Kong Corp. for $500,000. King uses the cost method to account for its investment. On January 1, 2019, Kong's retained earnings and common shares were $350,000 and $110,000, respectively.
Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2019.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
The Financial Statements of King Corp. and Kong Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp. } \\\hline \text { Sales } & \$ 500,000 & \$ 300,000 \\\hline \text { Other Revenues } & \$ 300,000 & \$ 120,000 \\\hline \text { Less: Expenses } & & \$ 240,000 \\\hline \text { Cost of Goods Sold } & \$ 400,000 & \$ 240,000 \\\hline \text { Depreciation Expense } & \$ 20,000 & \$ 10,000 \\\hline \text { Other Expenses } & \$ 80,000 & \$ 40,000 \\\hline \text { Income Tax Expense } & \$ 120,000 & \$ 52,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline\end{array}$ Retained Earnings Statements
$$\begin{array} { | l | r | r | } \hline & \text { King Carp. } & \text { Kong Corp. } \\\hline \text { Balarice, Jaruary } 1,2020 & \$ 250,000 & \$ 350,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline \text { Less: Dividends } & \mathbf { (\$ 3 0 , 0 0 0 ) } & \$3 8,000 ) \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline\end{array}$$ Balance Sheets
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Cash } & \$ 50,000 & \$ 25,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$ 250,000 \\\hline \text { Inventory } & \$ 50,000 & \$ 250,000 \\\hline \text { Investment in Kong Corp. } & \$ 500,000 & \\\hline \text { Land } & & \$ 25,000 \\\hline \text { Equipment } & \$ 400,000 & \$ 200,000 \\\hline \text { Accumulated Depreciation } & (\$ 250,000) & (\$ 150,000) \\\hline \text { Total Assets } & \$ 850,000 & \$ 600,000 \\\hline \text { Current Liabilities } & \$ 320,000 & \$ 62,000 \\\hline \text { Dividends Payable } & \$ 30,000 & \$ 38,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 110,000 \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline \text { Total Liabilities and Equity } & \$ 850,000 & \$ 600,000 \\\hline\end{array}$ Other Information:
? King sold a tract of Land to Kong at a profit of $10,000 during 2020. This land is still the property of Kong Corp.
? On January 1, 2020, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
? On January 1, 2020, King's inventories contained items purchased during 2019 from Kong for $10,000. This entire inventory was sold to outsiders during 2020. Also during 2020, King sold inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $4,000 during 2020.
? Both companies are subject to an effective tax rate of 40%
? Both companies use straight line amortization.
The amount of goodwill appearing on King's December 31, 2020 Consolidated Balance Sheet would be:

A) nil.
B) $126,000.
C) $224,000.
D) $240,000.

Question 23

On January 1, 2019, King Corp. acquired 80% of Kong Corp. for $500,000. King uses the cost method to account for its investment. On January 1, 2019, Kong's retained earnings and common shares were $350,000 and $110,000, respectively.
Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2019.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
The Financial Statements of King Corp. and Kong Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp. } & \text { Kong Corp. } \\\hline \text { Sales } & \$ 500,000 & \$ 300,000 \\\hline \text { Other Revenues } & \$ 300,000 & \$ 120,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 400,000 & \$ 240,000 \\\hline \text { Depreciation Expense } & \$ 20,000 & \$ 10,000 \\\hline \text { Other Expenses } & \$ 80,000 & \$ 40,000 \\\hline \text { Income Tax Expense } & \$ 120,000 & \$ 52,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 250,000 & \$ 350,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline \text { Less: Dividends } & (\$ 30,000) &( \$ 38,000) \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline\end{array}$ Balance Sheets
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Cash } & \$ 50,000 & \$ 25,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$ 250,000 \\\hline \text { Inventory } & \$ 50,000 & \$ 250,000 \\\hline \text { Investment in Kong Corp. } & \$ 500,000 & \\\hline \text { Land } & & \$ 25,000 \\\hline \text { Equipment } & \$ 400,000 & \$ 200,000 \\\hline \text { Accumulated Depreciation } & (\$ 250,000) & (\$ 150,000) \\\hline \text { Total Assets } & \$ 850,000 & \$ 600,000 \\\hline \text { Current Liabilities } & \$ 320,000 & \$ 62,000 \\\hline \text { Dividends Payable } & \$ 30,000 & \$ 38,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 110,000 \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline \text { Total Liabilities and Equity } & \$ 850,000 & \$ 600,000 \\\hline\end{array}$ Other Information:
? King sold a tract of Land to Kong at a profit of $10,000 during 2020. This land is still the property of Kong Corp.
? On January 1, 2020, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
? On January 1, 2020, King's inventories contained items purchased during 2019 from Kong for $10,000. This entire inventory was sold to outsiders during 2020. Also during 2020, King sold inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $4,000 during 2020.
? Both companies are subject to an effective tax rate of 40%
Both companies use straight line amortization.
What would be the amount appearing on the December 31, 2020 Consolidated Balance Sheet for deferred income taxes?

A) Nil
B) $10,000
C) $11,200
D) $12,000

Question 24

On January 1, 2019, King Corp. acquired 80% of Kong Corp. for $500,000. King uses the cost method to account for its investment. On January 1, 2019, Kong's retained earnings and common shares were $350,000 and $110,000, respectively.
Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2019.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
The Financial Statements of King Corp. and Kong Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp. } & \text { Kong Corp. } \\\hline \text { Sales } & \$ 500,000 & \$ 300,000 \\\hline \text { Other Revenues } & \$ 300,000 & \$ 120,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 400,000 & \$ 240,000 \\\hline \text { Depreciation Expense } & \$ 20,000 & \$ 10,000 \\\hline \text { Other Expenses } & \$ 80,000 & \$ 40,000 \\\hline \text { Income Tax Expense } & \$ 120,000 & \$ 52,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 250,000 & \$ 350,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline \text { Less: Dividends } & (\$ 30,000) &( \$ 38,000) \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline\end{array}$ Balance Sheets
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Cash } & \$ 50,000 & \$ 25,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$ 250,000 \\\hline \text { Inventory } & \$ 50,000 & \$ 250,000 \\\hline \text { Investment in Kong Corp. } & \$ 500,000 & \\\hline \text { Land } & & \$ 25,000 \\\hline \text { Equipment } & \$ 400,000 & \$ 200,000 \\\hline \text { Accumulated Depreciation } & (\$ 250,000) & (\$ 150,000) \\\hline \text { Total Assets } & \$ 850,000 & \$ 600,000 \\\hline \text { Current Liabilities } & \$ 320,000 & \$ 62,000 \\\hline \text { Dividends Payable } & \$ 30,000 & \$ 38,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 110,000 \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline \text { Total Liabilities and Equity } & \$ 850,000 & \$ 600,000 \\\hline\end{array}$ Other Information:
? King sold a tract of Land to Kong at a profit of $10,000 during 2020. This land is still the property of Kong Corp.
? On January 1, 2020, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
? On January 1, 2020, King's inventories contained items purchased during 2019 from Kong for $10,000. This entire inventory was sold to outsiders during 2020. Also during 2020, King sold inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $4,000 during 2020.
? Both companies are subject to an effective tax rate of 40%
? Both companies use straight line amortization.
What would be the amount appearing on the December 31, 2020 Consolidated Balance Sheet for inventories?

A) $295,000
B) $296,000
C) $297,000
D) $300,000

Question 25

On January 1, 2019, King Corp. acquired 80% of Kong Corp. for $500,000. King uses the cost method to account for its investment. On January 1, 2019, Kong's retained earnings and common shares were $350,000 and $110,000, respectively.
Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2019.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
The Financial Statements of King Corp. and Kong Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp. } & \text { Kong Corp. } \\\hline \text { Sales } & \$ 500,000 & \$ 300,000 \\\hline \text { Other Revenues } & \$ 300,000 & \$ 120,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 400,000 & \$ 240,000 \\\hline \text { Depreciation Expense } & \$ 20,000 & \$ 10,000 \\\hline \text { Other Expenses } & \$ 80,000 & \$ 40,000 \\\hline \text { Income Tax Expense } & \$ 120,000 & \$ 52,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 250,000 & \$ 350,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline \text { Less: Dividends } & (\$ 30,000) &( \$ 38,000) \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline\end{array}$ Balance Sheets
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Cash } & \$ 50,000 & \$ 25,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$ 250,000 \\\hline \text { Inventory } & \$ 50,000 & \$ 250,000 \\\hline \text { Investment in Kong Corp. } & \$ 500,000 & \\\hline \text { Land } & & \$ 25,000 \\\hline \text { Equipment } & \$ 400,000 & \$ 200,000 \\\hline \text { Accumulated Depreciation } & (\$ 250,000) & (\$ 150,000) \\\hline \text { Total Assets } & \$ 850,000 & \$ 600,000 \\\hline \text { Current Liabilities } & \$ 320,000 & \$ 62,000 \\\hline \text { Dividends Payable } & \$ 30,000 & \$ 38,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 110,000 \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline \text { Total Liabilities and Equity } & \$ 850,000 & \$ 600,000 \\\hline\end{array}$ Other Information:
? King sold a tract of Land to Kong at a profit of $10,000 during 2020. This land is still the property of Kong Corp.
? On January 1, 2020, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
? On January 1, 2020, King's inventories contained items purchased during 2019 from Kong for $10,000. This entire inventory was sold to outsiders during 2020. Also during 2020, King sold inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $4,000 during 2020.
? Both companies are subject to an effective tax rate of 40%
? Both companies use straight line amortization.
What would be the non-controlling interest amount in King's Consolidated Net Income for 2020?

A) $12,240
B) $10,000
C) $11,600
D) $15,000

Question 26

On January 1, 2019, Ting Corp. acquired 75% of Won Corp. for $1,500,000. Ting uses the cost method to account for its investment in Won. On January 1, 2019, Won's retained earnings and common shares were $600,000 and $220,000, respectively.
Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $50,000 higher than its book value.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
The Financial Statements of Ting Corp. and Won Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp. } & \text { Won Corp. } \\\hline \text { Sales } & \$ 1,000,000 & \$ 600,000 \\\hline \text { Other Revenues } & \$ 600,000 & \$ 240,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 800,000 & \$ 480,000 \\\hline \text { Depreciation Expense } & \$ 40,000 & \$ 20,000 \\\hline \text { Other Expenses } & \$ 160,000 & \$ 80,000 \\\hline \text { Income Tax Expense } & \$ 240,000 & \$ 104,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 400,000 & \$ 700,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline \text { Less: Dividends } & (\$ 60,000) & \$ 76,000) \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline\end{array}$ Balance Sheets:
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp. } \\\hline \text { Cash } & \$ 339,250 & \$ 50,000 \\\hline \text { Accounts Receivable } & \$ 500,000 & \$ 500,000 \\\hline \text { Inventory } & \$ 100,000 & \$ 500,000 \\\hline \text { Investment in Won Corp. } & \$ 1,500,000 & \\\hline \begin{array}{l}\text { Investment in Won Corp. } \\\text { bonds }\end{array} & \$ 60,750 & \\\hline \text { Land } & & \$ 50,000 \\\hline \text { Equipment } & \$ 1,000,000 & \$ 450,000 \\\hline \text { Accumulated Depreciation } & (\$ 500,000) & (\$ 300,000) \\\hline \text { Total Assets } & \$ 3,000,000 & \$ 1,250,000 \\\hline\\\hline \text { Current Liabilities } & \$ 1,300,000 & \$ 119,000 \\\hline \text { Bonds Payable } & & \$ 150,000 \\\hline \text { Less: Bond Discount } & & (\$ 19,000) \\\hline \text { Common Shares } & \$ 1,000,000 & \$ 220,000 \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline \text { Total Liabilities and Equity } & \$ 3,000,000 & \$ 1,250,000 \\\hline\end{array}$ Other Information:
? Won sold a tract of land to Ting at a profit of $20,000 during 2019. This land is still the property of Ting Corp.
? On January 1, 2020, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
? On January 1, 2020, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2020, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $10,000 during 2019.
? Both companies are subject to an effective tax rate of 40%.
? Both companies use straight line amortization exclusively.
? On January 1, 2020, Ting acquired half of Won's bonds for $60,000.
? The bonds carry a coupon rate of 10% and mature on January 1, 2040. The initial bond issue took place on January 1, 2020. The total discount on the issue date of the bonds was $20,000.
? Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared.
What is the amount of goodwill arising from this business combination on January 1, 2019?

A) $610,000
B) $1,210,000
C) $1,250,000
D) $1,110,000

Question 27

On January 1, 2019, King Corp. acquired 80% of Kong Corp. for $500,000. King uses the cost method to account for its investment. On January 1, 2019, Kong's retained earnings and common shares were $350,000 and $110,000, respectively.
Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2019.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
The Financial Statements of King Corp. and Kong Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp. } & \text { Kong Corp. } \\\hline \text { Sales } & \$ 500,000 & \$ 300,000 \\\hline \text { Other Revenues } & \$ 300,000 & \$ 120,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 400,000 & \$ 240,000 \\\hline \text { Depreciation Expense } & \$ 20,000 & \$ 10,000 \\\hline \text { Other Expenses } & \$ 80,000 & \$ 40,000 \\\hline \text { Income Tax Expense } & \$ 120,000 & \$ 52,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 250,000 & \$ 350,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline \text { Less: Dividends } & (\$ 30,000) &( \$ 38,000) \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline\end{array}$ Balance Sheets
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Cash } & \$ 50,000 & \$ 25,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$ 250,000 \\\hline \text { Inventory } & \$ 50,000 & \$ 250,000 \\\hline \text { Investment in Kong Corp. } & \$ 500,000 & \\\hline \text { Land } & & \$ 25,000 \\\hline \text { Equipment } & \$ 400,000 & \$ 200,000 \\\hline \text { Accumulated Depreciation } & (\$ 250,000) & (\$ 150,000) \\\hline \text { Total Assets } & \$ 850,000 & \$ 600,000 \\\hline \text { Current Liabilities } & \$ 320,000 & \$ 62,000 \\\hline \text { Dividends Payable } & \$ 30,000 & \$ 38,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 110,000 \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline \text { Total Liabilities and Equity } & \$ 850,000 & \$ 600,000 \\\hline\end{array}$ Other Information:
? King sold a tract of Land to Kong at a profit of $10,000 during 2020. This land is still the property of Kong Corp.
? On January 1, 2020, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
? On January 1, 2020, King's inventories contained items purchased during 2019 from Kong for $10,000. This entire inventory was sold to outsiders during 2020. Also during 2020, King sold inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $4,000 during 2020.
? Both companies are subject to an effective tax rate of 40%
? Both companies use straight line amortization.
What would be the non-controlling Interest amount appearing on King's Consolidated Balance Sheet at January 1, 2019?

A) $100,000
B) $101,800
C) $125,000
D) $185,000

Question 28

On January 1, 2019, King Corp. acquired 80% of Kong Corp. for $500,000. King uses the cost method to account for its investment. On January 1, 2019, Kong's retained earnings and common shares were $350,000 and $110,000, respectively.
Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2019.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
The Financial Statements of King Corp. and Kong Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp. } & \text { Kong Corp. } \\\hline \text { Sales } & \$ 500,000 & \$ 300,000 \\\hline \text { Other Revenues } & \$ 300,000 & \$ 120,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 400,000 & \$ 240,000 \\\hline \text { Depreciation Expense } & \$ 20,000 & \$ 10,000 \\\hline \text { Other Expenses } & \$ 80,000 & \$ 40,000 \\\hline \text { Income Tax Expense } & \$ 120,000 & \$ 52,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 250,000 & \$ 350,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline \text { Less: Dividends } & (\$ 30,000) &( \$ 38,000) \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline\end{array}$ Balance Sheets
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Cash } & \$ 50,000 & \$ 25,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$ 250,000 \\\hline \text { Inventory } & \$ 50,000 & \$ 250,000 \\\hline \text { Investment in Kong Corp. } & \$ 500,000 & \\\hline \text { Land } & & \$ 25,000 \\\hline \text { Equipment } & \$ 400,000 & \$ 200,000 \\\hline \text { Accumulated Depreciation } & (\$ 250,000) & (\$ 150,000) \\\hline \text { Total Assets } & \$ 850,000 & \$ 600,000 \\\hline \text { Current Liabilities } & \$ 320,000 & \$ 62,000 \\\hline \text { Dividends Payable } & \$ 30,000 & \$ 38,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 110,000 \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline \text { Total Liabilities and Equity } & \$ 850,000 & \$ 600,000 \\\hline\end{array}$ Other Information:
? King sold a tract of Land to Kong at a profit of $10,000 during 2020. This land is still the property of Kong Corp.
? On January 1, 2020, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
? On January 1, 2020, King's inventories contained items purchased during 2019 from Kong for $10,000. This entire inventory was sold to outsiders during 2020. Also during 2020, King sold inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $4,000 during 2020.
? Both companies are subject to an effective tax rate of 40%
? Both companies use straight line amortization.
What is the total amount of pre-tax profit from intercompany inventory sales that was realized during 2020?

A) $2,000
B) $5,000
C) $7,000
D) $10,000

Question 29

On January 1, 2019, King Corp. acquired 80% of Kong Corp. for $500,000. King uses the cost method to account for its investment. On January 1, 2019, Kong's retained earnings and common shares were $350,000 and $110,000, respectively.
Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2019.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
The Financial Statements of King Corp. and Kong Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp. } & \text { Kong Corp. } \\\hline \text { Sales } & \$ 500,000 & \$ 300,000 \\\hline \text { Other Revenues } & \$ 300,000 & \$ 120,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 400,000 & \$ 240,000 \\\hline \text { Depreciation Expense } & \$ 20,000 & \$ 10,000 \\\hline \text { Other Expenses } & \$ 80,000 & \$ 40,000 \\\hline \text { Income Tax Expense } & \$ 120,000 & \$ 52,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 250,000 & \$ 350,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline \text { Less: Dividends } & (\$ 30,000) &( \$ 38,000) \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline\end{array}$ Balance Sheets
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Cash } & \$ 50,000 & \$ 25,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$ 250,000 \\\hline \text { Inventory } & \$ 50,000 & \$ 250,000 \\\hline \text { Investment in Kong Corp. } & \$ 500,000 & \\\hline \text { Land } & & \$ 25,000 \\\hline \text { Equipment } & \$ 400,000 & \$ 200,000 \\\hline \text { Accumulated Depreciation } & (\$ 250,000) & (\$ 150,000) \\\hline \text { Total Assets } & \$ 850,000 & \$ 600,000 \\\hline \text { Current Liabilities } & \$ 320,000 & \$ 62,000 \\\hline \text { Dividends Payable } & \$ 30,000 & \$ 38,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 110,000 \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline \text { Total Liabilities and Equity } & \$ 850,000 & \$ 600,000 \\\hline\end{array}$ Other Information:
? King sold a tract of Land to Kong at a profit of $10,000 during 2020. This land is still the property of Kong Corp.
? On January 1, 2020, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
? On January 1, 2020, King's inventories contained items purchased during 2019 from Kong for $10,000. This entire inventory was sold to outsiders during 2020. Also during 2020, King sold inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $4,000 during 2020.
? Both companies are subject to an effective tax rate of 40%
? Both companies use straight line amortization.
What would be the amount of other revenue appearing on King's Consolidated Income Statement for the year ended December 31, 2020?

A) $359,600
B) $399,600
C) $410,000
D) $420,000

Question 30

On January 1, 2019, King Corp. acquired 80% of Kong Corp. for $500,000. King uses the cost method to account for its investment. On January 1, 2019, Kong's retained earnings and common shares were $350,000 and $110,000, respectively.
Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2019.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
The Financial Statements of King Corp. and Kong Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp. } & \text { Kong Corp. } \\\hline \text { Sales } & \$ 500,000 & \$ 300,000 \\\hline \text { Other Revenues } & \$ 300,000 & \$ 120,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 400,000 & \$ 240,000 \\\hline \text { Depreciation Expense } & \$ 20,000 & \$ 10,000 \\\hline \text { Other Expenses } & \$ 80,000 & \$ 40,000 \\\hline \text { Income Tax Expense } & \$ 120,000 & \$ 52,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 250,000 & \$ 350,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline \text { Less: Dividends } & (\$ 30,000) &( \$ 38,000) \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline\end{array}$ Balance Sheets
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Cash } & \$ 50,000 & \$ 25,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$ 250,000 \\\hline \text { Inventory } & \$ 50,000 & \$ 250,000 \\\hline \text { Investment in Kong Corp. } & \$ 500,000 & \\\hline \text { Land } & & \$ 25,000 \\\hline \text { Equipment } & \$ 400,000 & \$ 200,000 \\\hline \text { Accumulated Depreciation } & (\$ 250,000) & (\$ 150,000) \\\hline \text { Total Assets } & \$ 850,000 & \$ 600,000 \\\hline \text { Current Liabilities } & \$ 320,000 & \$ 62,000 \\\hline \text { Dividends Payable } & \$ 30,000 & \$ 38,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 110,000 \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline \text { Total Liabilities and Equity } & \$ 850,000 & \$ 600,000 \\\hline\end{array}$ Other Information:
? King sold a tract of Land to Kong at a profit of $10,000 during 2020. This land is still the property of Kong Corp.
? On January 1, 2020, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
? On January 1, 2020, King's inventories contained items purchased during 2019 from Kong for $10,000. This entire inventory was sold to outsiders during 2020. Also during 2020, King sold inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $4,000 during 2020.
? Both companies are subject to an effective tax rate of 40%
Both companies use straight line amortization.
What would be the amount of consolidated patents appearing on King's Consolidated Balance Sheet as at December 31, 2020?

A) $4,000
B) $5,000
C) $12,000
D) $15,000

Question 31

On January 1, 2019, King Corp. acquired 80% of Kong Corp. for $500,000. King uses the cost method to account for its investment. On January 1, 2019, Kong's retained earnings and common shares were $350,000 and $110,000, respectively.
Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2019.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
The Financial Statements of King Corp. and Kong Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp. } & \text { Kong Corp. } \\\hline \text { Sales } & \$ 500,000 & \$ 300,000 \\\hline \text { Other Revenues } & \$ 300,000 & \$ 120,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 400,000 & \$ 240,000 \\\hline \text { Depreciation Expense } & \$ 20,000 & \$ 10,000 \\\hline \text { Other Expenses } & \$ 80,000 & \$ 40,000 \\\hline \text { Income Tax Expense } & \$ 120,000 & \$ 52,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 250,000 & \$ 350,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline \text { Less: Dividends } & (\$ 30,000) &( \$ 38,000) \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline\end{array}$ Balance Sheets
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Cash } & \$ 50,000 & \$ 25,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$ 250,000 \\\hline \text { Inventory } & \$ 50,000 & \$ 250,000 \\\hline \text { Investment in Kong Corp. } & \$ 500,000 & \\\hline \text { Land } & & \$ 25,000 \\\hline \text { Equipment } & \$ 400,000 & \$ 200,000 \\\hline \text { Accumulated Depreciation } & (\$ 250,000) & (\$ 150,000) \\\hline \text { Total Assets } & \$ 850,000 & \$ 600,000 \\\hline \text { Current Liabilities } & \$ 320,000 & \$ 62,000 \\\hline \text { Dividends Payable } & \$ 30,000 & \$ 38,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 110,000 \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline \text { Total Liabilities and Equity } & \$ 850,000 & \$ 600,000 \\\hline\end{array}$ Other Information:
? King sold a tract of Land to Kong at a profit of $10,000 during 2020. This land is still the property of Kong Corp.
? On January 1, 2020, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
? On January 1, 2020, King's inventories contained items purchased during 2019 from Kong for $10,000. This entire inventory was sold to outsiders during 2020. Also during 2020, King sold inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $4,000 during 2020.
? Both companies are subject to an effective tax rate of 40%
? Both companies use straight line amortization.
What is the amount of unamortized acquisition differential (excluding unimpaired goodwill) on December 31, 2020?

A) $4,000
B) $5,000
C) $8,000
D) $10,000

Question 32

On January 1, 2019, King Corp. acquired 80% of Kong Corp. for $500,000. King uses the cost method to account for its investment. On January 1, 2019, Kong's retained earnings and common shares were $350,000 and $110,000, respectively.
Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2019.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
The Financial Statements of King Corp. and Kong Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp. } & \text { Kong Corp. } \\\hline \text { Sales } & \$ 500,000 & \$ 300,000 \\\hline \text { Other Revenues } & \$ 300,000 & \$ 120,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 400,000 & \$ 240,000 \\\hline \text { Depreciation Expense } & \$ 20,000 & \$ 10,000 \\\hline \text { Other Expenses } & \$ 80,000 & \$ 40,000 \\\hline \text { Income Tax Expense } & \$ 120,000 & \$ 52,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 250,000 & \$ 350,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline \text { Less: Dividends } & (\$ 30,000) &( \$ 38,000) \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline\end{array}$ Balance Sheets
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Cash } & \$ 50,000 & \$ 25,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$ 250,000 \\\hline \text { Inventory } & \$ 50,000 & \$ 250,000 \\\hline \text { Investment in Kong Corp. } & \$ 500,000 & \\\hline \text { Land } & & \$ 25,000 \\\hline \text { Equipment } & \$ 400,000 & \$ 200,000 \\\hline \text { Accumulated Depreciation } & (\$ 250,000) & (\$ 150,000) \\\hline \text { Total Assets } & \$ 850,000 & \$ 600,000 \\\hline \text { Current Liabilities } & \$ 320,000 & \$ 62,000 \\\hline \text { Dividends Payable } & \$ 30,000 & \$ 38,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 110,000 \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline \text { Total Liabilities and Equity } & \$ 850,000 & \$ 600,000 \\\hline\end{array}$ Other Information:
? King sold a tract of Land to Kong at a profit of $10,000 during 2020. This land is still the property of Kong Corp.
? On January 1, 2020, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
? On January 1, 2020, King's inventories contained items purchased during 2019 from Kong for $10,000. This entire inventory was sold to outsiders during 2020. Also during 2020, King sold inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $4,000 during 2020.
? Both companies are subject to an effective tax rate of 40%
? Both companies use straight line amortization.
What would be the amount appearing on the December 31, 2020 Consolidated Balance Sheet for land?

A) $15,000
B) $17,000
C) $21,000
D) $25,000

Question 33

On January 1, 2019, Ting Corp. acquired 75% of Won Corp. for $1,500,000. Ting uses the cost method to account for its investment in Won. On January 1, 2019, Won's retained earnings and common shares were $600,000 and $220,000, respectively.
Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $50,000 higher than its book value.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
The Financial Statements of Ting Corp. and Won Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp. } & \text { Won Corp. } \\\hline \text { Sales } & \$ 1,000,000 & \$ 600,000 \\\hline \text { Other Revenues } & \$ 600,000 & \$ 240,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 800,000 & \$ 480,000 \\\hline \text { Depreciation Expense } & \$ 40,000 & \$ 20,000 \\\hline \text { Other Expenses } & \$ 160,000 & \$ 80,000 \\\hline \text { Income Tax Expense } & \$ 240,000 & \$ 104,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 400,000 & \$ 700,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline \text { Less: Dividends } & (\$ 60,000) & \$ 76,000) \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline\end{array}$ Balance Sheets:
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp. } \\\hline \text { Cash } & \$ 339,250 & \$ 50,000 \\\hline \text { Accounts Receivable } & \$ 500,000 & \$ 500,000 \\\hline \text { Inventory } & \$ 100,000 & \$ 500,000 \\\hline \text { Investment in Won Corp. } & \$ 1,500,000 & \\\hline \begin{array}{l}\text { Investment in Won Corp. } \\\text { bonds }\end{array} & \$ 60,750 & \\\hline \text { Land } & & \$ 50,000 \\\hline \text { Equipment } & \$ 1,000,000 & \$ 450,000 \\\hline \text { Accumulated Depreciation } & (\$ 500,000) & (\$ 300,000) \\\hline \text { Total Assets } & \$ 3,000,000 & \$ 1,250,000 \\\hline\\\hline \text { Current Liabilities } & \$ 1,300,000 & \$ 119,000 \\\hline \text { Bonds Payable } & & \$ 150,000 \\\hline \text { Less: Bond Discount } & & (\$ 19,000) \\\hline \text { Common Shares } & \$ 1,000,000 & \$ 220,000 \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline \text { Total Liabilities and Equity } & \$ 3,000,000 & \$ 1,250,000 \\\hline\end{array}$ Other Information:
? Won sold a tract of land to Ting at a profit of $20,000 during 2019. This land is still the property of Ting Corp.
? On January 1, 2020, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
? On January 1, 2020, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2020, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $10,000 during 2019.
? Both companies are subject to an effective tax rate of 40%.
? Both companies use straight line amortization exclusively.
? On January 1, 2020, Ting acquired half of Won's bonds for $60,000.
? The bonds carry a coupon rate of 10% and mature on January 1, 2040. The initial bond issue took place on January 1, 2020. The total discount on the issue date of the bonds was $20,000.
? Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared.
What effect would the intercompany bond sale have on Ting?

A) Ting would record a loss $5,000.
B) Ting would record a loss of $4,000.
C) Ting would record a gain of $14,000.
D) Ting would record a gain of $15,000.

Question 34

On January 1, 2019, King Corp. acquired 80% of Kong Corp. for $500,000. King uses the cost method to account for its investment. On January 1, 2019, Kong's retained earnings and common shares were $350,000 and $110,000, respectively.
Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2019.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
The Financial Statements of King Corp. and Kong Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp. } & \text { Kong Corp. } \\\hline \text { Sales } & \$ 500,000 & \$ 300,000 \\\hline \text { Other Revenues } & \$ 300,000 & \$ 120,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 400,000 & \$ 240,000 \\\hline \text { Depreciation Expense } & \$ 20,000 & \$ 10,000 \\\hline \text { Other Expenses } & \$ 80,000 & \$ 40,000 \\\hline \text { Income Tax Expense } & \$ 120,000 & \$ 52,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 250,000 & \$ 350,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline \text { Less: Dividends } & (\$ 30,000) &( \$ 38,000) \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline\end{array}$ Balance Sheets
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Cash } & \$ 50,000 & \$ 25,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$ 250,000 \\\hline \text { Inventory } & \$ 50,000 & \$ 250,000 \\\hline \text { Investment in Kong Corp. } & \$ 500,000 & \\\hline \text { Land } & & \$ 25,000 \\\hline \text { Equipment } & \$ 400,000 & \$ 200,000 \\\hline \text { Accumulated Depreciation } & (\$ 250,000) & (\$ 150,000) \\\hline \text { Total Assets } & \$ 850,000 & \$ 600,000 \\\hline \text { Current Liabilities } & \$ 320,000 & \$ 62,000 \\\hline \text { Dividends Payable } & \$ 30,000 & \$ 38,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 110,000 \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline \text { Total Liabilities and Equity } & \$ 850,000 & \$ 600,000 \\\hline\end{array}$ Other Information:
? King sold a tract of Land to Kong at a profit of $10,000 during 2020. This land is still the property of Kong Corp.
? On January 1, 2020, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
? On January 1, 2020, King's inventories contained items purchased during 2019 from Kong for $10,000. This entire inventory was sold to outsiders during 2020. Also during 2020, King sold inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $4,000 during 2020.
? Both companies are subject to an effective tax rate of 40%
? Both companies use straight line amortization.
What would be the amount appearing on the December 31, 2020 Consolidated Income Statement for cost of goods sold?

A) $640,000
B) $593,000
C) $590,000
D) $400,000

Question 35

On January 1, 2019, Ting Corp. acquired 75% of Won Corp. for $1,500,000. Ting uses the cost method to account for its investment in Won. On January 1, 2019, Won's retained earnings and common shares were $600,000 and $220,000, respectively.
Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $50,000 higher than its book value.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
The Financial Statements of Ting Corp. and Won Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp. } & \text { Won Corp. } \\\hline \text { Sales } & \$ 1,000,000 & \$ 600,000 \\\hline \text { Other Revenues } & \$ 600,000 & \$ 240,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 800,000 & \$ 480,000 \\\hline \text { Depreciation Expense } & \$ 40,000 & \$ 20,000 \\\hline \text { Other Expenses } & \$ 160,000 & \$ 80,000 \\\hline \text { Income Tax Expense } & \$ 240,000 & \$ 104,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 400,000 & \$ 700,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline \text { Less: Dividends } & (\$ 60,000) & \$ 76,000) \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline\end{array}$ Balance Sheets:
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp. } \\\hline \text { Cash } & \$ 339,250 & \$ 50,000 \\\hline \text { Accounts Receivable } & \$ 500,000 & \$ 500,000 \\\hline \text { Inventory } & \$ 100,000 & \$ 500,000 \\\hline \text { Investment in Won Corp. } & \$ 1,500,000 & \\\hline \begin{array}{l}\text { Investment in Won Corp. } \\\text { bonds }\end{array} & \$ 60,750 & \\\hline \text { Land } & & \$ 50,000 \\\hline \text { Equipment } & \$ 1,000,000 & \$ 450,000 \\\hline \text { Accumulated Depreciation } & (\$ 500,000) & (\$ 300,000) \\\hline \text { Total Assets } & \$ 3,000,000 & \$ 1,250,000 \\\hline \text { Current Liabilities } & \$ 1,300,000 & \$ 119,000 \\\hline \text { Bonds Payable } & & \$ 150,000 \\\hline \text { Less: Bond Discount } & & (\$ 19,000) \\\hline \text { Common Shares } & \$ 1,000,000 & \$ 220,000 \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline \text { Total Liabilities and Equity } & \$ 3,000,000 & \$ 1,250,000 \\\hline\end{array}$ Other Information:
? Won sold a tract of land to Ting at a profit of $20,000 during 2019. This land is still the property of Ting Corp.
? On January 1, 2020, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
? On January 1, 2020, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2020, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $10,000 during 2019.
? Both companies are subject to an effective tax rate of 40%.
? Both companies use straight line amortization exclusively.
? On January 1, 2020, Ting acquired half of Won's bonds for $60,000.
? The bonds carry a coupon rate of 10% and mature on January 1, 2040. The initial bond issue took place on January 1, 2020. The total discount on the issue date of the bonds was $20,000.
? Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared.
What effect would the intercompany bond sale have on Ting's December 31, 2020 Consolidated Income Statement?

A) Ting would record a loss of $15,000.
B) Ting would record a loss of $10,000.
C) Ting would record a gain of $5,000.
D) Ting would record a gain of $15,000.

Question 36

On January 1, 2019, King Corp. acquired 80% of Kong Corp. for $500,000. King uses the cost method to account for its investment. On January 1, 2019, Kong's retained earnings and common shares were $350,000 and $110,000, respectively.
Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2019.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
The Financial Statements of King Corp. and Kong Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp. } & \text { Kong Corp. } \\\hline \text { Sales } & \$ 500,000 & \$ 300,000 \\\hline \text { Other Revenues } & \$ 300,000 & \$ 120,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 400,000 & \$ 240,000 \\\hline \text { Depreciation Expense } & \$ 20,000 & \$ 10,000 \\\hline \text { Other Expenses } & \$ 80,000 & \$ 40,000 \\\hline \text { Income Tax Expense } & \$ 120,000 & \$ 52,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 250,000 & \$ 350,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline \text { Less: Dividends } & (\$ 30,000) &( \$ 38,000) \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline\end{array}$ Balance Sheets
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Cash } & \$ 50,000 & \$ 25,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$ 250,000 \\\hline \text { Inventory } & \$ 50,000 & \$ 250,000 \\\hline \text { Investment in Kong Corp. } & \$ 500,000 & \\\hline \text { Land } & & \$ 25,000 \\\hline \text { Equipment } & \$ 400,000 & \$ 200,000 \\\hline \text { Accumulated Depreciation } & (\$ 250,000) & (\$ 150,000) \\\hline \text { Total Assets } & \$ 850,000 & \$ 600,000 \\\hline \text { Current Liabilities } & \$ 320,000 & \$ 62,000 \\\hline \text { Dividends Payable } & \$ 30,000 & \$ 38,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 110,000 \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline \text { Total Liabilities and Equity } & \$ 850,000 & \$ 600,000 \\\hline\end{array}$ Other Information:
? King sold a tract of Land to Kong at a profit of $10,000 during 2020. This land is still the property of Kong Corp.
? On January 1, 2020, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
? On January 1, 2020, King's inventories contained items purchased during 2019 from Kong for $10,000. This entire inventory was sold to outsiders during 2020. Also during 2020, King sold inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $4,000 during 2020.
? Both companies are subject to an effective tax rate of 40%
? Both companies use straight line amortization.
Ignoring income taxes and any non-controlling interest effects, what is the amount of unrealized profit remaining from the intercompany sale of equipment at December 31, 2020?

A) Nil
B) $10,000
C) $15,000
D) $20,000

Question 37

On January 1, 2019, King Corp. acquired 80% of Kong Corp. for $500,000. King uses the cost method to account for its investment. On January 1, 2019, Kong's retained earnings and common shares were $350,000 and $110,000, respectively.
Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2019.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
The Financial Statements of King Corp. and Kong Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp. } & \text { Kong Corp. } \\\hline \text { Sales } & \$ 500,000 & \$ 300,000 \\\hline \text { Other Revenues } & \$ 300,000 & \$ 120,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 400,000 & \$ 240,000 \\\hline \text { Depreciation Expense } & \$ 20,000 & \$ 10,000 \\\hline \text { Other Expenses } & \$ 80,000 & \$ 40,000 \\\hline \text { Income Tax Expense } & \$ 120,000 & \$ 52,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 250,000 & \$ 350,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline \text { Less: Dividends } & (\$ 30,000) &( \$ 38,000) \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline\end{array}$ Balance Sheets
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Cash } & \$ 50,000 & \$ 25,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$ 250,000 \\\hline \text { Inventory } & \$ 50,000 & \$ 250,000 \\\hline \text { Investment in Kong Corp. } & \$ 500,000 & \\\hline \text { Land } & & \$ 25,000 \\\hline \text { Equipment } & \$ 400,000 & \$ 200,000 \\\hline \text { Accumulated Depreciation } & (\$ 250,000) & (\$ 150,000) \\\hline \text { Total Assets } & \$ 850,000 & \$ 600,000 \\\hline \text { Current Liabilities } & \$ 320,000 & \$ 62,000 \\\hline \text { Dividends Payable } & \$ 30,000 & \$ 38,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 110,000 \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline \text { Total Liabilities and Equity } & \$ 850,000 & \$ 600,000 \\\hline\end{array}$ Other Information:
? King sold a tract of Land to Kong at a profit of $10,000 during 2020. This land is still the property of Kong Corp.
? On January 1, 2020, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
? On January 1, 2020, King's inventories contained items purchased during 2019 from Kong for $10,000. This entire inventory was sold to outsiders during 2020. Also during 2020, King sold inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $4,000 during 2020.
? Both companies are subject to an effective tax rate of 40%
? Both companies use straight line amortization.
What is the total amount of unrealized pre-tax profits in inventory at the start of 2021?

A) Nil
B) $2,000
C) $5,000
D) $8,000

Question 38

On January 1, 2019, Ting Corp. acquired 75% of Won Corp. for $1,500,000. Ting uses the cost method to account for its investment in Won. On January 1, 2019, Won's retained earnings and common shares were $600,000 and $220,000, respectively.
Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $50,000 higher than its book value.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
The Financial Statements of Ting Corp. and Won Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp. } & \text { Won Corp. } \\\hline \text { Sales } & \$ 1,000,000 & \$ 600,000 \\\hline \text { Other Revenues } & \$ 600,000 & \$ 240,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 800,000 & \$ 480,000 \\\hline \text { Depreciation Expense } & \$ 40,000 & \$ 20,000 \\\hline \text { Other Expenses } & \$ 160,000 & \$ 80,000 \\\hline \text { Income Tax Expense } & \$ 240,000 & \$ 104,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 400,000 & \$ 700,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline \text { Less: Dividends } & (\$ 60,000) & \$ 76,000) \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline\end{array}$ Balance Sheets:
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp. } \\\hline \text { Cash } & \$ 339,250 & \$ 50,000 \\\hline \text { Accounts Receivable } & \$ 500,000 & \$ 500,000 \\\hline \text { Inventory } & \$ 100,000 & \$ 500,000 \\\hline \text { Investment in Won Corp. } & \$ 1,500,000 & \\\hline \begin{array}{l}\text { Investment in Won Corp. } \\\text { bonds }\end{array} & \$ 60,750 & \\\hline \text { Land } & & \$ 50,000 \\\hline \text { Equipment } & \$ 1,000,000 & \$ 450,000 \\\hline \text { Accumulated Depreciation } & (\$ 500,000) & (\$ 300,000) \\\hline \text { Total Assets } & \$ 3,000,000 & \$ 1,250,000 \\\hline \text { Current Liabilities } & \$ 1,300,000 & \$ 119,000 \\\hline \text { Bonds Payable } & & \$ 150,000 \\\hline \text { Less: Bond Discount } & & (\$ 19,000) \\\hline \text { Common Shares } & \$ 1,000,000 & \$ 220,000 \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline \text { Total Liabilities and Equity } & \$ 3,000,000 & \$ 1,250,000 \\\hline\end{array}$ Other Information:
? Won sold a tract of land to Ting at a profit of $20,000 during 2019. This land is still the property of Ting Corp.
? On January 1, 2020, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
? On January 1, 2020, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2020, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $10,000 during 2019.
? Both companies are subject to an effective tax rate of 40%.
? Both companies use straight line amortization exclusively.
? On January 1, 2020, Ting acquired half of Won's bonds for $60,000.
? The bonds carry a coupon rate of 10% and mature on January 1, 2040. The initial bond issue took place on January 1, 2020. The total discount on the issue date of the bonds was $20,000.
? Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared.
What would be the carrying value of the bonds payable appearing on Ting's December 31, 2020 Consolidated Statement of Financial Position?

A) $64,500
B) $65,000
C) $65,500
D) $131,000

Question 39

On January 1, 2019, Ting Corp. acquired 75% of Won Corp. for $1,500,000. Ting uses the cost method to account for its investment in Won. On January 1, 2019, Won's retained earnings and common shares were $600,000 and $220,000, respectively.
Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $50,000 higher than its book value.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
The Financial Statements of Ting Corp. and Won Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp. } & \text { Won Corp. } \\\hline \text { Sales } & \$ 1,000,000 & \$ 600,000 \\\hline \text { Other Revenues } & \$ 600,000 & \$ 240,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 800,000 & \$ 480,000 \\\hline \text { Depreciation Expense } & \$ 40,000 & \$ 20,000 \\\hline \text { Other Expenses } & \$ 160,000 & \$ 80,000 \\\hline \text { Income Tax Expense } & \$ 240,000 & \$ 104,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 400,000 & \$ 700,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline \text { Less: Dividends } & (\$ 60,000) & \$ 76,000) \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline\end{array}$ Balance Sheets:
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp. } \\\hline \text { Cash } & \$ 339,250 & \$ 50,000 \\\hline \text { Accounts Receivable } & \$ 500,000 & \$ 500,000 \\\hline \text { Inventory } & \$ 100,000 & \$ 500,000 \\\hline \text { Investment in Won Corp. } & \$ 1,500,000 & \\\hline \begin{array}{l}\text { Investment in Won Corp. } \\\text { bonds }\end{array} & \$ 60,750 & \\\hline \text { Land } & & \$ 50,000 \\\hline \text { Equipment } & \$ 1,000,000 & \$ 450,000 \\\hline \text { Accumulated Depreciation } & (\$ 500,000) & (\$ 300,000) \\\hline \text { Total Assets } & \$ 3,000,000 & \$ 1,250,000 \\\hline\\\hline \text { Current Liabilities } & \$ 1,300,000 & \$ 119,000 \\\hline \text { Bonds Payable } & & \$ 150,000 \\\hline \text { Less: Bond Discount } & & (\$ 19,000) \\\hline \text { Common Shares } & \$ 1,000,000 & \$ 220,000 \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline \text { Total Liabilities and Equity } & \$ 3,000,000 & \$ 1,250,000 \\\hline\end{array}$ Other Information:
? Won sold a tract of land to Ting at a profit of $20,000 during 2019. This land is still the property of Ting Corp.
? On January 1, 2020, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
? On January 1, 2020, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2020, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $10,000 during 2019.
? Both companies are subject to an effective tax rate of 40%.
? Both companies use straight line amortization exclusively.
? On January 1, 2020, Ting acquired half of Won's bonds for $60,000.
? The bonds carry a coupon rate of 10% and mature on January 1, 2040. The initial bond issue took place on January 1, 2020. The total discount on the issue date of the bonds was $20,000.
? Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared.
What effect would the intercompany bond sale have on Won?

A) Won would record a loss $14,000.
B) Won would record a loss of $10,000.
C) Won would record a gain of $4,000.
D) Won would record a gain of $10,000.

Question 40

On January 1, 2019, King Corp. acquired 80% of Kong Corp. for $500,000. King uses the cost method to account for its investment. On January 1, 2019, Kong's retained earnings and common shares were $350,000 and $110,000, respectively.
Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2019.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
The Financial Statements of King Corp. and Kong Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp. } & \text { Kong Corp. } \\\hline \text { Sales } & \$ 500,000 & \$ 300,000 \\\hline \text { Other Revenues } & \$ 300,000 & \$ 120,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 400,000 & \$ 240,000 \\\hline \text { Depreciation Expense } & \$ 20,000 & \$ 10,000 \\\hline \text { Other Expenses } & \$ 80,000 & \$ 40,000 \\\hline \text { Income Tax Expense } & \$ 120,000 & \$ 52,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 250,000 & \$ 350,000 \\\hline \text { Net Income } & \$ 180,000 & \$ 78,000 \\\hline \text { Less: Dividends } & (\$ 30,000) &( \$ 38,000) \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline\end{array}$ Balance Sheets
$\begin{array}{|l|r|r|}\hline & \text { King Corp } & \text { Kong Corp } \\\hline \text { Cash } & \$ 50,000 & \$ 25,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$ 250,000 \\\hline \text { Inventory } & \$ 50,000 & \$ 250,000 \\\hline \text { Investment in Kong Corp. } & \$ 500,000 & \\\hline \text { Land } & & \$ 25,000 \\\hline \text { Equipment } & \$ 400,000 & \$ 200,000 \\\hline \text { Accumulated Depreciation } & (\$ 250,000) & (\$ 150,000) \\\hline \text { Total Assets } & \$ 850,000 & \$ 600,000 \\\hline \text { Current Liabilities } & \$ 320,000 & \$ 62,000 \\\hline \text { Dividends Payable } & \$ 30,000 & \$ 38,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 110,000 \\\hline \text { Retained Earnings } & \$ 400,000 & \$ 390,000 \\\hline \text { Total Liabilities and Equity } & \$ 850,000 & \$ 600,000 \\\hline\end{array}$ Other Information:
? King sold a tract of Land to Kong at a profit of $10,000 during 2020. This land is still the property of Kong Corp.
? On January 1, 2020, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
? On January 1, 2020, King's inventories contained items purchased during 2019 from Kong for $10,000. This entire inventory was sold to outsiders during 2020. Also during 2020, King sold inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $4,000 during 2020.
? Both companies are subject to an effective tax rate of 40%
? Both companies use straight line amortization.
Ignoring income taxes and any non-controlling interest effects, what is the amount of profit realized during 2020 from the intercompany sale of equipment?

A) Nil
B) $4,000
C) $5,000
D) $8,000

Question 41

Hot Inc. owns 60% of Cold Inc, which it purchased on January 1, 2019 for $540,000. On that date, Cold's retained earnings and common shares were valued at $100,000 and $250,000, respectively. Cold's book values approximated its fair values on that date, with the exception of the company's inventory and a patent identified on acquisition. The patent had an estimated useful life of 10 years from the date of acquisition. The inventory had a book value that was $10,000 in excess of its fair value, while the patent had a fair value of $50,000. Hot uses the equity method to account for its investment in Cold Inc. The inventory on hand on the acquisition date was sold to outside parties during the year.
Hot Inc. sold depreciable assets to Cold on January 1, 2019, at a loss of $15,000.
On January 1, 2020, Cold sold depreciable assets to Hot at a gain of $10,000. Both assets had a remaining useful life of 5 years on the date of their intercompany sale.
During 2019, Cold sold inventory to Hot in the amount of $18,000. This inventory was sold to outside parties during 2020.
During 2020, Hot sold inventory to Cold for $45,000. One third of this inventory was still in Cold's warehouse on December 31, 2020.
All sales (both internal and external) are priced to provide the seller with a mark-up of 50% above cost.
Cold's Net Income and Dividends for 2019 and 2020 are shown below.
Both companies are subject to a tax rate of 20%.
Prepare a Schedule of Realized and Unrealized Profits for 2019 and 2020 for both companies. Show your figures before and after tax.
Schedule of Realizes and Unrealized Profits - 2019, 2020

Question 42

On January 1, 2019, Ting Corp. acquired 75% of Won Corp. for $1,500,000. Ting uses the cost method to account for its investment in Won. On January 1, 2019, Won's retained earnings and common shares were $600,000 and $220,000, respectively.
Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $50,000 higher than its book value.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
The Financial Statements of Ting Corp. and Won Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp. } & \text { Won Corp. } \\\hline \text { Sales } & \$ 1,000,000 & \$ 600,000 \\\hline \text { Other Revenues } & \$ 600,000 & \$ 240,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 800,000 & \$ 480,000 \\\hline \text { Depreciation Expense } & \$ 40,000 & \$ 20,000 \\\hline \text { Other Expenses } & \$ 160,000 & \$ 80,000 \\\hline \text { Income Tax Expense } & \$ 240,000 & \$ 104,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 400,000 & \$ 700,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline \text { Less: Dividends } & (\$ 60,000) & \$ 76,000) \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline\end{array}$ Balance Sheets:
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp. } \\\hline \text { Cash } & \$ 339,250 & \$ 50,000 \\\hline \text { Accounts Receivable } & \$ 500,000 & \$ 500,000 \\\hline \text { Inventory } & \$ 100,000 & \$ 500,000 \\\hline \text { Investment in Won Corp. } & \$ 1,500,000 & \\\hline \begin{array}{l}\text { Investment in Won Corp. } \\\text { bonds }\end{array} & \$ 60,750 & \\\hline \text { Land } & & \$ 50,000 \\\hline \text { Equipment } & \$ 1,000,000 & \$ 450,000 \\\hline \text { Accumulated Depreciation } & (\$ 500,000) & (\$ 300,000) \\\hline \text { Total Assets } & \$ 3,000,000 & \$ 1,250,000 \\\hline \text { Current Liabilities } & \$ 1,300,000 & \$ 119,000 \\\hline \text { Bonds Payable } & & \$ 150,000 \\\hline \text { Less: Bond Discount } & & (\$ 19,000) \\\hline \text { Common Shares } & \$ 1,000,000 & \$ 220,000 \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline \text { Total Liabilities and Equity } & \$ 3,000,000 & \$ 1,250,000 \\\hline\end{array}$ Other Information:
? Won sold a tract of land to Ting at a profit of $20,000 during 2019. This land is still the property of Ting Corp.
? On January 1, 2020, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
? On January 1, 2020, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2020, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $10,000 during 2019.
? Both companies are subject to an effective tax rate of 40%.
? Both companies use straight line amortization exclusively.
? On January 1, 2020, Ting acquired half of Won's bonds for $60,000.
? The bonds carry a coupon rate of 10% and mature on January 1, 2040. The initial bond issue took place on January 1, 2020. The total discount on the issue date of the bonds was $20,000.
? Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared.
What would be the amount of other revenue appearing on Ting's Consolidated Income Statement for the Year ended December 31, 2020?

A) $803,000
B) $840,000
C) $788,000
D) $808,000

Question 43

Hot Inc. owns 60% of Cold Inc, which it purchased on January 1, 2019 for $540,000. On that date, Cold's retained earnings and common shares were valued at $100,000 and $250,000, respectively. Cold's book values approximated its fair values on that date, with the exception of the company's inventory and a patent identified on acquisition. The patent had an estimated useful life of 10 years from the date of acquisition. The inventory had a book value that was $10,000 in excess of its fair value, while the patent had a fair value of $50,000. Hot uses the equity method to account for its investment in Cold Inc. The inventory on hand on the acquisition date was sold to outside parties during the year.
Hot Inc. sold depreciable assets to Cold on January 1, 2019, at a loss of $15,000. On January 1, 2020, Cold sold depreciable assets to Hot at a gain of $10,000. Both assets had a remaining useful life of 5 years on the date of their intercompany sale.
During 2019, Cold sold inventory to Hot in the amount of $18,000. This inventory was sold to outside parties during 2020. During 2020, Hot sold inventory to Cold for $45,000. One third of this inventory was still in Cold's warehouse on December 31, 2020. All sales (both internal and external) are priced to provide the seller with a mark-up of 50% above cost.
Cold's Net Income and Dividends for 2019 and 2020 are shown below.
Both companies are subject to a tax rate of 20%.
Compute the goodwill on the acquisition date.

Question 44

On January 1, 2019, Ting Corp. acquired 75% of Won Corp. for $1,500,000. Ting uses the cost method to account for its investment in Won. On January 1, 2019, Won's retained earnings and common shares were $600,000 and $220,000, respectively.
Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $50,000 higher than its book value.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
The Financial Statements of Ting Corp. and Won Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp. } \\\hline \text { Sales } & \$ 1,000,000 & \$ 600,000 \\\hline \text { Other Revenues } & \$ 600,000 & \$ 240,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 800,000 & \$ 480,000 \\\hline \text { Depreciation Expense } & \$ 40,000 & \$ 20,000 \\\hline \text { Other Expenses } & \$ 160,000 & \$ 80,000 \\\hline \text { Income Tax Expense } & \$ 240,000 & \$ 104,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 400,000 & \$ 700,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline \text { Less: Dividends } & (\$ 60,000) & \$ 76,000) \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline\end{array}$ Balance Sheets:
$\begin{array}{|l|r|r|} \hline& \text { Ting Corp } & \text { Won Corp. } \\\hline \text { Cash } & \$ 339,250 & \$ 50,000 \\\hline \text { Accounts Receivable } & \$ 500,000 & \$ 500,000 \\\hline \text { Inventory } & \$ 100,000 & \$ 500,000 \\\hline \text { Investment in Won Corp. } & \$ 1,500,000 & \\\hline \begin{array}{l}\text { Investment in Won Corp. } \\\text { bonds }\end{array} & \$ 60,750 & \\\hline \text { Land } & & \$ 50,000 \\\hline \text { Equipment } & \$ 1,000,000 & \$ 450,000 \\\hline \text { Accumulated Depreciation } & (\$ 500,000) & (\$ 300,000) \\\hline \text { Total Assets } & \$ 3,000,000 & \$ 1,250,000 \\\hline \text { Current Liabilities } & \$ 1,300,000 & \$ 119,000 \\\hline \text { Bonds Payable } & & \$ 150,000 \\\hline \text { Less: Bond Discount } & & (\$ 19,000) \\\hline \text { Common Shares } & \$ 1,000,000 & \$ 220,000 \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline \text { Total Liabilities and Equity } & \$ 3,000,000 & \$ 1,250,000 \\\hline\end{array}$ Other Information:
? Won sold a tract of land to Ting at a profit of $20,000 during 2019. This land is still the property of Ting Corp.
? On January 1, 2020, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
? On January 1, 2020, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2020, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $10,000 during 2019.
? Both companies are subject to an effective tax rate of 40%.
? Both companies use straight line amortization exclusively.
? On January 1, 2020, Ting acquired half of Won's bonds for $60,000.
? The bonds carry a coupon rate of 10% and mature on January 1, 2040. The initial bond issue took place on January 1, 2020. The total discount on the issue date of the bonds was $20,000.
? Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared.
What would be the amount appearing on the December 31, 2020 Consolidated Statement of Financial Position for deferred income taxes?

A) $0
B) $9000
C) $15,400
D) $2,600

Question 45

The financial statements of Plax Inc. and Slate Corp for the year ended December 31, 2020 are shown below:
Income Statements
Retained Earnings Statements
Balance Sheets
Other Information:
 Plax acquired 75% of Slate on January 1, 2016 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2017 and 2020, respectively.
 Plax uses the cost method to account for its investment.
 Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2023. The bonds were issued at a premium. On January 1, 2020 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
 On January 1, 2020, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
 Both companies are subject to a 40% tax rate.
 Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated financial statements are prepared.
Prepare a detailed calculation of consolidated net income. Do not prepare an income statement for this requirement.

Question 46

The financial statements of Plax Inc. and Slate Corp for the year ended December 31, 2020 are shown below:
Income Statements
Retained Earnings Statements
Balance Sheets
Other Information:
 Plax acquired 75% of Slate on January 1, 2016 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2017 and 2020, respectively.
 Plax uses the cost method to account for its investment.
 Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2023. The bonds were issued at a premium. On January 1, 2020 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
 On January 1, 2020, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
 Both companies are subject to a 40% tax rate.
 Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated financial statements are prepared.
Prepare Plax's Consolidated Income Statement for the year ended December 31, 2020. Show the allocation of consolidated net income between the controlling and non-controlling shareholders.

Question 47

On January 1, 2019, Ting Corp. acquired 75% of Won Corp. for $1,500,000. Ting uses the cost method to account for its investment in Won. On January 1, 2019, Won's retained earnings and common shares were $600,000 and $220,000, respectively.
Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $50,000 higher than its book value.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
The Financial Statements of Ting Corp. and Won Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp. } \\\hline \text { Sales } & \$ 1,000,000 & \$ 600,000 \\\hline \text { Other Revenues } & \$ 600,000 & \$ 240,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 800,000 & \$ 480,000 \\\hline \text { Depreciation Expense } & \$ 40,000 & \$ 20,000 \\\hline \text { Other Expenses } & \$ 160,000 & \$ 80,000 \\\hline \text { Income Tax Expense } & \$ 240,000 & \$ 104,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 400,000 & \$ 700,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline \text { Less: Dividends } & (\$ 60,000) & \$ 76,000) \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline\end{array}$ Balance Sheets:
$\begin{array}{|l|r|r|} \hline& \text { Ting Corp } & \text { Won Corp. } \\\hline \text { Cash } & \$ 339,250 & \$ 50,000 \\\hline \text { Accounts Receivable } & \$ 500,000 & \$ 500,000 \\\hline \text { Inventory } & \$ 100,000 & \$ 500,000 \\\hline \text { Investment in Won Corp. } & \$ 1,500,000 & \\\hline \begin{array}{l}\text { Investment in Won Corp. } \\\text { bonds }\end{array} & \$ 60,750 & \\\hline \text { Land } & & \$ 50,000 \\\hline \text { Equipment } & \$ 1,000,000 & \$ 450,000 \\\hline \text { Accumulated Depreciation } & (\$ 500,000) & (\$ 300,000) \\\hline \text { Total Assets } & \$ 3,000,000 & \$ 1,250,000 \\\hline \text { Current Liabilities } & \$ 1,300,000 & \$ 119,000 \\\hline \text { Bonds Payable } & & \$ 150,000 \\\hline \text { Less: Bond Discount } & & (\$ 19,000) \\\hline \text { Common Shares } & \$ 1,000,000 & \$ 220,000 \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline \text { Total Liabilities and Equity } & \$ 3,000,000 & \$ 1,250,000 \\\hline\end{array}$ Other Information:
? Won sold a tract of land to Ting at a profit of $20,000 during 2019. This land is still the property of Ting Corp.
? On January 1, 2020, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
? On January 1, 2020, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2020, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $10,000 during 2019.
? Both companies are subject to an effective tax rate of 40%.
? Both companies use straight line amortization exclusively.
? On January 1, 2020, Ting acquired half of Won's bonds for $60,000.
? The bonds carry a coupon rate of 10% and mature on January 1, 2040. The initial bond issue took place on January 1, 2020. The total discount on the issue date of the bonds was $20,000.
? Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared.
What would be the non-controlling interest amount appearing on Ting's Consolidated Statement of Financial Position on January 1, 2019?

A) $298,300
B) $375,000
C) $450,000
D) $500,000

Question 48

On January 1, 2019, Ting Corp. acquired 75% of Won Corp. for $1,500,000. Ting uses the cost method to account for its investment in Won. On January 1, 2019, Won's retained earnings and common shares were $600,000 and $220,000, respectively.
Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $50,000 higher than its book value.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
The Financial Statements of Ting Corp. and Won Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp. } & \text { Won Corp. } \\\hline \text { Sales } & \$ 1,000,000 & \$ 600,000 \\\hline \text { Other Revenues } & \$ 600,000 & \$ 240,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 800,000 & \$ 480,000 \\\hline \text { Depreciation Expense } & \$ 40,000 & \$ 20,000 \\\hline \text { Other Expenses } & \$ 160,000 & \$ 80,000 \\\hline \text { Income Tax Expense } & \$ 240,000 & \$ 104,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 400,000 & \$ 700,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline \text { Less: Dividends } & (\$ 60,000) & \$ 76,000) \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline\end{array}$ Balance Sheets:
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp. } \\\hline \text { Cash } & \$ 339,250 & \$ 50,000 \\\hline \text { Accounts Receivable } & \$ 500,000 & \$ 500,000 \\\hline \text { Inventory } & \$ 100,000 & \$ 500,000 \\\hline \text { Investment in Won Corp. } & \$ 1,500,000 & \\\hline \begin{array}{l}\text { Investment in Won Corp. } \\\text { bonds }\end{array} & \$ 60,750 & \\\hline \text { Land } & & \$ 50,000 \\\hline \text { Equipment } & \$ 1,000,000 & \$ 450,000 \\\hline \text { Accumulated Depreciation } & (\$ 500,000) & (\$ 300,000) \\\hline \text { Total Assets } & \$ 3,000,000 & \$ 1,250,000 \\\hline \text { Current Liabilities } & \$ 1,300,000 & \$ 119,000 \\\hline \text { Bonds Payable } & & \$ 150,000 \\\hline \text { Less: Bond Discount } & & (\$ 19,000) \\\hline \text { Common Shares } & \$ 1,000,000 & \$ 220,000 \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline \text { Total Liabilities and Equity } & \$ 3,000,000 & \$ 1,250,000 \\\hline\end{array}$ Other Information:
? Won sold a tract of land to Ting at a profit of $20,000 during 2019. This land is still the property of Ting Corp.
? On January 1, 2020, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
? On January 1, 2020, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2020, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $10,000 during 2019.
? Both companies are subject to an effective tax rate of 40%.
? Both companies use straight line amortization exclusively.
? On January 1, 2020, Ting acquired half of Won's bonds for $60,000.
? The bonds carry a coupon rate of 10% and mature on January 1, 2040. The initial bond issue took place on January 1, 2020. The total discount on the issue date of the bonds was $20,000.
? Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared.
What is the total amount of pre-tax profit from intercompany inventory sales that was realized during 2020?

A) $2,500
B) $6,200
C) $20,200
D) $22,500

Question 49

On January 1, 2019, Ting Corp. acquired 75% of Won Corp. for $1,500,000. Ting uses the cost method to account for its investment in Won. On January 1, 2019, Won's retained earnings and common shares were $600,000 and $220,000, respectively.
Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $50,000 higher than its book value.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
The Financial Statements of Ting Corp. and Won Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp. } & \text { Won Corp. } \\\hline \text { Sales } & \$ 1,000,000 & \$ 600,000 \\\hline \text { Other Revenues } & \$ 600,000 & \$ 240,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 800,000 & \$ 480,000 \\\hline \text { Depreciation Expense } & \$ 40,000 & \$ 20,000 \\\hline \text { Other Expenses } & \$ 160,000 & \$ 80,000 \\\hline \text { Income Tax Expense } & \$ 240,000 & \$ 104,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 400,000 & \$ 700,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline \text { Less: Dividends } & (\$ 60,000) & \$ 76,000) \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline\end{array}$ Balance Sheets:
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp. } \\\hline \text { Cash } & \$ 339,250 & \$ 50,000 \\\hline \text { Accounts Receivable } & \$ 500,000 & \$ 500,000 \\\hline \text { Inventory } & \$ 100,000 & \$ 500,000 \\\hline \text { Investment in Won Corp. } & \$ 1,500,000 & \\\hline \begin{array}{l}\text { Investment in Won Corp. } \\\text { bonds }\end{array} & \$ 60,750 & \\\hline \text { Land } & & \$ 50,000 \\\hline \text { Equipment } & \$ 1,000,000 & \$ 450,000 \\\hline \text { Accumulated Depreciation } & (\$ 500,000) & (\$ 300,000) \\\hline \text { Total Assets } & \$ 3,000,000 & \$ 1,250,000 \\\hline \text { Current Liabilities } & \$ 1,300,000 & \$ 119,000 \\\hline \text { Bonds Payable } & & \$ 150,000 \\\hline \text { Less: Bond Discount } & & (\$ 19,000) \\\hline \text { Common Shares } & \$ 1,000,000 & \$ 220,000 \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline \text { Total Liabilities and Equity } & \$ 3,000,000 & \$ 1,250,000 \\\hline\end{array}$ Other Information:
? Won sold a tract of land to Ting at a profit of $20,000 during 2019. This land is still the property of Ting Corp.
? On January 1, 2020, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
? On January 1, 2020, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2020, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $10,000 during 2019.
? Both companies are subject to an effective tax rate of 40%.
? Both companies use straight line amortization exclusively.
? On January 1, 2020, Ting acquired half of Won's bonds for $60,000.
? The bonds carry a coupon rate of 10% and mature on January 1, 2040. The initial bond issue took place on January 1, 2020. The total discount on the issue date of the bonds was $20,000.
? Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared.
Ignoring taxes, what is the total amount of unrealized profits in inventory at the end of 2020?

A) $2,500
B) $3,000
C) $5,000
D) $20,000

Question 50

Hot Inc. owns 60% of Cold Inc, which it purchased on January 1, 2019 for $540,000. On that date, Cold's retained earnings and common shares were valued at $100,000 and $250,000, respectively. Cold's book values approximated its fair values on that date, with the exception of the company's inventory and a patent identified on acquisition. The patent had an estimated useful life of 10 years from the date of acquisition. The inventory had a book value that was $10,000 in excess of its fair value, while the patent had a fair value of $50,000. Hot uses the equity method to account for its investment in Cold Inc. The inventory on hand on the acquisition date was sold to outside parties during the year.
Hot Inc. sold depreciable assets to Cold on January 1, 2019, at a loss of $15,000.
On January 1, 2020, Cold sold depreciable assets to Hot at a gain of $10,000. Both assets had a remaining useful life of 5 years on the date of their intercompany sale.
During 2019, Cold sold inventory to Hot in the amount of $18,000. This inventory was sold to outside parties during 2020.
During 2020, Hot sold inventory to Cold for $45,000. One third of this inventory was still in Cold's warehouse on December 31, 2020.
All sales (both internal and external) are priced to provide the seller with a mark-up of 50% above cost.
Cold's Net Income and Dividends for 2019 and 2020 are shown below.
Both companies are subject to a tax rate of 20%.
Compute the amount of income tax that would be deferred as at December 31, 2020.

Question 51

The financial statements of Plax Inc. and Slate Corp for the year ended December 31, 2020 are shown below:
Income Statements
Retained Earnings Statements
Balance Sheets
Other Information:
 Plax acquired 75% of Slate on January 1, 2016 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2017 and 2020, respectively.
 Plax uses the cost method to account for its investment.
 Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2023. The bonds were issued at a premium. On January 1, 2020 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
 On January 1, 2020, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
 Both companies are subject to a 40% tax rate.
 Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated financial statements are prepared.
Prepare a summary of intercompany interest revenues and expenses.

Question 52

On January 1, 2019, Ting Corp. acquired 75% of Won Corp. for $1,500,000. Ting uses the cost method to account for its investment in Won. On January 1, 2019, Won's retained earnings and common shares were $600,000 and $220,000, respectively.
Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $50,000 higher than its book value.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
The Financial Statements of Ting Corp. and Won Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp. } & \text { Won Corp. } \\\hline \text { Sales } & \$ 1,000,000 & \$ 600,000 \\\hline \text { Other Revenues } & \$ 600,000 & \$ 240,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 800,000 & \$ 480,000 \\\hline \text { Depreciation Expense } & \$ 40,000 & \$ 20,000 \\\hline \text { Other Expenses } & \$ 160,000 & \$ 80,000 \\\hline \text { Income Tax Expense } & \$ 240,000 & \$ 104,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 400,000 & \$ 700,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline \text { Less: Dividends } & (\$ 60,000) & \$ 76,000) \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline\end{array}$ Balance Sheets:
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp. } \\\hline \text { Cash } & \$ 339,250 & \$ 50,000 \\\hline \text { Accounts Receivable } & \$ 500,000 & \$ 500,000 \\\hline \text { Inventory } & \$ 100,000 & \$ 500,000 \\\hline \text { Investment in Won Corp. } & \$ 1,500,000 & \\\hline \begin{array}{l}\text { Investment in Won Corp. } \\\text { bonds }\end{array} & \$ 60,750 & \\\hline \text { Land } & & \$ 50,000 \\\hline \text { Equipment } & \$ 1,000,000 & \$ 450,000 \\\hline \text { Accumulated Depreciation } & (\$ 500,000) & (\$ 300,000) \\\hline \text { Total Assets } & \$ 3,000,000 & \$ 1,250,000 \\\hline \text { Current Liabilities } & \$ 1,300,000 & \$ 119,000 \\\hline \text { Bonds Payable } & & \$ 150,000 \\\hline \text { Less: Bond Discount } & & (\$ 19,000) \\\hline \text { Common Shares } & \$ 1,000,000 & \$ 220,000 \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline \text { Total Liabilities and Equity } & \$ 3,000,000 & \$ 1,250,000 \\\hline\end{array}$ Other Information:
? Won sold a tract of land to Ting at a profit of $20,000 during 2019. This land is still the property of Ting Corp.
? On January 1, 2020, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
? On January 1, 2020, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2020, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $10,000 during 2019.
? Both companies are subject to an effective tax rate of 40%.
? Both companies use straight line amortization exclusively.
? On January 1, 2020, Ting acquired half of Won's bonds for $60,000.
? The bonds carry a coupon rate of 10% and mature on January 1, 2040. The initial bond issue took place on January 1, 2020. The total discount on the issue date of the bonds was $20,000.
? Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared.
What would be the amount of consolidated patents appearing on Ting's Consolidated Statement of Financial Position as at December 31, 2020?

A) $20,000
B) $0
C) $12,000
D) $16,000

Question 53

The financial statements of Plax Inc. and Slate Corp for the year ended December 31, 2020 are shown below:
Income Statements
Retained Earnings Statements
Balance Sheets
Other Information:
 Plax acquired 75% of Slate on January 1, 2016 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2017 and 2020, respectively.
 Plax uses the cost method to account for its investment.
 Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2023. The bonds were issued at a premium. On January 1, 2020 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
 On January 1, 2020, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
 Both companies are subject to a 40% tax rate.
 Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated financial statements are prepared.
Prepare a summary of intercompany bond transactions. Be sure to show the gain or loss for each company as well as the effect on the consolidated entity.

Question 54

On January 1, 2019, Ting Corp. acquired 75% of Won Corp. for $1,500,000. Ting uses the cost method to account for its investment in Won. On January 1, 2019, Won's retained earnings and common shares were $600,000 and $220,000, respectively.
Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $50,000 higher than its book value.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
The Financial Statements of Ting Corp. and Won Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$$\begin{array} { | l | r | r | } \hline & \text { Ting Corp. } & \text { Wan Corp. } \\\hline \text { Sales } & \$ 1,000,000 & \$ 600,000 \\\hline \text { Other Revenues } & \$ 600,000 & \$ 240,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 800,000 & \$ 480,000 \\\hline \text { Depreciation Expense } & \$ 40,000 & \$ 20,000 \\\hline \text { Other Expenses } & \$ 160,000 & \$ 80,000 \\\hline \text { fncome Tax Expense } & \$ 240,000 & \$ 104,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline\end{array}$$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 400,000 & \$ 700,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline \text { Less: Dividends } & (\$ 60,000) & \$ 76,000) \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline\end{array}$ Balance Sheets:
$\begin{array}{|l|r|r|} \hline& \text { Ting Corp } & \text { Won Corp. } \\\hline \text { Cash } & \$ 339,250 & \$ 50,000 \\\hline \text { Accounts Receivable } & \$ 500,000 & \$ 500,000 \\\hline \text { Inventory } & \$ 100,000 & \$ 500,000 \\\hline \text { Investment in Won Corp. } & \$ 1,500,000 & \\\hline \begin{array}{l}\text { Investment in Won Corp. } \\\text { bonds }\end{array} & \$ 60,750 & \\\hline \text { Land } & & \$ 50,000 \\\hline \text { Equipment } & \$ 1,000,000 & \$ 450,000 \\\hline \text { Accumulated Depreciation } & (\$ 500,000) & (\$ 300,000) \\\hline \text { Total Assets } & \$ 3,000,000 & \$ 1,250,000 \\\hline \text { Current Liabilities } & \$ 1,300,000 & \$ 119,000 \\\hline \text { Bonds Payable } & & \$ 150,000 \\\hline \text { Less: Bond Discount } & & (\$ 19,000) \\\hline \text { Common Shares } & \$ 1,000,000 & \$ 220,000 \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline \text { Total Liabilities and Equity } & \$ 3,000,000 & \$ 1,250,000 \\\hline\end{array}$ Other Information:
? Won sold a tract of land to Ting at a profit of $20,000 during 2019. This land is still the property of Ting Corp.
? On January 1, 2020, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
? On January 1, 2020, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2020, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $10,000 during 2019.
? Both companies are subject to an effective tax rate of 40%.
? Both companies use straight line amortization exclusively.
? On January 1, 2020, Ting acquired half of Won's bonds for $60,000.
? The bonds carry a coupon rate of 10% and mature on January 1, 2040. The initial bond issue took place on January 1, 2020. The total discount on the issue date of the bonds was $20,000.
? Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared.
Ignoring income taxes, what is the amount of unrealized profit/(loss) remaining from the intercompany sale of equipment at December 31, 2020?

A) $16,000 loss
B) $12,000 gain
C) $12,500 gain
D) $16,000 gain

Question 55

On January 1, 2019, Ting Corp. acquired 75% of Won Corp. for $1,500,000. Ting uses the cost method to account for its investment in Won. On January 1, 2019, Won's retained earnings and common shares were $600,000 and $220,000, respectively.
Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $50,000 higher than its book value.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
The Financial Statements of Ting Corp. and Won Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp. } & \text { Won Corp. } \\\hline \text { Sales } & \$ 1,000,000 & \$ 600,000 \\\hline \text { Other Revenues } & \$ 600,000 & \$ 240,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 800,000 & \$ 480,000 \\\hline \text { Depreciation Expense } & \$ 40,000 & \$ 20,000 \\\hline \text { Other Expenses } & \$ 160,000 & \$ 80,000 \\\hline \text { Income Tax Expense } & \$ 240,000 & \$ 104,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 400,000 & \$ 700,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline \text { Less: Dividends } & (\$ 60,000) & \$ 76,000) \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline\end{array}$ Balance Sheets:
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp. } \\\hline \text { Cash } & \$ 339,250 & \$ 50,000 \\\hline \text { Accounts Receivable } & \$ 500,000 & \$ 500,000 \\\hline \text { Inventory } & \$ 100,000 & \$ 500,000 \\\hline \text { Investment in Won Corp. } & \$ 1,500,000 & \\\hline \begin{array}{l}\text { Investment in Won Corp. } \\\text { bonds }\end{array} & \$ 60,750 & \\\hline \text { Land } & & \$ 50,000 \\\hline \text { Equipment } & \$ 1,000,000 & \$ 450,000 \\\hline \text { Accumulated Depreciation } & (\$ 500,000) & (\$ 300,000) \\\hline \text { Total Assets } & \$ 3,000,000 & \$ 1,250,000 \\\hline \text { Current Liabilities } & \$ 1,300,000 & \$ 119,000 \\\hline \text { Bonds Payable } & & \$ 150,000 \\\hline \text { Less: Bond Discount } & & (\$ 19,000) \\\hline \text { Common Shares } & \$ 1,000,000 & \$ 220,000 \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline \text { Total Liabilities and Equity } & \$ 3,000,000 & \$ 1,250,000 \\\hline\end{array}$ Other Information:
? Won sold a tract of land to Ting at a profit of $20,000 during 2019. This land is still the property of Ting Corp.
? On January 1, 2020, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
? On January 1, 2020, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2020, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $10,000 during 2019.
? Both companies are subject to an effective tax rate of 40%.
? Both companies use straight line amortization exclusively.
? On January 1, 2020, Ting acquired half of Won's bonds for $60,000.
? The bonds carry a coupon rate of 10% and mature on January 1, 2040. The initial bond issue took place on January 1, 2020. The total discount on the issue date of the bonds was $20,000.
? Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared.
What is the amount of unamortized acquisition differential (excluding unimpaired goodwill) on December 31, 2020?

A) $4,000
B) $16,000
C) $12,000
D) $20,000

Question 56

The financial statements of Plax Inc. and Slate Corp for the year ended December 31, 2020 are shown below:
Income Statements
Retained Earnings Statements
Balance Sheets
Other Information:
 Plax acquired 75% of Slate on January 1, 2016 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2017 and 2020, respectively.
 Plax uses the cost method to account for its investment.
 Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2023. The bonds were issued at a premium. On January 1, 2020 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
 On January 1, 2020, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
 Both companies are subject to a 40% tax rate.
 Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated financial statements are prepared.
Prepare a detailed calculation of consolidated retained earnings as at January 1, 2020. Do not prepare a Statement of Retained Earnings for this requirement.

Question 57

On January 1, 2019, Ting Corp. acquired 75% of Won Corp. for $1,500,000. Ting uses the cost method to account for its investment in Won. On January 1, 2019, Won's retained earnings and common shares were $600,000 and $220,000, respectively.
Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $50,000 higher than its book value.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
The Financial Statements of Ting Corp. and Won Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp. } & \text { Won Corp. } \\\hline \text { Sales } & \$ 1,000,000 & \$ 600,000 \\\hline \text { Other Revenues } & \$ 600,000 & \$ 240,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 800,000 & \$ 480,000 \\\hline \text { Depreciation Expense } & \$ 40,000 & \$ 20,000 \\\hline \text { Other Expenses } & \$ 160,000 & \$ 80,000 \\\hline \text { Income Tax Expense } & \$ 240,000 & \$ 104,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 400,000 & \$ 700,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline \text { Less: Dividends } & (\$ 60,000) & \$ 76,000) \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline\end{array}$ Balance Sheets:
$\begin{array}{|l|r|r|} \hline& \text { Ting Corp } & \text { Won Corp. } \\\hline \text { Cash } & \$ 339,250 & \$ 50,000 \\\hline \text { Accounts Receivable } & \$ 500,000 & \$ 500,000 \\\hline \text { Inventory } & \$ 100,000 & \$ 500,000 \\\hline \text { Investment in Won Corp. } & \$ 1,500,000 & \\\hline \begin{array}{l}\text { Investment in Won Corp. } \\\text { bonds }\end{array} & \$ 60,750 & \\\hline \text { Land } & & \$ 50,000 \\\hline \text { Equipment } & \$ 1,000,000 & \$ 450,000 \\\hline \text { Accumulated Depreciation } & (\$ 500,000) & (\$ 300,000) \\\hline \text { Total Assets } & \$ 3,000,000 & \$ 1,250,000 \\\hline \text { Current Liabilities } & \$ 1,300,000 & \$ 119,000 \\\hline \text { Bonds Payable } & & \$ 150,000 \\\hline \text { Less: Bond Discount } & & (\$ 19,000) \\\hline \text { Common Shares } & \$ 1,000,000 & \$ 220,000 \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline \text { Total Liabilities and Equity } & \$ 3,000,000 & \$ 1,250,000 \\\hline\end{array}$ Other Information:
? Won sold a tract of land to Ting at a profit of $20,000 during 2019. This land is still the property of Ting Corp.
? On January 1, 2020, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
? On January 1, 2020, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2020, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $10,000 during 2019.
? Both companies are subject to an effective tax rate of 40%.
? Both companies use straight line amortization exclusively.
? On January 1, 2020, Ting acquired half of Won's bonds for $60,000.
? The bonds carry a coupon rate of 10% and mature on January 1, 2040. The initial bond issue took place on January 1, 2020. The total discount on the issue date of the bonds was $20,000.
? Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared.
Ignoring income taxes, what is the amount of profit/(loss) realized during 2020 from the intercompany sale of equipment?

A) $4,000 loss
B) $2,800 gain
C) $4,000 gain
D) $20,000 gain

Question 58

On January 1, 2019, Ting Corp. acquired 75% of Won Corp. for $1,500,000. Ting uses the cost method to account for its investment in Won. On January 1, 2019, Won's retained earnings and common shares were $600,000 and $220,000, respectively.
Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
? Inventory had a fair value that was $50,000 higher than its book value.
? A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
The Financial Statements of Ting Corp. and Won Corp. for the year ended December 31, 2020 are shown below:
Income Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp. } & \text { Won Corp. } \\\hline \text { Sales } & \$ 1,000,000 & \$ 600,000 \\\hline \text { Other Revenues } & \$ 600,000 & \$ 240,000 \\\hline \text { Less: Expenses } & & \\\hline \text { Cost of Goods Sold } & \$ 800,000 & \$ 480,000 \\\hline \text { Depreciation Expense } & \$ 40,000 & \$ 20,000 \\\hline \text { Other Expenses } & \$ 160,000 & \$ 80,000 \\\hline \text { Income Tax Expense } & \$ 240,000 & \$ 104,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp } \\\hline \text { Balance, January 1, 2020 } & \$ 400,000 & \$ 700,000 \\\hline \text { Net Income } & \$ 360,000 & \$ 156,000 \\\hline \text { Less: Dividends } & (\$ 60,000) & \$ 76,000) \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline\end{array}$ Balance Sheets:
$\begin{array}{|l|r|r|}\hline & \text { Ting Corp } & \text { Won Corp. } \\\hline \text { Cash } & \$ 339,250 & \$ 50,000 \\\hline \text { Accounts Receivable } & \$ 500,000 & \$ 500,000 \\\hline \text { Inventory } & \$ 100,000 & \$ 500,000 \\\hline \text { Investment in Won Corp. } & \$ 1,500,000 & \\\hline \begin{array}{l}\text { Investment in Won Corp. } \\\text { bonds }\end{array} & \$ 60,750 & \\\hline \text { Land } & & \$ 50,000 \\\hline \text { Equipment } & \$ 1,000,000 & \$ 450,000 \\\hline \text { Accumulated Depreciation } & (\$ 500,000) & (\$ 300,000) \\\hline \text { Total Assets } & \$ 3,000,000 & \$ 1,250,000 \\\hline \text { Current Liabilities } & \$ 1,300,000 & \$ 119,000 \\\hline \text { Bonds Payable } & & \$ 150,000 \\\hline \text { Less: Bond Discount } & & (\$ 19,000) \\\hline \text { Common Shares } & \$ 1,000,000 & \$ 220,000 \\\hline \text { Retained Earnings } & \$ 700,000 & \$ 780,000 \\\hline \text { Total Liabilities and Equity } & \$ 3,000,000 & \$ 1,250,000 \\\hline\end{array}$ Other Information:
? Won sold a tract of land to Ting at a profit of $20,000 during 2019. This land is still the property of Ting Corp.
? On January 1, 2020, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
? On January 1, 2020, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2020, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
? There was a goodwill impairment loss of $10,000 during 2019.
? Both companies are subject to an effective tax rate of 40%.
? Both companies use straight line amortization exclusively.
? On January 1, 2020, Ting acquired half of Won's bonds for $60,000.
? The bonds carry a coupon rate of 10% and mature on January 1, 2040. The initial bond issue took place on January 1, 2020. The total discount on the issue date of the bonds was $20,000.
? Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared.
What amount of sales revenue would appear on Ting's Consolidated Income Statement for the year ended December 31, 2020?

A) $1,450,000
B) $1,480,000
C) $1,570,000
D) $1,600,000

Question 59

The financial statements of Plax Inc. and Slate Corp for the year ended December 31, 2020 are shown below:
Income Statements
Retained Earnings Statements
Balance Sheets
Other Information:
 Plax acquired 75% of Slate on January 1, 2016 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2017 and 2020, respectively.
 Plax uses the cost method to account for its investment.
 Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2023. The bonds were issued at a premium. On January 1, 2020 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
 On January 1, 2020, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
 Both companies are subject to a 40% tax rate.
 Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated financial statements are prepared.
Calculate the goodwill as at December 31, 2020.

Question 60

Hot Inc. owns 60% of Cold Inc, which it purchased on January 1, 2019 for $540,000. On that date, Cold's retained earnings and common shares were valued at $100,000 and $250,000, respectively. Cold's book values approximated its fair values on that date, with the exception of the company's inventory and a patent identified on acquisition. The patent had an estimated useful life of 10 years from the date of acquisition. The inventory had a book value that was $10,000 in excess of its fair value, while the patent had a fair value of $50,000. Hot uses the equity method to account for its investment in Cold Inc. The inventory on hand on the acquisition date was sold to outside parties during the year.
Hot Inc. sold depreciable assets to Cold on January 1, 2019, at a loss of $15,000.
On January 1, 2020, Cold sold depreciable assets to Hot at a gain of $10,000. Both assets had a remaining useful life of 5 years on the date of their intercompany sale.
During 2019, Cold sold inventory to Hot in the amount of $18,000. This inventory was sold to outside parties during 2020.
During 2020, Hot sold inventory to Cold for $45,000. One third of this inventory was still in Cold's warehouse on December 31, 2020.
All sales (both internal and external) are priced to provide the seller with a mark-up of 50% above cost.
Cold's Net Income and Dividends for 2019 and 2020 are shown below.
Both companies are subject to a tax rate of 20%.
Compute the balance in Hot's Investment in Cold account as at December 31, 2020.
Investment in Cold Account

Question 61

The financial statements of Plax Inc. and Slate Corp for the year ended December 31, 2020 are shown below:
Income Statements
Retained Earnings Statements
Balance Sheets
Other Information:
 Plax acquired 75% of Slate on January 1, 2016 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2017 and 2020, respectively.
 Plax uses the cost method to account for its investment.
 Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2023. The bonds were issued at a premium. On January 1, 2020 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
 On January 1, 2020, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
 Both companies are subject to a 40% tax rate.
 Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated financial statements are prepared.
Prepare a detailed calculation of consolidated retained earnings as at December 31, 2020. Do not prepare a Statement of Retained Earnings for this requirement.

Question 62

The financial statements of Plax Inc. and Slate Corp for the year ended December 31, 2020 are shown below:
Income Statements
Retained Earnings Statements
Balance Sheets
Other Information:
 Plax acquired 75% of Slate on January 1, 2016 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2017 and 2020, respectively.
 Plax uses the cost method to account for its investment.
 Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2023. The bonds were issued at a premium. On January 1, 2020 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
 On January 1, 2020, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
 Both companies are subject to a 40% tax rate.
 Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated financial statements are prepared.
Prepare Plax's Consolidated Statement of Financial Position as at December 31, 2020.

Question 63

The financial statements of Plax Inc. and Slate Corp for the year ended December 31, 2020 are shown below:
Income Statements
Retained Earnings Statements
Balance Sheets
Other Information:
 Plax acquired 75% of Slate on January 1, 2016 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2017 and 2020, respectively.
 Plax uses the cost method to account for its investment.
 Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2023. The bonds were issued at a premium. On January 1, 2020 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
 On January 1, 2020, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
 Both companies are subject to a 40% tax rate.
 Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated financial statements are prepared.
Prepare a Statement of Consolidated Retained Earnings for the year ended December 31, 2020 for Plax Inc.

Question 64

The financial statements of Plax Inc. and Slate Corp for the year ended December 31, 2020 are shown below:
Income Statements
Retained Earnings Statements
Balance Sheets
Other Information:
 Plax acquired 75% of Slate on January 1, 2016 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2017 and 2020, respectively.
 Plax uses the cost method to account for its investment.
 Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2023. The bonds were issued at a premium. On January 1, 2020 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
 On January 1, 2020, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
 Both companies are subject to a 40% tax rate.
 Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated financial statements are prepared.
Assuming that Plax uses the equity method, prepare a computation showing the balance in Plax's investment in Slate account on December 31, 2020.

Question 65

The financial statements of Plax Inc. and Slate Corp for the year ended December 31, 2020 are shown below:
Income Statements
Retained Earnings Statements
Balance Sheets
Other Information:
 Plax acquired 75% of Slate on January 1, 2016 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2017 and 2020, respectively.
 Plax uses the cost method to account for its investment.
 Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2023. The bonds were issued at a premium. On January 1, 2020 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
 On January 1, 2020, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
 Both companies are subject to a 40% tax rate.
 Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated financial statements are prepared.
Prepare a Calculation of Non-Controlling Interest as at December 31, 2020 for Plax Inc.