Problem I. (30C.P.A.Multiple Choice Questions).

Part A. Use the following fact pattern to answer multiple choice questions 1 through 15, with sub-instructions for particularquestions:

On January 1, 2018, Parent Co. acquired 80% of Sub Inc. by paying $800,000. Non-controlling interest was valued at $200,000. Sub reported common stock on that date of $520,000 with retained earnings of $352,000. A building was undervalued in the company's financial recordsby

$18,000. This building had a ten-year remaining life. Copyrights of $80,000 were notrecognized and should be amortized over 20 years. Sub earned income and paid cash dividends asfollows:

NetIncome DividendsPaid

2018 $115,000 $64,600

2019 $144,400 $71,600

2020 $164,000 $94,000

On December 31, 2020, the Parent owed $20,800 to Sub Inc. There have been no changesin Sub's common stock account since theacquisition.

To answer questions 1 through 3, prepare the allocation of the acquisition onJanuary 1, 2018. In your presentation, but sure to show the excess fair value over cost allocated to the identifiable assets, and any resulting goodwill. In addition, for the identifiable assets, be sure to calculatethe annual amortization of excess fair value over bookvalue.

1. What is the fair value of Sub Co. at the acquisition date (1/1/18)? A. $825,000.

B. $1,000,000.

C.$800,000.

D.$200,000.

1.How much is the allocation of the excess fair value allocated tocopyright? A. $64,000.

B.$8,000.

C.$72,000.

D.$80,000.

2.The goodwill resulting from this 80% acquisitionis? A. $30,000.

B.$24,000.

C.$48,000.

D.$0.

To answer questions 4 through 7, preparejournal entriesthat Parent is required to record associated with the investment under the Equity Method in2020beforeconsolidation.

3.The journal entry to record Sub Co.'s income for 2020 would requirea:

A.Debit to Equity in Sub Earnings,$131,200.

B.Credit to Equity in Sub Earnings,$164,000.

C.Credit to Equity in Sub Earnings,$131,200.

D.Debit to Investment in Sub Co.,$164,000.

4.The journal entry to record the parent's receipt of the Sub Co. dividend for 2020 wouldrequire a:

A.Debit to Equity in Sub Earnings,$75,200.

B.Credit to Equity in Sub Earnings,$75,200.

C.Debit to Investment in Sub. Co.,$75,200.

D.Credit to Investment in Sub. Co.,$75,200.

5.The journal entry to record the excess amortization for 2020 would requirea:

A.Debit to Equity in Sub Earnings,$4,640.

B.Credit to Investment in Sub Co.,$5,800.

C.Debit to Equity in Sub Earnings,$5,800.

D.Debit to Amortization Expense,$4,640.

6.At the end of 2020, after recording all the necessary journal entries, what is the balance inthe Investment in Sub Co.account?

A.$835,680.

B.$940,640.

C. $1,140,640.

D.$937,160.

7) At the end of 2020, after recording all the necessary journal entries, what is the balance inthe Investment in Sub Co.account?

A.$835,680.

B.$940,640.

C. $1,140,640.

D.$937,160.

Questions 8 through 11involve Worksheet Entries for2020:

8.Consolidation Worksheet Entry Swould require a debit to Retained Earnings-S for:

A. $475,200.

B.$506,560.

C. $492,640.

D. Unable todetermine.

9.Consolidation Worksheet Entry Swould require a credit to Non-controlling Interestfor:

A. $203,540.

B.$198,310.

C. $199,040.

D.$201,775.

10.Consolidation Worksheet Entry Awould require a credit to Non-controlling Interest for:

A. $24,340.

B.$25,600.

C. $22,120.

D.$23,280.

11.Consolidation Worksheet Entry Awould require a debit to Building for:

A. $12,600.

B.$14,400.

C. $11,520.

D.$10,080.

Questions 12 and 13requires use ofExhibit 1below for2020:

Exhibit 1: Worksheet for Income Statement(2020)

IncomeStatement Parent SubCo. Debit Credit NCI Consolidated

Revenues (810,000) (504,000) ? ? ? ?

Cost of GoodsSold 344,000 200,000 ? ? ? ?

DepreciationExpense 60,000 20,000 ? ? ? ?

AmortizationExpense 170,000 120,000 ? ? ? ?

Equity in SubEarnings ? 0 ? ? ? ?

Separate NetIncome ? ? ? ? ? ?

Note: Equity in Sub Earnings above has been intentionally left blank as well as separate net incomes.

12.Calculate the Non-controlling interest income for 2020 usingExhibit 1above. How muchis the NCI income for2020?

A.$32,800.

B.$32,480.

C. $31,640.

D.$32,000.

13.Calculate the controlling interest income for 2020 usingExhibit 1above. How much is the controlling interest income for2020?

A.$362,560.

B.$394,200.

C. $236,000.

D.$354,800.

Questions 14 and 15requires use ofExhibit 2below for2020:

Exhibit 2: Worksheet for Balance Sheet (partial)(2020)

Balance Sheet(selected) Parent SubCo Debit Credit NCI Consolidated

Buildings(net) 304,000 470,200

Copyrights(net) 880,000 540,000

Non-controllingInterest

Hint: When calculating NCI, do not forget dividends from Retained EarningsStatement.

14.Using data inExhibit 2above, what would be the consolidated balances for Buildingsand Copyrights, respectively at the balance sheetdate?

A. $772,400;$1,416,000.

B. $772,400;$1,496,000.

C. $786,800; $1,488,000.

D. $786,800;$1,416,000.

15.Using data inExhibit 2above, what would be the Non-controlling interest in the subsidiary at the balance sheetdate?

A.$253,960.

B.$222,320.

C. $216,440.

D.$235,160.

Part B. Use the following fact pattern to answer multiple choice questions 16 through 30, with sub-instructions for particularquestions:

Andrea Co. acquired 70% of Calabrese Co. on January 1, 2016. At the date of acquisition, the excess acquisition price was allocated partly to undervalued building of $108,000 (6-year remaining life) and undervalued capitalized software of $860,000 (20-year remaining life).The remaining excess was allocated to goodwill of$130,000.

Various Intra-Entity Transactions Were Recorded by the RelatedCompanies:

On February 13, 2018, Andrea Co. sold land to Calabrese Co. for $1,200,000 cash. The land had been acquired by Andrea Co. in 1987 for $380,000. On March 1, 2020, Calabrese Co. sold the land to unaffiliated buyers for$1,320,000.

On January 1, 2019, Andrea sold equipment to Calabrese Co. for $140,000. The equipmenthad been acquired by Andrea in 2015 at a cost of $120,000 and had a remaining book valueof

$100,000 at the date of transfer. The equipment had a remaining useful life of 10years.

In 2018 through 2020, Andrea transferred finished goods to Calabrese Co.Note: Round all gross profit rates to the nearest 100^th.

Period Cost TransferPrice Unsold Goods atYear-end*.

2018 $50,000 $70,000 $ 12,000

2019 $60,000 $ 100,000 $ 30,000

2020 $90,000 $ 120,000 $ 50,000

*The ending inventories are at transferprice.

Questions 16 through 20involves Worksheet Entries for2020:

16.Consolidation Worksheet Entry Awould requirea:

A.Debit Capitalized Software,$651,000.

B.Credit Non-controlling Interest,$237,900.

C.Credit Investment in Calabrese Co.,$597,800.

D.Debit Building,$18,000.

17.In 2020, if Calabrese Co. earned income of $220,000, and declared and paid dividendsof

$60,000,Consolidation Worksheet Entry Iwould requirea:

A.Debit Investment in Calabrese Co.,$112,000.

B.Debit Equity in Sub Earnings,$111,300.

C.Credit to Equity in Sub Earnings,$154,000.

D.Credit to Investment in Calabrese Co.,$112,000.

Question 18requires use ofExhibit 3below for2020:

Exhibit 3: Worksheet for Balance Sheet (partial)(2020)

Balance Sheet(selected) Parent Subsidiary Debit Credit NCI Consolidated

Buildings(net) 780,000 490,000

Capitalized Software(net) 318,000 260,000

18.Using data inExhibit 3above, given the inter-entity transactions, what would be the consolidated balances for Buildings and Capitalized Software, respectively, at the balancesheet date?

A. $1,270,000;$1,223,000.

B. $1,270,000;$1,180,000.

C. $1,316,000;1,440,000.

D. $1,288,000;$1,223,000.

19.The unsold finished goods at 12/31/19 were sold in 2020.Consolidation WorksheetEntry

*Gat December 31, 2020 would requirea:

A.Credit to Cost of Goods Sold,$8,400.

B.Debit to Retained Earnings (Seller),$12,000.

C.Credit to Investment in Calabrese Co.,$12,000.

D.Debit to Cost of Goods Sold,$30,000.

20.During 2020, assume that Andrea sold the finished goods to Calabrese on account.The

journal entryto record the transfer would requirea:

A.Credit Cost of Goods Sold, $120,000, on the seller'sbooks.

B.Debit Inventory, $90,000, on the buyer'sbooks.

C.Credit Cash, $120,000, on the buyer'sbooks.

D.Debit Due from Subsidiary, $120,000, on the seller'sbooks.

21.Consolidation Worksheet Entry TIat the end of 2020 would requirea:

A.Debit to Land-P,$920,000.

B.Credit to Gain on Sale,$540,000.

C.Credit to Cost of Goods Sold,$120,000.

D.Debit to Sales,$90,000.

22.Consolidation Worksheet Entry Gat the end of 2020 would requirea:

A.Credit to Sales,$120,000.

B.Credit to Inventory,$12,000.

C.Debit to Cost of Goods Sold,$12,500.

D.Debit to Inventory,$12,500.

Question 23requires use ofExhibit 4below for2020:

Exhibit4:WorksheetforIncomeStatement(partial)(2020)

Income Statement(selected) Parent Subsidiary Debit Credit NCI Consolidated

Cost of GoodsSold 480,000 366,000

23.Using data inExhibit 4above, given the inter-entity transactions, what would be the consolidated balance of Cost of Goods Sold at the end of2020?

A.$726,500.

B.$738,500.

C.$846,500.

D.$858,500.

24.In 2020,Consolidation Worksheet Entry *TAwould requirea:

A.Credit to Equipment,$16,000.

B.Debit to Gain on Sale,$40,000.

C.Credit to Accumulated Depreciation,$60,000.

D.Debit to Equipment,$20,000.

Question 25requires use ofExhibit 5below for2020:

Exhibit5:WorksheetforIncomeStatement(partial)(2020)

Income Statement(selected) Parent Subsidiary Debit Credit NCI Consolidated

DepreciationExpense 48,000 32,000

25.Using data inExhibit 5above, given the inter-entity transactions, what would be the consolidated balance of Depreciation Expense at the end of2020?

A.$80,000.

B.$72,000.

C. $84,000.

D.$76,000.

Questions 26 through 28requires use ofExhibit 6below for2020:

Exhibit6:WorksheetforBalanceSheet(partial)(2020)

Balance Sheet(selected) Parent Subsidiary Debit Credit NCI Consolidated

Equipment 400,000 360,000

AccumulatedDepreciation (180,000) (110,000)

26.Using data inExhibit 6above, given the inter-entity transactions, what would be the consolidated balance of Equipment at the end of 2020?

A.$756,000.

B.$740,000.

C. $780,000.

D.$778,000.

27.Using data inExhibit 6above, given the inter-entity transactions, what would be the consolidated balance of Accumulated Depreciation at the end of2020?

A.$294,000.

B.$286,000.

C. $242,000.

D.$238,000.

28.Using data inExhibit 6above, given the inter-entity transactions, what would be the consolidated book value of the equipment at the end of2020?

A.$542,000.

B.$548,000.

C. $560,000.

D.$540,000.

Question 29requires use ofExhibit 7below for2020:

Exhibit 7: Worksheet for Balance Sheet (partial)(2020)

Balance Sheet(selected) Parent Subsidiary Debit Credit NCI Consolidated

Land 1,460,000 886,000

Remember: The subsidiary sold the land in 2020 to unrelatedbuyers.

29.Using data inExhibit 7above, given the inter-entity transactions, what would be the consolidated balance of Land at the end of2020?

A.$3,666,000.

B.$2,346,000.

C. $2,342,000.

D.$1,980,000.

30.Assuming the land is the only property disposition in the consolidated group for 2020,how much gain should be reported on the consolidated balance sheet at the end of theyear?

A.$0.

B.$120,000.

C. $820,000.

D.$940,000.