Question 1

When a subsidiary is acquired sometime after the first day of the fiscal year,which of the following statements is true?

Accepted Answer

A)  Income from subsidiary is not recognized until there is an entire year of consolidated operations
B)  Income from subsidiary is recognized from date of acquisition to year-end
C)  Excess cost over acquisition value is recognized at the beginning of the fiscal year
D)  No goodwill can be recognized
E)  Income from subsidiary is recognized for the entire year B

Question 2

What is the total amount of goodwill recognized per SFAS 141 (R)using the acquisition method?

Accepted Answer

A)  $150,000
B)  $250,000
C)  $0
D)  $120,000
E)  $170,000 A

Question 3

In consolidation at December 31,2009,what adjustment is necessary for Hogan's Equipment account?

Accepted Answer

A)  $3,000 increase
B)  $3,000 decrease
C)  $2,700 increase
D)  $2,700 decrease
E)  No change A

Question 4

The impact of the consolidation on consolidated net income for 2009 is determined to be

Accepted Answer

A)  $31,000
B)  $33,000
C)  $55,000
D)  $60,000
E)  $39,000

Question 5

When a parent uses the equity method throughout the year to account for investment in a subsidiary,which of the following statements is false before making adjustments on the consolidated worksheet?

Accepted Answer

A)  Parent company net income equals controlling interest in consolidated net income
B)  Parent company retained earnings equals consolidated retained earnings
C)  Parent company total assets equals consolidated total assets
D)  Parent company dividends equals consolidated dividends
E)  Goodwill may need to be recorded

Question 6

For each of the following situations,select the best answer concerning consolidating financial information where there is a non-controlling interest in the subsidiary:
(A)Acquisition method.
(B)Purchase method.
(C)Acquisition method and Purchase method.
_____ 1.Reflects the cost principle,but also assigns a value to the non-controlling interest shares at book value.
_____ 2.Recognizes the non-controlling interest has a value to be reported,but since it is not a part of the exchange transaction,no new basis of accountability arises.
_____ 3.Recognizes that management effectively controls 100% of the net assets acquired and is thus accountable for the entire fair value.
_____ 4.Requires the computation of an implied value.
_____ 5.Recognizes the full fair value of partially owned acquisitions.
_____ 6.Non-controlling interest is reported at an implied fair value.
_____ 7.Non-controlling interest is reported at book value.
_____ 8.Required by SFAS 141(R)Business Combinations.

Accepted Answer

The answer of For each of the following situations,select the...

Question 7

When using the acquisition method for accounting for business combinations,all of the following statements are false regarding the sale of subsidiary shares except:

Accepted Answer

A)  If control ceases to exist and significant influence ceases to exist,the difference between selling price and acquisition value is recorded as a realized gain or loss
B)  If control ceases to exist and significant influence ceases to exist,the difference between selling price and acquisition value is recorded as an unrealized gain or loss
C)  If control ceases to exist and significant influence ceases to exist,the difference between selling price and carrying value is recorded as a realized gain or loss
D)  If control ceases to exist and significant influence ceases to exist,the difference between selling price and carrying value is recorded as an unrealized gain or loss
E)  If control ceases to exist and significant influence ceases to exist,the difference between selling price and carrying value is recorded as an adjustment to retained earnings

Question 8

What is consolidated net income that is attributable to Royce's controlling interest?

Accepted Answer

A)  $686,000
B)  $560,000
C)  $644,000
D)  $635,600
E)  $691,600

Question 9

What amount of goodwill should be attributed to Perch according to the acquisition method per SFAS 141(R)?

Accepted Answer

A)  $150,000
B)  $250,000
C)  $0
D)  $120,000
E)  $170,000

Question 10

In consolidation at January 1,2009,what adjustment is necessary for Hogan's Buildings account?

Accepted Answer

A)  $2,000 increase
B)  $2,000 decrease
C)  $1,800 increase
D)  $1,800 decrease
E)  No change

Question 11

In consolidation at December 31,2009,what adjustment is necessary for Hogan's Buildings account?

Accepted Answer

A)  $1,620 increase
B)  $1,620 decrease
C)  $1,800 increase
D)  $1,800 decrease
E)  No change

Question 12

Under the purchase methodof accounting for business combinations,which of the following statements is true about consolidated financial statements?

Accepted Answer

A)  The accounting emphasis in preparing consolidated financial statements is placed on the business combination being formed
B)  Holding control of a subsidiary provides the parent with an indivisible interest in that company
C)  The objective of consolidated financial statements is to serve as a report to the stockholders of the parent company
D)  The purchase method is a hybrid of the acquisition method and the pooling of interests method
E)  The purchase method is no longer allowed for combinations occurring according to SFAS 141(R)

Question 13

Under the purchase method of accounting for business combinations,which of the following statements is false about consolidated financial statements?

Accepted Answer

A)  Holding control of a subsidiary provides the parent with an indivisible interest in that company
B)  Consolidated financial statements are produced primarily for the benefit of the parent company stockholders
C)  The non-controlling interest is calculated at book value amounts
D)  A portion of the subsidiary net assets is valued at book value and a portion is valued at fair value
E)  All of the subsidiary net assets are valued at fair value

Question 14

When consolidating a subsidiary that was acquired on a date other than the first day of the fiscal year,which of the following statements is true in the presentation of consolidated financial statements?

Accepted Answer

A)  Purchased pre-acquisition earnings are deducted from combined revenues and expenses
B)  Purchased pre-acquisition earnings are added to combined revenues and expenses
C)  Purchased pre-acquisition earnings are deducted from the beginning consolidated stockholders' equity
D)  Purchased pre-acquisition earnings are added to the beginning consolidated stockholders' equity
E)  Purchased pre-acquisition earnings are ignored on the consolidated income statement

Question 15

What is the dollar amount of non-controlling interest which should appear on a balance sheet prepared immediately after consolidation according to the purchase method according to SFAS 141?

Accepted Answer

A)  $350,000
B)  $300,000
C)  $400,000
D)  $250,000
E)  $0

Question 16

Kordel Inc.holds 75% of the outstanding common stock of Raxston Corp.Raxston currently owes Kordel $500,000 for inventory acquired over the past few months.In preparing consolidated financial statements,what amount of this debt should be eliminated?

Accepted Answer

A)  $375,000
B)  $125,000
C)  $300,000
D)  $500,000
E)  $0

Question 17

In consolidation at December 31,2010,what adjustment is necessary for Hogan's Buildings account?

Accepted Answer

A)  $1,440 increase
B)  $1,440 decrease
C)  $1,600 increase
D)  $1,600 decrease
E)  No change

Question 18

What amount should have been reported for the land on a consolidated balance sheet,assuming the investment was obtained prior to SFAS 141(R)and the purchase method,parent company concept,was used?

Accepted Answer

A)  $70,000
B)  $75,000
C)  $85,000
D)  $92,500
E)  $100,000

Question 19

What amount of goodwill should be attributed to the non-controlling interest according to the acquisition method per SFAS 141(R)?

Accepted Answer

A)  $0
B)  $20,000
C)  $30,000
D)  $100,000
E)  $120,000

Question 20

In consolidation at December 31,2010,what adjustment is necessary for Hogan's Land account?

Accepted Answer

A)  $0
B)  $7,000 increase
C)  $6,300 increase
D)  $6,300 decrease
E)  $7,000 decrease

Exam 4: Consolidated Financial Statements and Outside Ownership