Deck 5: Consolidated Financial Statements Intra-Entity Asset Transactions

Question 1

Norek Corp.owned 70% of the voting common stock of Thelma Co.On January 2,2017,Thelma sold a parcel of land to Norek.The land had a book value of $32,000 and was sold to Norek for $45,000.Thelma's reported net income for 2017 was $119,000.Assuming there are no excess amortizations associated with the consolidation,and no other intra-entity asset transfers,what is net income attributable to the noncontrolling interest?

A)$35,700.
B)$31,800.
C)$39,600.
D)$22,200.
E)$26,100.

Answer 1

$31,800.

Question 2

Bauerly Co.owned 70% of the voting common stock of Devin Co.During 2017,Devin made frequent sales of inventory to Bauerly.There was deferred intra-entity gross profit of $40,000 in the beginning inventory and $25,000 of intra-entity gross profit at the end of the year.Devin reported net income of $137,000 for 2017.Bauerly decided to use the equity method to account for the investment.Assuming there are no excess amortizations associated with the consolidation,and no other intra-entity asset transfers,what is the net income attributable to the noncontrolling interest for 2017?

A)$41,100.
B)$33,600.
C)$21,600.
D)$45,600.
E)$36,600.

Answer 2

$45,600.

Question 3

Prince Co.owned 80% of Kile Corp.'s common stock.During October 2018,Kile sold merchandise to Prince for $140,000.At December 31,2018,50% of this merchandise remained in Prince's inventory.For 2018,gross profit percentages were 30% of sales for Prince and 40% of sales for Kile.The amount of intra-entity gross profit remaining in ending inventory at December 31,2018 that should be eliminated in the consolidation process is:

A)$28,000.
B)$56,000.
C)$22,400.
D)$21,000.
E)$42,000.

Answer 3

$28,000.

Question 4

Gentry Inc.acquired 100% of Gaspard Farms on January 5,2017.During 2017,Gentry sold Gaspard Farms $625,000 of goods,which had cost $425,000.Gaspard Farms still owned 12% of the goods at the end of the year.In 2018,Gentry sold goods with a cost of $800,000 to Gaspard Farms for $1,000,000,and Gaspard Farms still owned 10% of the goods at year-end.For 2018,the cost of goods sold totaled $5,400,000 for Gentry,and $1,200,000 for Gaspard Farms.What was consolidated cost of goods sold for 2018?

A)$6,600,000.
B)$6,604,000.
C)$5,620,000.
D)$5,596,000.
E)$5,625,000.

Question 5

On November 8,2018,Power Corp.sold land to Wood Co. ,its wholly owned subsidiary.The land cost $61,500 and was sold to Wood for $89,000.For consolidated financial statement reporting purposes,when must the gain on the sale of the land be recognized?

A)Proportionately over a designated period of years.
B)When Wood Co.sells the land to a third party.
C)No gain may be recognized.
D)As Wood uses the land.
E)When Wood Co.begins using the land productively.

Question 6

Gibson Corp.owned a 90% interest in Sparis Co.Sparis frequently made sales of inventory to Gibson.The sales,which include a markup over cost of 25%,were $420,000 in 2017 and $500,000 in 2018.At the end of each year,Gibson still owned 30% of the goods.Net income for Sparis was $912,000 during 2018.Assuming there are no excess amortizations associated with the consolidation,and no other intra-entity asset transfers,what was the net income attributable to the noncontrolling interest for 2018?

A)$84,300.
B)$85,680.
C)$90,720.
D)$91,680.
E)$96,720.

Question 7

On January 1,2018,Payton Co.sold equipment to its subsidiary,Starker Corp. ,for $115,000.The equipment had cost $125,000,and the balance in accumulated depreciation was $45,000.The equipment had an estimated remaining useful life of eight years and $0 salvage value.Both companies use straight-line depreciation.On their separate 2018 income statements,Payton and Starker reported depreciation expense of $84,000 and $60,000,respectively.The amount of depreciation expense on the consolidated income statement for 2018 would have been:

A)$144,000.
B)$148,375.
C)$109,000.
D)$134,000.
E)$139,625.

Question 8

REFERENCE: 05-03
Pot Co.holds 90% of the common stock of Skillet Co.During 2018,Pot reported sales of $1,120,000 and cost of goods sold of $840,000.For this same period,Skillet had sales of $420,000 and cost of goods sold of $252,000.

-Included in the amounts for Pot's sales were Pot's sales of merchandise to Skillet for $140,000.There were no intra-entity transfers from Skillet to Pot.Intra-entity transfers had the same markup as sales to outsiders.Skillet still held 40% of the intra-entity gross profit remaining in ending inventory at the end of 2018.What are consolidated sales and cost of goods sold,respectively for 2018?

A)$1,400,000 and $ 952,000.
B)$1,400,000 and $ 966,000.
C)$1,540,000 and $1,078,000.
D)$1,400,000 and $1,022,000.
E)$1,540,000 and $1,092,000.

Question 9

Yukon Co.acquired 75% percent of the voting common stock of Ontario Corp.on January 1,2018.During the year,Yukon made sales of inventory to Ontario.The inventory cost Yukon $260,000 and was sold to Ontario for $390,000.Ontario held $60,000 of the goods in its inventory at the end of the year.The amount of intra-entity gross profit for which recognition is deferred,and should therefore be eliminated in the consolidation process at the end of 2018,is:

A)$15,000.
B)$20,000.
C)$32,500.
D)$30,000.
E)$110,000.

Question 10

On January 1,2018,Race Corp.acquired 80% of the voting common stock of Gallow Inc.During the year,Race sold to Gallow for $450,000 goods that cost $330,000.At year-end,Gallow owned 15% of the goods transferred.Gallow reported net income of $204,000,and Race's net income was $806,000.Race decided to use the equity method to account for this investment.Assuming there are no excess amortizations associated with the consolidation,and no other intra-entity asset transfers,what was the net income attributable to the noncontrolling interest?

A)$ 3,600.
B)$22,800.
C)$30,900.
D)$32,900.
E)$40,800.

Question 11

REFERENCE: 05-03
Pot Co.holds 90% of the common stock of Skillet Co.During 2018,Pot reported sales of $1,120,000 and cost of goods sold of $840,000.For this same period,Skillet had sales of $420,000 and cost of goods sold of $252,000.

-Included in the amounts for Skillet's sales were intra-entity gross profits related to Skillet's intra-entity transfer of merchandise to Pot for $140,000.There were no intra-entity transfers from Pot to Skillet.Intra-entity transfers had the same markup as sales to outsiders.Pot still had 40% of the intra-entity gross profit remaining in ending inventory at the end of 2018.What are consolidated sales and cost of goods sold for 2018?

A)$1,400,000 and $ 952,000.
B)$1,400,000 and $ 966,000.
C)$1,540,000 and $1,078,000.
D)$1,400,000 and $ 974,400.
E)$1,540,000 and $1,092,000.

Question 12

Chain Co.owned all of the voting common stock of Shannon Corp.The corporations' balance sheets dated December 31,2017,include the following balances for land: for Chain--$416,000,and for Shannon--$256,000.On the original date of acquisition,the book value of Shannon's land was equal to its fair value.On April 4,2018,Chain sold to Shannon a parcel of land with a book value of $65,000.The selling price was $83,000.There were no other transfers,which affected the companies' land accounts during 2017.What is the consolidated balance for land on the 2018 balance sheet?

A)$672,000.
B)$690,000.
C)$755,000.
D)$737,000.
E)$654,000.

Question 13

REFERENCE: 05-01
Edgar Co.acquired 60% of Stendall Co.on January 1,2018.During 2018,Edgar made several sales of inventory to Stendall.The cost and sales price of the goods were $140,000 and $200,000,respectively.Stendall still owned one-fourth of the goods at the end of 2018.Consolidated cost of goods sold for 2018 was $2,140,000 due to a consolidating adjustment for intra-entity transfers less intra-entity gross profit in Stendall's ending inventory.

-How would consolidated cost of goods sold have differed if the inventory transfers had been for the same amount and cost,but from Stendall to Edgar?

A)Consolidated cost of goods sold would have remained $2,140,000.
B)Consolidated cost of goods sold would have been more than $2,140,000 because of the controlling interest in the subsidiary.
C)Consolidated cost of goods sold would have been less than $2,140,000 because of the noncontrolling interest in the subsidiary.
D)Consolidated cost of goods sold would have been more than $2,140,000 because of the noncontrolling interest in the subsidiary.
E)The effect on consolidated cost of goods sold cannot be predicted from the information provided.

Question 14

REFERENCE: 05-02
Clemente Co.owned all of the voting common stock of Snider Co.On January 2,2017,Clemente sold equipment to Snider for $125,000.The equipment cost Clemente $140,000.At the time of the transfer,the balance in accumulated depreciation was $40,000.The equipment had a remaining useful life of five years and a $0 salvage value.Both entities use the straight-line method of depreciation.

-At what amount should the equipment (net of depreciation)be included in the consolidated balance sheet dated December 31,2017?

A)$105,000.
B)$100,000.
C)$ 95,000.
D)$ 80,000.
E)$ 85,000.

Question 15

During 2017,Von Co.sold inventory to its wholly-owned subsidiary,Lord Co.The inventory cost $30,000 and was sold to Lord for $44,000.For consolidation reporting purposes,when is the $14,000 intra-entity gross profit recognized?

A)When goods are transferred to a third party by Lord.
B)When Lord pays Von for the goods.
C)When Von sold the goods to Lord.
D)When Lord receives the goods.
E)No gain can be recognized since the transfer was between related parties.

Question 16

REFERENCE: 05-02
Clemente Co.owned all of the voting common stock of Snider Co.On January 2,2017,Clemente sold equipment to Snider for $125,000.The equipment cost Clemente $140,000.At the time of the transfer,the balance in accumulated depreciation was $40,000.The equipment had a remaining useful life of five years and a $0 salvage value.Both entities use the straight-line method of depreciation.

-At what amount should the equipment (net of depreciation)be included in the consolidated balance sheet dated December 31,2018?

A)$110,000.
B)$105,000.
C)$100,000.
D)$ 90,000.
E)$ 60,000.

Question 17

X-Beams Inc.owned 70% of the voting common stock of Kent Corp.During 2018,Kent made several sales of inventory to X-Beams.The total selling price was $180,000 and the cost was $100,000.At the end of the year,20% of the goods were still in X-Beams' inventory.Kent's reported net income was $300,000.Assuming there are no excess amortizations associated with the consolidation,and no other intra-entity asset transfers,what was the net income attributable to the noncontrolling interest in Kent?

A)$90,000.
B)$85,200.
C)$54,000.
D)$94,800.
E)$86,640.

Question 18

Webb Co.acquired 100% of Rand Inc.on January 5,2018.During 2018,Webb sold goods to Rand for $2,400,000 that cost Webb $1,800,000.Rand still owned 40% of the goods at the end of the year.Cost of goods sold was $10,800,000 for Webb and $6,400,000 for Rand.What was consolidated cost of goods sold?

A)$17,200,000.
B)$15,040,000.
C)$14,800,000.
D)$15,400,000.
E)$14,560,000.

Question 19

REFERENCE: 05-01
Edgar Co.acquired 60% of Stendall Co.on January 1,2018.During 2018,Edgar made several sales of inventory to Stendall.The cost and sales price of the goods were $140,000 and $200,000,respectively.Stendall still owned one-fourth of the goods at the end of 2018.Consolidated cost of goods sold for 2018 was $2,140,000 due to a consolidating adjustment for intra-entity transfers less intra-entity gross profit in Stendall's ending inventory.

-How would net income attributable to the noncontrolling interest be different if the transfers had been for the same amount and cost,but from Stendall to Edgar?

A)Net income attributable to the noncontrolling interest would have decreased by $6,000.
B)Net income attributable to the noncontrolling interest would have increased by $24,000.
C)Net income attributable to the noncontrolling interest would have increased by $20,000.
D)Net income attributable to the noncontrolling interest would have decreased by $18,000.
E)Net income attributable to the noncontrolling interest would have decreased by $56,000.

Question 20

Justings Co.owned 80% of Evana Corp.During 2018,Justings sold to Evana land with a book value of $48,000.The selling price was $70,000.For purposes of the December 31,2018 consolidated financial statements,at what amount should the land be reported?

A)$17,600.
B)$22,000.
C)$48,000.
D)$56,000.
E)$70,000.

Question 21

REFERENCE: 05-05
Strickland Company sells inventory to its parent,Carter Company,at a profit during 2017.Carter sells one-third of the inventory in 2017.
In the consolidation worksheet for 2018,assuming Carter uses the initial value method of accounting for its investment in Strickland,which of the following accounts would be credited to defer recognition of intra-entity gross profit with regard to the 2017 intra-entity transfers?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment in Strickland Company.
E)Sales.

Question 22

REFERENCE: 05-06
Walsh Company sells inventory to its subsidiary,Fisher Company,at a profit during 2017.With respect to one-third of the inventory sold to Fisher,Walsh accounts for it using the equity method of accounting..
In the consolidation worksheet for 2017,which of the following accounts would be credited to eliminate unrecognized intra-entity gross profit with regard to the 2017 intra-entity transfers?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment in Fisher Company.
E)Sales.

Question 23

REFERENCE: 05-04
On January 1,2018,Pride,Inc.acquired 80% of the outstanding voting common stock of Strong Corp.for $364,000.There is no active market for Strong's stock.Of this payment,$28,000 was allocated to equipment (with a five-year life)that had been undervalued on Strong's books by $35,000.Any remaining excess was attributable to goodwill,which has not been impaired.
As of December 31,2018,before preparing the consolidated worksheet,the financial statements appeared as follows:
During 2018,Pride bought inventory for $112,000 and sold it to Strong for $140,000.Only half of the inventory purchase price had been remitted to Pride by Strong at year-end.As of December 31,2018,60% of these goods remained in the company's possession.

-What is the consolidated total for inventory at December 31,2018?

A)$336,000.
B)$280,000.
C)$364,000.
D)$347,200.
E)$349,300.

Question 24

REFERENCE: 05-04
On January 1,2018,Pride,Inc.acquired 80% of the outstanding voting common stock of Strong Corp.for $364,000.There is no active market for Strong's stock.Of this payment,$28,000 was allocated to equipment (with a five-year life)that had been undervalued on Strong's books by $35,000.Any remaining excess was attributable to goodwill,which has not been impaired.
As of December 31,2018,before preparing the consolidated worksheet,the financial statements appeared as follows:
During 2018,Pride bought inventory for $112,000 and sold it to Strong for $140,000.Only half of the inventory purchase price had been remitted to Pride by Strong at year-end.As of December 31,2018,60% of these goods remained in the company's possession.

-What is the consolidated total of noncontrolling interest appearing in the balance sheet?

A)$100,800.
B)$ 97,440.
C)$ 93,800.
D)$120,400.
E)$117,040.

Question 25

REFERENCE: 05-05
Strickland Company sells inventory to its parent,Carter Company,at a profit during 2017.Carter sells one-third of the inventory in 2017.
In the consolidation worksheet for 2017,which of the following accounts would be debited to eliminate unrecognized intra-entity gross profit with regard to the 2017 intra-entity transfers?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment in Strickland Company.
E)Sales.

Question 26

REFERENCE: 05-04
On January 1,2018,Pride,Inc.acquired 80% of the outstanding voting common stock of Strong Corp.for $364,000.There is no active market for Strong's stock.Of this payment,$28,000 was allocated to equipment (with a five-year life)that had been undervalued on Strong's books by $35,000.Any remaining excess was attributable to goodwill,which has not been impaired.
As of December 31,2018,before preparing the consolidated worksheet,the financial statements appeared as follows:
During 2018,Pride bought inventory for $112,000 and sold it to Strong for $140,000.Only half of the inventory purchase price had been remitted to Pride by Strong at year-end.As of December 31,2018,60% of these goods remained in the company's possession.

-What is the total of consolidated revenues?

A)$700,000.
B)$644,000.
C)$588,000.
D)$560,000.
E)$840,000.

Question 27

REFERENCE: 05-05
Strickland Company sells inventory to its parent,Carter Company,at a profit during 2017.Carter sells one-third of the inventory in 2017.
In the consolidation worksheet for 2017,which of the following accounts would be debited to eliminate the intra-entity transfer of inventory?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment in Strickland Company.
E)Sales.

Question 28

REFERENCE: 05-05
Strickland Company sells inventory to its parent,Carter Company,at a profit during 2017.Carter sells one-third of the inventory in 2017.
In the consolidation worksheet for 2017,which of the following accounts would be credited to defer unrecognized intra-entity gross profit with regard to the 2017 intra-entity transfers?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment in Strickland Company.
E)Sales.

Question 29

REFERENCE: 05-03
Pot Co.holds 90% of the common stock of Skillet Co.During 2018,Pot reported sales of $1,120,000 and cost of goods sold of $840,000.For this same period,Skillet had sales of $420,000 and cost of goods sold of $252,000.

-Included in the amounts for Pot's sales were Pot's sales for merchandise to Skillet for $140,000.There were no sales from Skillet to Pot.Intra-entity transfers had the same markup as sales to outsiders.Skillet had resold all of the intra-entity transfers (purchases)from Pot to outside parties during 2018.What are consolidated sales and cost of goods sold for 2018?

A)$1,400,000 and $952,000.
B)$1,400,000 and $1,092,000.
C)$1,540,000 and $952,000.
D)$1,400,000 and $1,232,000.
E)$1,540,000 and $1,092,000.

Question 30

REFERENCE: 05-04
On January 1,2018,Pride,Inc.acquired 80% of the outstanding voting common stock of Strong Corp.for $364,000.There is no active market for Strong's stock.Of this payment,$28,000 was allocated to equipment (with a five-year life)that had been undervalued on Strong's books by $35,000.Any remaining excess was attributable to goodwill,which has not been impaired.
As of December 31,2018,before preparing the consolidated worksheet,the financial statements appeared as follows:
During 2018,Pride bought inventory for $112,000 and sold it to Strong for $140,000.Only half of the inventory purchase price had been remitted to Pride by Strong at year-end.As of December 31,2018,60% of these goods remained in the company's possession.

-What is the total of consolidated cost of goods sold?

A)$196,000.
B)$212,800.
C)$184,800.
D)$203,000.
E)$168,000.

Question 31

REFERENCE: 05-06
Walsh Company sells inventory to its subsidiary,Fisher Company,at a profit during 2017.With respect to one-third of the inventory sold to Fisher,Walsh accounts for it using the equity method of accounting..
In the consolidation worksheet for 2017,which of the following accounts would be debited to eliminate unrecognized intra-entity gross profit with regard to the 2017 intra-entity transfers?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment in Fisher Company.
E)Sales.

Question 32

REFERENCE: 05-04
On January 1,2018,Pride,Inc.acquired 80% of the outstanding voting common stock of Strong Corp.for $364,000.There is no active market for Strong's stock.Of this payment,$28,000 was allocated to equipment (with a five-year life)that had been undervalued on Strong's books by $35,000.Any remaining excess was attributable to goodwill,which has not been impaired.
As of December 31,2018,before preparing the consolidated worksheet,the financial statements appeared as follows:
During 2018,Pride bought inventory for $112,000 and sold it to Strong for $140,000.Only half of the inventory purchase price had been remitted to Pride by Strong at year-end.As of December 31,2018,60% of these goods remained in the company's possession.

-What is the total of consolidated operating expenses?

A)$42,000.
B)$47,600.
C)$53,200.
D)$49,000.
E)$35,000.

Question 33

REFERENCE: 05-05
Strickland Company sells inventory to its parent,Carter Company,at a profit during 2017.Carter sells one-third of the inventory in 2017.
In the consolidation worksheet for 2018,assuming Carter uses the initial value method of accounting for its investment in Strickland,which of the following accounts would be debited to defer unrecognized intra-entity gross profit with regard to the 2017 intra-entity transfers?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment in Strickland Company.
E)Sales.

Question 34

REFERENCE: 05-06
Walsh Company sells inventory to its subsidiary,Fisher Company,at a profit during 2017.With respect to one-third of the inventory sold to Fisher,Walsh accounts for it using the equity method of accounting..
In the consolidation worksheet for 2017,which of the following accounts would be credited to eliminate the intra-entity transfer of inventory?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment in Fisher Company.
E)Sales.

Question 35

Dalton Corp.owned 70% of the outstanding common stock of Shrugs Inc.On January 1,2016,Dalton acquired a building with a ten-year life for $420,000.No salvage value was anticipated and the building was to be depreciated on the straight-line basis.On January 1,2018,Dalton sold this building to Shrugs for $392,000.At that time,the building had a remaining life of eight years but still no expected salvage value.For consolidation purposes,what is the Excess Depreciation (ED entry)for this building for 2018?

A)Accumulated Depreciation 7,000 Depreciation expense 7,000
B)Accumulated Depreciation 4,900 Depreciation Expense 4,900
C)Depreciation Expense 7,000 Accumulated Depreciation 7,000
D)Depreciation Expense 4,900 Accumulated Depreciation 4,900
E)Accumulated Depreciation 42,000 Depreciation Expense 42,000

Question 36

REFERENCE: 05-06
Walsh Company sells inventory to its subsidiary,Fisher Company,at a profit during 2017.With respect to one-third of the inventory sold to Fisher,Walsh accounts for it using the equity method of accounting..
In the consolidation worksheet for 2018,which of the following accounts would be debited to eliminate unrecognized intra-entity gross profit with regard to the 2017 intra-entity transfers?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment in Fisher Company.
E)Sales.

Question 37

REFERENCE: 05-06
Walsh Company sells inventory to its subsidiary,Fisher Company,at a profit during 2017.With respect to one-third of the inventory sold to Fisher,Walsh accounts for it using the equity method of accounting..
In the consolidation worksheet for 2017,which of the following accounts would be debited to eliminate the intra-entity transfer of inventory?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment in Fisher Company.
E)Sales.

Question 38

REFERENCE: 05-06
Walsh Company sells inventory to its subsidiary,Fisher Company,at a profit during 2017.With respect to one-third of the inventory sold to Fisher,Walsh accounts for it using the equity method of accounting..
In the consolidation worksheet for 2018,which of the following accounts would be credited to eliminate unrecognized intra-entity gross profit with regard to the 2017 intra-entity transfers?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment in Fisher Company.
E)Sales.

Question 39

REFERENCE: 05-05
Strickland Company sells inventory to its parent,Carter Company,at a profit during 2017.Carter sells one-third of the inventory in 2017.
In the consolidation worksheet for 2017,which of the following accounts would be credited to eliminate the intra-entity transfer of inventory?

A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment in Strickland Company.
E)Sales.

Question 40

REFERENCE: 05-04
On January 1,2018,Pride,Inc.acquired 80% of the outstanding voting common stock of Strong Corp.for $364,000.There is no active market for Strong's stock.Of this payment,$28,000 was allocated to equipment (with a five-year life)that had been undervalued on Strong's books by $35,000.Any remaining excess was attributable to goodwill,which has not been impaired.
As of December 31,2018,before preparing the consolidated worksheet,the financial statements appeared as follows:
During 2018,Pride bought inventory for $112,000 and sold it to Strong for $140,000.Only half of the inventory purchase price had been remitted to Pride by Strong at year-end.As of December 31,2018,60% of these goods remained in the company's possession.

-What is the consolidated total for equipment (net)at December 31,2018?

A)$ 952,000.
B)$1,058,400.
C)$1,069,600.
D)$1,064,000.
E)$1,066,800.

Question 41

REFERENCE: 05-07
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,transfers inventory to Posito at a 25% gross profit rate.The following data are available pertaining specifically to Posito's intra-entity purchases from Gargiulo.Gargiulo was acquired on January 1,2017.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Purchases by Posito } & \$ 8,000 & \$ 12,000 & \$ 15,000 \\\text { Ending inventory on Posito's books } & 1,200 & 4,000 & 3,000\end{array}$
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Gargiulo's net income } & \$ 70,000 & \$ 85,000 & \$ 94,000 \\\text { Dividends paid by Gargiulo } & 10,000 & 10,000 & 15,000\end{array}$


-Compute the equity in earnings of Gargiulo reported on Posito's books for 2018.

A)$76,500.
B)$77,130.
C)$75,870.
D)$75,600.
E)$75,800.

Question 42

REFERENCE: 05-07
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,transfers inventory to Posito at a 25% gross profit rate.The following data are available pertaining specifically to Posito's intra-entity purchases from Gargiulo.Gargiulo was acquired on January 1,2017.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Purchases by Posito } & \$ 8,000 & \$ 12,000 & \$ 15,000 \\\text { Ending inventory on Posito's books } & 1,200 & 4,000 & 3,000\end{array}$
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Gargiulo's net income } & \$ 70,000 & \$ 85,000 & \$ 94,000 \\\text { Dividends paid by Gargiulo } & 10,000 & 10,000 & 15,000\end{array}$


-Compute the equity in earnings of Gargiulo reported on Posito's books for 2017.

A)$63,000.
B)$62,730.
C)$63,270.
D)$70,000.
E)$62,700.

Question 43

REFERENCE: 05-07
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,transfers inventory to Posito at a 25% gross profit rate.The following data are available pertaining specifically to Posito's intra-entity purchases from Gargiulo.Gargiulo was acquired on January 1,2017.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Purchases by Posito } & \$ 8,000 & \$ 12,000 & \$ 15,000 \\\text { Ending inventory on Posito's books } & 1,200 & 4,000 & 3,000\end{array}$
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Gargiulo's net income } & \$ 70,000 & \$ 85,000 & \$ 94,000 \\\text { Dividends paid by Gargiulo } & 10,000 & 10,000 & 15,000\end{array}$


-For consolidation purposes,what amount would be debited to January 1 retained earnings for the 2019 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2018 intra-entity transfer of merchandise?

A)$3,000.
B)$2,400.
C)$1,000.
D)$ 800.
E)$ 900.

Question 44

REFERENCE: 05-07
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,transfers inventory to Posito at a 25% gross profit rate.The following data are available pertaining specifically to Posito's intra-entity purchases from Gargiulo.Gargiulo was acquired on January 1,2017.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Purchases by Posito } & \$ 8,000 & \$ 12,000 & \$ 15,000 \\\text { Ending inventory on Posito's books } & 1,200 & 4,000 & 3,000\end{array}$
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Gargiulo's net income } & \$ 70,000 & \$ 85,000 & \$ 94,000 \\\text { Dividends paid by Gargiulo } & 10,000 & 10,000 & 15,000\end{array}$


-Assuming there are no excess amortizations associated with the consolidation,and no other intra-entity asset transfers,compute the net income attributable to the noncontrolling interest of Gargiulo for 2018.

A)$8,500.
B)$8,570.
C)$8,430.
D)$8,400.
E)$7,580.

Question 45

REFERENCE: 05-07
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,transfers inventory to Posito at a 25% gross profit rate.The following data are available pertaining specifically to Posito's intra-entity purchases from Gargiulo.Gargiulo was acquired on January 1,2017.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Purchases by Posito } & \$ 8,000 & \$ 12,000 & \$ 15,000 \\\text { Ending inventory on Posito's books } & 1,200 & 4,000 & 3,000\end{array}$
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Gargiulo's net income } & \$ 70,000 & \$ 85,000 & \$ 94,000 \\\text { Dividends paid by Gargiulo } & 10,000 & 10,000 & 15,000\end{array}$


-Assuming there are no excess amortizations associated with the consolidation,and no other intra-entity asset transfers,compute the net income attributable to the noncontrolling interest of Gargiulo for 2019.

A)$9,400.
B)$9,375.
C)$9,425.
D)$9,325.
E)$8,485.

Question 46

REFERENCE: 05-07
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,transfers inventory to Posito at a 25% gross profit rate.The following data are available pertaining specifically to Posito's intra-entity purchases from Gargiulo.Gargiulo was acquired on January 1,2017.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Purchases by Posito } & \$ 8,000 & \$ 12,000 & \$ 15,000 \\\text { Ending inventory on Posito's books } & 1,200 & 4,000 & 3,000\end{array}$
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Gargiulo's net income } & \$ 70,000 & \$ 85,000 & \$ 94,000 \\\text { Dividends paid by Gargiulo } & 10,000 & 10,000 & 15,000\end{array}$


-For consolidation purposes,what amount would be debited to January 1 retained earnings for the 2017 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2017 intra-entity transfer of merchandise?

A)$ 0.
B)$1,600.
C)$ 300.
D)$ 240.
E)$ 270.

Question 47

Which of the following statements is true regarding an intra-entity transfer of land?

A)A loss is always recognized but a gain is deferred in a consolidated income statement.
B)A loss and a gain are deferred until the land is sold to an outside party.
C)A loss and a gain are always recognized in a consolidated income statement.
D)A gain is always recognized but a loss is deferred in a consolidated income statement.
E)Recognition of a gain or loss is deferred by adjusting stockholders' equity through comprehensive income.

Question 48

Which of the following statements is true concerning an intra-entity transfer of a depreciable asset?

A)Net income attributable to the noncontrolling interest is never affected by a gain on the transfer.
B)Net income attributable to the noncontrolling interest is always affected by a gain on the transfer.
C)Net income attributable to the noncontrolling interest is affected by a downstream gain only.
D)Net income attributable to the noncontrolling interest is affected only when the transfer is upstream.
E)Net income attributable to the noncontrolling interest is increased by an upstream gain in the year of transfer.

Question 49

REFERENCE: 05-08
Patti Company owns 80% of the common stock of Shannon,Inc.In the current year,Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000.For the same period,Shannon has sales of $200,000 and cost of goods sold of $160,000.During the year,Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup.At the end of the year,Shannon still possesses 30 percent of this inventory.

-Compute consolidated cost of goods sold.

A)$7,500,000.
B)$7,600,000.
C)$7,615,000.
D)$7,604,500.
E)$7,660,000.

Question 50

Parent sold land to its subsidiary resulting in a gain in 2016,the year of transfer.The subsidiary sold the land to an unrelated third party for a gain in 2019.Which of the following statements is true?

A)A gain will be recognized in the consolidated income statement in 2016.
B)A gain will be recognized in the consolidated income statement in 2019.
C)No gain will be recognized in the 2019 consolidated income statement.
D)Only the parent company will recognize a gain in 2019.
E)The subsidiary will recognize a gain in 2016.

Question 51

REFERENCE: 05-08
Patti Company owns 80% of the common stock of Shannon,Inc.In the current year,Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000.For the same period,Shannon has sales of $200,000 and cost of goods sold of $160,000.During the year,Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup.At the end of the year,Shannon still possesses 30 percent of this inventory.

-Compute consolidated sales.

A)$10,000,000.
B)$10,126,000.
C)$10,140,000.
D)$10,200,000.
E)$10,260,000.

Question 52

An intra-entity transfer took place whereby the book value exceeded the transfer price of a depreciable asset.Which statement is true for the year after the year of transfer?

A)A worksheet entry is made with a debit to retained earnings for an upstream transfer.
B)A worksheet entry is made with a credit to retained earnings for an upstream transfer.
C)A worksheet entry is made with a debit to retained earnings for a downstream transfer.
D)A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer.
E)No worksheet entry is necessary.

Question 53

REFERENCE: 05-07
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,transfers inventory to Posito at a 25% gross profit rate.The following data are available pertaining specifically to Posito's intra-entity purchases from Gargiulo.Gargiulo was acquired on January 1,2017.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Purchases by Posito } & \$ 8,000 & \$ 12,000 & \$ 15,000 \\\text { Ending inventory on Posito's books } & 1,200 & 4,000 & 3,000\end{array}$
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Gargiulo's net income } & \$ 70,000 & \$ 85,000 & \$ 94,000 \\\text { Dividends paid by Gargiulo } & 10,000 & 10,000 & 15,000\end{array}$


-Compute the equity in earnings of Gargiulo reported on Posito's books for 2019.

A)$84,600.
B)$84,375.
C)$83,925.
D)$84,825.
E)$84,850.

Question 54

REFERENCE: 05-07
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,transfers inventory to Posito at a 25% gross profit rate.The following data are available pertaining specifically to Posito's intra-entity purchases from Gargiulo.Gargiulo was acquired on January 1,2017.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Purchases by Posito } & \$ 8,000 & \$ 12,000 & \$ 15,000 \\\text { Ending inventory on Posito's books } & 1,200 & 4,000 & 3,000\end{array}$
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Gargiulo's net income } & \$ 70,000 & \$ 85,000 & \$ 94,000 \\\text { Dividends paid by Gargiulo } & 10,000 & 10,000 & 15,000\end{array}$


-For consolidation purposes,what amount would be debited to cost of goods sold for the 2018 consolidation worksheet with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2018 transfer of merchandise?

A)$1,000.
B)$ 800.
C)$3,000.
D)$2,400.
E)$ 900.

Question 55

REFERENCE: 05-07
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,transfers inventory to Posito at a 25% gross profit rate.The following data are available pertaining specifically to Posito's intra-entity purchases from Gargiulo.Gargiulo was acquired on January 1,2017.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Purchases by Posito } & \$ 8,000 & \$ 12,000 & \$ 15,000 \\\text { Ending inventory on Posito's books } & 1,200 & 4,000 & 3,000\end{array}$
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Gargiulo's net income } & \$ 70,000 & \$ 85,000 & \$ 94,000 \\\text { Dividends paid by Gargiulo } & 10,000 & 10,000 & 15,000\end{array}$


-For consolidation purposes,what amount would be debited to cost of goods sold for the 2019 consolidation worksheet with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2019 intra-entity transfer of merchandise?

A)$ 600.
B)$ 750.
C)$3,760.
D)$3,000.
E)$ 675.

Question 56

REFERENCE: 05-07
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,transfers inventory to Posito at a 25% gross profit rate.The following data are available pertaining specifically to Posito's intra-entity purchases from Gargiulo.Gargiulo was acquired on January 1,2017.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Purchases by Posito } & \$ 8,000 & \$ 12,000 & \$ 15,000 \\\text { Ending inventory on Posito's books } & 1,200 & 4,000 & 3,000\end{array}$
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Gargiulo's net income } & \$ 70,000 & \$ 85,000 & \$ 94,000 \\\text { Dividends paid by Gargiulo } & 10,000 & 10,000 & 15,000\end{array}$


-For consolidation purposes,what amount would be debited to cost of goods sold for the 2017 consolidation worksheet with regard to unrecognized intra-entity gross profit remaining in ending inventory with respect to the transfer of merchandise?

A)$ 300.
B)$ 240.
C)$2,000.
D)$1,600.
E)$ 270.

Question 57

REFERENCE: 05-07
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,transfers inventory to Posito at a 25% gross profit rate.The following data are available pertaining specifically to Posito's intra-entity purchases from Gargiulo.Gargiulo was acquired on January 1,2017.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Purchases by Posito } & \$ 8,000 & \$ 12,000 & \$ 15,000 \\\text { Ending inventory on Posito's books } & 1,200 & 4,000 & 3,000\end{array}$
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Gargiulo's net income } & \$ 70,000 & \$ 85,000 & \$ 94,000 \\\text { Dividends paid by Gargiulo } & 10,000 & 10,000 & 15,000\end{array}$


-Assuming there are no excess amortizations associated with the consolidation,and no other intra-entity asset transfers,compute the net income attributable to the noncontrolling interest of Gargiulo for 2017.

A)$6,970.
B)$7,000.
C)$7,030.
D)$6,270.
E)$6,230.

Question 58

REFERENCE: 05-07
Gargiulo Company,a 90% owned subsidiary of Posito Corporation,transfers inventory to Posito at a 25% gross profit rate.The following data are available pertaining specifically to Posito's intra-entity purchases from Gargiulo.Gargiulo was acquired on January 1,2017.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Purchases by Posito } & \$ 8,000 & \$ 12,000 & \$ 15,000 \\\text { Ending inventory on Posito's books } & 1,200 & 4,000 & 3,000\end{array}$
Assume the equity method is used.The following data are available pertaining to Gargiulo's income and dividends.
$\begin{array}{lrrr} & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} \\\text { Gargiulo's net income } & \$ 70,000 & \$ 85,000 & \$ 94,000 \\\text { Dividends paid by Gargiulo } & 10,000 & 10,000 & 15,000\end{array}$


-For consolidation purposes,what amount would be debited to January 1 retained earnings for the 2018 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2017 intra-entity transfer of merchandise?

A)$ 240.
B)$ 300.
C)$2,000.
D)$1,600.
E)$ 270.

Question 59

An intra-entity transfer of a depreciable asset took place whereby the transfer price exceeded the book value of the asset.Which statement is true with respect to the year following the year in which the transfer occurred?

A)A worksheet entry is made with a debit to gain for a downstream transfer.
B)A worksheet entry is made with a debit to gain for an upstream transfer.
C)A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer when the parent uses the equity method.
D)A worksheet entry is made with a debit to retained earnings for a downstream transfer,regardless of the method used account for the investment.
E)No worksheet entry is necessary.

Question 60

An intra-entity transfer took place whereby the transfer price was less than the book value of a depreciable asset.Which statement is true for the year subsequent to the year of transfer?

A)A worksheet entry is made with a debit to investment in subsidiary for an upstream transfer.
B)A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer.
C)A worksheet entry is made with a credit to investment in subsidiary for a downstream transfer when the parent uses the equity method.
D)A worksheet entry is made with a debit to retained earnings for an upstream transfer,regardless of the method used to account for the investment.
E)No worksheet entry is necessary.

Question 61

REFERENCE: 05-11
Stiller Company,an 80% owned subsidiary of Leo Company,purchased land from Leo on March 1,2017,for $75,000.The land originally cost Leo $60,000.Stiller reported net income of $125,000 and $140,000 for 2017 and 2018,respectively.Leo uses the equity method to account for its investment.

-On a consolidation worksheet,having used the equity method,what adjustment would be made for 2018 regarding the land transfer?

A)Debit retained earnings for $15,000.
B)Credit retained earnings for $15,000.
C)Debit retained earnings for $50,000.
D)Credit retained earnings for $50,000.
E)Debit investment in Stiller for $15,000.

Question 62

REFERENCE: 05-09
Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000.The equipment had a book value of $50,000 at January 1,2017.On January 1,2017,Wilson realized that the useful life of the equipment was longer than originally anticipated,at ten remaining years.
On April 1,2017 Simon Company,a 90% owned subsidiary of Wilson Company,bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date.The following data are available pertaining to Simon's income and dividends declared:
$$\begin{array} { l r r r } & 2017 & 2018 & 2019 \\\text { Net income } & \$ 100,000 & \$ 120,000 & \$ 130,000 \\\text { Dividends declared } & 40,000 & 50,000 & 60,000\end{array}$$

-Assuming there are no excess amortizations associated with the consolidation,and no other intra-entity asset transfers,compute Wilson's share of income from Simon for consolidation for 2018.

A)$108,000
B)$110,000.
C)$106,000.
D)$109,825.
E)$109,800.

Question 63

REFERENCE: 05-08
Patti Company owns 80% of the common stock of Shannon,Inc.In the current year,Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000.For the same period,Shannon has sales of $200,000 and cost of goods sold of $160,000.During the year,Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup.At the end of the year,Shannon still possesses 30 percent of this inventory.

-Assume the same information,except Shannon sold inventory to Patti.Compute consolidated sales.

A)$10,000,000.
B)$10,126,000.
C)$10,140,000.
D)$10,200,000.
E)$10,260,000.

Question 64

REFERENCE: 05-11
Stiller Company,an 80% owned subsidiary of Leo Company,purchased land from Leo on March 1,2017,for $75,000.The land originally cost Leo $60,000.Stiller reported net income of $125,000 and $140,000 for 2017 and 2018,respectively.Leo uses the equity method to account for its investment.

-On a consolidation worksheet,what adjustment would be made for 2017 regarding the land transfer?

A)Debit gain for $50,000.
B)Credit gain for $50,000.
C)Debit land for $15,000.
D)Credit land for $15,000.
E)Credit gain for $15,000.

Question 65

REFERENCE: 05-12
Stark Company,a 90% owned subsidiary of Parker,Inc. ,sold land to Parker on May 1,2017,for $80,000.The land originally cost Stark $85,000.Stark reported net income of $200,000,$180,000,and $220,000 for 2017,2018,and 2019,respectively.Parker sold the land purchased from Stark in 2017 for $92,000 in 2019.Both companies use the equity method of accounting.
Which of the following will be included in a consolidation entry for 2017?

A)Debit loss for $5,000.
B)Credit loss for $5,000.
C)Credit land for $5,000.
D)Debit gain for $5,000.
E)Credit gain for $5,000.

Question 66

REFERENCE: 05-09
Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000.The equipment had a book value of $50,000 at January 1,2017.On January 1,2017,Wilson realized that the useful life of the equipment was longer than originally anticipated,at ten remaining years.
On April 1,2017 Simon Company,a 90% owned subsidiary of Wilson Company,bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date.The following data are available pertaining to Simon's income and dividends declared:
$$\begin{array} { l r r r } & 2017 & 2018 & 2019 \\\text { Net income } & \$ 100,000 & \$ 120,000 & \$ 130,000 \\\text { Dividends declared } & 40,000 & 50,000 & 60,000\end{array}$$

-Compute the amortization of gain through a depreciation adjustment for 2017 for consolidation purposes.

A)$1,950.
B)$1,825.
C)$1,500.
D)$2,000.
E)$5,250.

Question 67

REFERENCE: 05-10
On January 1,2017,Smeder Company,an 80% owned subsidiary of Collins,Inc. ,transferred equipment with a 10-year life (six of which remain with no salvage value)to Collins in exchange for $84,000 cash.At the date of transfer,Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000.Straight-line depreciation is used.Smeder reported net income of $28,000 and $32,000 for 2017 and 2018,respectively.All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.

-What is the net effect on net income as a result of consolidating adjustments made in 2017 with respect to the equipment transfer?

A)Increase net income by $2,000.
B)Decrease net income by $12,000.
C)Decrease net income by $10,000.
D)Decrease net income by $14,000.
E)Increase net income by $10,000.

Question 68

REFERENCE: 05-10
On January 1,2017,Smeder Company,an 80% owned subsidiary of Collins,Inc. ,transferred equipment with a 10-year life (six of which remain with no salvage value)to Collins in exchange for $84,000 cash.At the date of transfer,Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000.Straight-line depreciation is used.Smeder reported net income of $28,000 and $32,000 for 2017 and 2018,respectively.All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.

-What amount of gain should be reported by Smeder Company relating to the equipment for 2017 prior to making consolidating entries?

A)$36,000.
B)$34,000.
C)$12,000.
D)$10,000.
E)$ 0.

Question 69

REFERENCE: 05-09
Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000.The equipment had a book value of $50,000 at January 1,2017.On January 1,2017,Wilson realized that the useful life of the equipment was longer than originally anticipated,at ten remaining years.
On April 1,2017 Simon Company,a 90% owned subsidiary of Wilson Company,bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date.The following data are available pertaining to Simon's income and dividends declared:
$$\begin{array} { l r r r } & 2017 & 2018 & 2019 \\\text { Net income } & \$ 100,000 & \$ 120,000 & \$ 130,000 \\\text { Dividends declared } & 40,000 & 50,000 & 60,000\end{array}$$

-What amount should be recorded on Wilson's books as gain on the transfer of equipment,prior to preparing consolidating entries?

A)$19,500.
B)$18,250.
C)$11,750.
D)$38,250.
E)$37,500.

Question 70

REFERENCE: 05-11
Stiller Company,an 80% owned subsidiary of Leo Company,purchased land from Leo on March 1,2017,for $75,000.The land originally cost Leo $60,000.Stiller reported net income of $125,000 and $140,000 for 2017 and 2018,respectively.Leo uses the equity method to account for its investment.

-Assuming there are no excess amortizations or other intra-entity transactions,compute income from Stiller on Leo's books for 2017.

A)$110,000
B)$100,000.
C)$125,000.
D)$ 85,000.
E)$ 88,000.

Question 71

REFERENCE: 05-09
Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000.The equipment had a book value of $50,000 at January 1,2017.On January 1,2017,Wilson realized that the useful life of the equipment was longer than originally anticipated,at ten remaining years.
On April 1,2017 Simon Company,a 90% owned subsidiary of Wilson Company,bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date.The following data are available pertaining to Simon's income and dividends declared:
$$\begin{array} { l r r r } & 2017 & 2018 & 2019 \\\text { Net income } & \$ 100,000 & \$ 120,000 & \$ 130,000 \\\text { Dividends declared } & 40,000 & 50,000 & 60,000\end{array}$$

-Assuming there are no excess amortizations associated with the consolidation,and no other intra-entity asset transfers,compute Wilson's share of income from Simon for consolidation for 2017.

A)$72,000.
B)$90,000.
C)$73,575.
D)$73,800.
E)$72,500.

Question 72

REFERENCE: 05-12
Stark Company,a 90% owned subsidiary of Parker,Inc. ,sold land to Parker on May 1,2017,for $80,000.The land originally cost Stark $85,000.Stark reported net income of $200,000,$180,000,and $220,000 for 2017,2018,and 2019,respectively.Parker sold the land purchased from Stark in 2017 for $92,000 in 2019.Both companies use the equity method of accounting.

-Compute the gain or loss reported on Stark's books prior to consolidation from the intra-entity transfer of land in 2017.

A)$80,000 gain.
B)$80,000 loss.
C)$ 5,000 gain.
D)$ 5,000 loss.
E)$85,000 loss.

Question 73

REFERENCE: 05-09
Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000.The equipment had a book value of $50,000 at January 1,2017.On January 1,2017,Wilson realized that the useful life of the equipment was longer than originally anticipated,at ten remaining years.
On April 1,2017 Simon Company,a 90% owned subsidiary of Wilson Company,bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date.The following data are available pertaining to Simon's income and dividends declared:
$$\begin{array} { l r r r } & 2017 & 2018 & 2019 \\\text { Net income } & \$ 100,000 & \$ 120,000 & \$ 130,000 \\\text { Dividends declared } & 40,000 & 50,000 & 60,000\end{array}$$

-Compute the amortization of gain through a depreciation adjustment for 2019 for consolidation purposes.

A)$1,925.
B)$1,825.
C)$2,000.
D)$1,500.
E)$7,000.

Question 74

REFERENCE: 05-11
Stiller Company,an 80% owned subsidiary of Leo Company,purchased land from Leo on March 1,2017,for $75,000.The land originally cost Leo $60,000.Stiller reported net income of $125,000 and $140,000 for 2017 and 2018,respectively.Leo uses the equity method to account for its investment.

-Assuming there are no excess amortizations or other intra-entity transactions,compute income from Stiller on Leo's books for 2018.

A)$140,000.
B)$ 97,000.
C)$125,000.
D)$100,000.
E)$112,000.

Question 75

REFERENCE: 05-10
On January 1,2017,Smeder Company,an 80% owned subsidiary of Collins,Inc. ,transferred equipment with a 10-year life (six of which remain with no salvage value)to Collins in exchange for $84,000 cash.At the date of transfer,Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000.Straight-line depreciation is used.Smeder reported net income of $28,000 and $32,000 for 2017 and 2018,respectively.All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.

-Assuming there are no excess amortizations associated with the consolidation,and no other intra-entity asset transfers,what amount of this gain should be recognized for consolidation purposes for 2017?

A)$12,000.
B)$9,600.
C)$8,400.
D)$2,000.
E)$1,200.

Question 76

REFERENCE: 05-12
Stark Company,a 90% owned subsidiary of Parker,Inc. ,sold land to Parker on May 1,2017,for $80,000.The land originally cost Stark $85,000.Stark reported net income of $200,000,$180,000,and $220,000 for 2017,2018,and 2019,respectively.Parker sold the land purchased from Stark in 2017 for $92,000 in 2019.Both companies use the equity method of accounting.
Which of the following will be included in a consolidation entry for 2018?

A)Debit retained earnings for $5,000.
B)Credit retained earnings for $5,000.
C)Debit investment in subsidiary for $5,000.
D)Credit investment in subsidiary for $5,000.
E)Credit land for $5,000.

Question 77

REFERENCE: 05-10
On January 1,2017,Smeder Company,an 80% owned subsidiary of Collins,Inc. ,transferred equipment with a 10-year life (six of which remain with no salvage value)to Collins in exchange for $84,000 cash.At the date of transfer,Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000.Straight-line depreciation is used.Smeder reported net income of $28,000 and $32,000 for 2017 and 2018,respectively.All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.

-For consolidation purposes,what net debit or credit will be made for the year 2017 relating to the accumulated depreciation for the equipment transfer?

A)Debit accumulated depreciation,$46,000.
B)Debit accumulated depreciation,$48,000.
C)Credit accumulated depreciation,$48,000.
D)Credit accumulated depreciation,$46,000.
E)Debit accumulated depreciation,$2,000.

Question 78

REFERENCE: 05-09
Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000.The equipment had a book value of $50,000 at January 1,2017.On January 1,2017,Wilson realized that the useful life of the equipment was longer than originally anticipated,at ten remaining years.
On April 1,2017 Simon Company,a 90% owned subsidiary of Wilson Company,bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date.The following data are available pertaining to Simon's income and dividends declared:
$$\begin{array} { l r r r } & 2017 & 2018 & 2019 \\\text { Net income } & \$ 100,000 & \$ 120,000 & \$ 130,000 \\\text { Dividends declared } & 40,000 & 50,000 & 60,000\end{array}$$

-Assuming there are no excess amortizations associated with the consolidation,and no other intra-entity asset transfers,compute Wilson's share of income from Simon for consolidation for 2019.

A)$118,825.
B)$115,000.
C)$117,000.
D)$119,000.
E)$118,800.

Question 79

REFERENCE: 05-09
Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000.The equipment had a book value of $50,000 at January 1,2017.On January 1,2017,Wilson realized that the useful life of the equipment was longer than originally anticipated,at ten remaining years.
On April 1,2017 Simon Company,a 90% owned subsidiary of Wilson Company,bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date.The following data are available pertaining to Simon's income and dividends declared:
$$\begin{array} { l r r r } & 2017 & 2018 & 2019 \\\text { Net income } & \$ 100,000 & \$ 120,000 & \$ 130,000 \\\text { Dividends declared } & 40,000 & 50,000 & 60,000\end{array}$$

-Compute the amortization of gain through a depreciation adjustment for 2018 for consolidation purposes.

A)$1,950.
B)$1,825.
C)$2,000.
D)$1,500.
E)$7,000.

Question 80

REFERENCE: 05-11
Stiller Company,an 80% owned subsidiary of Leo Company,purchased land from Leo on March 1,2017,for $75,000.The land originally cost Leo $60,000.Stiller reported net income of $125,000 and $140,000 for 2017 and 2018,respectively.Leo uses the equity method to account for its investment.

-Compute the gain or loss on the intra-entity transfer of land that should be reported on the books of Stiller prior to consolidation.

A)$15,000 loss.
B)$15,000 gain.
C)$50,000 loss.
D)$50,000 gain.
E)$65,000 gain.