Question 1

Prince Company acquires Duchess, Inc.on January 1, 2016.At the date of acquisition, Duchess has long-term debt with a fair value of $1,500,000 and a carrying amount of $1,200,000. With respect to long-term debt consolidation worksheet adjustments in periods following the acquisition, which of the following is correct:

Accepted Answer

A)  Debit Interest Expense and Credit Long-Term Debt Expense. 
B)  Prince must recognize an increase in interest expense if the amount is material. 
C)  Do not adjust the value of the debt because Prince is not obligated to repay the debt. 
D)  Credit Long-Term Debt and Debit Interest Expense on the balance sheet of Duchess 
E)  Debit Long-Term Debt and Credit Interest Expense

Question 2

If Watkins pays $300,000 in cash for Glen, at what amount would the subsidiary's Building be represented in a January 2, 2017 consolidation?

Accepted Answer

A)  $200,000. 
B)  $225,000. 
C)  $273,000. 
D)  $279,000. 
E)  $300,000.

Question 3

Red Co.acquired 100% of Green, Inc.on January 1, 2017.On that date, Green had land with a book value of $42,000 and a fair value of $52,000.Also, on the date of acquisition, Green had a building with a book value of $200,000 and a fair value of $390,000.Green had equipment with a book value of $350,000 and a fair value of $280,000.The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life.How much total expense will be in the consolidated financial statements for the year ended December 31, 2017 related to the acquisition allocations of Green?

Accepted Answer

A)  $43,000. 
B)  $33,000. 
C)  $ 5,000. 
D)  $15,000. 
E)  $0.

Question 4

What was consolidated net income for the year ended December 31, 2018?

Accepted Answer

The answer of What was consolidated net income for the...

Question 5

Jansen Inc.acquired all of the outstanding common stock of Merriam Co.on January 1, 2017, for $257,000.Annual amortization of $19,000 resulted from this acquisition.Jansen reported net income of $70,000 in 2017 and $50,000 in 2018 and paid $22,000 in dividends each year.Merriam reported net income of $40,000 in 2017 and $47,000 in 2018 and paid $10,000 in dividends each year.What is the Investment in Merriam Co.balance on Jansen's books as of December 31, 2018, if the equity method has been applied?

Accepted Answer

A)  $286,000. 
B)  $295,000. 
C)  $276,000. 
D)  $344,000. 
E)  $324,000.

Question 6

Which one of the following accounts would not appear in the consolidated financial statements at the end of the first fiscal period of the combination?

Accepted Answer

A)  Goodwill. 
B)  Equipment. 
C)  Investment in Subsidiary. 
D)  Common Stock. 
E)  Additional Paid-In Capital.

Question 7

All of the following are acceptable methods to account for a majority-owned investment in subsidiary except

Accepted Answer

A)  The equity method. 
B)  The initial value method. 
C)  The partial equity method. 
D)  The fair-value method. 
E)  Book value method.

Question 8

In Cale's accounting records, what amount would appear on December 31, 2017 for equity in subsidiary earnings?

Accepted Answer

A)  $77,000. 
B)  $79,000. 
C)  $125,000. 
D)  $127,000. 
E)  $81,800.

Question 9

Compute the amount of Hurley's long-term liabilities that would be reported in a December 31, 2017, consolidated balance sheet.

Accepted Answer

A)  $1,800. 
B)  $1,700. 
C)  $1,725. 
D)  $1,675. 
E)  $3,500.

Question 10

Dutch Co.has loaned $90,000 to its subsidiary, Hans Corp., which retains separate incorporation.How would this loan be treated on a consolidated balance sheet?

Accepted Answer

The answer of Dutch Co.has loaned $90,000 to its subsidiary,...

Question 11

Compute the amount of Hurley's buildings that would be reported in a December 31, 2018, consolidated balance sheet.

Accepted Answer

A)  $1,620. 
B)  $1,380. 
C)  $1,320. 
D)  $1,080. 
E)  $1,500.

Question 12

How much difference would there have been in Franel's income with regard to the effect of the investment, between using the equity method or using the partial equity method of internal recordkeeping?

Accepted Answer

A)  $170,000. 
B)  $354,000. 
C)  $164,000. 
D)  $ 6,000. 
E)  $174,000.

Question 13

If the parent's net income reflected use of the partial equity method, what were the consolidated retained earnings on December 31, 2018?

Accepted Answer

The answer of If the parent's net income reflected use...

Question 14

Assume the initial value method is applied.How much equity income will Kaye report on its internal accounting records as a result of Fiore's operations?

Accepted Answer

A)  $400 
B)  $300 
C)  $380 
D)  $100 
E)  $210

Question 15

When consolidating parent and subsidiary financial statements, which of the following statements is true?

Accepted Answer

A)  Goodwill is never recognized. 
B)  Goodwill required is amortized over 20 years. 
C)  Goodwill may be recorded on the parent company's books. 
D)  The value of any goodwill should be tested annually for impairment in value. 
E)  Goodwill should be expensed in the year of acquisition.

Question 16

How is the fair value allocation of an intangible asset allocated to expense when the asset has no legal, regulatory, contractual, competitive, economic, or other factors that limit its life?

Accepted Answer

A)  Equally over 20 years. 
B)  Equally over 40 years. 
C)  Equally over 20 years with an annual impairment review. 
D)  No amortization, but annually reviewed for impairment and adjusted accordingly. 
E)  No amortization over an indefinite period time.

Question 17

Avery Company acquires Billings Company in a combination accounted for as an acquisition and adopts the equity method to account for Investment in Billings.At the end of four years, the Investment in Billings account on Avery's books is $198,984.What items constitute this balance?

Accepted Answer

The answer of Avery Company acquires Billings Company in a...

Question 18

How much difference would there have been in Franel's income with regard to the effect of the investment, between using the equity method or using the initial value method of internal recordkeeping?

Accepted Answer

A)  $190,000. 
B)  $360,000. 
C)  $164,000. 
D)  $354,000. 
E)  $150,000.

Question 19

If Watkins pays $450,000 in cash for Glen, what amount would be represented as the subsidiary's Building in a consolidation at December 31, 2019, assuming the book value of the building at that date is still $200,000?

Accepted Answer

A)  $200,000. 
B)  $285,000. 
C)  $290,000. 
D)  $295,000. 
E)  $300,000.

Question 20

Which of Pritchett's reporting units require both steps to test for goodwill impairment?

Accepted Answer

The answer of Which of Pritchett's reporting units require both...

Exam 3: A: Consolidations - Subsequent to the Date of Acquisition