Question
Sleepy Company, a 70%-owned subsidiary of Pickle Corporation, reported net income of $600,000 and paid dividends totaling $225,000 during Year 3. Year 3 amortization of
Sleepy Company, a 70%-owned subsidiary of Pickle Corporation, reported net income of $600,000 and paid dividends totaling $225,000 during Year 3. Year 3 amortization of differences between current fair values and carrying amounts of Sleepy's identifiable net assets at the date of the business combination was $112,500. The noncontrolling interest in consolidated net income of Sleepy for Year 3 was:
| A. | $33,750. | |
| B. | $67,500. | |
| C. | $180,000. | |
| D. | $146,250. |
The workpaper entry in the year of sale to eliminate unrealized intercompany profit in ending inventory includes a:
| A. | credit to Ending Inventory (Cost of Sales). | |
| B. | debit to Ending Inventory (Cost of Sales). | |
| C. | credit to Sales. | |
| D. | debit to Inventory - Balance Sheet. |
In determining controlling interest in consolidated income in the consolidated financial statements, unrealized intercompany profit on inventory acquired by a parent from its subsidiary should:
| A. | be eliminated to the extent of the parent company's controlling interest in the subsidiary. | |
| B. | be eliminated to the extent of the noncontrolling interest in the subsidiary. | |
| C. | be eliminated in full. | |
| D. | not be eliminated. |
If the fair value of the subsidiary's identifiable net assets exceeds both the book value and the value implied by the purchase price, the workpaper entry to eliminate the investment account:
| A. | debits Difference Between Implied and Book Value. | |
| B. | credits Difference Between Implied and Book Value. | |
| C. | debits Excess of Fair Value over Implied Value. | |
| D. | debits Difference Between Implied and Fair Value. |
P Company regularly sells merchandise to its 80%-owned subsidiary, S Corporation. In 2016, P sold merchandise that cost $192,000 to S for $240,000. Half of this merchandise remained in S's December 31, 2016 inventory. During 2017, P sold merchandise that cost $300,000 to S for $375,000. Forty percent of this merchandise inventory remained in S's December 31, 2017 inventory. Selected income statement information for the two affiliates for the year 2017 is as follows:
| P | S |
| Sales Revenue | $1,800,000 | $900,000 | |
| Cost of Goods Sold | 1,440,000 | 750,000 | |
| Gross profit | $ 360,000 | $150,000 |
Consolidated sales revenue for P and Subsidiary for 2017 are:
| A. | $2,700,000. | |
| B. | $2,565,000. | |
| C. | $2,325,000. | |
| D. | $2,400,000. |
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No Nonsense Employee Retention Audit
Authors: Jeff Kortes
1st Edition
0988307014, 978-0988307018
