Deck 4: Consolidated Financial Statements and Outside Ownership

Question 1

Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1, 2014. For 2014, Kailey reported revenues of $810,000 and expenses of $630,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000.
What is the amount of net income to the controlling interest for 2014?

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

Answer 1

B
Explanation: Revenue $810,000 - Expenses $630,000 = Income $180,000 × 4/12 = $60,000 - Annual Amortization ($15,000 × 4/12) = $55,000 × .60 = $33,000

Question 2

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded.
What amount of goodwill should be attributed to Perch at the date of acquisition?

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

Answer 2

D
Explanation: (Purchase Price for 80%) $1,600,000 - (FV $1,850,000 × .80 = $1,480,000) = $120,000

Question 3

Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1, 2014. For 2014, Kailey reported revenues of $810,000 and expenses of $630,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000.
In consolidation, the total amount of expenses related to Kailey, and to Denber's acquisition of Kailey, for 2014 is determined to be

A) $153,750.
B) $161,250.
C) $205,000.
D) $210,000.
E) $215,000.

Answer 3

E

Question 4

For business combinations involving less than 100 percent ownership, the acquirer recognizes and measures all of the following at the acquisition date except:

A) identifiable assets acquired, at fair value.
B) liabilities assumed, at book value.
C) non-controlling interest, at fair value.
D) goodwill or a gain from bargain purchase.
E) none of these choices is correct.

Question 5

Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2014. During 2014, Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of excess cost allocations totaled $60,000 in 2014.
What is the effect of including Harbor in consolidated net income for 2014?

A) $350,000.
B) $308,000.
C) $500,000.
D) $440,000.
E) $290,000.

Question 6

When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000.
What is the total amount of excess land allocation at the acquisition date?

A) $0.
B) $30,000.
C) $22,500.
D) $25,000.
E) $17,500.

Question 7

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded.
What amount of goodwill should be attributed to the non-controlling interest at the date of acquisition?

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

Question 8

Kordel Inc. acquired 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?

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

Question 9

Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1, 2014. For 2014, Kailey reported revenues of $810,000 and expenses of $630,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000.
What is the amount of the non-controlling interest's share of Kailey's income for 2014?

A) $22,000.
B) $24,000.
C) $48,000.
D) $66,000.
E) $72,000.

Question 10

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded.
What is the dollar amount of non-controlling interest that should appear in a consolidated balance sheet prepared at the date of acquisition?

A) $350,000.
B) $300,000.
C) $400,000.
D) $370,000.
E) $0.

Question 11

When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000.
What amount should have been reported for the land in a consolidated balance sheet at the acquisition date?

A) $52,500.
B) $70,000.
C) $75,000.
D) $92,500.
E) $100,000.

Question 12

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded.
What is the total amount of goodwill recognized at the date of acquisition?

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

Question 13

When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000.
What is the amount of excess land allocation attributed to the controlling interest at the acquisition date?

A) $0.
B) $30,000.
C) $22,500.
D) $25,000.
E) $17,500.

Question 14

When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000.
What is the amount of excess land allocation attributed to the non-controlling interest at the acquisition date?

A) $0.
B) $30,000.
C) $22,500.
D) $7,500.
E) $17,500.

Question 15

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded.
What is the dollar amount of Float Corp.'s net assets that would be represented in a consolidated balance sheet prepared at the date of acquisition?

A) $1,600,000.
B) $1,480,000.
C) $1,200,000.
D) $1,780,000.
E) $1,850,000.

Question 16

Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2014. During 2014, Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of excess cost allocations totaled $60,000 in 2014.
The non-controlling interest's share of the earnings of Harbor Corp. is calculated to be

A) $132,000.
B) $150,000.
C) $168,000.
D) $160,000.
E) $0.

Question 17

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded.
What is the dollar amount of fair value over book value differences attributed to Perch at the date of acquisition?

A) $120,000.
B) $150,000.
C) $280,000.
D) $350,000.
E) $370,000.

Question 18

When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000.
What amount should have been reported for the land in a consolidated balance sheet, assuming the investment was obtained prior to the date the purchase method of accounting for new business combinations was discontinued?

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

Question 19

MacHeath Inc. bought 60% of the outstanding common stock of Nomes Inc. in an acquisition business combination that resulted in the recognition of goodwill. Nomes owned a piece of land that cost $250,000 but was worth $600,000 at the date of acquisition. What value would be attributed to this land in a consolidated balance sheet at the date of acquisition?

A) $250,000.
B) $150,000.
C) $600,000.
D) $360,000.
E) $460,000.

Question 20

Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1, 2014. For 2014, Kailey reported revenues of $810,000 and expenses of $630,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000.
What is the effect of including Kailey in consolidated net income for 2014?

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

Question 21

On January 1, 2014, Palk Corp. and Spraz Corp. had condensed balance sheets as follows: On January 2, 2014, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2014. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill.
What are the total consolidated current liabilities at January 2, 2014?

A) $53,200.
B) $56,000.
C) $64,400.
D) $42,000.
E) $70,000.

Question 22

Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2014 when Park's book value was $560,000. The Royce stock was not actively traded. On the date of acquisition, Park had equipment (with a ten-year life) that was undervalued in the financial records by $140,000. One year later, the following selected figures were reported by the two companies. Additionally, no dividends have been paid. What is the consolidated balance of the Equipment account at December 31, 2015?

A) $644,400.
B) $784,000.
C) $719,600.
D) $770,000.
E) $775,600.

Question 23

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?

A) Preacquisition earnings are deducted from consolidated revenues and expenses.
B) Preacquisition earnings are added to consolidated revenues and expenses.
C) Preacquisition earnings are deducted from the beginning consolidated stockholders' equity.
D) Preacquisition earnings are added to the beginning consolidated stockholders' equity.
E) Preacquisition earnings are ignored in the consolidated income statement.

Question 24

Which of the following statements is false regarding multiple acquisitions of a subsidiary's existing common stock?

A) The parent recognizes a larger percent of subsidiary income.
B) A step acquisition resulting in control may result in a parent recognizing a gain on revaluation.
C) The book value of the subsidiary will increase.
D) The parent's percent ownership in subsidiary will increase.
E) Non-controlling interest in subsidiary's net income will decrease.

Question 25

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

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 will not be recorded on the parent's books.

Question 26

When a parent uses the initial value method throughout the year to account for its investment in an acquired subsidiary, which of the following statements is true before making adjustments on the consolidated worksheet?

A) Parent company net income equals 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 equal consolidated dividends.
E) Goodwill needs to be recognized on the parent's books.

Question 27

On January 1, 2014, Palk Corp. and Spraz Corp. had condensed balance sheets as follows: On January 2, 2014, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2014. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill.
What is consolidated noncurrent assets at January 2, 2014?

A) $195,000.
B) $192,200.
C) $186,600.
D) $181,000.
E) $169,800.

Question 28

Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2014 when Park's book value was $560,000. The Royce stock was not actively traded. On the date of acquisition, Park had equipment (with a ten-year life) that was undervalued in the financial records by $140,000. One year later, the following selected figures were reported by the two companies. Additionally, no dividends have been paid. What is consolidated net income for 2015 attributable to Royce's controlling interest?

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

Question 29

Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2014 when Park's book value was $560,000. The Royce stock was not actively traded. On the date of acquisition, Park had equipment (with a ten-year life) that was undervalued in the financial records by $140,000. One year later, the following selected figures were reported by the two companies. Additionally, no dividends have been paid. What is the non-controlling interest's share of the subsidiary's net income for the year ended December 31, 2015 and what is the ending balance of the non-controlling interest in the subsidiary at December 31, 2015?

A) $56,000 and $280,000.
B) $50,400 and $218,400.
C) $56,000 and $224,000.
D) $56,000 and $336,000.
E) $50,400 and $330,400.

Question 30

On January 1, 2014, Palk Corp. and Spraz Corp. had condensed balance sheets as follows: On January 2, 2014, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2014. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill.
What is consolidated stockholders' equity at January 2, 2014?

A) $112,000.
B) $133,000.
C) $168,000.
D) $182,000.
E) $203,000.

Question 31

On January 1, 2014, Palk Corp. and Spraz Corp. had condensed balance sheets as follows: On January 2, 2014, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2014. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill.
What is consolidated current assets at January 2, 2014?

A) $127,000.
B) $129,800.
C) $143,800.
D) $148,000.
E) $135,400.

Question 32

All of the following statements regarding the sale of subsidiary shares are true except which of the following?

A) The use of specific identification based on serial number is acceptable.
B) The use of the FIFO assumption is acceptable.
C) The use of the averaging assumption is acceptable.
D) The use of specific LIFO assumption is acceptable.
E) The parent company must determine whether consolidation is still appropriate for the remaining shares owned.

Question 33

Jax Company uses the acquisition method for accounting for its investment in Saxton Company. Jax sells some of its shares of Saxton such that neither control nor significant influence exists. Which of the following statements is true?

A) The difference between selling price and acquisition value is recorded as a realized gain or loss.
B) The difference between selling price and acquisition value is recorded as an unrealized gain or loss.
C) The difference between selling price and carrying value is recorded as a realized gain or loss.
D) The difference between selling price and carrying value is recorded as an unrealized gain or loss.
E) The difference between selling price and carrying value is recorded as an adjustment to retained earnings.

Question 34

In measuring non-controlling interest at the date of acquisition, which of the following would not be indicative of the value attributed to the non-controlling interest?

A) Fair value based on stock trades of the acquired company.
B) Subsidiary cash flows discounted to present value.
C) Book value of subsidiary net assets.
D) Projections of residual income.
E) Consideration transferred by the parent company that implies a total subsidiary value.

Question 35

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

A) Parent company net income will equal controlling interest in consolidated net income when initial value, book value, and fair value of the investment are equal.
B) Parent company net income will exceed controlling interest in consolidated net income when fair value of depreciable assets acquired exceeds book value of depreciable assets.
C) Parent company net income will be less than controlling interest in consolidated net income when fair value of net assets acquired exceeds book value of net assets acquired.
D) Goodwill will be recognized if acquisition value exceeds fair value of net assets acquired.
E) Subsidiary net assets are valued at their book values before consolidating entries are made.

Question 36

Which of the following statements is true regarding the sale of subsidiary shares when using the acquisition method for accounting for business combinations?

A) If control continues, the difference between selling price and acquisition value is recorded as a realized gain or loss.
B) If control continues, the difference between selling price and acquisition value is an unrealized gain or loss.
C) If control continues, the difference between selling price and carrying value is recorded as an adjustment to additional paid-in capital.
D) If control continues, the difference between selling price and carrying value is recorded as a realized gain or loss.
E) If control continues, the difference between selling price and carrying value is recorded as an adjustment to retained earnings.

Question 37

Keefe Inc, a calendar-year corporation, acquires 70% of George Company on September 1, 2014, and an additional 10% on January 1, 2015. Total annual amortization of $6,000 relates to the first acquisition. George reports the following figures for 2015: Without regard for this investment, Keefe independently earns $300,000 in net income during 2015.
All net income is earned evenly throughout the year.
What is the controlling interest in consolidated net income for 2015?

A) $380,000.
B) $375,200.
C) $375,800.
D) $376,000.
E) $400,000.

Question 38

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

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.

Question 39

In a step acquisition, which of the following statements is false?

A) The acquisition method views a step acquisition essentially the same as a single step acquisition.
B) Income from subsidiary is computed by applying a partial year for a new purchase acquired during the year.
C) Income from subsidiary is computed for the entire year for a new purchase acquired during the year.
D) Obtaining control through a step acquisition is a significant remeasurement event.
E) Preacquisition earnings are not included in the consolidated income statement.

Question 40

When a parent uses the acquisition method for business combinations and sells shares of its subsidiary, which of the following statements is false?

A) If majority control is still maintained, consolidated financial statements are still required.
B) If majority control is not maintained but significant influence exists, the equity method to account for the investment is still used but consolidated financial statements are not required.
C) If majority control is not maintained but significant influence exists, the equity method is still used to account for the investment and consolidated financial statements are still required.
D) If majority control is not maintained and significant influence no longer exists, a prospective change in accounting principle to the fair value method is required.
E) A gain or loss calculation must be prepared if control is lost.

Question 41

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
In consolidation at December 31, 2014, what adjustment is necessary for Hogan's Buildings account?

A) $1,620 increase.
B) $1,620 decrease.
C) $1,800 increase.
D) $1,800 decrease.
E) No adjustment is necessary.

Question 42

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the EQUITY METHOD is applied.
Compute Pell's income from Demers for the year ended December 31, 2016.

A) $50,400.
B) $56,000.
C) $98,400.
D) $97,000.
E) $104,000.

Question 43

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
In consolidation at December 31, 2014, what adjustment is necessary for Hogan's Land account?

A) $8,000 decrease.
B) $7,000 increase.
C) $6,300 increase.
D) $6,300 decrease.
E) No adjustment is necessary.

Question 44

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the EQUITY METHOD is applied.
Compute Pell's investment account balance in Demers at December 31, 2015.

A) $577,200.
B) $604,000.
C) $592,800.
D) $632,800.
E) $572,000.

Question 45

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the EQUITY METHOD is applied.
Compute Pell's investment account balance in Demers at December 31, 2014.

A) $580,000.
B) $574,400.
C) $548,000.
D) $542,400.
E) $541,000.

Question 46

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the EQUITY METHOD is applied.
Compute Pell's income from Demers for the year ended December 31, 2015.

A) $90,400.
B) $89,000.
C) $50,400.
D) $56,000.
E) $96,000.

Question 47

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
In consolidation at December 31, 2015, what net adjustment is necessary for Hogan's Patent account?

A) $4,200.
B) $5,500.
C) $8,000.
D) $6,600.
E) No adjustment is necessary.

Question 48

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
In consolidation at December 31, 2014, what adjustment is necessary for Hogan's Equipment account?

A) $3,000 increase.
B) $3,000 decrease.
C) $2,700 increase.
D) $2,700 decrease.
E) No adjustment is necessary.

Question 49

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
In consolidation at January 1, 2014, what adjustment is necessary for Hogan's Buildings account?

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

Question 50

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the EQUITY METHOD is applied.
Compute the non-controlling interest in the net income of Demers at December 31, 2014.

A) $20,000.
B) $12,000.
C) $18,600.
D) $10,600.
E) $14,400.

Question 51

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
In consolidation at December 31, 2015, what adjustment is necessary for Hogan's Equipment account?

A) $2,000 increase.
B) $2,000 decrease.
C) $1,800 increase.
D) $1,800 decrease.
E) No adjustment is necessary.

Question 52

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
In consolidation at December 31, 2015, what adjustment is necessary for Hogan's Land account?

A) $7,000 decrease.
B) $7,000 increase.
C) $6,300 increase.
D) $6,300 decrease.
E) No adjustment is necessary.

Question 53

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
In consolidation at January 1, 2014, what adjustment is necessary for Hogan's Patent account?

A) $7,000.
B) $6,300.
C) $11,000.
D) $9,900.
E) No adjustment is necessary.

Question 54

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the EQUITY METHOD is applied.
Compute Pell's investment account balance in Demers at December 31, 2016.

A) $639,000.
B) $643,200.
C) $763,200.
D) $676,000.
E) $620,000.

Question 55

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
In consolidation at December 31, 2014, what net adjustment is necessary for Hogan's Patent account?

A) $5,600.
B) $8,800.
C) $7,000.
D) $7,700.
E) No adjustment is necessary.

Question 56

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
In consolidation at January 1, 2014, what adjustment is necessary for Hogan's Land account?

A) $7,000 increase.
B) $7,000 decrease.
C) $6,300 increase.
D) $6,300 decrease.
E) No adjustment is necessary.

Question 57

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
The acquisition value attributable to the non-controlling interest at January 1, 2014 is:

A) $23,400.
B) $24,000.
C) $24,900.
D) $26,000.
E) $20,000.

Question 58

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
In consolidation at December 31, 2015, what adjustment is necessary for Hogan's Buildings account?

A) $1,440 increase.
B) $1,440 decrease.
C) $1,600 increase.
D) $1,600 decrease.
E) No adjustment is necessary.

Question 59

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.
In consolidation at January 1, 2014, what adjustment is necessary for Hogan's Equipment account?

A) $4,000 increase.
B) $4,000 decrease.
C) $3,600 increase.
D) $3,600 decrease.
E) No adjustment is necessary.

Question 60

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the EQUITY METHOD is applied.
Compute Pell's income from Demers for the year ended December 31, 2014.

A) $74,400.
B) $73,000.
C) $42,400.
D) $41,000.
E) $80,000.

Question 61

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the EQUITY METHOD is applied.
Compute the non-controlling interest in the net income of Demers at December 31, 2016.

A) $20,400.
B) $24,600.
C) $26,000.
D) $14,000.
E) $12,600.

Question 62

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the PARTIAL EQUITY method is applied.
Compute Pell's investment in Demers at December 31, 2015.

A) $676,000.
B) $629,000.
C) $580,000.
D) $604,000.
E) $572,000.

Question 63

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the PARTIAL EQUITY method is applied.
Compute Pell's investment in Demers at December 31, 2016.

A) $780,000.
B) $660,000.
C) $785,000.
D) $676,000.
E) $620,000.

Question 64

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the INITIAL VALUE is applied.
Compute the non-controlling interest in the net income of Demers at December 31, 2015.

A) $18,400.
B) $14,000.
C) $22,600.
D) $24,000.
E) $12,600.

Question 65

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the EQUITY METHOD is applied.
Compute the non-controlling interest in Demers at December 31, 2016.

A) $107,800.
B) $140,000.
C) $165,200.
D) $160,800.
E) $146,800.

Question 66

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the EQUITY METHOD is applied.
Compute the non-controlling interest in Demers at December 31, 2015.

A) $107,000.
B) $126,000.
C) $109,200.
D) $149,600.
E) $148,200.

Question 67

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the INITIAL VALUE is applied.
Compute the non-controlling interest in Demers at December 31, 2014.

A) $135,600.
B) $80,000.
C) $117,000.
D) $100,000.
E) $110,600.

Question 68

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the EQUITY METHOD is applied.
Compute the non-controlling interest in Demers at December 31, 2014.

A) $135,600.
B) $137,000.
C) $112,000.
D) $100,000.
E) $118,600.

Question 69

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the INITIAL VALUE is applied.
Compute the non-controlling interest in Demers at December 31, 2015.

A) $126,000.
B) $106,000.
C) $109,200.
D) $149,600.
E) $148,200.

Question 70

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the INITIAL VALUE is applied.
How much does Pell record as Income from Demers for the year ended December 31, 2015?

A) $90,400.
B) $40,000.
C) $89,000.
D) $50,400.
E) $56,000.

Question 71

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the INITIAL VALUE is applied.
Compute Pell's investment in Demers at December 31, 2016.

A) $592,400.
B) $500,000.
C) $625,000.
D) $676,000.
E) $620,000.

Question 72

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the EQUITY METHOD is applied.
Compute the non-controlling interest in the net income of Demers at December 31, 2015.

A) $18,400.
B) $14,400.
C) $22,600.
D) $24,000.
E) $12,600.

Question 73

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the INITIAL VALUE is applied.
How much does Pell record as Income from Demers for the year ended December 31, 2016?

A) $48,000.
B) $56,000.
C) $98,400.
D) $97,000.
E) $50,400.

Question 74

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the INITIAL VALUE is applied.
How much does Pell record as Income from Demers for the year ended December 31, 2014?

A) $32,000.
B) $74,400.
C) $73,000.
D) $42,400.
E) $41,000.

Question 75

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the INITIAL VALUE is applied.
Compute the non-controlling interest in the net income of Demers at December 31, 2014.

A) $12,000.
B) $10,600.
C) $18,600.
D) $20,000.
E) $14,400.

Question 76

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the INITIAL VALUE is applied.
Compute Pell's investment in Demers at December 31, 2015.

A) $625,000.
B) $664,800.
C) $592,400.
D) $500,000.
E) $572,000.

Question 77

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the INITIAL VALUE is applied.
Compute the non-controlling interest in Demers at December 31, 2016.

A) $107,800.
B) $140,000.
C) $80,000.
D) $50,000.
E) $160,800.

Question 78

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the INITIAL VALUE is applied.
Compute Pell's investment in Demers at December 31, 2014.

A) $500,000.
B) $574,400.
C) $625,000.
D) $542,400.
E) $532,000.

Question 79

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the INITIAL VALUE is applied.
Compute the non-controlling interest in the net income of Demers at December 31, 2016.

A) $24,600.
B) $14,000.
C) $26,000.
D) $20,400.
E) $12,600.

Question 80

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the PARTIAL EQUITY method is applied.
Compute Pell's investment in Demers at December 31, 2014.

A) $625,000.
B) $574,400.
C) $548,000.
D) $542,400.
E) $532,000.