10. In years after DOA, consolidation workpaper elimination entry #2

A) eliminates P's equity method accounting for the year.

B) creates the contra-consolidated income account for the noncontrolling interest.

C) eliminates P's "Investment in Sub" account against S's Owners Equity accounts.

D) None of the above.

11. In years after DOA, consolidation workpaper elimination entry #3

A) eliminates P's equity method accounting for the year.

B) creates the contra-consolidated income account for the noncontrolling interest.

C) eliminates P's "Investment in Sub" account against S's Owners Equity accounts.

D) None of the above.

12. In years after DOA, consolidation workpaper elimination entry #1

A) eliminates P's equity method accounting for the year.

B) creates the contra-consolidated income account for the noncontrolling interest.

C) eliminates P's "Investment in Sub" account against S's Owners Equity accounts.

D) None of the above.

13. In the preparation of consolidated financial statements, elimination entries are made on:

A) the parent's books.

B) the subsidiary's books.

C) both the parent's and subsidiary's books.

D) on the consolidated workpapers.

14. Puget, Inc. owns a 70 percent interest in Sound, Inc. which it purchased in year x8.For year x9, S has Other Comprehensive Income (OCI) of $50,000 from the unrealized gain on available for sale securities.P's consolidated working paper will include an entry to eliminate:

A) $50,000 of S's Other Comprehensive Income.

B) $35,000 of S's Other Comprehensive Income.The remaining $15,000 reduces consolidated retained earnings.

C) $35,000 of P's equity-method account 'Subsidiary - Other Comprehensive Income.'

D) $35,000 of S's Other Comprehensive Income.The remaining $15,000 is ignored in the consolidation process.

15. Ponderosa acquired 100% control of Sumac on January 1, year x9.The purchase differential included $30,000 attributable to the fair-value increment on Sumac's inventory.Both Ponderosa and Sumac account for inventory using LIFO.Sumac's December 31, x9 inventory was greater than the beginning balance.Consolidated net income for x9 will be:

A) $30,000 greater than if FIFO had been used.

B) $30,000 less than if FIFO had been used.

C) The same as if FIFO had been used.

D) Different under FIFO only if there had been a noncontrolling interest.

16. The amount reported for Total Comprehensive Income in the preparation of consolidated financial statements excludes

A) consolidated net income.

B) other comprehensive income.

C) unrealized holding gains and losses from investments 'available for sale.'

D) dividends paid to noncontrolling interests.

17. A parent acquired majority control of a subsidiary at a cost in excess of book value, a portion of which was assigned to goodwill.Subsequent impairment of goodwill should be recognized as:

A) an expense on the parent's Income Statement.

B) a loss reported in consolidated net income.

C) ignored, according to U.S. and international GAAP.

D) all of these are true.

18. In the year goodwill associated with a purchase differential is impaired, the parent's

A) equity method net income will not equal consolidated net income if the parent doesn't make an equity method entry for the impairment.

B) investment account must be reduced.

C) equity method net income will equal consolidated net income.

D) retained earnings will be less than consolidated retained earnings.

19. Which one of the following items results in an increase in an investor's investment account under the equity method?

A) Dividend payments.

B) Amortization of cost over book value

C) Investee income.

D) Investor income.

20. Under the equity method of accounting for a stock investment, the investment initially should be recorded at

A) proportionate share of the book value of the investee company's net assets

B) cost minus any purchase differential

C) proportionate share of the fair value of the investee company's net assets

D) cost

21. Which of the following situations best describes a business combination to be accounted for as a statutory merger?

A) All the outstanding stock of a company is acquired.

B) Cash or other consideration is exchanged for total net assets of another company.

C) Two companies combine to form a new third company, and the original two companies are dissolved.

D) One company transfers assets to another company it has created.

22. A statutory consolidation is a type of business combination in which:

A) each of the combining companies is dissolved and the net assets of both companies are transferred to a newly created corporation.

B) one of the combining companies survives and the other loses its separate identity.

C) one company acquires the voting shares of the other company and the two companies continue to operate as separate legal entities.

D) two publicly traded companies agree to share a board of directors.

23. Business combinations reported as

'poolings of interest'

A) are similar to purchase/acquisition combinations except that no goodwill is reported.

B) are intended to show the combined firms as if they were always one company.

C) are similar to purchase/acquisition combinations except that combined assets and liabilities are reported at fair value as of the combination date.

D) are intended to show the combined firms as if a 'basket purchase' of assets has occurred.

24. Goodwill reported on financial statements is that of

A) the parent firm only.

B) both parent and subsidiary firms.

C) the combined entity only.

D) the subsidiary firm(s) only.

25. Stock issue costs in purchase acquistions are

A) effectively ignored

B) immediately expensed

C) used to reduce the recorded amount of stock issued

D) accumulated and amortized