Quiz 4

Current Location 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:

Correct Answer:

less unrealized profit in ending inventory plus realized profit in beginning inventory.

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:

Correct

both Retained Earnings - P and Noncontrolling Interest.

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 Sales

S

$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:

Correct Answer:

Question 4 2 out of 2 points

$380,0 00.

$380,0 00.

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 Sales Revenue Cost of Goods Sold Gross profit

S

$1,800,000 $900,000 1,440,000

750,000

$ 360,000 $150,000

Consolidated cost of goods sold for P Company and Subsidiary for 2011 are: Answer Selected Answer:

Correct Answer:

$1,821,0 00.

$1,821,0 00.

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 Sales Revenue Cost of Goods Sold Gross profit

S

$2,250,000 $1,125,000 1,800,000

937,500

$ 450,000 $ 187,500

Consolidated cost of goods sold for P Company and Subsidiary for 2011 are: Answer Selected Answer:

Correct Answer:

$2,276,7 00.

$2,276,7 00.

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:

Correct Answer:

Question 7

Sales and cost of goods sold should be reduced by the intercompany sales.

Sales and cost of goods sold should be reduced by the intercompany sales.

0 out of 2 points

The material sale of inventory items by a parent company to an affiliated company: Answer Selected Answer:

Correct Answer:

enters the consolidated revenue computation only if the transfer was the result of arm’s length bargaining.

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:

Correct Answer:

$15,00 0.

$15,00 0.

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, onefourth 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:

Correct Answer:

$30,00 0.

$30,00 0.

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:

Correct Answer:

$120,0 00.

$120,0 00.

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 Sales Cost of Sales

S

$1,200,000 $600,000 (600,000) (400,000)

Operating Expenses Net Income (2011)

(300,000) ( 80,000) $ 300,000 $120,000

Noncontrolling interest in income for 2011 is: Answer Selected Answer:

Correct Answer:

$20,00 0.

$20,00 0.

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:

Correct Answer:

Question 14 0 out of 2 points

$54,00 0.

$54,00 0.

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:

Correct Answer:

(the subsidiary’s net income + unrealized profits in the beginning inventory – unrealized profits in the ending inventory) × 20%.

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 Sales Revenue Cost of Goods Sold Gross profit

S

$1,800,000 $900,000 1,440,000

750,000

$ 360,000 $150,000

Consolidated sales revenue for P and Subsidiary for 2011 are: Answer Selected Answer:

$2,325,0 00. Correct Answer:

$2,325,0 00.

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:

$604,8 00.

Correct Answer:

$604,8 00.

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:

Correct Answer:

considered to be realized over the remaining useful life of the equipment as an adjustment to depreciation in the consolidated statements.

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:

Correct Answer:

$384,0 00.

$403,2 00.

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:

Correct Answer:

Noncontrolling interest and Retained Earnings (Parent) accounts, and credit the nondepreciable asset.

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:

Correct Answer:

Question 23 2 out of 2 points

debit to Accumulated Depreciation for $4,000.

debit to Accumulated Depreciation for $4,000.

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:

Correct Answer:

$120,0 00.

$120,0 00.

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:

Correct Answer:

Question 25 2 out of 2 points

minus the net amount of unrealized gain on the intercompany sale.

minus the net amount of unrealized gain on the intercompany sale.

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:

Correct Answer:

consolidated net income will be the same as if the sale had not occurred.

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:

Correct Answer:

the parent and the subsidiary is less than wholly owned.

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:

Correct Answer:

no entry because the gain happened prior to this year.

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:

Correct Answer:

$150,0 00.

$150,0 00.

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:

Correct Answer:

$120,0 00.

$60,00 0.

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:

Correct Answer:

realized intercompany gain at the end of the period.

unrealized intercompany gain at the beginning of the period.

Saturday, February 9, 2013 2:11:50 PM EST OK