Question 1 (2 points)

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What is the PRIMARY accounting difference between accounting when the subsidiary is dissolved and when the subsidiary retains its incorporation?

Question 1 options:

	if the subsidiary is dissolved, assets and liabilities are consolidated at their book values.
	if the subsidiary retains its incorporation, there will be no goodwill associated with the acquisition
	if the subsidiary retains its incorporation, the consolidation is not formally recorded in the accounting records of the acquiring company
	if the subsidiary is dissolved, it will not be operated as a separate division

Question 2 (2 points)

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On January 1, 2017 Cat Company acquired all of the outstanding stock of Mouse Company. At that time Mouse had a vehicle with a book value of $100,000 and a fair market value of $200,000. This vehicle (on January 1, 2017) had a 10 year life with no salvage and Mouse uses straight-line depreciation. What worksheet entry is needed on December 31, 2018 connected with this equipment?

Question 2 options:

	debit equipment $80,000 credit investment in Mouse $80,000
	debit equipment 100,000 credit investment in Cat 100,000
	debit depreciation expense 10,000 debit retained earnings 10,000 credit accumulated depreciation 20,000
	debit depreciation expense 20,000 credit accumulated depreciation 20,000

Question 3 (2 points)

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On January 1, 2018 the Clark Kent Company acquired 100% of the voting common stock of Lois Lane Inc. The book and fair value of Lois Lane Inc.'s accounts immediately prior to the acquisition are as follows;

Inventory: fmv $ 210,000 book value $170,000

Land: fmv $240,000 book value $220,000

Building (net) $270,000 book value $240,000

Liabilities fmv $420,000 book value $430,000

Common stock: $120,000

retained earnings $240,000

Clark Kent issued 12,000 shares of stock worth $47 per share to acquire Lois Lane. What is the amount of liabilities in this transaction?

Question 3 options:

	$564,000 (47*12000 shares)
	$420,000
	$430,000
	$0 since Clark financed the acquisition with equity

Question 4 (2 points)

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The Zombie Company acquired all of the stock of the Vampire Company in 2000. On October 31st 2018 Zombie Company purchased $500,000 of merchandise (inventory) from the Bosco Company. Zombie sold this merchandise to Vampire Company on December 1st 2018 for $900,000. At the end of 2018, Vampire had not sold any of the merchandise acquired from Zombie. The worksheet entry needed in 2018 would be:

Question 4 options:

	Debit sales 400,000 credit cost of goods sold 400,000
	Debit sales 900,000 credit cost of goods sold 500,000 credit inventory 400,000
	Debit sales 500,000 credit cost of goods sold 500,000
	debit cost of goods sold 500,000 debit inventory 400,000 credit sales 900,000

Question 5 (2 points)

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On January 1, 2018 Dog Company purchased 1000 of the 100,000 shares of Cat Company for $10,000. During 2018 Cat Company had a 2 for 1 stock split. Because of this split, Dog Company should

Question 5 options:

	show an investment of 1000 shares with a value of $10,000 based on the original purchase
	show an investment of 2000 shares worth $20,000 with a gain of $10,000
	show an investment of 2000 shares worth $10,000 with no gain
	show an investment of 2000 shares worth $20,000 with an unrealized holding gain of $10,000.

Question 6 (2 points)

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The Colt Company owns 100% (1000 of the 1000 shares) of the Texan Company. The Texan Company has 10,000 shares of preferred stock and reported income of $60,000. The Texan Company reported income of $240,000. The dividend on the preferred stock is $10,000. What is Colt's earnings per share (EPS)

Question 6 options:

	$30.00
	$24.00
	$29.00
	6.00

Question 7 (2 points)

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Where do dividends paid by a subsidiary to NCI appear on the consolidated statement of cash flows?

Question 7 options:

	as an outflow from financing activities
	as an outflow from operating activities
	dividends of a subsidiary are not shown on the consolidated cash flow statement
	as an outflow from investing activities

Question 8 (2 points)

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On January 3rd 2018 Batman Company acquired 1500 of the 10,000 voting shares of Joker Company for $15,000. With this investment, Batman has no influence over Joker. During 2018, Joker paid a $1 per share dividend, reported income of $90,000 and on December 31 Joker's stock was selling for $7 per share. The impact on the 2018 financial statements of Batman due to its investment in Joker is:

Question 8 options:

	+1500 for the dividend received
	-3000 dividend minus decline in stock value
	+10,500 for its share of Joker income
	-4500 due to the decline in Joker stock

Question 9 (2 points)

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On January 1, 2000 Homer Company purchased all of the stock of Simpson Company. On January 1, 2017 Homer Company sold a piece of land to Simpson Company for $40,000. Homer had purchased the land in 2010 for $10,000. What worksheet entry is needed in 2018 connected with this land?

Question 9 options:

	debit r/e 40,000 credit land 40,000
	none, since the consolidated entity still owns the land
	debit gain 30,000 credit land 30,000
	debit r/e 30,000 credit land 30,000

Question 10 (2 points)

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On January 1, 2010 Froto Company purchased 30% of Gandoff company and accounted for this investment under the equity method. On January 1, 2018 Froto sold two-thirds of its investment in Gandoff. With this sale, Froto no longer has influence over Gandoff. How should Froto account for this change?

Question 10 options:

	Froto should use the fair-value method for 2018 and future years but should not make a retrospective adjustment to the investment account
	Froto should continue to use the equity method to maintain consistency in its financial statements
	Froto should restate the prior years' financial statements and change the balance in the investment account as if the fair-value method had been used since 2010
	Froto has the option of using either the equity method or the fair-value method for 2010 and future years