Accounting 308 Chapter 5-7

Rohan Corporation holds assets with a fair value of $150,000 and a book value of $125,000 and liabilities with a book value and fair value of $50,000. What balance will be assigned to the noncontrolling interest in the consolidated balance sheet if Helms Company pays $90,000 to acquire 75 percent ownership in Rohan and goodwill of $20,000 is reported?
When a parent owns less than 100% of a subsidiary, the noncontrolling interest shareholders are allocated their ownership percentage of income or net assets in all of the following eliminating entries except for
The optional accumulated depreciation elimination entry
Which of the following stockholders equity accounts are eliminated during the consolidation process?
Common Stock of the subsidiary, Preferred Stock of the subsidiary, Additional Paid-in Capital of the subsidiary
When there are intercompany sales of inventory during the year and a three-part consolidation worksheet is prepared, elimination entries related to the intercompany sales:
I. Always are needed.
II. Are not needed if the entire inventory is resold to unrelated parties prior to the end of the year
Which of the following are examples of intercompany balances and transactions that must be eliminated in preparing consolidated financial statements?
I. Security holdings
II. Interest and dividends
III. Sales and purchases
All of them
Senior Inc. owns 85 percent of Junior Inc. During 20X8, Senior sold goods with a 25 percent gross profit to Junior. Junior sold all of these goods in 20X8. How should 20X8 consolidated income statement items be adjusted?
Sales and cost of goods sold should be reduced by the intercompany sales.
During the year a parent makes sales of inventory at a profit to its 75 percent owned subsidiary. The subsidiary also makes sales of inventory at a profit to its parent during the same year. Both the parent and the subsidiary have on hand at the end of the year 20 percent of the inventory acquired from one another. Consolidated revenues for the year should exclude:
total revenues from intercompany sales.
Consolidated net income may include the parent's separate operating income plus the parent's share of the subsidiary's reported net income:
plus the profit realized this year from upstream intercompany sales of inventory made last year.
Consolidated net income for a parent and its 80 percent owned subsidiary should be computed by eliminating
all unrealized profit in downstream intercompany inventory sales, and unrealized profit in upstream intercompany inventory sales made during the current year
When a parent and its subsidiary use a periodic inventory system rather than a perpetual system, the income and asset balances reported in the consolidated financial statements are:
I. affected only if there are upstream intercompany sales of inventory.
II. affected only if there are downstream intercompany sales of inventory.
neither I or II
A subsidiary made sales of inventory to its parent at a profit this year. The parent, in turn, sold all but 20 percent of the inventory to unaffiliated companies, recognizing a profit. The amount that should be reported as cost of goods sold in the consolidated income statement prepared for the year should be
the amount reported as intercompany sales by the subsidiary minus unrealized profit in the ending inventory of the parent
The consolidation treatment of profits on inventory transfers that occurred before the business combination depends on whether:
I. the companies were independent at that time.
II. the sale transaction was the result of arm's-length bargaining
I and II
A wholly owned subsidiary sold land to its parent during the year at a gain. The parent continues to hold the land at the end of the year. The amount to be reported as consolidated net income for the year should equal:
the parent's separate operating income, plus the subsidiary's net income, minus the intercompany gain.
Any intercompany gain or loss on a downstream sale of land should be recognized in consolidated net income:
I. in the year of the downstream sale.
II. over the period of time the subsidiary uses the land.
III. in the year the subsidiary sells the land to an unrelated party.
A parent sold land to its partially owned subsidiary during the year at a loss. The subsidiary continues to hold the land at the end of the year. The amount to be reported as consolidated net income for the year should equal:
the parent's separate operating income, plus the intercompany loss, plus the subsidiary's net income
Parent Company owns 70% of Son Company's outstanding stock. During 20X1 Son Company sold land to Parent Company for a gain of $25,000. Parent company held the land all of 20X1. The gain on the sale to Parent should be
recorded on Son's books as a gain of $25,000 and then eliminated during the consolidation process
Using the fully adjusted equity method, an intercompany gain on an upstream sale of land is:
recognized by the subsidiary and the deferral is shared between the controlling and noncontrolling stockholders of the subsidiary.