Question 4 to 9 are based on the following data concerning Procter Company and its 100%-owned subsidiary, Sanford Company. The balance sheets of Procter Company and Sanford Company at December 31, 19x4, are as follows

AssetsProcterSanford

Cash2 100 000350 000

Inventory1 400 000350 000

Long-Term Assets (Net)17 500 0002 800 000

Investment in Sanford Company 2 800 000

Total23 800 0003 500 000

Equities

Liabilities7 000 0001 400 000

Common stock8 400 0001 400 000

Retained Earnings8 400 000700 000

Total23 800 0003 500 000

When you are answering questions 4 to 9, each question should be assumed to be independent of every other question. Where appropriate, the excess of acquisition price over book value should be amortized over 20 years.

1) When Procter Company acquired the capital stock of Sanford Company, the acquisition price was $2,800,000. On a consolidated balance sheet prepared as of December 31, 19x4, the amount shown as "Excess of Acquisition Cost Over Book Value" would be

A. $700,000.

B. $1,400,000.

c. $2,100,000.

D. $2,800,000.

2) All of Sanford Company's capital stock was acquired by Procter Company on January 1, 19x4, for $2,800,000. During 19x4, Sanford Company earned $300,000 and paid $300,000 in dividends. On January 1, 19x4, it was determined that the book value of Sanford Company's assets was exactly equal to their fair market value. Procter Company uses the equity method of accounting for its investment in Sanford Company. On a consolidated balance sheet prepared as of December 31, 19x4, the amount shown as "Retained Earnings" would be

A. $8,000,000.

B. $8,365,000.

c. $8,400,000.

D. $9,100,000.

3) On January 1, 19x3, Procter Company acquired all of the stock of Sanford Company for $2,625,000. Sanford Company's net income during 19x3 and 19x4 totaled $997,500, and dividends paid during the same period totaled $822,500. During 19x4 Sanford Company sold goods to Procter Company for $525,000. These goods had cost $350,000 when purchased from an outsider. One-fifth of these goods were still in Procter Company's inventory on December

31, 19x4. At the date of acquisition, the book value of the assets of Sanford Company was exactly equal to their fair market value. On a consolidated balance sheet prepared as

of December 31, 19x4, the amount shown as "Inventory" would be

A. $1,400,000.

B. $1,575,000.

c. $1,715,000.

D. $1,750,000.

4) Assuming the same data as in question 6, the balance shown on a consolidated balance sheet as of December 31, 19x4, for "Retained Earnings" would be

A. $9,100,000. c. $8,365,000.

B. $8,400,000. D. $8,295,000.

5) Procter Company acquired the capital stock of Sanford Company on January 1, 19x4, for $2,450,000. During 19x4 Sanford Company had net income of $450,000 and paid $100,000 in dividends. The equity method of accounting is used by Procter Company to record its investment in Sanford Company. On January 1, 19x4, the long-term assets of Sanford Company had a fair market value that was $175,000 in excess of their book value. These assets are being depreciated over a 10-year life using the straightline method of depreciation. On a consolidated balance sheet prepared as of December 31, 19x4, the amount shown as "Long-Term Assets (Net)" would be

A. $20,300,000. c. $20,457,500.

B. $20,395,000. D. $20,825,000.

6) Assuming the same facts as in question 8, the balance shown on a consolidated balance sheet as of December 31, 19x4, for "Retained Earnings" would be

A. $8,330,000. c. $8,382,500.

B. $8,356,250. D. $8,400,000.