1) Accounting for investments depends in part to the level of
influence or control. What method is generally tied to influence deemed to be
insignifcant?
influence or control. What method is generally tied to influence deemed to be
insignifcant?
2) Accounting for investments depends in part to the level of
influence or control. What method is generally tied to significant influence?
influence or control. What method is generally tied to significant influence?
3) Under the equity method of accounting for a stock investment,
the investment initially should be recorded at
the investment initially should be recorded at
4) Byner Corporation accounts for its investment in the common
stock of Yount Company under the equity method. Byner Corporation should
ordinarily record a cash dividend received from Yount as
stock of Yount Company under the equity method. Byner Corporation should
ordinarily record a cash dividend received from Yount as
5) On January 1, 2007, Yang Corporation acquired 25 % of the
outstanding shares of Spiel Corporation for $100,000 cash. Spiel Company
reported net income of $75,000 and paid dividends of $30,000 for both 2007 and
2008. The fair value of shares held by Yang was $110,000 and $105,000 on
December 31, 2007 and 2008, respectively. What amount will be reported by Yang
as income from its investment in Spiel for 2008, if it used the equity method
of accounting?
outstanding shares of Spiel Corporation for $100,000 cash. Spiel Company
reported net income of $75,000 and paid dividends of $30,000 for both 2007 and
2008. The fair value of shares held by Yang was $110,000 and $105,000 on
December 31, 2007 and 2008, respectively. What amount will be reported by Yang
as income from its investment in Spiel for 2008, if it used the equity method
of accounting?
6) On January 1, 2009, Athlon Company acquired 30 % of the common
stock of Opteron Corporation, at underlying book value. For the same year,
Opteron reported net income of $55,000, which includes an extraordinary gain of
$40,000. It did not pay any dividends during the year. By what amount would
Athlon's investment in Opteron Corporation increase for the year, if Athlon
used the equity method?
stock of Opteron Corporation, at underlying book value. For the same year,
Opteron reported net income of $55,000, which includes an extraordinary gain of
$40,000. It did not pay any dividends during the year. By what amount would
Athlon's investment in Opteron Corporation increase for the year, if Athlon
used the equity method?
7) The primary role of the International Accounting Standards Board
(IASB) is to
(IASB) is to
8) The International Accounting Standards Board (IASB)
9) Which of the following statements about the International
Accounting Standards Board (IASB) is accurate?
Accounting Standards Board (IASB) is accurate?
10) On March 1, 2008, Wilson Corporation sold goods for a U.S.
dollar equivalent of $31,000 to a Thai company. The transaction is denominated
in Thai bahts. The payment is received on May 10. The exchange rates were
dollar equivalent of $31,000 to a Thai company. The transaction is denominated
in Thai bahts. The payment is received on May 10. The exchange rates were
11) On December 5, 2008, Texas-based Imperial Corporation purchased
goods from a Saudi Arabian firm for 100,000 riyals (SAR), to be paid on January
10, 2009. The transaction is denominated in Saudi riyals. Imperial's fiscal
year ends on December 31, and its reporting currency is the U.S. dollar. The exchange
rates are:
goods from a Saudi Arabian firm for 100,000 riyals (SAR), to be paid on January
10, 2009. The transaction is denominated in Saudi riyals. Imperial's fiscal
year ends on December 31, and its reporting currency is the U.S. dollar. The exchange
rates are:
12) Mint Corporation has several transactions with foreign
entities. Each transaction is denominated in the local currency unit of the
country in which the foreign entity is located. On November 2, 2008, Mint sold
confectionary items to a foreign company at a price of LCU 23,000 when the
direct exchange rate was 1 LCU = $1.08. The account has not been settled as of
December 31, 2008, when the exchange rate has increased to 1 LCU = $1.10. The
foreign exchange gain or loss on Mint's records at year-end for this transaction
will be
entities. Each transaction is denominated in the local currency unit of the
country in which the foreign entity is located. On November 2, 2008, Mint sold
confectionary items to a foreign company at a price of LCU 23,000 when the
direct exchange rate was 1 LCU = $1.08. The account has not been settled as of
December 31, 2008, when the exchange rate has increased to 1 LCU = $1.10. The
foreign exchange gain or loss on Mint's records at year-end for this transaction
will be
13) When the local currency of the foreign subsidiary is the
functional currency, a foreign subsidiary's inventory carried at cost would be
converted to U.S. dollars by
functional currency, a foreign subsidiary's inventory carried at cost would be
converted to U.S. dollars by
14) Infinity Corporation acquired 80 % of the common stock of an
Egyptian company on January 1, 2008. The goodwill associated with this
acquisition was $18,350. Exchange rates at various dates during 2008 follow:
Egyptian company on January 1, 2008. The goodwill associated with this
acquisition was $18,350. Exchange rates at various dates during 2008 follow:
15) If the U.S. dollar is the currency in which the foreign
affiliate's books and records are maintained, and the U.S. dollar is also the
functional currency,
affiliate's books and records are maintained, and the U.S. dollar is also the
functional currency,
16) Beta Company acquired 100 % of the voting common shares of
Standard Video Corporation, its bitter rival, by issuing bonds with a par value
and fair value of $150,000. Immediately prior to the acquisition, Beta reported
total assets of $500,000, liabilities of $280,000, and stockholders' equity of
$220,000. At that date, Standard Video reported total assets of $400,000,
liabilities of $250,000, and stockholders' equity of $150,000. Included in
Standard's liabilities was an account payable to Beta in the amount of $20,000,
which Beta included in its accounts receivable. What amount of total
liabilities was reported in the consolidated balance sheet immediately after
acquisition?
Standard Video Corporation, its bitter rival, by issuing bonds with a par value
and fair value of $150,000. Immediately prior to the acquisition, Beta reported
total assets of $500,000, liabilities of $280,000, and stockholders' equity of
$220,000. At that date, Standard Video reported total assets of $400,000,
liabilities of $250,000, and stockholders' equity of $150,000. Included in
Standard's liabilities was an account payable to Beta in the amount of $20,000,
which Beta included in its accounts receivable. What amount of total
liabilities was reported in the consolidated balance sheet immediately after
acquisition?
17) Beta Company acquired 100 % of the voting common shares of
Standard Video Corporation, its bitter rival, by issuing bonds with a par value
and fair value of $150,000. Immediately prior to the acquisition, Beta reported
total assets of $500,000, liabilities of $280,000, and stockholders' equity of
$220,000. At that date, Standard Video reported total assets of $400,000,
liabilities of $250,000, and stockholders' equity of $150,000. Included in
Standard's liabilities was an account payable to Beta in the amount of $20,000,
which Beta included in its accounts receivable. What amount of total assets was
reported in the consolidated balance sheet immediately after acquisition?
Standard Video Corporation, its bitter rival, by issuing bonds with a par value
and fair value of $150,000. Immediately prior to the acquisition, Beta reported
total assets of $500,000, liabilities of $280,000, and stockholders' equity of
$220,000. At that date, Standard Video reported total assets of $400,000,
liabilities of $250,000, and stockholders' equity of $150,000. Included in
Standard's liabilities was an account payable to Beta in the amount of $20,000,
which Beta included in its accounts receivable. What amount of total assets was
reported in the consolidated balance sheet immediately after acquisition?
18) Beta Company acquired 100 % of the voting common shares of
Standard Video Corporation, its bitter rival, by issuing bonds with a par value
and fair value of $150,000. Immediately prior to the acquisition, Beta reported
total assets of $500,000, liabilities of $280,000, and stockholders' equity of
$220,000. At that date, Standard Video reported total assets of $400,000,
liabilities of $250,000, and stockholders' equity of $150,000. Included in
Standard's liabilities was an account payable to Beta in the amount of $20,000,
which Beta included in its accounts receivable. What amount of stockholders'
equity was reported in the consolidated balance sheet immediately after
acquisition?
Standard Video Corporation, its bitter rival, by issuing bonds with a par value
and fair value of $150,000. Immediately prior to the acquisition, Beta reported
total assets of $500,000, liabilities of $280,000, and stockholders' equity of
$220,000. At that date, Standard Video reported total assets of $400,000,
liabilities of $250,000, and stockholders' equity of $150,000. Included in
Standard's liabilities was an account payable to Beta in the amount of $20,000,
which Beta included in its accounts receivable. What amount of stockholders'
equity was reported in the consolidated balance sheet immediately after
acquisition?
19) West, Inc. holds 100 % of the common stock of Coast Company, an
investment acquired for $680,000. Immediately following the combination, West's
net assets have a book value of $1,150,000 and a fair value of $1,390,000. The
book value and the fair value of Coast's net assets on the date of combination
are $400,000 and $550,000, respectively. Immediately following the combination,
a consolidated balance sheet is prepared. What will be the amount of net assets
reported in the consolidated balance sheet, prepared immediately following the
combination?
investment acquired for $680,000. Immediately following the combination, West's
net assets have a book value of $1,150,000 and a fair value of $1,390,000. The
book value and the fair value of Coast's net assets on the date of combination
are $400,000 and $550,000, respectively. Immediately following the combination,
a consolidated balance sheet is prepared. What will be the amount of net assets
reported in the consolidated balance sheet, prepared immediately following the
combination?
20) West, Inc. holds 100 % of the common stock of Coast Company, an
investment acquired for $680,000. Immediately following the combination, West's
net assets have a book value of $1,150,000 and a fair value of $1,390,000. The
book value and the fair value of Coast's net assets on the date of combination
are $400,000 and $550,000, respectively. Immediately following the combination,
a consolidated balance sheet is prepared. What will be the amount of total
consolidated stockholders' equity be reported in the consolidated balance sheet
prepared immediately following the combination?
investment acquired for $680,000. Immediately following the combination, West's
net assets have a book value of $1,150,000 and a fair value of $1,390,000. The
book value and the fair value of Coast's net assets on the date of combination
are $400,000 and $550,000, respectively. Immediately following the combination,
a consolidated balance sheet is prepared. What will be the amount of total
consolidated stockholders' equity be reported in the consolidated balance sheet
prepared immediately following the combination?
21) Tanner Company, a subsidiary acquired for cash, owned equipment
with a fair value higher than the book value as of the date of combination. A
consolidated balance sheet prepared immediately after the acquisition would
include this difference in
with a fair value higher than the book value as of the date of combination. A
consolidated balance sheet prepared immediately after the acquisition would
include this difference in
22) ABC Corporation owns 75 % of XYZ Company's voting shares.
During 2008, ABC produced 50,000 chairs at a cost of $79 each and sold 35,000
chairs to XYZ for $90 each. XYZ sold 18,000 of the chairs to unaffiliated
companies for $117 each prior to December 31, 2008, and sold the remainder in
early 2009 for $130 each. Both companies use perpetual inventory systems. Based
on the information given above, what amount of cost of goods sold must be
eliminated from the consolidated income statement for 2008?
During 2008, ABC produced 50,000 chairs at a cost of $79 each and sold 35,000
chairs to XYZ for $90 each. XYZ sold 18,000 of the chairs to unaffiliated
companies for $117 each prior to December 31, 2008, and sold the remainder in
early 2009 for $130 each. Both companies use perpetual inventory systems. Based
on the information given above, what amount of cost of goods sold must be
eliminated from the consolidated income statement for 2008?
23) On January 1, 2008, Colorado Corporation acquired 75 % of
Denver Company's voting common stock for $90,000 cash. At that date, the fair
value of the noncontrolling interest was $30,000. Denvers's balance sheet at
the date of acquisition contained the following balances:
Denver Company's voting common stock for $90,000 cash. At that date, the fair
value of the noncontrolling interest was $30,000. Denvers's balance sheet at
the date of acquisition contained the following balances:
24) Consolidated net income for a parent and its 80 % owned
subsidiary should be computed by eliminating
subsidiary should be computed by eliminating
25) On January 1, 2008, Wilhelm Corporation acquired 90 % of Kaiser
Company's voting stock, at underlying book value. The fair value of the
noncontrolling interest was equal to 10 % of the book value of Kaiser at that
date. Wilhelm uses the equity method in accounting for its ownership of Kaiser.
On December 31, 2009, the trial balances of the two companies are as follows:
Company's voting stock, at underlying book value. The fair value of the
noncontrolling interest was equal to 10 % of the book value of Kaiser at that
date. Wilhelm uses the equity method in accounting for its ownership of Kaiser.
On December 31, 2009, the trial balances of the two companies are as follows:
What amount would be reported as total liabilities in the
consolidated balance sheet at December 31, 2009?
consolidated balance sheet at December 31, 2009?
26) On January 1, 2008, Wilhelm Corporation acquired 90 % of Kaiser
Company's voting stock, at underlying book value. The fair value of the
noncontrolling interest was equal to 10 % of the book value of Kaiser at that
date. Wilhelm uses the equity method in accounting for its ownership of Kaiser.
On December 31, 2009, the trial balances of the two companies are as follows:
Company's voting stock, at underlying book value. The fair value of the
noncontrolling interest was equal to 10 % of the book value of Kaiser at that
date. Wilhelm uses the equity method in accounting for its ownership of Kaiser.
On December 31, 2009, the trial balances of the two companies are as follows:
What amount would be reported as total assets in the consolidated
balance sheet at December 31, 2009?
balance sheet at December 31, 2009?
27) Bristle Corporation acquired 75 % of Silver Corporation's
common stock on December 31, 2008, for $300,000. The fair value of the
noncontrolling interest at that date was determined to be $100,000. Silver's
balance sheet immediately before the combination reflected the following
balances:
common stock on December 31, 2008, for $300,000. The fair value of the
noncontrolling interest at that date was determined to be $100,000. Silver's
balance sheet immediately before the combination reflected the following
balances:
A careful review of the fair value of Silver's assets and
liabilities indicated that inventory, land, and buildings and equipment (net)
had fair values of $65,000, $100,000, and, $300,000, respectively. Goodwill is
assigned proportionately to Bristle and the noncontrolling shareholders. What
amount of land will be included in the consolidated balance sheet immediately
following the acquisition?
liabilities indicated that inventory, land, and buildings and equipment (net)
had fair values of $65,000, $100,000, and, $300,000, respectively. Goodwill is
assigned proportionately to Bristle and the noncontrolling shareholders. What
amount of land will be included in the consolidated balance sheet immediately
following the acquisition?
28) Sky Corporation owns 75 % of Earth Company's stock. On July 1,
2008, Sky sold a building to Earth for $33,000. Sky had purchased this building
on January 1, 2006, for $36,000. The building's original eight-year estimated
total economic life remains unchanged. Both companies use straight-line
depreciation. The equipment's residual value is considered negligible. Based on
this information, in the preparation of the 2009 consolidated income statement,
depreciation expense will be
2008, Sky sold a building to Earth for $33,000. Sky had purchased this building
on January 1, 2006, for $36,000. The building's original eight-year estimated
total economic life remains unchanged. Both companies use straight-line
depreciation. The equipment's residual value is considered negligible. Based on
this information, in the preparation of the 2009 consolidated income statement,
depreciation expense will be
29) Sky Corporation owns 75 % of Earth Company's stock. On July 1,
2008, Sky sold a building to Earth for $33,000. Sky had purchased this building
on January 1, 2006, for $36,000. The building's original eight-year estimated
total economic life remains unchanged. Both companies use straight-line
depreciation. The equipment's residual value is considered negligible. Based on
this information, in the preparation of the 2008 consolidated financial
statements, building will be _____ in the eliminating entries.
2008, Sky sold a building to Earth for $33,000. Sky had purchased this building
on January 1, 2006, for $36,000. The building's original eight-year estimated
total economic life remains unchanged. Both companies use straight-line
depreciation. The equipment's residual value is considered negligible. Based on
this information, in the preparation of the 2008 consolidated financial
statements, building will be _____ in the eliminating entries.
30) ABC Corporation purchased land on January 1, 2006, for $50,000.
On July 15, 2008, it sold the land to its subsidiary, XYZ Corporation, for
$70,000. ABC owns 80 % of XYZ's voting shares. What will be the workpaper
eliminating entry to remove the effects of the intercompany sale of land in
preparing the consolidated financial statements for 2009?
On July 15, 2008, it sold the land to its subsidiary, XYZ Corporation, for
$70,000. ABC owns 80 % of XYZ's voting shares. What will be the workpaper
eliminating entry to remove the effects of the intercompany sale of land in
preparing the consolidated financial statements for 2009?
31) Sigma Company develops and markets organic food products to
natural foods retailers. The following information is available for the company
for the year 2008:
natural foods retailers. The following information is available for the company
for the year 2008:
Based on the preceding information, what amount will be reported by
the company as cash received from customers during the year?
the company as cash received from customers during the year?
32) Sigma Company develops and markets organic food products to
natural foods retailers. The following information is available for the company
for the year 2008:
natural foods retailers. The following information is available for the company
for the year 2008:
Based on the preceding information, what amount will be reported by
the company as cash flows from operating activities for 2008?
the company as cash flows from operating activities for 2008?
33) Tower Corporation's controller has just finished preparing a
consolidated balance sheet, income statement, and statement of changes in
retained earnings for the year ended December 31, 2009. Tower owns 80 % of
Network Corporation's stock, which it acquired at underlying book value on
November 1, 2006. At that date, the fair value of the noncontrolling interest
was equal to 20 % of Network Corporation's book value. The following
information is available:
consolidated balance sheet, income statement, and statement of changes in
retained earnings for the year ended December 31, 2009. Tower owns 80 % of
Network Corporation's stock, which it acquired at underlying book value on
November 1, 2006. At that date, the fair value of the noncontrolling interest
was equal to 20 % of Network Corporation's book value. The following
information is available:
34) Flyer Corporation holds 90 % of Kite Company's common shares
but none of its preferred shares. On the date of acquisition, the fair value of
the noncontrolling interest was equal to 10 % of the book value of Kite
Company. Summary balance sheets for the companies on December 31, 2008, are as
follows:
but none of its preferred shares. On the date of acquisition, the fair value of
the noncontrolling interest was equal to 10 % of the book value of Kite
Company. Summary balance sheets for the companies on December 31, 2008, are as
follows:
35) Company X has net income of $100,000 and $150,000 in net income
for 2008 and 2009, respectively. Weighted average number of shares outstanding
is 1,000,000 for both 2008 and 2009. What is basic earnings per share for 2008?
for 2008 and 2009, respectively. Weighted average number of shares outstanding
is 1,000,000 for both 2008 and 2009. What is basic earnings per share for 2008?
36) Electric Corporation holds 80 % of Utility Company's voting
common shares, acquired at book values, but none of its preferred shares. At
the date of acquisition, the fair value of the noncontrolling interest was
equal to 20 % f the book value of Utility Company. Summary balance sheets for
the companies on December 31, 2008, are as follows:
common shares, acquired at book values, but none of its preferred shares. At
the date of acquisition, the fair value of the noncontrolling interest was
equal to 20 % f the book value of Utility Company. Summary balance sheets for
the companies on December 31, 2008, are as follows:
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