8. The Parent has 70% interest in Bill Inc. The separate-entity R/E statements of the two companies as of Dec 31, 2019 are below:

At the beginning of 2019, the accounting books of the Parent suggest the followings associated with the inventories the Parent purchased from Bill during 2018:

Before-tax profit Tax expense After-tax profit $6,000 $2,400 $3,600

Assuming the Parent uses cost method for equity investments, adjustments based on the

given information will show an impact on the Parent's portion in the consolidated net income of

Parent

Bill

Beginning

$100,000

$30,000

Net income

10,000

3,000

Dividends declared

2,000

0

Year-end

108,000

33,000

a) $3,600 increase

b) $4,620 increase

c) $6,000increase

d) $2,520 increase

9) With respect to a foreign investee that has been classified as a self-sustaining Sub, the gain or loss from translating the Sub's acquisition differentials should be reported in

A. Net income of the translated income statement

B. OCI of the translated balance sheet

C. Net income of the consolidated income statement

D. OCI of the consolidated balance sheet

11) The Parent has an 70% interest in the Sub. On Jan.1, 20X1, the Sub sold a piece of land to the Parent for $280,000, and recognized a gain of $60,000. On that day, it also sold a piece of land to an unrelated party for $300,000 and recognized a gain of $80,000. On July 1, 20X1, the Parent sold a piece of land it purchased a few years ago from an unrelated company to the Sub for $200,000 and recognized a gain of $20,000. Both companies pay income tax at the rate of 40%. Assuming gains from sales of land are fully taxable, and the Parent uses the cost method for its equity investments. What is the net impact of these land transactions on the Parent's portion in consolidated net income?

A. $33,600 increase

B. $8,400 increase

C. $3,600 decrease

D. $12,000 decrease

9) Which of the following statements is NOT true?

a. On the day a joint venture is established, the difference between FV and BV of the asset contributed can be fully recognized as unrealized gains or losses.

b. On the day a joint venture is established, the difference between FV and BV of the asset contributed can be partially recognized as unrealized gains or losses.

c. On the day a joint operation is established, the difference between FV and BV of the asset contributed can be fully recognized as realized gains or losses.

d. On the day a joint operation is established, the difference between FV and BV of the asset contributed can be partially recognized as realized gains or losses.

12) The Parent held 90% of the Sub's 10,000 outstanding voting shares right before July 1, 20X1. On July 1, 20X1, the Sub issued additional 2,000 voting shares for $80,000 and the Parent did not buy any of them. Right before this event, the Parent had a balance of $400,000 in its investment account for this Sub under the equity method. Which of the following statements is true?

a. The effect of this event on the Parent is a net loss of $6,680.

b. The effect of this event on the Parent is a net gain of $6,680.

c. The effect of this event on the Parent is zero

d. None of above

13) ELE Ltd. acquired 60% of ENT's voting shares on Jan. 1 Y6 for $480,000 when ENT's financial position showed common shares of $320,000 and R/E of $220,000. On that day, ENT's inventories were undervalued by $20,000 and a patent with an estimated remaining life of five years was overvalued by $30,000. ELE uses cost method for its investments in ENT.

ENT reported the followings after the acquisition:

Profit Dividends

Dec 31, Y6 $91,800 $26,130

Dec 31, Y7 (22,140) 12,000

Dec 31, Y8 67,600 35,700

What is the increase of ENT's fair value since acquisition under the entity theory?

A. $137,260

B. $135,260

C. $139,262

D. $61,430

14. IIT became a Sub of the Parent on Jan. 1, 2019. On that day, its $100,000 face-value 10- year bond had a carrying value of $107,019.47 and a market value of $105,456.82. The bond was issued on Jan 1, 2018 with a stated interest rate of 8% and semi-annual interest payment. On the issuing day, the market rate was 6%.

For 2019, amortizing bond acquisition differential for consolidation will

A. Increase bond interest expense.

B. Decrease bond interest expense.

C. Increase bond interest payment.

D. Decrease bond interest payment.