I have questions in page 44 m/c from 35 to 64 if you explain to me the answers for company pell
ch4 1. 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. noncontrolling interest, at fair value. D. goodwill or a gain from bargain purchase. E. none of these choices is correct. 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. 2. 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. 3. 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. 4. 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. 5. What is the amount of excess land allocation attributed to the noncontrolling interest at the acquisition date? A. $0. B. $30,000. C. $22,500. D. $7,500. E. $17,500. 6. What amount should have been reported for the land in a consolidated balance sheet, assuming the investment was obtained prior to January 1, 2009 and the purchase method of accounting for business combinations was used? A. $70,000. B. $75,000. C. $85,000. D. $92,500. E. $100,000. 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 noncontrolling interest shares of Float Corp. are not actively traded. 7. 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. 8. 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. 9. What amount of goodwill should be attributed to the noncontrolling interest at the date of acquisition? A. $0. B. $20,000. C. $30,000. D. $100,000. E. $120,000. 10. What is the dollar amount of noncontrolling 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. 11. 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. 12. 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. Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2010. During 2010, Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of excess cost allocations totaled $60,000 in 2010. 13. The noncontrolling 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. 14. What is the effect of including Harbor in consolidated net income for 2010? A. $350,000. B. $308,000. C. $500,000. D. $440,000. E. $290,000. Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1, 2010. For 2010, 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. 15. In consolidation, the total amount of expenses related to Kailey, and to Denber's acquisition of Kailey, for 2010 is determined to be A. $153,750. B. $161,250. C. $205,000. D. $210,000. E. $215,000. 16. What is the effect of including Kailey in consolidated net income for 2010? A. $31,000. B. $33,000. C. $55,000. D. $60,000. E. $39,000. 17. What is the amount of net income to the controlling interest for 2010? A. $31,000. B. $33,000. C. $55,000. D. $60,000. E. $39,000. 18. What is the amount of the noncontrolling interest's share of Denber's income for 2010? A. $22,000. B. $24,000. C. $48,000. D. $66,000. E. $72,000. 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. 20. 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. Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2010 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. 21. What is consolidated net income for 2011 attributable to Royce's controlling interest? A. $686,000. B. $560,000. C. $644,000. D. $635,600. E. $691,600. 22. What is the noncontrolling interest's share of the subsidiary's net income for the year ended December 31, 2011 and what is the ending balance of the noncontrolling interest in the subsidiary at December 31, 2011? 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. 23. What is the consolidated balance of the Equipment account at December 31, 2011? A. $644,400. B. $784,000. C. $719,600. D. $770,000. E. $775,600. On January 1, 2010, Palk Corp. and Spraz Corp. had condensed balance sheets as follows: On January 2, 2010, 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, 2010. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill. 24. What is consolidated current assets at January 2, 2010? A. $127,000. B. $129,800. C. $143,800. D. $148,000. E. $135,400. 25. What is consolidated noncurrent assets at January 2, 2010? A. $195,000. B. $192,200. C. $186,600. D. $181,000. E. $169,800. 26. What is consolidated current liabilities at January 2, 2010? A. $53,200. B. $56,000. C. $64,400. D. $42,000. E. $70,000. 27. What is consolidated stockholders' equity at January 2, 2010? A. $112,000. B. $133,000. C. $168,000. D. $182,000. E. $203,000. 28. In measuring noncontrolling interest at the date of acquisition, which of the following would not be indicative of the value attributed to the noncontrolling 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. 29. 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. 30. 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. 31. 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. 32. 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. 33. 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. Noncontrolling interest in subsidiary's net income will decrease. 34. 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. 35. 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. 36. 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. BIf 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. CIf 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. 37. 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. 38. 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. 39. 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. 40. Keefe, Inc., a calendar-year corporation, acquires 70% of George Company on September 1, 2010, and an additional 10% on April 1, 2011. Total annual amortization of $6,000 relates to the first acquisition. George reports the following figures for 2011: Without regard for this investment, Keefe independently earns $300,000 in net income during 2011. All net income is earned evenly throughout the year. What is the controlling interest in consolidated net income for 2011? A. $373,300. B. $372,850. C. $371,500. D. $376,000. E. $372,805. McGuire company acquired 90 percent of Hogan Company on January 1, 2010, 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. 41. The acquisition value attributable to the noncontrolling interest at January 1, 2010 is: A. $23,400. B. $24,000. C. $24,900. D. $26,000. E. $20,000. 42. In consolidation at January 1, 2010, 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. 43. In consolidation at December 31, 2010, 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. 44. In consolidation at December 31, 2011, 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. 45. In consolidation at December 31, 2010, 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. 46. In consolidation at December 31, 2011, 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. 47. In consolidation at January 1, 2010, 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. 48. In consolidation at December 31, 2010, 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. 49. In consolidation at December 31, 2011, 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. 50. In consolidation at January 1, 2010, 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. 51. In consolidation at December 31, 2010, 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. 52. In consolidation at December 31, 2011, what net adjustment is necessary for Hogan's Patent account? A. $4,200. B. $5,500. C. 8,8000. D. $6,600. E. No adjustment is necessary. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. 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. 53. Compute Pell's investment in Demers at December 31, 2010. A. $580,000. B. $574,400. C. $548,000. D. $542,400. E. $541,000. 54. Compute Pell's investment in Demers at December 31, 2011. A. $577,200. B. $604,000. C. $592,800. D. $632,800. E. $572,000. 55. Compute Pell's investment in Demers at December 31, 2012. A. $639,000. B. $643,200. C. $763,200. D. $676,000. E. $620,000. 56. Compute Pell's income from Demers for the year ended December 31, 2010. A. $74,400. B. $73,000. C. $42,400. D. $41,000. E. $80,000. 57. Compute Pell's income from Demers for the year ended December 31, 2011. A. $90,400. B. $89,000. C. $50,400. D. $56,000. E. $96,000. 58. Compute Pell's income from Demers for the year ended December 31, 2012. A. $50,400. B. $56,000. C. $98,400. D. $97,000. E. $104,000. 59. Compute the noncontrolling interest in the net income of Demers at December 31, 2010. A. $20,000. B. $12,000. C. $18,600. D. $10,600. E. $14,400. 60. Compute the noncontrolling interest in the net income of Demers at December 31, 2011. A. $18,400. B. $14,400. C. $22,600. D. $24,000. E. $12,600. 61. Compute the noncontrolling interest in the net income of Demers at December 31, 2012. A. $20,400. B. $24,600. C. $26,000. D. $14,000. E. $12,600. 62. Compute the noncontrolling interest in Demers at December 31, 2010. A. $135,600. B. $137,000. C. $112,000. D. $100,000. E. $118,600. 63. Compute the noncontrolling interest in Demers at December 31, 2011. A. $107,000. B. $126,000. C. $109,200. D. $149,600. E. $148,200. 64. Compute the noncontrolling interest in Demers at December 31, 2012. A. $107,800. B. $140,000. C. $165,200. D. $160,800. E. $146,800. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. 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 method is applied. 65. Compute Pell's investment in Demers at December 31, 2010. A. $500,000. B. $574,400. C. $625,000. D. $542,400. E. $532,000. 66. Compute Pell's investment in Demers at December 31, 2011. A. $625,000. B. $664,800. C. $592,400. D. $500,000. E. $572,000. 67. Compute Pell's investment in Demers at December 31, 2012. A. $592,400. B. $500,000. C. $625,000. D. $676,000. E. $620,000. 68. How much does Pell record as Income from Demers for the year ended December 31, 2010? A. $32,000. B. $74,400. C. $73,000. D. $42,400. E. $41,000. 69. How much does Pell record as Income from Demers for the year ended December 31, 2011? A. $90,400. B. $40,000. C. $89,000. D. $50,400. E. $56,000. 70. How much does Pell record as Income from Demers for the year ended December 31, 2012? A. $48,000. B. $56,000. C. $98,400. D. $97,000. E. $50,400. 71. Compute the noncontrolling interest in the net income of Demers at December 31, 2010. A. $12,000. B. $10,600. C. $18,600. D. $20,000. E. $14,400. 72. Compute the noncontrolling interest in the net income of Demers at December 31, 2011. A. $18,400. B. $14,000. C. $22,600. D. $24,000. E. $12,600. 73. Compute the noncontrolling interest in the net income of Demers at December 31, 2012. A. $24,600. B. $14,000. C. $26,000. D. $20,400. E. $12,600. 74. Compute the noncontrolling interest in Demers at December 31, 2010. A. $135,600. B. $80,000. C. $117,000. D. $100,000. E. $110,600. 75. Compute the noncontrolling interest in Demers at December 31, 2011. A. $126,000. B. $106,000. C. $109,200. D. $149,600. E. $148,200. 76. Compute the noncontrolling interest in Demers at December 31, 2012. A. $107,800. B. $140,000. C. $80,000. D. $50,000. E. $160,800. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. 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. Demers earns income and pays dividends as follows: Assume the partial equity method is applied. 77. Compute Pell's investment in Demers at December 31, 2010. A. $625,000. B. $574,400. C. $548,000. D. $542,400. E. $532,000. 78. Compute Pell's investment in Demers at December 31, 2011. A. $676,000. B. $629,000. C. $580,000. D. $604,000. E. $572,000. 79. Compute Pell's investment in Demers at December 31, 2012. A. $780,000. B. $660,000. C. $785,000. D. $676,000. E. $620,000. 80. How much does Pell record as Income from Demers for the year ended December 31, 2010? A. $80,000. B. $74,400. C. $73,000. D. $42,400. E. $41,000. 81. How much does Pell record as income from Demers for the year ended December 31, 2011? A. $90,400. B. $89,000. C. $50,400. D. $96,000. E. $56,000. 82. How much does Pell record as income from Demers for the year ended December 31, 2012? A. $98,400. B. $56,000. C. $104,000. D. $97,000. E. $50,400. 83. Compute the noncontrolling interest in the net income of Demers at December 31, 2010. A. $20,000. B. $12,000. C. $18,600. D. $10,600. E. $14,400. 84. Compute the noncontrolling interest in the net income of Demers at December 31, 2011. A. $18,400. B. $14,000. C. $22,600. D. $24,000. E. $12,600. 85. Compute the noncontrolling interest in the net income of Demers at December 31, 2012. A. $20,400. B. $26,000. C. $24,600. D. $14,000. E. $12,600. 86. Compute the noncontrolling interest in Demers at December 31, 2010. A. $135,600. B. $114,000. C. $112,000. D. $100,000. E. $110,600. 87. Compute the noncontrolling interest in Demers at December 31, 2011. A. $124,000. B. $126,000. C. $109,200. D. $149,600. E. $ 148,200. 88. Compute the noncontrolling interest in Demers at December 31, 2012. A. $107,800. B. $140,000. C. $80,000. D. $160,800. E. $146,800. Parsons Company acquired 90% of Roxy Company several years ago and recorded goodwill of $200,000 at that date. During 2013 an analysis of the fair value of Roxy's assets determined an impairment of goodwill in the amount of $50,000. 89. At what amount would consolidated goodwill be reported for 2013? A. $150,000. B. $200,000. C. $50,000. D. $0. E. $135,000. 90. What journal entry would be made by Parsons regarding the impairment of goodwill? A. Journal entry A. B. Journal entry B. C. Journal entry C. D. Journal entry D. E. Journal entry E. 91. In comparing U.S. GAAP and international financial reporting standards (IFRS) with regard to a basis for measurement of a noncontrolling interest, which of the following is true? A U.S. GAAP requires acquisition-date fair value measurement and IFRS requires the acquiree's . identifiable net asset fair value measurement. B. U.S. GAAP and IFRS both require acquisition-date fair value measurement. C. U.S. GAAP and IFRS both require the acquiree's identifiable net asset fair value measurement. D U.S. GAAP requires acquisition-date fair value measurement, but IFRS allows an option for acquisition. date fair value measurement. E. U.S. GAAP and IFRS both apportion goodwill to the parent only. 92. Where should a noncontrolling interest appear on a consolidated balance sheet? 93. What is preacquisition income? 94. Beta Corp. owns less than one hundred percent of the voting common stock of Shedds Co. Under what conditions will Beta be required to prepare consolidated financial statements? 95. Where may a noncontrolling interest be presented in a consolidated balance sheet? 96. How would you determine the amount of goodwill to be recognized at date of acquisition when there is a noncontrolling interest present? 97. How is a noncontrolling interest in the net income of an entity reported in the income statement? 98. One company buys a controlling interest in another company on April 1. How should the preacquisition subsidiary revenues and expenses be handled in the consolidated balances for the year of acquisition? 99. Prevatt, Inc. owns 80% of Franklin Company. During the current year, a portion of the investment in Franklin is sold. Prior to recording the sale, Prevatt adjusts the carrying value of its investment. What is the purpose of the adjustment? 100.How does a parent company account for the sale of a portion of an investment in a subsidiary? 101.Alonzo Co. acquired 60% of Beazley Corp. by paying $240,000 cash. There is no active trading market for Beazley Corp. At the time of the acquisition, the book value of Beazley's net assets was $300,000. Required: What amount should have been assigned to the noncontrolling interest immediately after the combination? 102.Tosco Co. paid $540,000 for 80% of the stock of Martz Co. when the book value of Martz's net assets was $600,000. For all of Martz's assets and liabilities, book value and fair value were approximately equal. Required: Using the acquisition method, what amount of goodwill should appear in a consolidated balance sheet prepared immediately after the combination? 103.On January 1, 2011, Elva Corp. paid $750,000 for 80% of Fenton Co. when the book value of Fenton's net assets was $800,000. Fenton owned a building with a fair value of $150,000 and a book value of $120,000. Required: At what amount would the building appear on a consolidated balance sheet prepared immediately after the combination, under the acquisition method of accounting for business combinations? 104.Pennant Corp. owns 70% of the common stock of Scarvens Co. Scarvens' revenues for 2011 totaled $200,000. Required: What amount of Scarvens' revenues would be included in the consolidated revenues under the acquisition method of accounting for business combinations? Caldwell Inc. acquired 65% of Club Corp. for $2,600,000. Club owned a building and equipment with tenyear useful lives. The book value of these assets was $830,000, and the fair value was $950,000. For Club's other assets and liabilities, book value was equal to fair value. The total fair value of Club's net assets was $3,500,000. 105.Using the acquisition method, determine the amount of goodwill associated with Caldwell's purchase of Club. 106.Determine the amount of the noncontrolling interest as of the date of the acquisition. On January 1, 2010, Glenville Co. acquired an 80% interest in Acron Corp. for $500,000. There is no active trading market for Acron's stock. The fair value of Acron's net assets was $600,000 and Glenville accounts for its interest using the acquisition method. 107.Determine the amount of goodwill to be recognized in this acquisition. 108.Determine the value assigned to the noncontrolling interest as of the date of the acquisition. On January 1, 2008, prior to the effective date for use of the acquisition method, Cranston Inc. reported net assets of $1,064,000, although equipment (with a four-year life) with a book value of $616,000 was worth $700,000. Peak Corp. paid $969,000 on that date for an 80% ownership interest in Cranston. Cranston's stock is not actively traded. Peak still owns its 80% interest in 2011. 109.What is the excess amortization for 2011 using the purchase method of accounting for business combinations? 110.What is the consolidated goodwill balance on January 1, 2011, assuming the purchase method of accounting for business combinations is used? On January 1, 2010, Jannison Inc. acquired 90% of Techron Co. by paying $477,000 cash. There is no active trading market for Techron stock. Techron Co. reported a Common Stock account balance of $140,000 and Retained Earnings of $280,000 at that date. The fair value of Techron Co. was appraised at $530,000. The total annual amortization was $11,000 as a result of this transaction. The subsidiary earned $98,000 in 2010 and $126,000 in 2011 with dividend payments of $42,000 each year. Without regard for this investment, Jannison had income of $308,000 in 2010 and $364,000 in 2011. Use the economic unit concept to account for this acquisition. 111.Prepare a proper presentation of consolidated net income for 2010. 112.Prepare a proper presentation of consolidated net income for 2011. 113.What is the noncontrolling interest balance as of December 31, 2011? 114.On January 1, 2009, Vacker Co. acquired 70% of Carper Inc. by paying $650,000. This included a $20,000 control premium. Carper reported common stock on that date of $420,000 with retained earnings of $252,000. A building was undervalued in the company's financial records by $28,000. This building had a ten-year remaining life. Copyrights of $80,000 were to be recognized and amortized over 20 years. Carper earned income and paid cash dividends as follows: On December 31, 2011, Vacker owed $30,800 to Carper. There have been no changes in Carper's common stock account since the acquisition. Required: If the equity method had been applied by Vacker for this acquisition, what were the consolidation entries needed as of December 31, 2011? On January 1, 2011, John Doe Enterprises (JDE) acquired a 55% interest in Bubba Manufacturing, Inc. (BMI). JDE paid for the transaction with $3 million cash and 500,000 shares of JDE common stock (par value $1.00 per share). At the time of the acquisition, BMI's book value was $16,970,000. On January 1, JDE stock had a market value of $14.90 per share and there was no control premium in this transaction. Any consideration transferred over book value is assigned to goodwill. BMI had the following balances on January 1, 2011. For internal reporting purposes, JDE employed the equity method to account for this investment. 115.Prepare a schedule to determine goodwill, and the amortization and allocation amounts. 116.The following account balances are for the year ending December 31, 2011 for both companies. Required: Prepare a consolidation worksheet for this business combination. Assume goodwill has been reviewed and there is no goodwill impairment. 117.McLaughlin, Inc. acquires 70 percent of Ellis Corporation on September 1, 2010, and an additional 10 percent on November 1, 2011. Annual amortization of $8,400 attributed to the controlling interest relates to the first acquisition. Ellis reports the following figures for 2011: Without regard for this investment, McLaughlin earns $480,000 in net income ($840,000 revenues less $360,000 expenses; incurred evenly through the year) during 2011. Required: Prepare a schedule of consolidated net income and apportionment to noncontrolling and controlling interests for 2011. 118.Select True (T) or False (F) for each of the following statements: 1. Tr ue _ _ A parent will recognize a gain or loss if it sells a portion of its_ investment in a subsidiary and maintains control after the sale._ _ 2. A parent sells a portion of its investment in a subsidiary and no longer_ Tr maintains control. This sale of shares represents a remeasurement event for_ ue the investee._ 3. Fa lse _ International financial reporting standards (IFRS) allow an option_ to value the noncontrolling interest with goodwill or to value the_ noncontrolling interest without goodwill._ _ 4. Consolidated net income represents the combined net income of the_ Fa parent and subsidiary after subtracting the noncontrolling interest in the net_ lse income of the subsidiary._ 5. Fa lse _ The total acquisition-date fair value of an acquired firm is the sum_ of the fair value of the controlling interest and the fair value of the_ noncontrolling interest._ _ 6. When control of a subsidiary is acquired on a date other than the first_ Fa day of a fiscal year, excess amortization expenses are pro-rated to include_ lse only the post-acquisition period._ 7. Tr ue _ For a mid-year acquisition following an equity method investment_ of the same company, the consolidated income statement will_ report consolidated revenues and expenses for the entire year._ _ 8. In a step acquisition where the parent previously held a noncontrolling_ Tr interest in the acquired firm, the parent remeasures the prior interest to fair_ ue value._ 9. Fa lse _ When a parent has control over a subsidiary with less than 100 percent_ ownership, and thereafter increases its ownership, the parent remeasures_ the prior interest to fair value._ ch4 Key 1. For business combinations involving less than 100 percent ownership, the acquirer recognizes and measures all of the following at the acquisition date except: A. B. C. D. E. identifiable assets acquired, at fair value. liabilities assumed, at book value. noncontrolling interest, at fair value. goodwill or a gain from bargain purchase. none of these choices is correct. AACSB: Reflective thinking AICPA FN: Measurement Blooms: Knowledge Difficulty: Medium Hoyle - Chapter 04 #1 Learning Objective: 04-02 Describe the valuation principles underlying the acquisition method of accounting for the noncontrolling interest. 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. Hoyle - Chapter 04 2. What amount should have been reported for the land in a consolidated balance sheet at the acquisition date? A. B. C. D. E. $52,500. $70,000. $75,000. $92,500. $100,000. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Easy Hoyle - Chapter 04 #2 Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. 3. What is the total amount of excess land allocation at the acquisition date? A. B. C. D. E. $0. $30,000. $22,500. $25,000. $17,500. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Easy Hoyle - Chapter 04 #3 Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. 4. What is the amount of excess land allocation attributed to the controlling interest at the acquisition date? A. B. C. D. E. $0. $30,000. $22,500. $25,000. $17,500. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #4 Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. 5. What is the amount of excess land allocation attributed to the noncontrolling interest at the acquisition date? A. B. C. D. E. $0. $30,000. $22,500. $7,500. $17,500. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #5 Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. 6. What amount should have been reported for the land in a consolidated balance sheet, assuming the investment was obtained prior to January 1, 2009 and the purchase method of accounting for business combinations was used? A. B. C. D. E. $70,000. $75,000. $85,000. $92,500. $100,000. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #6 Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. Learning Objective: 04-11 Understand the principles of the legacy purchase method in accounting for a noncontrolling interest. 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 noncontrolling interest shares of Float Corp. are not actively traded. Hoyle - Chapter 04 7. What is the total amount of goodwill recognized at the date of acquisition? A. B. C. D. E. $150,000. $250,000. $0. $120,000. $170,000. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #7 Learning Objective: 04-03 Allocate goodwill acquired in a business combination across the controlling and noncontrolling interests. 8. What amount of goodwill should be attributed to Perch at the date of acquisition? A. B. C. D. E. $150,000. $250,000. $0. $120,000. $170,000. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #8 Learning Objective: 04-03 Allocate goodwill acquired in a business combination across the controlling and noncontrolling interests. 9. What amount of goodwill should be attributed to the noncontrolling interest at the date of acquisition? A. B. C. D. E. $0. $20,000. $30,000. $100,000. $120,000. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #9 Learning Objective: 04-03 Allocate goodwill acquired in a business combination across the controlling and noncontrolling interests. 10. What is the dollar amount of noncontrolling interest that should appear in a consolidated balance sheet prepared at the date of acquisition? A. B. C. D. E. $350,000. $300,000. $400,000. $370,000. $0. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #10 Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. 11. 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. B. C. D. E. $1,600,000. $1,480,000. $1,200,000. $1,780,000. $1,850,000. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #11 Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. 12. What is the dollar amount of fair value over book value differences attributed to Perch at the date of acquisition? A. B. C. D. E. $120,000. $150,000. $280,000. $350,000. $370,000. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #12 Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2010. During 2010, Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of excess cost allocations totaled $60,000 in 2010. Hoyle - Chapter 04 13. The noncontrolling interest's share of the earnings of Harbor Corp. is calculated to be A. B. C. D. E. $132,000. $150,000. $168,000. $160,000. $0. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #13 Learning Objective: 04-04 Allocate consolidated net income across the controlling and noncontrolling interests. 14. What is the effect of including Harbor in consolidated net income for 2010? A. B. C. D. E. $350,000. $308,000. $500,000. $440,000. $290,000. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #14 Learning Objective: 04-04 Allocate consolidated net income across the controlling and noncontrolling interests. Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1, 2010. For 2010, 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. Hoyle - Chapter 04 15. In consolidation, the total amount of expenses related to Kailey, and to Denber's acquisition of Kailey, for 2010 is determined to be A. B. C. D. E. $153,750. $161,250. $205,000. $210,000. $215,000. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #15 Learning Objective: 04-08 Understand the impact on consolidated financial statements of a midyear acquisition. 16. What is the effect of including Kailey in consolidated net income for 2010? A. B. C. D. E. $31,000. $33,000. $55,000. $60,000. $39,000. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #16 Learning Objective: 04-08 Understand the impact on consolidated financial statements of a midyear acquisition. 17. What is the amount of net income to the controlling interest for 2010? A. B. C. D. E. $31,000. $33,000. $55,000. $60,000. $39,000. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #17 Learning Objective: 04-08 Understand the impact on consolidated financial statements of a midyear acquisition. 18. What is the amount of the noncontrolling interest's share of Denber's income for 2010? A. B. C. D. E. $22,000. $24,000. $48,000. $66,000. $72,000. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #18 Learning Objective: 04-08 Understand the impact on consolidated financial statements of a midyear acquisition. 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. B. C. D. E. $250,000. $150,000. $600,000. $360,000. $460,000. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #19 Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. 20. 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. B. C. D. E. $375,000. $125,000. $300,000. $500,000. $0. AACSB: Reflective thinking AICPA FN: Measurement Blooms: Comprehension Difficulty: Easy Hoyle - Chapter 04 #20 Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2010 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. Hoyle - Chapter 04 21. What is consolidated net income for 2011 attributable to Royce's controlling interest? A. B. C. D. E. $686,000. $560,000. $644,000. $635,600. $691,600. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #21 Learning Objective: 04-04 Allocate consolidated net income across the controlling and noncontrolling interests. 22. What is the noncontrolling interest's share of the subsidiary's net income for the year ended December 31, 2011 and what is the ending balance of the noncontrolling interest in the subsidiary at December 31, 2011? A. B. C. D. E. $56,000 and $280,000. $50,400 and $218,400. $56,000 and $224,000. $56,000 and $336,000. $50,400 and $330,400. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #22 Learning Objective: 04-04 Allocate consolidated net income across the controlling and noncontrolling interests. Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. 23. What is the consolidated balance of the Equipment account at December 31, 2011? A. B. C. D. E. $644,400. $784,000. $719,600. $770,000. $775,600. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #23 Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. On January 1, 2010, Palk Corp. and Spraz Corp. had condensed balance sheets as follows: On January 2, 2010, 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, 2010. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill. Hoyle - Chapter 04 24. What is consolidated current assets at January 2, 2010? A. B. C. D. E. $127,000. $129,800. $143,800. $148,000. $135,400. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #24 Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. 25. What is consolidated noncurrent assets at January 2, 2010? A. B. C. D. E. $195,000. $192,200. $186,600. $181,000. $169,800. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #25 Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. 26. What is consolidated current liabilities at January 2, 2010? A. B. C. D. E. $53,200. $56,000. $64,400. $42,000. $70,000. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #26 Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. 27. What is consolidated stockholders' equity at January 2, 2010? A. B. C. D. E. $112,000. $133,000. $168,000. $182,000. $203,000. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #27 Learning Objective: 04-06 Identify appropriate placements for the components of the noncontrolling interest in consolidated financial statements. 28. In measuring noncontrolling interest at the date of acquisition, which of the following would not be indicative of the value attributed to the noncontrolling interest? A. B. C. D. E. Fair value based on stock trades of the acquired company. Subsidiary cash flows discounted to present value. Book value of subsidiary net assets. Projections of residual income. Consideration transferred by the parent company that implies a total subsidiary value. AACSB: Reflective thinking AICPA FN: Measurement Blooms: Knowledge Difficulty: Medium Hoyle - Chapter 04 #28 Learning Objective: 04-02 Describe the valuation principles underlying the acquisition method of accounting for the noncontrolling interest. 29. 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. B. C. D. E. Parent company net income equals controlling interest in consolidated net income. Parent company retained earnings equals consolidated retained earnings. Parent company total assets equals consolidated total assets. Parent company dividends equals consolidated dividends. Goodwill will not be recorded on the parent's books. AACSB: Reflective thinking AICPA FN: Measurement Blooms: Comprehension Difficulty: Medium Hoyle - Chapter 04 #29 Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. 30. 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. B. C. D. E. Parent company net income equals consolidated net income. Parent company retained earnings equals consolidated retained earnings. Parent company total assets equals consolidated total assets. Parent company dividends equal consolidated dividends. Goodwill needs to be recognized on the parent's books. AACSB: Reflective thinking AICPA FN: Measurement Blooms: Comprehension Difficulty: Medium Hoyle - Chapter 04 #30 Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. 31. 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. AACSB: Reflective thinking AICPA FN: Measurement Blooms: Comprehension Difficulty: Medium Hoyle - Chapter 04 #31 Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. 32. 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. AACSB: Reflective thinking AICPA FN: Measurement Blooms: Knowledge Difficulty: Medium Hoyle - Chapter 04 #32 Learning Objective: 04-09 Understand the impact on consolidated financial statements when a step acquisition has taken place. 33. Which of the following statements is false regarding multiple acquisitions of a subsidiary's existing common stock? A. B. C. D. E. The parent recognizes a larger percent of subsidiary income. A step acquisition resulting in control may result in a parent recognizing a gain on revaluation. The book value of the subsidiary will increase. The parent's percent ownership in subsidiary will increase. Noncontrolling interest in subsidiary's net income will decrease. AACSB: Reflective thinking AICPA FN: Measurement Blooms: Comprehension Difficulty: Medium Hoyle - Chapter 04 #33 Learning Objective: 04-09 Understand the impact on consolidated financial statements when a step acquisition has taken place. 34. When a subsidiary is acquired sometime after the first day of the fiscal year, which of the following statements is true? A. B. C. D. E. Income from subsidiary is not recognized until there is an entire year of consolidated operations. Income from subsidiary is recognized from date of acquisition to year-end. Excess cost over acquisition value is recognized at the beginning of the fiscal year. No goodwill can be recognized. Income from subsidiary is recognized for the entire year. AACSB: Reflective thinking AICPA FN: Measurement Blooms: Knowledge Difficulty: Easy Hoyle - Chapter 04 #34 Learning Objective: 04-08 Understand the impact on consolidated financial statements of a midyear acquisition. 35. 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. B. C. D. E. Preacquisition earnings are deducted from consolidated revenues and expenses. Preacquisition earnings are added to consolidated revenues and expenses. Preacquisition earnings are deducted from the beginning consolidated stockholders' equity. Preacquisition earnings are added to the beginning consolidated stockholders' equity. Preacquisition earnings are ignored in the consolidated income statement. AACSB: Reflective thinking AICPA FN: Measurement Blooms: Knowledge Difficulty: Medium Hoyle - Chapter 04 #35 Learning Objective: 04-08 Understand the impact on consolidated financial statements of a midyear acquisition. 36. 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. CIf 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. AACSB: Reflective thinking AICPA FN: Measurement Blooms: Knowledge Difficulty: Medium Hoyle - Chapter 04 #36 Learning Objective: 04-10 Record the sale of a subsidiary (or a portion of its shares). 37. 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. AACSB: Reflective thinking AICPA FN: Measurement Blooms: Knowledge Difficulty: Medium Hoyle - Chapter 04 #37 Learning Objective: 04-10 Record the sale of a subsidiary (or a portion of its shares). 38. 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. If control continues, the difference between selling price and carrying value is recorded as an C. 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. AACSB: Reflective thinking AICPA FN: Measurement Blooms: Knowledge Difficulty: Medium Hoyle - Chapter 04 #38 Learning Objective: 04-10 Record the sale of a subsidiary (or a portion of its shares). 39. 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. AACSB: Reflective thinking AICPA FN: Measurement Blooms: Comprehension Difficulty: Medium Hoyle - Chapter 04 #39 Learning Objective: 04-10 Record the sale of a subsidiary (or a portion of its shares). 40. Keefe, Inc., a calendar-year corporation, acquires 70% of George Company on September 1, 2010, and an additional 10% on April 1, 2011. Total annual amortization of $6,000 relates to the first acquisition. George reports the following figures for 2011: Without regard for this investment, Keefe independently earns $300,000 in net income during 2011. All net income is earned evenly throughout the year. What is the controlling interest in consolidated net income for 2011? A. B. C. D. E. $373,300. $372,850. $371,500. $376,000. $372,805. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #40 Learning Objective: 04-08 Understand the impact on consolidated financial statements of a midyear acquisition. McGuire company acquired 90 percent of Hogan Company on January 1, 2010, 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. Hoyle - Chapter 04 41. The acquisition value attributable to the noncontrolling interest at January 1, 2010 is: A. B. C. D. E. $23,400. $24,000. $24,900. $26,000. $20,000. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #41 Learning Objective: 04-02 Describe the valuation principles underlying the acquisition method of accounting for the noncontrolling interest. 42. In consolidation at January 1, 2010, what adjustment is necessary for Hogan's Buildings account? A. B. C. D. E. $2,000 increase. $2,000 decrease. $1,800 increase. $1,800 decrease. No change. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Easy Hoyle - Chapter 04 #42 Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. 43. In consolidation at December 31, 2010, what adjustment is necessary for Hogan's Buildings account? A. B. C. D. E. $1,620 increase. $1,620 decrease. $1,800 increase. $1,800 decrease. No adjustment is necessary. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #43 Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. 44. In consolidation at December 31, 2011, what adjustment is necessary for Hogan's Buildings account? A. B. C. D. E. $1,440 increase. $1,440 decrease. $1,600 increase. $1,600 decrease. No adjustment is necessary. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Easy Difficulty: Medium Hoyle - Chapter 04 #44 Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. 45. In consolidation at December 31, 2010, what adjustment is necessary for Hogan's Equipment account? A. B. C. D. E. $3,000 increase. $3,000 decrease. $2,700 increase. $2,700 decrease. No adjustment is necessary. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #45 Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. 46. In consolidation at December 31, 2011, what adjustment is necessary for Hogan's Equipment account? A. B. C. D. E. $2,000 increase. $2,000 decrease. $1,800 increase. $1,800 decrease. No adjustment is necessary. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Medium Hoyle - Chapter 04 #46 Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. 47. In consolidation at January 1, 2010, what adjustment is necessary for Hogan's Land account? A. B. C. D. E. $7,000 increase. $7,000 decrease. $6,300 increase. $6,300 decrease. No adjustment is necessary. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Easy Hoyle - Chapter 04 #47 Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. 48. In consolidation at December 31, 2010, what adjustment is necessary for Hogan's Land account? A. B. C. D. E. $8,000 decrease. $7,000 increase. $6,300 increase. $6,300 decrease. No adjustment is necessary. AACSB: Analytic AICPA FN: Measurement Blooms: Application Difficulty: Easy Hoyle - Chapter 04 #48 Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. 49. In consolidation at December 31, 2011, what adjustment is necessary for Hogan's Land account? A. B. C. D. E. $7,000 decrease. $7,000 in
