Parent Co. purchases all the common stock of Subsidiary Co. On January 1, 2010, Parent sells a machine with a net book value of $30,000 to Subsidiary for $40,000. Subsidiary uses straight-line depreciation and intends to use the machine for five years. What is the net effect of the related consolidation adjustment entries on the profit (before tax) in the year 2011?

Select one:

a. Increase $2,000

b. Increase $10,000

c. No effect

d. Decrease $2,000

Parent company (P Co) paid $180,000 to acquire 60% interest in Subsidiary (S Co) when the share capital of S was $110,000 and its retained earnings was $100,000. At the date of acquisition (January 1 2015), the excess of fair value over book values of S Co were $50,000, which were caused by an undervalued fixed asset. The undervalued fixed asset had a useful life 10 years from date of acquisition. The fair value of non-controlling interests as at the date of acquisition was $114,000. On December 31 2019, retained earnings of S was $210,000 and share capital remain unchanged since acquisition date. Tax rate is 20%. The undepreciated portion of the fair value adjustment (after-tax) on December 31 2019 is:

Select one:

a. $20,000

b. $8,000

c. $14,000

d. $25,000

Which of the following is incorrect?

Select one:

a. Accounting and consulting fees incurred in a business combination are expenses under the current standards for acquisitions.

b. Under acquisition accounting, acquisition costs are expensed.

c. Security issue costs reduce the proceeds from the issue of shares.

d. Under acquisition accounting, acquisition cost are recorded by decreasing goodwill as a contra account.

Parent company (P Co) owned 100% of Subsidiary Company (S Co). P Co purchased inventory from S Co at 140% of Subsidiarys cost. During 2019, S Co sold inventory that had cost it $40,000 to P Co. P Co sold all of this inventor to unrelated party for $81,200 during 2019. The consolidated adjustment entry needs to:

Select one:

a. Debit Sale $16,000

b. Credit Cost of Sale $56,000

c. Credit Cost of Sale $40,000

d. Debit Cost of Sale $56,000

Parent company (P Co) owned 100% of Subsidiary Company (S Co). P Co purchased inventory from S Co at 140% of Subsidiarys cost. During 2019, S Co sold inventory that had cost it $40,000 to P Co. P Co sold all of this inventor to unrelated party for $81,200 during 2019. What amount should be eliminated from revenue in preparing the consolidated financial statements?

Select one:

a. $16,000

b. $81,200

c. $40,000

d. $56,000