1. Any excess of fair value over book value attributable to land on the date of acquisition is to be:

Multiple Choice

• capitalized and amortized.

• allocated to other identifiable assets.

• charged to Retained Earnings on the date of acquisition.

• taken into income when the Land is sold

  2. Consolidated retained earnings include:

• the parent's net income plus its share of the subsidiary's income less any dividends declared by either the parent or the subsidiary.

• consolidated net income less any dividends declared by either the parent or the subsidiary.

• the parent's share of consolidated net income less any dividends declared by the parent.

• consolidated net income less any dividends declared by the parent only.

  3. Errant Inc. purchased 100% of the outstanding voting shares of Grub Inc. for $200,000 on January 1, 2019. On that date, Grub Inc. had common shares and retained earnings worth $100,000 and $60,000, respectively. Goodwill is tested annually for impairment. The balance sheets of both companies, as well as Grub's fair market values on the date of acquisition are disclosed below:

  	Errant Inc.	Grub Inc.	Grub Inc.
  	(carrying value)	(carrying value)	(fair value)
  Cash	$120,000	$76,000	$76,000
  Accounts Receivable	$80,000	$40,000	$40,000
  Inventory	$60,000	$34,000	$50,000
  Equipment (net)	$400,000	$80,000	$70,000
  Trademark		$70,000	$84,000
  Total Assets	$660,000	$300,000
  Current Liabilities	$180,000	$80,000	$80,000
  Bonds Payable	$320,000	$60,000	$64,000
  Common Shares	$90,000	$100,000
  Retained Earnings	$70,000	$60,000
  Total Liabilities and Equity	$660,000	$300,000

  The net incomes for Errant and Grub for the year ended December 31, 2019 were $160,000 and $90,000 respectively. Grub paid $9,000 in dividends to Errant during the year. There were no other inter-company transactions during the year. Moreover, an impairment test conducted on December 31, 2019 revealed that the Goodwill should actually have a value of $20,000. Both companies use a FIFO system, and most of Grub's inventory on the date of acquisition was sold during the year. Errant did not declare any dividends during the year. Assume that any difference between the fair values and book values of the equipment, trademark and bonds payable would all be amortized over 10 years. Assume that Errant Inc. uses the equity method unless stated otherwise. What would be the journal entry to record the dividends received by Errant during the year?

  Multiple Choice

• 	Debit	Credit
  Cash	$9,000
  Acquisition Differential		$9,000

• 	Debit	Credit
  Cash	$9,000
  Investment in Grub		$9,000

• 	Debit	Credit
  Cash	$9,000
  Equity method income		$9,000

• 	Debit	Credit
  Cash	$9,000
  Goodwill		$9,000

  4.

  Consolidated Net Income would be:

  Multiple Choice

• higher if the parent chooses to use Equity Method rather than the Cost Method.

• the same under both the Cost and Equity Methods.

• higher if the parent chooses to use the Equity Method rather than the Cost Method, provided that the subsidiary showed a profit.

• lower if the parent chooses to use Equity Method rather than the Cost Method