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ch4 Key
1. According to SFAS 160, Non-controlling Interests and
Consolidated Financial Statements, a non-controlling interest is
most likely to be shown as part of equity under the A. Partial
equity concept B. Proportionate consolidation concept C. Economic
unit concept D. Parent company concept E. Proprietary concept
Difficulty: Easy Hoyle - Chapter 04 #1
When Jolt Co. acquired 75% of the common stock of Yelts Corp.,
Yelts owned land with a book value of $70,000 and a fair value of
$100,000.
Hoyle - Chapter 04
2. What amount should have been reported for the land on a
consolidated balance sheet, according to SFAS 141(R), assuming the
economic unit concept was used? A. $70,000 B. $75,000 C. $85,000 D.
$92,500 E. $100,000
Difficulty: Easy Hoyle - Chapter 04 #2
3. What amount of excess land allocation would be included for
the calculation of non-controlling interest, according to SFAS
141(R)? A. $0 B. $7,500 C. $17,500 D. $25,000 E. $70,000
Difficulty: Easy Hoyle - Chapter 04 #3
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4. What amount should have been reported for the land on a
consolidated balance sheet, assuming the investment was obtained
prior to SFAS 141(R) and the parent company concept was used? A.
$70,000 B. $75,000 C. $85,000 D. $92,500 E. $100,000
Difficulty: Medium Hoyle - Chapter 04 #4
Perch Co. acquired 80% of the common stock of Float Corp. for
$1,600,000. The fair value of Float's net assets was $1,850,000 and
the book value was $1,500,000. The non-controlling interest shares
of Float Corp. are not actively traded.
Hoyle - Chapter 04
5. What is the total amount of goodwill recognized according to
the economic unit concept per SFAS 141 (R)? A. $150,000 B. $250,000
C. $0 D. $120,000 E. $170,000
Difficulty: Medium Hoyle - Chapter 04 #5
6. What amount of goodwill should be attributed to Perch
according to the economic unit concept per SFAS 141(R)? A. $150,000
B. $250,000 C. $0 D. $120,000 E. $170,000
Difficulty: Medium Hoyle - Chapter 04 #6
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7. What amount of goodwill should be attributed to the
non-controlling interest according to the economic unit concept per
SFAS 141(R)? A. $0 B. $20,000 C. $30,000 D. $100,000 E.
$120,000
Difficulty: Medium Hoyle - Chapter 04 #7
8. What is the dollar amount of non-controlling interest which
should appear on a balance sheet prepared immediately after
consolidation according to the economic unit concept per SFAS
141(R)? A. $350,000 B. $300,000 C. $400,000 D. $370,000 E. $0
Difficulty: Medium Hoyle - Chapter 04 #8
9. What is the dollar amount of Float Corp.'s net assets that
would be represented on a balance sheet prepared immediately after
consolidation according to the economic unit concept per SFAS
141(R)? A. $1,600,000 B. $1,480,000 C. $1,200,000 D. $1,780,000 E.
$1,850,000
Difficulty: Medium Hoyle - Chapter 04 #9
10. What is the dollar amount of non-controlling interest which
should appear on a balance sheet prepared immediately after
consolidation according to the parent company concept? A. $350,000
B. $300,000 C. $400,000 D. $250,000 E. $0
Difficulty: Medium Hoyle - Chapter 04 #10
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Femur Co. owns 70% of the voting common stock of Harbor Corp.
During 2009, Harbor had revenues of $2,500,000 and expenses of
$2,000,000. The amortization of excess cost allocations totaled
$60,000 in 2009. Femur Co. accounts for its consolidations
according to SFAS 141(R) and SFAS 160.
Hoyle - Chapter 04
11. The non-controlling interest's share of the earnings of
Harbor Corp. is calculated to be A. $132,000 B. $150,000 C.
$168,000 D. $160,000 E. $0
Difficulty: Medium Hoyle - Chapter 04 #11
12. What is the net effect of the inclusion of Harbor on
consolidated net income for 2009? A. $350,000 B. $308,000 C.
$500,000 D. $440,000 E. $290,000
Difficulty: Medium Hoyle - Chapter 04 #12
Denber Co. acquired 60% of the common stock of Kailey Corp. on
September 1, 2009. For 2009, Kailey reported revenues of $800,000
and expenses of $620,000. The annual amount of amortization related
to this acquisition was $15,000. Denber Co. accounts for its
consolidations according to SFAS 141(R) and SFAS 160.
Hoyle - Chapter 04
13. In consolidation, the total amount of expenses related to
Kailey and to Denber's acquisition of Kailey for 2009 is determined
to be A. $206,667 B. $211,667 C. $221,667 D. $620,000 E.
$635,000
Difficulty: Medium Hoyle - Chapter 04 #13
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14. The impact of the consolidation on consolidated net income
for 2009 is determined to be A. $31,000 B. $33,000 C. $55,000 D.
$60,000 E. $39,000
Difficulty: Medium Hoyle - Chapter 04 #14
15. The non-controlling interest's share of Denber's income for
2009 is calculated to be A. $22,000 B. $24,000 C. $48,000 D.
$66,000 E. $72,000
Difficulty: Medium Hoyle - Chapter 04 #15
16. MacHeath Inc. bought 60% of the outstanding common stock of
Nomes Inc. in a business combination that resulted in the
recognition of goodwill. Nomes owned a piece of land that cost
$250,000 but was worth $600,000 at the date of purchase. What value
would be attributed to this land in a consolidated balance sheet at
the date of takeover, according to the economic unit concept per
SFAS 141(R) and the parent company concept per SFAS 141?
A. Entry A B. Entry B C. Entry C D. Entry D E. Entry E
Difficulty: Medium Hoyle - Chapter 04 #16
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17. Kordel Inc. holds 75% of the outstanding common stock of
Raxston Corp. Raxston currently owes Kordel $500,000 for inventory
acquired over the past few months. In preparing consolidated
financial statements, what amount of this debt should be
eliminated? A. $375,000 B. $125,000 C. $300,000 D. $500,000 E.
$0
Difficulty: Easy Hoyle - Chapter 04 #17
Royce Co. acquired 60% of Park Co. for $420,000 when Park's book
value was $560,000. On that date, Park had equipment (with a
ten-year life) that was undervalued in the financial records by
$140,000. Two years later, the following figures were reported by
the two companies (stockholders' equity accounts have been omitted
from their separate operations). Royce accounts for its
consolidations according to SFAS 141(R) and SFAS 160.
Hoyle - Chapter 04
18. What is consolidated net income that is attributable to
Royce's controlling interest? A. $686,000 B. $560,000 C. $644,000
D. $635,600 E. $691,600
Difficulty: Medium Hoyle - Chapter 04 #18
19. What is the non-controlling interest's share of the
subsidiary's net income and what is the ending balance of the
non-controlling interest in the subsidiary? A. $50,400 and $324,800
B. $53,648 and $304,500 C. $56,000 and $296,800 D. $52,640 and
$313,600 E. $55,270 and $297,300
Difficulty: Hard Hoyle - Chapter 04 #19
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20. What is the consolidated balance of the Equipment account?
A. $666,400 B. $604,000 C. $756,000 D. $711,200 E. $764,000
Difficulty: Medium Hoyle - Chapter 04 #20
On January 1, 2009, Palk Corp. and Spraz Corp. had condensed
balance sheets as follows: On January 2, 2009, Palk borrowed
$84,000 to acquire 90% of the outstanding common shares of Spraz.
This was to be paid in ten equal annual principal payments, plus
interest, beginning December 31, 2009. The excess consideration
transferred over the underlying book value of the acquired net
assets was allocated 60% to inventory and 40% to goodwill. Palk
accounts for its consolidations according to SFAS 141(R) and SFAS
160.
Hoyle - Chapter 04
21. What is consolidated current assets as of January 2, 2009?
A. $138,600 B. $134,400 C. $126,000 D. $140,000 E. $127,400
Difficulty: Medium Hoyle - Chapter 04 #21
22. What is consolidated noncurrent assets as of January 2,
2009? A. $182,000 B. $190,400 C. $187,600 D. $191,333 E.
$189,000
Difficulty: Medium Hoyle - Chapter 04 #22
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23. What is consolidated current liabilities as of January 2,
2009? A. $70,000 B. $56,000 C. $64,400 D. $42,000 E. $58,100
Difficulty: Medium Hoyle - Chapter 04 #23
24. Under the economic unit concept, which of the following
statements is true about consolidated financial statements? A. The
accounting emphasis in preparing consolidated financial statements
is placed on the business combination being formed B. The
accounting emphasis in preparing consolidated financial statements
is placed on the parent's investment C. The objective of
consolidated financial statements is to serve as a report to the
stockholders of the parent company D. The economic unit concept is
a hybrid of the proportionate consolidation concept and the parent
company concept E. The economic unit concept is no longer allowed
according to SFAS 141(R)
Difficulty: Medium Hoyle - Chapter 04 #24
25. Under the proportionate consolidation concept, which of the
following statements is true about consolidated financial
statements? A. The accounting emphasis in preparing consolidated
financial statements is placed on the business combination being
formed B. Holding control of a subsidiary provides the parent with
an indivisible interest in that company C. The objective of
consolidated financial statements is to serve as a report to the
stockholders of the parent company D. The proportionate
consolidation concept is a hybrid of the economic unit concept and
the parent company concept E. The proportionate consolidation
concept is no longer allowed according to SFAS 141(R)
Difficulty: Medium Hoyle - Chapter 04 #25
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26. Under the parent company concept, which of the following
statements is false about consolidated financial statements? A.
Holding control of a subsidiary provides the parent with an
indivisible interest in that company B. Consolidated financial
statements are produced primarily for the benefit of the parent
company stockholders C. The non-controlling interest is calculated
at book value amounts D. A portion of the subsidiary net assets is
valued at book value and a portion is valued at fair value E. All
of the subsidiary net assets are valued at fair value
Difficulty: Medium Hoyle - Chapter 04 #26
27. When a parent uses the equity method throughout the year to
account for investment in a subsidiary, which of the following
statements is false before making adjustments on the consolidated
worksheet? A. Parent company net income equals controlling interest
in consolidated net income B. Parent company retained earnings
equals consolidated retained earnings C. Parent company total
assets equals consolidated total assets D. Parent company dividends
equals consolidated dividends E. Goodwill may need to be
recorded
Difficulty: Medium Hoyle - Chapter 04 #27
28. When a parent uses the initial value method throughout the
year to account for investment in a subsidiary, which of the
following statements is true before making adjustments on the
consolidated worksheet? A. Parent company net income equals
consolidated net income B. Parent company retained earnings equals
consolidated retained earnings C. Parent company total assets
equals consolidated total assets D. Parent company dividends equals
consolidated dividends E. Goodwill is never recognized
Difficulty: Medium Hoyle - Chapter 04 #28
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29. When a parent uses the partial equity method throughout the
year to account for investment in a subsidiary, which of the
following statements is false before making adjustments on the
consolidated worksheet? A. Parent company net income will equal
controlling interest in consolidated net income when initial value,
book value and fair value of the investment are equal B. Parent
company net income will exceed controlling interest in consolidated
net income when fair value acquired exceeds book value C. Parent
company net income will be less than controlling interest in
consolidated net income when fair value acquired exceeds book value
D. Goodwill will be recognized if acquisition value exceeds fair
value E. Subsidiary net assets are valued at their book values
Difficulty: Hard Hoyle - Chapter 04 #29
30. In a step acquisition, using the economic unit concept per
SFAS 141(R), which of the following statements is false? A. The
acquisition method views a step acquisition essentially the same as
a single step acquisition B. Income from subsidiary is computed by
applying a partial year for a new purchase acquired during the year
C. Income from subsidiary is computed for the entire year for a new
purchase acquired during the year D. Obtaining control through a
step acquisition is a significant re-measurement event E.
Pre-acquisition earnings are not included on the consolidated
income statement
Difficulty: Medium Hoyle - Chapter 04 #30
31. Which of the following statements is false regarding
multiple acquisitions of a subsidiary's existing common stock and
using the economic unit concept? A. The parent recognizes a larger
percent of income from subsidiary B. A step acquisition resulting
in control may result in a parent recognizing a gain on revaluation
C. The book value of the subsidiary will increase D. The parent's
percent ownership in subsidiary will increase E. Non-controlling
interest in subsidiary's net income will decrease
Difficulty: Medium Hoyle - Chapter 04 #31
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32. When a subsidiary is acquired sometime after the first day
of the fiscal year, which of the following statements is true? A.
Income from subsidiary is not recognized until there is an entire
year of consolidated operations B. Income from subsidiary is
recognized from date of acquisition to year-end C. Excess cost over
acquisition value is recognized at the beginning of the fiscal year
D. No goodwill can be recognized E. Income from subsidiary is
recognized for the entire year
Difficulty: Easy Hoyle - Chapter 04 #32
33. When consolidating a subsidiary that was acquired on a date
other than the first day of the fiscal year, which of the following
statements is true in the presentation of consolidated financial
statements? A. Purchased pre-acquisition earnings are deducted from
combined revenues and expenses B. Purchased pre-acquisition
earnings are added to combined revenues and expenses C. Purchased
pre-acquisition earnings are deducted from the beginning
consolidated stockholders' equity D. Purchased pre-acquisition
earnings are added to the beginning consolidated stockholders'
equity E. Purchased pre-acquisition earnings are ignored on the
consolidated income statement
Difficulty: Medium Hoyle - Chapter 04 #33
34. When a parent uses the acquisition method for business
combinations and sells shares of its subsidiary, which of the
following statements is false? A. If majority control is still
maintained, consolidated financial statements are still required B.
If majority control is not maintained but significant influence
exists, the equity method to account for the investment is still
used but consolidated financial statements are not required C. If
majority control is not maintained but significant influence
exists, the equity method is still used to account for the
investment and consolidated financial statements are still required
D. If majority control is not maintained and significant influence
no longer exists, a prospective change in accounting principle to
the fair value method is required E. A gain or loss calculation
must be prepared if control is lost
Difficulty: Medium Hoyle - Chapter 04 #34
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35. All of the following statements regarding the sale of
subsidiary shares are true except which of the following? A. The
use of specific identification based on serial number is acceptable
B. The use of the FIFO assumption is acceptable C. The use of the
averaging assumption is acceptable D. The use of specific LIFO
assumption is acceptable E. The parent company must determine
whether consolidation is still appropriate for the remaining shares
owned
Difficulty: Medium Hoyle - Chapter 04 #35
36. Which of the following statements is true regarding the sale
of subsidiary shares when using the acquisition method for
accounting for business combinations? A. If control continues, the
difference between selling price and acquisition value is recorded
as a realized gain or loss B. If control continues, the difference
between selling price and acquisition value is an unrealized gain
or loss C. If control continues, the difference between selling
price and carrying value is recorded as an adjustment to additional
paid-in capital D. If control continues, the difference between
selling price and carrying value is recorded as a realized gain or
loss E. If control continues, the difference between selling price
and carrying value is recorded as an adjustment to retained
earnings
Difficulty: Medium Hoyle - Chapter 04 #36
37. When using the acquisition method for accounting for
business combinations, all of the following statements are false
regarding the sale of subsidiary shares except: A. If control
ceases to exist and significant influence ceases to exist, the
difference between selling price and acquisition value is recorded
as a realized gain or loss B. If control ceases to exist and
significant influence ceases to exist, the difference between
selling price and acquisition value is recorded as an unrealized
gain or loss C. If control ceases to exist and significant
influence ceases to exist, the difference between selling price and
carrying value is recorded as a realized gain or loss D. If control
ceases to exist and significant influence ceases to exist, the
difference between selling price and carrying value is recorded as
an unrealized gain or loss E. If control ceases to exist and
significant influence ceases to exist, the difference between
selling price and carrying value is recorded as an adjustment to
retained earnings
Difficulty: Medium Hoyle - Chapter 04 #37
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38. Keefe, Inc., a calendar-year corporation, acquires 70% of
George Company on September 1, 2009 and an additional 10% on April
1, 2010. Total annual amortization of $6,000 relates to the first
acquisition. George reports the following figures for 2010:
Without regard for this investment, Keefe earns $300,000 in net
income during 2010. All net income is earned evenly throughout the
year. What is the controlling interest in consolidated net income
for 2010? A. $373,300 B. $372,850 C. $371,500 D. $376,000 E.
$372,805
Difficulty: Medium Hoyle - Chapter 04 #38
McGuire company acquired 90 percent of Hogan Company on January
1, 2009, for $234,000 cash. Hogan's stockholders' equity consisted
of common stock of $160,000 and retained earnings of $80,000. An
analysis of Hogan's net assets revealed the following: Any excess
consideration transferred over fair value is attributable to an
unamortized patent with a useful life of 5 years.
Hoyle - Chapter 04
39. In consolidation at January 1, 2009, what adjustment is
necessary for Hogan's Buildings account? A. $2,000 increase B.
$2,000 decrease C. $1,800 increase D. $1,800 decrease E. No
change
Difficulty: Medium Hoyle - Chapter 04 #39
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40. In consolidation at December 31, 2009, what adjustment is
necessary for Hogan's Buildings account? A. $1,620 increase B.
$1,620 decrease C. $1,800 increase D. $1,800 decrease E. No
change
Difficulty: Medium Hoyle - Chapter 04 #40
41. In consolidation at December 31, 2010, what adjustment is
necessary for Hogan's Buildings account? A. $1,440 increase B.
$1,440 decrease C. $1,600 increase D. $1,600 decrease E. No
change
Difficulty: Medium Hoyle - Chapter 04 #41
42. In consolidation at January 1, 2009, what adjustment is
necessary for Hogan's Equipment account? A. $4,000 increase B.
$4,000 decrease C. $3,600 increase D. $3,600 decrease E. No
change
Difficulty: Easy Hoyle - Chapter 04 #42
43. In consolidation at December 31, 2009, what adjustment is
necessary for Hogan's Equipment account? A. $3,000 increase B.
$3,000 decrease C. $2,700 increase D. $2,700 decrease E. No
change
Difficulty: Medium Hoyle - Chapter 04 #43
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44. In consolidation at December 31, 2010, what adjustment is
necessary for Hogan's Equipment account? A. $2,000 increase B.
$2,000 decrease C. $1,800 increase D. $1,800 decrease E. No
change
Difficulty: Medium Hoyle - Chapter 04 #44
45. In consolidation at January 1, 2009, what adjustment is
necessary for Hogan's Land account? A. $7,000 increase B. $7,000
decrease C. $6,300 increase D. $6,300 decrease E. No change
Difficulty: Medium Hoyle - Chapter 04 #45
46. In consolidation at December 31, 2009, what adjustment is
necessary for Hogan's Land account? A. $0 B. $7,000 increase C.
$6,300 increase D. $6,300 decrease E. $8,000 decrease
Difficulty: Medium Hoyle - Chapter 04 #46
47. In consolidation at December 31, 2010, what adjustment is
necessary for Hogan's Land account? A. $0 B. $7,000 increase C.
$6,300 increase D. $6,300 decrease E. $7,000 decrease
Difficulty: Medium Hoyle - Chapter 04 #47
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48. In consolidation at January 1, 2009, what adjustment is
necessary for Hogan's Patent account? A. $7,000 B. $6,300 C. $0 D.
$11,000 E. $9,900
Difficulty: Medium Hoyle - Chapter 04 #48
49. In consolidation at December 31, 2009, what net adjustment
is necessary for Hogan's Patent account? A. $5,600 B. $8,800 C. $0
D. $7,700 E. $7,000
Difficulty: Medium Hoyle - Chapter 04 #49
50. In consolidation at December 31, 2010, what net adjustment
is necessary for Hogan's Patent account? A. $4,200 B. $5,500 C. $0
D. $6,600 E. $88,000
Difficulty: Medium Hoyle - Chapter 04 #50
Bell Company acquires 80% of Demers Company for $500,000 on
January 1, 2009. Demers reported common stock of $300,000 and
retained earnings of $200,000 on that date. Equipment was
undervalued by $30,000 and buildings were undervalued by $40,000,
each having a 10-year remaining life. Any excess consideration
transferred over fair value was attributed to goodwill with an
indefinite life. Based on an annual review, goodwill has not been
impaired. Demers earns income and pays dividends as follows:
Assume the equity method is applied.
Hoyle - Chapter 04
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51. Compute Bell's investment in Demers at December 31, 2009. A.
$580,000 B. $574,400 C. $548,000 D. $542,400 E. $541,000
Difficulty: Medium Hoyle - Chapter 04 #51
52. Compute Bell's investment in Demers at December 31, 2010. A.
$577,200 B. $664,800 C. $592,800 D. $580,000 E. $572,000
Difficulty: Medium Hoyle - Chapter 04 #52
53. Compute Bell's investment in Demers at December 31, 2011. A.
$639,000 B. $643,200 C. $763,200 D. $676,000 E. $620,000
Difficulty: Medium Hoyle - Chapter 04 #53
54. Compute Bell's income from Demers for the year ended
December 31, 2009. A. $74,400 B. $73,000 C. $42,400 D. $41,000 E.
$80,000
Difficulty: Medium Hoyle - Chapter 04 #54
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55. Compute Bell's income from Demers for the year ended
December 31, 2010. A. $90,400 B. $89,000 C. $50,400 D. $56,000 E.
$96,000
Difficulty: Medium Hoyle - Chapter 04 #55
56. Compute Bell's income from Demers for the year ended
December 31, 2011. A. $50,400 B. $56,000 C. $98,400 D. $97,000 E.
$104,000
Difficulty: Medium Hoyle - Chapter 04 #56
57. Compute the non-controlling interest in the net income of
Demers at December 31, 2009. A. $20,000 B. $12,000 C. $18,600 D.
$10,600 E. $14,400
Difficulty: Medium Hoyle - Chapter 04 #57
58. Compute the non-controlling interest in the net income of
Demers at December 31, 2010. A. $18,400 B. $14,400 C. $22,600 D.
$24,000 E. $12,600
Difficulty: Medium Hoyle - Chapter 04 #58
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59. Compute the non-controlling interest in the net income of
Demers at December 31, 2011. A. $20,400 B. $26,000 C. $24,600 D.
$14,000 E. $12,600
Difficulty: Medium Hoyle - Chapter 04 #59
60. Compute the non-controlling interest of Demers at December
31, 2009. A. $135,600 B. $117,000 C. $112,000 D. $100,000 E.
$110,600
Difficulty: Medium Hoyle - Chapter 04 #60
61. Compute the non-controlling interest of Demers at December
31, 2010. A. $107,000 B. $126,000 C. $109,200 D. $149,600 E.
$148,200
Difficulty: Medium Hoyle - Chapter 04 #61
62. Compute the non-controlling interest of Demers at December
31, 2011. A. $107,800 B. $140,000 C. $165,200 D. $160,800 E.
$146,800
Difficulty: Medium Hoyle - Chapter 04 #62
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Bell Company acquires 80% of Demers Company for $500,000 on
January 1, 2009. Demers reported common stock of $300,000 and
retained earnings of $200,000 on that date. Equipment was
undervalued by $30,000 and buildings were undervalued by $40,000,
each having a 10-year remaining life. Any excess consideration
transferred over fair value was attributed to goodwill with an
indefinite life. Based on an annual review, goodwill has not been
impaired. Demers earns income and pays dividends as follows:
Assume the initial value method is applied.
Hoyle - Chapter 04
63. Compute Bell's investment in Demers at December 31, 2009. A.
$500,000 B. $574,400 C. $625,000 D. $542,400 E. $532,000
Difficulty: Easy Hoyle - Chapter 04 #63
64. Compute Bell's investment in Demers at December 31, 2010. A.
$625,000 B. $664,800 C. $592,400 D. $500,000 E. $572,000
Difficulty: Easy Hoyle - Chapter 04 #64
65. Compute Bell's investment in Demers at December 31, 2011. A.
$592,400 B. $500,000 C. $625,000 D. $676,000 E. $620,000
Difficulty: Easy Hoyle - Chapter 04 #65
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66. How much does Bell report as Income from Demers for the year
ended December 31, 2009? A. $32,000 B. $74,400 C. $73,000 D.
$42,400 E. $41,000
Difficulty: Medium Hoyle - Chapter 04 #66
67. How much does Bell report as Income from Demers for the year
ended December 31, 2010? A. $90,400 B. $40,000 C. $89,000 D.
$50,400 E. $56,000
Difficulty: Medium Hoyle - Chapter 04 #67
68. How much does Bell report as Income from Demers for the year
ended December 31, 2011? A. $48,000 B. $56,000 C. $98,400 D.
$97,000 E. $50,400
Difficulty: Medium Hoyle - Chapter 04 #68
69. Compute the non-controlling interest in the net income of
Demers at December 31, 2009. A. $12,000 B. $10,600 C. $18,600 D.
$20,000 E. $14,400
Difficulty: Easy Hoyle - Chapter 04 #69
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70. Compute the non-controlling interest in the net income of
Demers at December 31, 2010. A. $18,400 B. $14,000 C. $22,600 D.
$24,000 E. $12,600
Difficulty: Medium Hoyle - Chapter 04 #70
71. Compute the non-controlling interest in the net income of
Demers at December 31, 2011. A. $24,600 B. $14,000 C. $26,000 D.
$20,400 E. $12,600
Difficulty: Medium Hoyle - Chapter 04 #71
72. Compute the non-controlling interest of Demers at December
31, 2009. A. $135,600 B. $80,000 C. $117,000 D. $100,000 E.
$110,600
Difficulty: Medium Hoyle - Chapter 04 #72
73. Compute the non-controlling interest of Demers at December
31, 2010. A. $126,000 B. $106,000 C. $109,200 D. $149,600 E.
$148,200
Difficulty: Medium Hoyle - Chapter 04 #73
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74. Compute the non-controlling interest of Demers at December
31, 2011. A. $107,800 B. $140,000 C. $80,000 D. $50,000 E.
$160,800
Difficulty: Medium Hoyle - Chapter 04 #74
Bell Company acquires 80% of Demers Company for $500,000 on
January 1, 2009. Demers reported common stock of $300,000 and
retained earnings of $200,000 on that date. Equipment was
undervalued by $30,000 and buildings were undervalued by $40,000,
each having a 10-year remaining life. Any excess consideration
transferred over fair value was attributed to goodwill with an
indefinite life. Demers earns income and pays dividends as
follows:
Assume the partial equity method is applied.
Hoyle - Chapter 04
75. Compute Bell's investment in Demers at December 31, 2009. A.
$625,000 B. $574,400 C. $548,000 D. $542,400 E. $532,000
Difficulty: Medium Hoyle - Chapter 04 #75
76. Compute Bell's investment in Demers at December 31, 2010. A.
$676,000 B. $629,000 C. $580,000 D. $604,000 E. $572,000
Difficulty: Medium Hoyle - Chapter 04 #76
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77. Compute Bell's investment in Demers at December 31, 2011. A.
$780,000 B. $660,000 C. $785,000 D. $676,000 E. $620,000
Difficulty: Medium Hoyle - Chapter 04 #77
78. How much does Bell report as Income from Demers for the year
ended December 31, 2009? A. $80,000 B. $74,400 C. $73,000 D.
$42,400 E. $41,000
Difficulty: Easy Hoyle - Chapter 04 #78
79. How much does Bell report as income from Demers for the year
ended December 31, 2010? A. $90,400 B. $89,000 C. $50,400 D.
$96,000 E. $56,000
Difficulty: Easy Hoyle - Chapter 04 #79
80. How much does Bell report as income from Demers for the year
ended December 31, 2011? A. $98,400 B. $56,000 C. $104,000 D.
$97,000 E. $50,400
Difficulty: Easy Hoyle - Chapter 04 #80
-
81. Compute the non-controlling interest in the net income of
Demers at December 31, 2009. A. $20,000 B. $12,000 C. $18,600 D.
$10,600 E. $14,400
Difficulty: Easy Hoyle - Chapter 04 #81
82. Compute the non-controlling interest in the net income of
Demers at December 31, 2010. A. $18,400 B. $14,000 C. $22,600 D.
$24,000 E. $12,600
Difficulty: Medium Hoyle - Chapter 04 #82
83. Compute the non-controlling interest in the net income of
Demers at December 31, 2011. A. $20,400 B. $26,000 C. $24,600 D.
$14,000 E. $12,600
Difficulty: Medium Hoyle - Chapter 04 #83
84. Compute the non-controlling interest of Demers at December
31, 2009. A. $135,600 B. $114,000 C. $112,000 D. $100,000 E.
$110,600
Difficulty: Medium Hoyle - Chapter 04 #84
-
85. Compute the non-controlling interest of Demers at December
31, 20010. A. $124,000 B. $126,000 C. $109,200 D. $149,600 E.
$148,200
Difficulty: Medium Hoyle - Chapter 04 #85
86. Compute the non-controlling interest of Demers at December
31, 2011. A. $107,800 B. $140,000 C. $80,000 D. $160,800 E.
$146,800
Difficulty: Medium Hoyle - Chapter 04 #86
Ross Company acquired 90% of Parsons Company several years ago
and recorded goodwill of $200,000 at that date. During 2009 an
analysis of the fair market value of Parson's assets determined an
impairment of goodwill in the amount of $50,000.
Hoyle - Chapter 04
87. At what amount would consolidated goodwill be reported for
2009? A. $150,000 B. $200,000 C. $50,000 D. $0 E. $135,000
Difficulty: Easy Hoyle - Chapter 04 #87
-
88. What journal entry would be made by Ross regarding its
investment in Parsons impairment of goodwill?
A. Journal entry A B. Journal entry B C. Journal entry C D.
Journal entry D E. Journal entry E
Difficulty: Medium Hoyle - Chapter 04 #88
89. Under the economic unit concept and according to SFAS 160,
where would the non-controlling interest appear on the consolidated
balance sheet?
The non-controlling interest would appear as a part of
stockholders' equity where it would be clearly identified, labeled
and distinguished from the parent's controlling interest in
subsidiaries.
Difficulty: Easy Hoyle - Chapter 04 #89
90. What is pre-acquisition income?
When a company acquires control of a subsidiary during a fiscal
year, pre-acquisition income is the income attributed to the
previous owners of the shares of the common stock for the portion
of the year before the acquisition.
Difficulty: Easy Hoyle - Chapter 04 #90
-
91. Shedds Corp. owns less than one hundred percent of the
voting common stock of Beta Co. Under what conditions will Shedds
be required to prepare consolidated financial statements?
Shedds will be required to prepare consolidated financial
statements if it has control of Beta. If Shedds has more than 50%
of the voting common stock of Beta, it has control and must prepare
consolidated financial statements. Occasionally, ownership of less
than 50% of the voting common stock can confer control. In this
situation, an argument can be made that the company with control
should prepare consolidated financial statements, although not
required currently.
Difficulty: Medium Hoyle - Chapter 04 #91
92. Where may a non-controlling interest be presented on a
consolidated balance sheet?
According to SFAS 160, a non-controlling interest must be shown
on the balance sheet as a part of stockholders' equity. It may no
longer be shown between liabilities and stockholders' equity or
classified as neither.
Difficulty: Medium Hoyle - Chapter 04 #92
93. A theory related to consolidation of a subsidiary is the
economic unit concept. What are the theoretical arguments on which
the economic unit concept is based?
The economic unit concept emphasizes the business combination
being formed, rather than the parent company's investment. The
subsidiary and its accounts cannot be divided along ownership
lines. The controlled company must be consolidated as a whole. The
subsidiary is perceived as an indivisible part of the consolidated
entity. The income statement will show all the income that is
generated by the net assets under the control of the parent
company.
Difficulty: Medium Hoyle - Chapter 04 #93
94. How would you determine the amount of goodwill to be
recognized at date of acquisition when there is a non-controlling
interest present and the economic unit concept is used?
The amount of goodwill to be recognized is calculated by
subtracting the non-controlling interest's proportionate fair value
of the net assets of the acquired entity from the fair value of the
non-controlling interest as evidenced by the parent's consideration
transferred for its own share of ownership.
Difficulty: Medium Hoyle - Chapter 04 #94
-
95. How is a non-controlling interest in the net income of an
entry reported in the income statement under the economic unit
concept?
The non-controlling interest would appear as a clearly
identifiable portion of consolidated net income such that the
controlling portion plus the non-controlling portion equals the
consolidated net income presented.
Difficulty: Medium Hoyle - Chapter 04 #95
96. One company buys a controlling interest in another company
on April 1. How should the pre-acquisition subsidiary revenues and
expenses be handled in the consolidated balances for the year of
acquisition?
Only post-acquisition revenues and expenses are included in
consolidated totals. The non-controlling interest is thereby viewed
as beginning as of the acquisition date.
Difficulty: Medium Hoyle - Chapter 04 #96
97. Franklin, Inc. owns 80% of Prevatt Company. During the
current year, a portion of the investment in Prevatt is sold. Prior
to recording the sale, Franklin adjusts the book value of its
investment. What is the purpose of the adjustment?
If control is maintained after the sale, then the difference
between the sales proceeds and the book value is an adjustment to
the parent's owners' equity. If control is not maintained, then
such difference is a gain or loss on sale of investment. In either
situation, the book value of the investment should be on the equity
method basis in order to calculate the proper entry for the sale.
Therefore, if Franklin adjusts the book value of its investment, it
is in order to bring an initial value method or partial equity
method investment basis to an equity method basis.
Difficulty: Medium Hoyle - Chapter 04 #97
98. How does a parent corporation account for the sale of a
portion of an investment in a subsidiary?
If control is maintained after the sale, then the difference
between the sales proceeds and the book value is an adjustment to
the parent's owners' equity (APIC). If control is not maintained,
then such difference is a gain or loss on sale of investment. In
either situation, the book value of the investment should be on the
equity method basis in order to calculate the proper entry for the
sale. Therefore, if the investment has been kept under the initial
value or the partial equity method, the investor adjusts the book
value of its investment in order to bring an initial value method
or partial equity method investment basis to an equity method
basis.
Difficulty: Medium Hoyle - Chapter 04 #98
-
99. Alonzo Co. acquired 60% of Beazley Corp. at a purchase price
of $240,000. At the time of the acquisition, the book value of
Beazley's net assets was $300,000. Required: Under the economic
unit concept, what amount should have been assigned to the
non-controlling interest immediately after the combination?
Difficulty: Medium Hoyle - Chapter 04 #99
100. Tosco Co. paid $540,000 for 80% of the stock of Martz Co.
when the book value of Martz's net assets was $600,000. For all of
Martz's assets and liabilities, book value and fair value were
approximately equal. Required: Under the economic unit concept
using the acquisition method, what amount of goodwill should appear
on a consolidated balance sheet prepared immediately after the
combination?
Difficulty: Medium Hoyle - Chapter 04 #100
101. On January 1, 2009, Elva Corp. paid $750,000 for 80% of
Fenton Co. when the book value of Fenton's net assets was $800,000.
Fenton owned a building with a fair value of $150,000 and a book
value of $120,000. Required: At what amount would the building
appear on a consolidated balance sheet prepared immediately after
the combination, assuming Elva used the acquisition method?
Difficulty: Medium Hoyle - Chapter 04 #101
-
102. Pennant Corp. owns 70% of the common stock of Scarvens Co.
Scarvens' revenues for 2009 totaled $200,000. Required: What amount
of Scarvens' revenues would be included in the consolidated total
under the economic unit concept?
Difficulty: Medium Hoyle - Chapter 04 #102
Caldwell Inc. acquired 65% of Club Corp. for $2,600,000. Club
owned a building and equipment with ten-year useful lives. The book
value of these assets was $830,000 and the fair value was $950,000.
For Club's other assets and liabilities, book value was equal to
fair value. The total fair value of Club's net assets was
$3,500,000.
Hoyle - Chapter 04
103. Using the economic unit concept and acquisition method,
determine the amount of goodwill associated with Caldwell's
purchase of Club.
Difficulty: Medium Hoyle - Chapter 04 #103
104. Using the economic unit concept, determine the amount of
the non-controlling interest as of the date of the acquisition.
Difficulty: Medium Hoyle - Chapter 04 #104
On January 1, 2009, Glenville Co. acquired an 80% interest in
Acron Corp. for $500,000. The fair value of Acron's net assets was
$600,000 and Glenville will account for its interest using the
acquisition method.
Hoyle - Chapter 04
-
105. Determine the amount of goodwill to be recognized in this
acquisition.
Difficulty: Medium Hoyle - Chapter 04 #105
106. Determine the value assigned to the non-controlling
interest as of the date of the acquisition.
Difficulty: Easy Hoyle - Chapter 04 #106
On January 1, 2008, prior to the effective date of SFAS 141(R),
Cranston Inc. reported net assets of $1,064,000, although equipment
(with a four-year life) with a book value of $616,000 was worth
$700,000. Peak Corp. paid $969,000 on that date for an 80%
ownership interest in Cranston. Peak still owns its 80% interest in
2009.
Hoyle - Chapter 04
107. What is the annual excess amortization using the parent
company concept?
Difficulty: Medium Hoyle - Chapter 04 #107
-
108. What is the consolidated goodwill balance on January 1,
2009, assuming the parent company concept is used?
Difficulty: Medium Hoyle - Chapter 04 #108
On January 1, 2009, Jannison Inc. acquired 90% of Techron Co. by
paying $477,000 cash. Techron Co. reported a Common Stock account
balance of $140,000 and Retained Earnings of $280,000 at that date.
The fair value of Techron Co. was appraised at $530,000. The total
annual amortization was $11,000 as a result of this transaction.
The subsidiary earned $98,000 in 2009 and $126,000 in 2010 with
dividend payments of $42,000 each year. Without regard for this
investment, Jannison had income of $308,000 in 2009 and $364,000 in
2010. Use the economic unit concept to account for this
acquisition.
Hoyle - Chapter 04
109. Prepare a proper presentation of consolidated net income
for 2009.
Difficulty: Medium Hoyle - Chapter 04 #109
-
110. Prepare a proper presentation of consolidated net income
for 2010.
Difficulty: Medium Hoyle - Chapter 04 #110
111. What is the non-controlling interest balance as of December
31, 2010?
Difficulty: Medium Hoyle - Chapter 04 #111
-
112. On January 1, 2009, Vacker Co. acquired 70% of Carper Inc.
by paying $650,000. This included a $20,000 control premium. Carper
reported common stock on that date of $420,000 with retained
earnings of $252,000. A building was undervalued in the company's
financial records by $28,000. This building had a ten-year
remaining life. Copyrights of $80,000 were to be recognized and
amortized over 20 years. Carper earned income and paid cash
dividends as follows:
On December 31, 2011, Vacker owed $30,800 to Carper. There have
been no changes in Carper's common stock account since the
acquisition. Required: If the equity method had been applied by
Vacker for this acquisition, what were the consolidation entries
needed as of December 31, 2011?
From the acquisition value, $28,000 was allocated based on the
fair value of the building. With a ten-year remaining life,
amortization will be $2,800 per year of which $1,960 is attributed
to the controlling interest. Copyright amortization would have been
$4,000 per year of which $2,800 is attributed to the controlling
interest.
Difficulty: Hard Hoyle - Chapter 04 #112
-
On January 1, 2009, John Doe Enterprises (JDE) bought a 55%
interest in Bubba Manufacturing, Inc. (BMI). JDE paid for the
transaction with $3 million cash and 500,000 shares of JDE common
stock (par value $1.00 per share). At the time of the acquisition,
BMI's book value was $16,970,000. On January 1, JDE stock had a
market value of $14.90 per share and there was no control premium
in this transaction. Any consideration transferred over book value
is assigned to goodwill. BMI had the following balances on January
1, 2009.
For internal reporting purposes, JDE employed the equity method
to account for this investment.
Hoyle - Chapter 04
113. Prepare a schedule to determine goodwill and the
amortization and allocation amounts.
Difficulty: Medium Hoyle - Chapter 04 #113
-
114. The following account balances are for the year ending
December 31, 2009 for both companies.
Required: Prepare a consolidation worksheet for this business
combination. Assume goodwill has been reviewed and there is no
goodwill impairment.
-
Consolidation Worksheet for John Doe Enterprises and Bubba
Manufacturing at 12/31/09. CONSOLIDATED WORKSHEET Acquisition For
the year ended 12/31/2009
Difficulty: Medium Hoyle - Chapter 04 #114
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115. McLaughlin, Inc. acquires 70 percent of Ellis Corporation
on September 1, 2009 and an additional 10 percent on November 1,
2010. Annual amortization of $8,400 attributed to the controlling
interest relates to the first acquisition. Ellis reports the
following figures for 2010:
Without regard for this investment, McLaughlin earns $480,000 in
net income ($840,000 revenues less $360,000 expenses earned and
incurred evenly through the year) during 2010. Required: Prepare a
proper schedule of consolidated net income and apportionment to
non-controlling and controlling interests for 2010.
* Amortization of $12,000 = original $8,400 for 70% grossed up
to the 100% amount of $12,000.
Difficulty: Medium Hoyle - Chapter 04 #115
-
116. For each of the following situations, select the best
answer concerning consolidating financial information where there
is a non-controlling interest in the subsidiary: (A) Economic unit
concept. (B) Parent company concept. (C) Economic unit concept and
parent company concept. _____ 1. Reflects the cost principle, but
also assigns a value to the non-controlling interest shares at book
value. _____ 2. Recognizes the non-controlling interest has a value
to be reported, but since it is not a part of the exchange
transaction, no new basis of accountability arises. _____ 3.
Recognizes that management effectively controls 100% of the net
assets acquired and is thus accountable for the entire fair value.
_____ 4. The vast majority of consolidated financial statements in
the U.S. are prepared under this concept for purchase business
combinations. _____ 5. Requires the computation of an implied
value. _____ 6. Recognizes the full fair value of partially owned
acquisitions. _____ 7. Non-controlling interest is reported at an
implied fair value. _____ 8. Non-controlling interest is reported
at book value. _____ 9. Required by SFAS 141(R) Business
Combinations.
(1) B; (2) B; (3) A; (4) B; (5) A; (6) A; (7) A; (8) B; (9)
A
Difficulty: Medium Hoyle - Chapter 04 #116