quiz 4
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Acc401 advanced accountingTRANSCRIPT
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ACC401018SC027-1132-001 Adv Accounting I
Week 5
Review Test Submission: Quiz 4
Question 1
2 out of 2 points
The noncontrolling interest in consolidated income when the selling affiliate is an 80% owned subsidiary is calculated by multiplying the noncontrolling minority ownership percentage by the subsidiary’s reported net income
Answer
Selected Answer:
less unrealized profit in ending inventory plus realized profit in beginning inventory.
Correct Answer:
less unrealized profit in ending inventory plus realized profit in beginning inventory.
Question 2
2 out of 2 points
A 90% owned subsidiary sold merchandise at a profit to its parent company near the end of 2010. Under the partial equity method, the workpaper entry in 2011 to recognize the intercompany profit in beginning inventory realized during 2011 includes a debit to
Answer
Selected Answer:
both Retained Earnings - P and Noncontrolling Interest.
Correct Answer:
both Retained Earnings - P and Noncontrolling Interest.
Question 3
2 out of 2 points
P Company owns an 80% interest in S Company. During 2011, S sells merchandise to P for $200,000 at a profit of $40,000. On December 31, 2011, 50% of this merchandise is included in P’s inventory. Income statements for P and S are summarized below:
P S
Sales $1,200,000 $600,000
Cost of Sales (600,000) (400,000)
Operating Expenses (300,000) ( 80,000)
Net Income (2011) $ 300,000 $120,000
Controlling interest in consolidated net income for 2011 is:
Answer
Selected Answer:
$380,000.
Correct Answer:
$380,000.
Question 4
2 out of 2 points
P Company regularly sells merchandise to its 80%-owned subsidiary, S Corporation. In 2010, P sold merchandise that cost $192,000 to S for $240,000. Half of this merchandise remained in S’s December 31, 2010 inventory. During 2011, P sold merchandise that cost $300,000 to S for $375,000. Forty percent of this merchandise inventory remained in S’s December 31, 2011 inventory. Selected income statement information for the two affiliates for the year 2011 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 cost of goods sold for P Company and Subsidiary for 2011 are:
Answer
Selected Answer:
$1,821,000.
Correct Answer:
$1,821,000.
Question 5
2 out of 2 points
P Company regularly sells merchandise to its 80%-owned subsidiary, S Corporation. In 2010, P sold merchandise that cost $240,000 to S for $300,000. Half of this merchandise remained in S’s December 31, 2010 inventory. During 2011, P sold merchandise that cost $375,000 to S for $468,000. Forty percent of this merchandise inventory remained in S’s December 31, 2011 inventory. Selected income statement information for the two affiliates for the year 2011 is as follows:
P S
Sales Revenue $2,250,000 $1,125,000
Cost of Goods Sold 1,800,000 937,500
Gross profit $ 450,000 $ 187,500
Consolidated cost of goods sold for P Company and Subsidiary for 2011 are:
Answer
Selected Answer:
$2,276,700.
Correct Answer:
$2,276,700.
Question 6
2 out of 2 points
Paige, Inc. owns 80% of Sigler, Inc. During 2011, Paige sold goods with a 40% gross profit to Sigler. Sigler sold all of these goods in 2011. For 2011 consolidated financial statements, how should the summation of Paige and Sigler income statement items be adjusted?
Answer
Selected Answer:
Sales and cost of goods sold should be reduced by the intercompany sales.
Correct Answer:
Sales and cost of goods sold should be reduced by the intercompany sales.
Question 7
0 out of 2 points
The material sale of inventory items by a parent company to an affiliated company:
Answer
Selected Answer:
enters the consolidated revenue computation only if the transfer was the result of arm’s length bargaining.
Correct Answer:
does not result in consolidated income until the merchandise is sold to outside parties.
Question 8
2 out of 2 points
P Company owns an 80% interest in S Company. During 2011, S sells merchandise to P for $150,000 at a profit of $30,000. On December 31, 2011, 50% of this merchandise is included in P’s inventory. Income statements for P and S are summarized below:
P S
Sales $900,000 $450,000
Cost of Sales (450,000) (300,000)
Operating Expenses (225,000) ( 60,000)
Net Income (2011) $225,000 $ 90,000
Noncontrolling interest in income for 2011 is:
Answer
Selected Answer:
$15,000.
Correct Answer:
$15,000.
Question 9
2 out of 2 points
Pratt Company owns 80% of Storey Company’s common stock. During 2011, Storey sold $400,000 of merchandise to Pratt. At December 31, 2011, one-fourth of the merchandise remained in Pratt’s inventory. In 2011, gross profit percentages were 25% for Pratt and 30% for Storey. The amount of unrealized intercompany profit that should be eliminated in the consolidated statements is
Answer
Selected Answer:
$30,000.
Correct Answer:
$30,000.
Question 10
2 out of 2 points
Sales from one subsidiary to another are called
Answer
Selected Answer:
horizontal sales.
Correct Answer:
horizontal sales.
Question 11
2 out of 2 points
P Corporation acquired a 60% interest in S Corporation on January 1, 2011, at book value equal to fair value. During 2011, P sold merchandise that cost $225,000 to S for $315,000. One-third of this merchandise remained in S’s inventory at December 31, 2011. S reported net income of $200,000 for 2011. P’s income from S for 2011 is:
Answer
Selected Answer:
$120,000.
Correct Answer:
$120,000.
Question 12
2 out of 2 points
P Company owns an 80% interest in S Company. During 2011, S sells merchandise to P for $200,000 at a profit of $40,000. On December 31, 2011, 50% of this merchandise is included in P’s inventory. Income statements for P and S are summarized below:
P S
Sales $1,200,000 $600,000
Cost of Sales (600,000) (400,000)
Operating Expenses (300,000) ( 80,000)
Net Income (2011) $ 300,000 $120,000
Noncontrolling interest in income for 2011 is:
Answer
Selected Answer:
$20,000.
Correct Answer:
$20,000.
Question 13
2 out of 2 points
P Corporation acquired a 60% interest in S Corporation on January 1, 2011, at book value equal to fair value. During 2011, P sold merchandise that cost $135,000 to S for $189,000. One-third of this merchandise remained in S’s inventory at December 31, 2011. S reported net income of $120,000 for 2011. P’s income from S for 2011 is:
Answer
Selected Answer:
$54,000.
Correct Answer:
$54,000.
Question 14
0 out of 2 points
A parent company regularly sells merchandise to its 80%-owned subsidiary. Which of the following statements describes the computation of noncontrolling interest income?
Answer
Selected Answer:
(the subsidiary’s net income + unrealized profits in the beginning inventory – unrealized profits in the ending inventory) × 20%.
Correct Answer:
the subsidiary’s net income times 20%.
Question 15
2 out of 2 points
P Company regularly sells merchandise to its 80%-owned subsidiary, S Corporation. In 2010, P sold merchandise that cost $192,000 to S for $240,000. Half of this merchandise remained in S’s December 31, 2010 inventory. During 2011, P sold merchandise that cost $300,000 to S for $375,000. Forty percent of this merchandise inventory remained in S’s December 31, 2011 inventory. Selected income statement information for the two affiliates for the year 2011 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 2011 are:
Answer
Selected Answer:
$2,325,000.
Correct Answer:
$2,325,000.
Question 16
2 out of 2 points
P Corporation acquired an 80% interest in S Corporation two years ago at an implied value equal to the book value of S. On January 2, 2011, S sold equipment with a five-year remaining life to P for a gain of $180,000. S reports net income of $900,000 for 2011 and pays dividends of $300,000. P’s Equity from Subsidiary Income for 2011 is:
Answer
Selected Answer:
$604,800.
Correct Answer:
$604,800.
Question 17
2 out of 2 points
Pratt Corporation owns 100% of Stone Company’s common stock. On January 1, 2011, Pratt sold equipment with a book value of $210,000 to Stone for $300,000. Stone is depreciating the equipment over a ten-year life by the straight-line method. The net adjustments to compute 2011 and 2012 consolidated income would be an increase (decrease) of
2011 2012
a. ($90,000) $0
b. ($90,000) $9,000
c. ($81,000) $0
d. ($81,000) $9,000
Answer
Selected Answer:
d
Correct Answer:
d
Question 18
2 out of 2 points
Gain or loss resulting from an intercompany sale of equipment between a parent and a subsidiary is
Answer
Selected Answer:
considered to be realized over the remaining useful life of the equipment as an adjustment to depreciation in the consolidated statements.
Correct Answer:
considered to be realized over the remaining useful life of the equipment as an adjustment to depreciation in the consolidated statements.
Question 19
2 out of 2 points
Parks Corporation owns 100% of Starr Company’s common stock. On January 1, 2011, Parks sold equipment with a book value of $350,000 to Starr for $500,000. Starr is depreciating the equipment over a ten-year life by the straight-line method. The net adjustments to compute 2011 and 2012 consolidated income would be an increase (decrease) of
2011 2012
a. ($150,000) $0
b. ($150,000) $15,000
c. ($135,000) $0
d. ($135,000) $15,000
Answer
Selected Answer:
d
Correct Answer:
d
Question 20
0 out of 2 points
P Corporation acquired an 80% interest in S Corporation two years ago at an implied value equal to the book value of S. On January 2, 2011, S sold equipment with a five-year remaining life to P for a gain of $120,000. S reports net income of $600,000 for 2011 and pays dividends of $200,000. P’s Equity from Subsidiary Income for 2011 is:
Answer
Selected Answer:
$384,000.
Correct Answer:
$403,200.
Question 21
2 out of 2 points
In years subsequent to the upstream intercompany sale of nondepreciable assets, the necessary consolidated workpaper entry under the cost method is to debit the
Answer
Selected Answer:
Noncontrolling interest and Retained Earnings (Parent) accounts, and credit the nondepreciable asset.
Correct Answer:
Noncontrolling interest and Retained Earnings (Parent) accounts, and credit the nondepreciable asset.
Question 22
2 out of 2 points
On January 1, 2010, P Corporation sold equipment with a 3-year remaining life and a book value of $40,000 to its 70% owned subsidiary for a price of $46,000. In the consolidated workpapers for the year ended December 31, 2011, an elimination entry for this transaction will include a:
Answer
Selected Answer:
debit to Accumulated Depreciation for $4,000.
Correct Answer:
debit to Accumulated Depreciation for $4,000.
Question 23
2 out of 2 points
In January 2008, S Company, an 80% owned subsidiary of P Company, sold equipment to P Company for $1,980,000. S Company’s original cost for this equipment was $2,000,000 and had accumulated depreciation of $200,000. P Company continued to depreciate the equipment over its 9 year remaining life using the straight-line method. This equipment was sold to a third party on January 1, 2011 for $1,440,000. What amount of gain should P Company record on its books in 2011?
Answer
Selected Answer:
$120,000.
Correct Answer:
$120,000.
Question 24
2 out of 2 points
In the year an 80% owned subsidiary sells equipment to its parent company at a gain, the noncontrolling interest in consolidated income is calculated by multiplying the noncontrolling interest percentage by the subsidiary’s reported net income
Answer
Selected Answer:
minus the net amount of unrealized gain on the intercompany sale.
Correct Answer:
minus the net amount of unrealized gain on the intercompany sale.
Question 25
2 out of 2 points
In 2011, P Company sells land to its 80% owned subsidiary, S Company, at a gain of $50,000. What is the effect of this sale of land on consolidated net income assuming S Company still owns the land at the end of the year?
Answer
Selected Answer:
consolidated net income will be the same as if the sale had not occurred.
Correct Answer:
consolidated net income will be the same as if the sale had not occurred.
Question 26
0 out of 2 points
When preparing consolidated financial statement workpapers, unrealized intercompany gains, as a result of equipment or inventory sales by affiliates, are allocated proportionately by percent of ownership between parent and subsidiary only when the selling affiliate is
Answer
Selected Answer:
the parent and the subsidiary is less than wholly owned.
Correct Answer:
the subsidiary and the subsidiary is less than wholly owned.
Question 27
0 out of 2 points
Several years ago, P Company bought land from S Company, its 80% owned subsidiary, at a gain of $50,000 to S Company. The land is still owned by P Company. The consolidated working papers for this year will require:
Answer
Selected Answer:
no entry because the gain happened prior to this year.
Correct Answer:
a credit to land for $50,000.
Question 28
2 out of 2 points
P Company purchased land from its 80% owned subsidiary at a cost of $100,000 greater than it subsidiary’s book value. Two years later P sold the land to an outside entity for $50,000 more than it’s cost. In its current year consolidated income statement P and its subsidiary should report a gain on the sale of land of:
Answer
Selected Answer:
$150,000.
Correct Answer:
$150,000.
Question 29
0 out of 2 points
In January 2008, S Company, an 80% owned subsidiary of P Company, sold equipment to P Company for $990,000. S Company’s original cost for this equipment was $1,000,000 and had accumulated depreciation of $100,000. P Company continued to depreciate the equipment over its 9 year remaining life using the straight-line method. This equipment was sold to a third party on January 1, 2011 for $720,000. What amount of gain should P Company record on its books in 2011?
Answer
Selected Answer:
$120,000.
Correct Answer:
$60,000.
Question 30
0 out of 2 points
The amount of the adjustment to the noncontrolling interest in consolidated net assets is equal to the noncontrolling interest’s percentage of the
Answer
Selected Answer:
realized intercompany gain at the end of the period.
Correct Answer:
unrealized intercompany gain at the beginning of the period.
Saturday, February 9, 2013 2:11:50 PM EST
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