Q&A Hero

Q: Parker Corporation owns an 80% interest in Sample Corporation's common stock. Throughout 2010, Sample had 10,000 shares of common stock outstanding and Parker had 100,000 shares of common stock outstanding. Sample's only dilutive security consists of $50,000 face amount of 8% bonds payable. Each $1,000 bond is convertible into 20 shares of Sample stock. Parker and Sample's separate incomes for the year are $100,000 and $75,000, respectively. Assume a 34% flat income tax rate. Required: Compute the amount of basic and diluted earnings per share for Parker (Consolidated) and Sample Corporations.

Q: Pandy Corporation owns a 90% interest in Sakaj Corporation's common stock. Throughout 2010, Sakaj had 20,000 shares of common stock outstanding and Pandy had 50,000 shares of common stock outstanding. Sakaj's only dilutive security consists of 10,000 stock options, with an exercise price of $20 per share. The average price of Sakaj's stock is $50 per share in 2010. The options are exercisable for one share of Sakaj's common stock. Pandy's and Sakaj's separate net incomes for the year are $200,000 and $180,000, respectively. Required: Compute the amount of basic and diluted earnings per share for Pandy (Consolidated) and Sakaj Corporations.

Q: Pancino Corporation owns a 90% interest in Sakal Corporation's common stock. Throughout 2010, Sakal had 20,000 shares of common stock outstanding and Pancino had 50,000 shares of common stock outstanding. Sakal's only dilutive security consists of 2,500 stock options, with an exercise price of $20 per share. The average price of Sakal's stock is $50 per share in 2010. The options are exercisable for one share of Sakal's common stock. Pancino's and Sakal's separate net incomes for the year are $100,000 and $80,000, respectively. Required: Compute the amount of basic and diluted earnings per share for Pancino (Consolidated) and Sakal Corporations.

Q: Savy Corporation's stockholders' equity on December 31, 2010 was as follows: 8% cumulative preferred stock, $100 par value, callable at $109, with two years of dividends in arrears $100,000 Common stock, $25 par value 700,000 Additional paid-in capital 250,000 Retained earnings 400,000 Total stockholders' equity $1,450,000 On January 1, 2011, Paul Corporation purchased a 70% interest in Savy's common stock for $2,100,000. On this date the book values of Savy's assets and liabilities are equal to their fair values. Required: 1. Determine the book value of the common stockholders' equity for Savy Corporation on January 1, 2011. 2. What is the amount of goodwill reported on the consolidated balance sheet for Paul Corporation and Subsidiary at January 2, 2011? 3. On January 2, 2011, Paul purchased 70% of Savy's preferred stock for $50,000. Prepare the journal entry(ies) for Paul for this purchase on January 2, 2011. 4. Prepare the elimination entry on the consolidating work papers for the Investment in Savy, Preferred Stock and Savy's Preferred Stock on January 2, 2011.

Q: Samford Corporation's stockholders' equity on December 31, 2010 was as follows: 8% cumulative preferred stock, $100 par value, callable at $109, with two years of dividends in arrears $100,000 Common stock, $25 par value 700,000 Additional paid-in capital 250,000 Retained earnings 400,000 Total stockholders' equity $1,450,000 On January 1, 2011, Panera Corporation purchased a 70% interest in Samford's common stock for $1,400,000. On this date the book values of Samford's assets and liabilities are equal to their fair values. Required: 1. Determine the book value of the common stockholders' equity for Samford Corporation on January 1, 2011. 2. What is the amount of goodwill reported on the consolidated balance sheet for Panera Corporation and Subsidiary at January 2, 2011? 3. What is the noncontrolling interest that appeared on a consolidated balance sheet for Panera Corporation and Subsidiary on January 2, 2011?

Q: Sally Corporation's stockholders' equity on December 31, 2010 was as follows: 10% cumulative preferred stock, $100 par value, callable at $105, with one year dividends in arrears $10,000 Common stock, $1 par value 50,000 Additional paid-in capital 150,000 Retained earnings 160,000 Total stockholders' equity $370,000 On January 1, 2011, Panera Corporation paid $500,000 for a 70% interest in Sally's common stock. On January 1, 2011, the book values of Sally's assets and liabilities were equal to fair values. Required: 1. Determine the book value of the common stockholders' equity for Sally Corporation on January 1, 2011. 2. What is the amount of goodwill reported on the consolidated balance sheet for Panera Corporation and Subsidiary at January 2, 2011? 3. On January 2, 2011, Panera purchased 70% of Sally's preferred stock for $5,000. Prepare the journal entry(ies) for Panera for this purchase on January 2, 2011. 4. Prepare the elimination entry on the consolidating work papers for the Investment in Sally, Preferred Stock and Sally's Preferred Stock on January 2, 2011.

Q: Saito Corporation's stockholders' equity on December 31, 2010 was as follows: 10% cumulative preferred stock, $100 par value, callable at $105, with one year dividends in arrears $10,000 Common stock, $1 par value 50,000 Additional paid-in capital 150,000 Retained earnings 160,000 Total stockholders' equity $370,000 On January 1, 2011, Panata Corporation paid $300,000 for a 70% interest in Saito's common stock. On January 1, 2011, the book values of Saito's assets and liabilities were equal to fair values. Required: 1. Determine the book value of the common stockholders' equity for Saito Corporation on January 1, 2011. 2. What is the amount of goodwill reported on the consolidated balance sheet for Panata Corporation (and Subsidiary) at January 2, 2011? 3. What is the noncontrolling interest that appeared on a consolidated balance sheet for Panata Corporation (and Subsidiary) on January 2, 2011?

Q: Palomba Corporation allocates consolidated income taxes to its 90%-owned subsidiary using the percentage allocation method. Under this method, consolidated income tax expense will be allocated to a subsidiary A) on the basis of the agreement between the parent and subsidiary. B) on the basis of the subsidiary's pretax income as a percentage of consolidated pretax income. C) on the basis of the income taxes remitted to the IRS. D) 90% to the subsidiary.

Q: Palmquist Corporation and its 80%-owned subsidiary, Sadler Corporation, are members of an affiliated group. They do not file consolidated tax returns. Sadler had $3,000,000 of income and paid $1,000,000 dividends in 2010. Palmquist and Sadler had 35% income tax rates. What amount of Sadler's dividends is taxable to Palmquist in 2010? A) $0 B) $ 70,000 C) $160,000 D) $200,000

Q: Palmer Company owns a 25% interest in Sad, Incorporated, a domestic company. Sad had net income of $60,000 and paid dividends of $20,000. Palmer's tax rate is 35%. For simplicity, assume that Sad's undistributed earnings are Palmer's only temporary timing difference. Assume Sad qualifies for the 80% dividend received deduction. Which of the following statements is correct? A) The current tax liability is $700. B) The current tax liability is $1,050. C) Under GAAP, Palmer provides for income taxes on Sad's undistributed earnings with a credit to deferred tax liability of $700. D) Under GAAP, Palmer provides for income taxes on Sad's undistributed earnings with a credit to deferred tax liability of $1,050.

Q: Palm owns a 70% interest in Sable, a domestic subsidiary. Sable is not part of Palm's affiliated group. Palm will pay taxes on A) none of the dividends it receives from Sable. B) 20% of the dividends it receives from Sable. C) 66% of the dividends it receives from Sable. D) 80% of the dividends it receives from Sable.

Q: When a subsidiary has preferred stock that is convertible into subsidiary common stock, the parent's equity in the subsidiary's diluted earnings is calculated by the number of A) subsidiary shares into which the subsidiary's dilutive securities can be converted times the subsidiary's basic EPS figure. B) parent shares into which the subsidiary's dilutive securities can be converted times the parent's basic EPS figure. C) subsidiary common shares held by the parent times the subsidiary's diluted EPS figure. D) parent shares into which the subsidiary's dilutive securities can be converted times the subsidiary's basic EPS figure.

Q: In computing consolidated diluted EPS, the replacement calculation replaces the parent's equity in subsidiary earnings with the A) parent's share of basic EPS of the subsidiary. B) subsidiary's share of basic EPS of the parent. C) parent's share of diluted EPS of the subsidiary. D) subsidiary's share of diluted EPS of the parent.

Q: Parnaby has 25,000 common stock shares outstanding and its 100%-owned subsidiary Sandal has 5,000 common stock shares outstanding. Parnaby and Sandal do not have any potentially dilutive securities outstanding. The separate net incomes for Parnaby and Sandal is $150,000 and $75,000 respectively. Diluted EPS for the consolidated company is A) $5.00. B) $6.00. C) $7.50. D) $9.00.

Q: If a parent company has controlling interest in a subsidiary which has no potentially dilutive securities outstanding, then in the calculation of consolidated diluted EPS, it will be necessary to A) only make an adjustment of subsidiary's basic earnings. B) replace the parent's equity in subsidiary earnings with the parent's equity in subsidiary's diluted EPS. C) make a replacement calculation in the parent's basic earnings for the EPS. D) only use the parent's common shares and shares represented by the parent's potentially dilutive securities.

Q: When a parent acquires the preferred stock of a subsidiary, there will be a constructive retirement and A) any difference paid above the book value of the preferred stock reduces the parent's additional paid-in capital. B) any difference paid above the book value of the preferred stock reduces the subsidiary's retained earnings. C) any difference paid above the book value of the preferred stock increases the parent's additional paid-in capital. D) any difference paid above the book value of the preferred stock increases the parent's retained earnings.

Q: Assume a company's preferred stock is cumulative with a call provision and has dividends in arrears. The amount of stockholders' equity allocated to preferred stockholders is equal to the number of shares outstanding times the A) sum of the par value per share plus any liquidation premium per share, plus the sum of any preferred dividends in arrears, plus the current year's dividend requirement, but only if dividends have been declared. B) sum of the par value per share, plus any liquidation premium per share, plus the sum of any preferred dividends in arrears, plus the current year's dividend requirement, regardless of whether dividends have been declared. C) call price plus the sum of any preferred dividends in arrears, plus the current year's dividend requirement, but only if dividends have been declared. D) call price plus the sum of any preferred dividends in arrears, plus the current year's dividend requirement, regardless of whether dividends have been declared.

Q: Pan Corporation has total stockholders' equity of $5,000,000 consisting of $1,000,000 of $10 par value Common Stock, $1,000,000 of Additional Paid-in Capital, and $3,000,000 of Retained Earnings. Pan owns 80% of Sailor Corporation's common stock purchased at book value, which equals fair value. Sailor has $900,000 of 10% cumulative preferred stock outstanding, with no preferred dividends in arrears. The preferred stock has no call price, redemption price or liquidation price. Pan acquired 60% of the preferred stock of Sailor for $500,000. After this transaction the balances in Pan's Retained Earnings and Additional Paid-in Capital accounts, respectively, are A) $2,960,000 and $1,000,000. B) $3,000,000 and $960,000. C) $3,000,000 and $1,040,000. D) $3,040,000 and $1,000,000.

Q: On January 1, 2011, Pardy Corporation acquired a 70% interest in the common stock of Salter Corporation for $7,000,000 when Salter's stockholders' equity was as follows:10% cumulative, nonparticipating preferred stock,$100 par, with a $105 liquidation preference,callable at $110 $ 1,000,000Common stock, $10 par value 6,000,000Additional paid-in capital 1,500,000Retained earnings 2,500,000Total stockholders' equity $11,000,000There were no preferred dividends in arrears on January 1, 2011. There are no book value/fair value differentials.Assume Salter's net income for 2011 is $220,000. No dividends are declared or paid in 2011. What is the change in Pardy's Investment in Salter for the year ending December 31, 2011?A) $ 84,000B) $119,000C) $154,000D) $189,000

Q: A subsidiary has dilutive securities outstanding that include convertible bonds payable. The bonds are convertible into the parent's common stock. When calculating consolidated diluted earnings per share, the convertible bonds will affect A) the numerator of consolidated diluted EPS only. B) the denominator of consolidated diluted EPS only. C) the numerator and denominator of consolidated diluted EPS. D) None of the above will be affected.

Q: On January 1, 2011, Adam Corporation purchased a 90% interest in Rodney Corporation. On January 1, 2011, Rodney Corporation purchased an 80% interest in Ben Corporation.In all investment acquisitions, the cost of the interest was equal to the book value of the interest and the fair value of the interest. The following information is available for 2011:Purchase Cost Net Income(Net Loss) for 2011Adam $1,000,000 $200,000Rodney $10,000 ($10,000)Ben $15,000 $50,000The separate net incomes do not include investment income.Required:1. What is controlling interest share of consolidated net income for 2011?2. What is noncontrolling interest shares of consolidated net income for 2011?

Q: On January 1, 2011, Paul Corporation acquired a 90% interest in Satorius Company for $360,000 when Satorius' stockholders' equity was $400,000; with Common stock $200,000 and Retained earnings $200,000.On January 1, 2011, Satorius Company purchased a 10% interest in Paul Company for $90,000 when Paul's total stockholders' equity was $900,000; with Common stock $500,000 and Retained earnings $400,000.The following data was available for the year ending December 31, 2011:Paul Company Satorius CompanyNet income $150,000 $130,000Dividends 0 0Use the conventional approach to account for the mutually-held stock. Assume there were no book value/fair value differentials for each investment. The separate net incomes do not include investment income.Required:1. Prepare the journal entry for Paul on January 1, 2011.2. Prepare the journal entry for Satorius on January 1, 2011.3. Prepare the journal entry to record the constructive retirement of 10% of Paul's outstanding stock due to Satorius' purchase of Paul's stock.4. Determine the incomes of Paul and Satorius on a consolidated basis with mutual income for 2011 using simultaneous equations.5. What is controlling interest share of consolidated net income and noncontrolling interest shares for 2011?6. What is consolidated net income?

Q: On January 1, 2011, Klode Corporation acquired an 80% interest in Savy Company for $400,000 when Savy's stockholders' equity was $500,000; with Common stock $400,000 and Retained earnings $100,000.On January 1, 2011, Savy purchased a 10% interest in Klode for $50,000 when Klode's total stockholders' equity was $500,000; with Common stock $400,000 and Retained earnings $100,000.The following data was available for the year ending December 31, 2011:Klode Company Savy CompanyNet income $70,000 $50,000Dividends 0 0Use the conventional approach to account for the mutually-held stock. Assume there were no book value/fair value differentials for each investment. The separate net incomes do not include investment income.Required:1. Prepare the journal entry for Klode on January 1, 2011.2. Prepare the journal entry for Savy on January 1, 2011.3. Prepare the journal entry to record the constructive retirement of 10% of Klode's outstanding stock due to Savy's purchase of Klode's stock.4. Determine the incomes of Klode and Savy on a consolidated basis with mutual income for 2011 using simultaneous equations.5. What is controlling interest share of consolidated net income and noncontrolling interest shares for 2011?

Q: On January 1, 2011, Peabody Corporation acquired a 90% interest in Salisbury Company for $270,000 when Salisbury's stockholders' equity was $300,000; with Common stock $200,000 and Retained earnings $100,000.On January 1, 2011, Salisbury purchased a 10% interest in Peabody for $70,000 when Peabody's total stockholders' equity was $700,000; with Common stock $500,000 and Retained earnings $200,000.The following data was available for the year ending December 31, 2011:Peabody Company Salisbury CompanyNet income $50,000 $30,000Dividends 0 0Use the conventional approach to account for the mutually-held stock. Assume there were no book value/fair value differentials for each investment. The separate net incomes do not include investment income.Required:1.Prepare the journal entry for Peabody on January 1, 2011.2. Prepare the journal entry for Salisbury on January 1, 2011.3. Prepare the journal entry to record the constructive retirement of 10% of Peabody's outstanding stock due to Salisbury's purchase of Peabody's stock.4. Determine the incomes of Peabody and Salisbury on a consolidated basis with mutual income for 2011 using simultaneous equations.5. What is controlling interest share of consolidated net income and noncontrolling interest shares for 2011?

Q: On January 1, 2011, Singh Company acquired an 80 percent interest in Gonzalez Company for $300,000. On January 1, 2011, Gonzalez's total stockholders' equity was $375,000. The fair value and book value of Gonzalez's individual assets and liabilities were equal.On January 2, 2011, Gonzalez Company acquired a 10 percent interest in Singh Company for $50,000. On January 2, 2011, Singh's total stockholders' equity was $500,000. The fair value and book value of Singh's individual assets and liabilities were equal.For the year ending December 31, 2011, the following data is available:Net income DividendsSingh Company $40,000 $0Gonzalez Company $10,000 $0The treasury stock method is used to account for the mutual stock holdings between Singh and Gonzalez. The separate net incomes do not include investment income. A partial consolidating worksheet is below.Required:Prepare the elimination entries for the year ending December 31, 2011.Do not enter them onto the worksheet. Instead, list them below.

Q: On January 1, 2011, Wrobel Company acquired a 90 percent interest in Sally Company for $270,000. On January 1, 2011, Sally's total stockholders' equity was $300,000. The fair value and book value of Sally's individual assets and liabilities were equal.On January 2, 2011, Sally Company acquired a 10 percent interest in Wrobel Company for $70,000. On January 2, 2011, Wrobel's total stockholders' equity was $700,000. The fair value and book value of Wrobel's individual assets and liabilities were equal.For the year ending December 31, 2011, the following data is available:Net income DividendsWrobel Company $50,000 $0Sally Company $30,000 $0The treasury stock method is used to account for the mutual stock holdings between Wrobel and Sally. The separate net incomes do not include investment income.A partial working paper is available for the year ending December 31, 2011.Required:Prepare the elimination entries for the year ending December 31, 2011.Do not enter them onto the worksheet. Instead, list them below.

Q: Padhy Corporation owns 80% of Abrams Corporation, Abrams Corporation owns 60% of Bacud Corporation, and Bacud Corporation owns 10% of Abrams Corporation. The separate net incomes (excluding investment income) of Padhy, Abrams, and Bacud are $300,000, $100,000, and $80,000, respectively. Assume the investments were acquired at a cost equal to the book value of each investment, which also equals the fair value.Required:Calculate the controlling interest share of consolidated net income and the noncontrolling interest shares for Padhy Corporation and its subsidiaries. Use the conventional method for your solution.

Q: Separate earnings and investment percentages for three affiliates for 2011 are as follows:Separate Percentage Interest Percentage InterestEarnings in Acres in BainPalace Company $450,000 80%Acres Inc 200,000 70%Bain Corporation 160,000 10%Assume the investments were acquired at a cost equal to the book value of each investment, which also equals the fair value. Separate earnings do not include investment income.Required:Calculate revised net incomes for Palace, Acres, and Bain by using the conventional method.Determine the controlling interest share of consolidated net income and the noncontrolling interest shares.

Q: Paine Corporation owns 90% of Achan Corporation, Achan Corporation owns 85% of Badge Corporation, and Badge Corporation owns 5% of Achan Corporation. The separate net incomes (excluding investment income) of Paine, Achan, and Badge are $400,000, $160,000, and $220,000, respectively. Assume the investments were acquired at a cost equal to the book value of each investment, which also equals the fair value.Required:Calculate revised net incomes for Paine, Achan, and Badge by using the conventional method.Determine the controlling interest share of consolidated net income and the noncontrolling interest shares.

Q: Paco Corporation owns 90% of Aber Corporation, Aber Corporation owns 85% of Back Corporation, and Back Corporation owns 5% of Aber Corporation. The separate net incomes (excluding investment income) of Paco, Aber, and Back are $100,000, $40,000, and $55,000, respectively. Assume the investments were acquired at a cost equal to the book value of each investment, which also equals the fair value.Required:1.Calculate revised net incomes for Paco, Aber, and Back by using the conventional method.2.Determine the controlling interest share of consolidated net income and the noncontrolling interest shares.

Q: On January 1, 2011 Paki Inc. bought 75% interest in Adam Corporation. At the time of purchase, Adam owned 80% of Baird Company. In all acquisitions, the book value equals the fair value, which equals the acquisition cost. Separate earnings (loss) (excluding investment income) for the three affiliates for 2011 are as follows:SeparateEarnings (Loss) DividendsPaki Company $400,000 $150,000Adam Inc (50,000) 90,000Baird Company 100,000 35,000Required:Compute controlling interest share of consolidated net income and noncontrolling interest shares for Paki and affiliates for 2011.

Q: Packer Corporation owns 100% of Abel Corporation, Abel Corporation owns 95% of Bacon Corporation and Bacon Corporation owns 80% of Cab Corporation. The separate net incomes (excluding investment income) of Packer, Abel, Bacon, and Cab are $300,000, $100,000, $200,000, and $300,000, respectively. All of the investments were made at times when the investee's book values were equal to their fair values. There were no cost/book value differentials for each investment.Required:Determine the controlling interest share of consolidated net income and noncontrolling interest shares for Packer Corporation and Subsidiaries for the current year.

Q: Paik Corporation owns 80% of Acdol Corporation and 60% of Ben Corporation. Acdol Corporation owns 10% of Ben Corporation. All subsidiary investments were acquired at book value. There are no fair value/book value differentials associated with each investment. Separate net incomes (excluding investment income) of the affiliated companies for 2011 are:Paik: $600,000 which includes $60,000 unrealized losses on inventory items sold to BenAcdol: $360,000Ben: $340,000 which includes $100,000 unrealized profit on land sold to AcdolRequired:Determine controlling interest share of consolidated net income and noncontrolling interest shares for Paik Corporation and Subsidiaries for 2011.

Q: Pacini Corporation owns an 80% interest in Abdoo Corporation, acquired on January 1, 2010 for $700,000 when Abdoo's stockholders' equity consisted of $600,000 of Capital Stock and $200,000 of Retained Earnings.Abdoo Corporation acquired a 60% interest in Bach Corporation on July 1, 2010 for $180,000 when Bach had Capital Stock of $200,000 and Retained Earnings of $50,000. On January 1, 2011, Abdoo acquired a 70% interest in Cabo Corporation for $270,000 when Cabo had Capital Stock of $250,000 and Retained Earnings of $100,000.No change in outstanding stock of any of the affiliated companies has occurred since the investments were made. All cost-book value differentials are goodwill. There are no fair value/book value differentials. The stockholders' equity section of the separate balance sheets of Abdoo, Bach, and Cabo at December 31, 2011 are as follows:Abdoo Bach CaboCapital Stock $600,000 $200,000 $250,000Retained Earnings 280,000 140,000 130,000Total stockholders' equity $880,000 $340,000 $380,000Required:1.Compute the amount at which goodwill should be shown in the consolidated balance sheet of Pacini Corporation and Subsidiaries at December 31, 2011.2.Pacini and Abdoo have applied the equity method correctly. Determine the balances of the three investment accounts at December 31, 2011.

Q: Paice Corporation owns 80% of the voting common stock of Accardi Corporation. Paice owns 60% of the voting common stock of Badger Corporation. Accardi owns 20% of the voting common stock of Badger. There are no cost/book value/fair value differentials to consider. The separate net incomes (excluding investment income) of these affiliated companies for 2011 are:Paice $300,000Accardi 160,000Badger 120,000Required:Calculate controlling interest share of consolidated net income and noncontrolling interest shares for Paice Corporation and Subsidiaries for 2011.

Q: On January 1, 2012, Pauline Company acquired 90% of Stephen Company at a cost of $90,000. On January 1, 2012, Stephen Company acquired 10% of Pauline Company at a cost of $10,000.On January 1, 2012, the following data is available:Stephen Company Pauline CompanyCommon Stock $50,000 Common Stock $50,000Retained Earnings $50,000 Retained Earnings $50,000Assets fair value $100,000 Assets fair value $100,000Assets book value $100,000 Assets book value $100,000Liabilities $0 Liabilities $0At December 31, 2012, the following data is available:January 1, 2012 December 31, 2012On Pauline Books:Investment in Stephen $90,000 $105,000On Stephen Books:Investment in Pauline $10,000 $10,000Assuming the treasury stock method is used, what elimination entry is needed for the Investment in Pauline at December 31, 2012?A)Retained earnings5,000Common stock5,000Investment in Pauline10,000B)Investment in Stephen10,000Investment in Pauline10,000C)Income from Pauline10,000Investment in Pauline10,000D)Treasury stock10,000Investment in Pauline10,000

Q: Raymond Company owns 90% of Rachel Company. Rachel Company owns 10% of Raymond Company. The treasury stock method is used. On the books of Rachel Company, we maintain the Investment in Raymond using the ________ method. The ending balance in Investment in Raymond is ________ stockholders' equity in the consolidated balance sheet.A) equity; deducted fromB) cost; deducted fromC) treasury stock; deducted fromD) conventional; added to

Q: When mutually-held stock involves subsidiaries holding the stock of each other, the ________ method is not used.A) equityB) costC) conventionalD) treasury stock

Q: Use the following information to answer the question(s) below.Paiva Corporation owns 80% of Ackroyd Corporation's outstanding common stock and Ackroyd owns 80% of the outstanding common stock of Bailey Corporation. Bailey Corporation owns 10% of the outstanding common stock of Ackroyd Corporation. The cost of the investments was equal to book value and there were not fair value/book value differences for the investments. The separate net incomes for the three affiliated companies for the year ended December 31, 2011 (excluding investment income) are as follows: Paiva Corporation, $100,000, Ackroyd Corporation, $50,000, and Bailey Corporation, $30,000. Use the conventional approach.Symbols used:P = Income of Paiva on a consolidated basisA = Income of Ackroyd on a consolidated basisB = Income of Bailey on a consolidated basisBailey's noncontrolling interest share for 2011 isA) $7,609.B) $8,044.C) $15,652.D) $23,696.

Q: Use the following information to answer the question(s) below.Pahm Corporation owns 80% of the outstanding voting common stock of Abussi Corporation, which was purchased for $60,000 over Abussi's book value. The excess purchase price was attributable to goodwill. Abussi Corporation owns 60% of the outstanding common stock of Badock Corporation, which was purchased at book value. The separate net incomes of Pahm, Abussi, and Badock (excluding investment income) for the year are $200,000, $240,000, and $260,000, respectively. There were no fair value/book value differences in the assets and liabilities of Pahm, Abussi and Badock.The net income reported for Pahm Corporation for the current year isA) $504,800.B) $516,800.C) $545,200.D) $557,200.

Q: Use the following information to answer the question(s) below.Pace Corporation owns 70% of Abaza Corporation and 60% of Babon Corporation. Abaza Corporation owns 20% of Babon Corporation. Pace's investment in Abaza was consummated in one transaction at a purchase price $20,000 in excess of the book value. Pace's purchase of Babon was made in one transaction at a price $30,000 above book value. Abaza's investment in Babon was completed in one transaction at a purchase price $10,000 in excess of the book value. The purchase price differential for all three investments was attributable to goodwill. (There were no fair value/book value differences in assets and liabilities for each investment.) Pace's separate net income for the current year is $100,000. Abaza's separate net income is $190,000, which includes a $10,000 unrealized loss on the sale of land to Pace. Babon's separate net income is $150,000. Separate net incomes exclude investment income.The amount of noncontrolling interest share for the current year isA) $69,000.B) $85,000.C) $95,000.D) $99,000.

Q: Paglia Corporation owns 80% of Aburn Corporation and has separate net income of $200,000 for 2010. Aburn Corporation has separate net income of $100,000 and owns 70% of the outstanding stock of Badley Corporation. Badley Corporation has separate net income of $80,000. (Separate net incomes exclude investment income.) The cost of each investment was equal to book value and fair value. The controlling interest share of consolidated net income for 2010 isA) $324,800.B) $328,800.C) $344,800.D) $344,800.

Q: Pablo Corporation acquired 60% of Abagia Corporation on January 1, 2010, at a cost of $20,000 in excess of book value. Also, on July 1, 2010, Pablo acquired 60% of Babin Corporation at book value. On January 1, 2011, Abagia acquired a 20% interest in Babin at a cost of $10,000 in excess of book value. The excess purchase costs paid by Pablo and Abagia were attributed to goodwill.On July 1, 2011, Pablo sold land with a book value of $20,000 to Abagia for $40,000. The $20,000 unrealized gain is included in Pablo's separate income. Separate net incomes for the affiliated companies (excluding investment income) for 2011 are:Pablo $250,000Abagia 70,000Babin 100,000Controlling interest share of consolidated net income for 2011 isA) $304,000.B) $324,000.C) $344,000.D) $364,000.

Q: Pabari Corporation owns an 80% interest in Alders Corporation and Alders owns a 60% interest in Babao Corporation. Both interests were acquired at a cost equal to book value equal to fair value. During 2010, Alders sells land to Babao at a profit of $12,000. Babao still holds the land at December 31, 2010. Net income(loss) of the three companies (excluding investment income) for 2010 are:Pabari Corporation $180,000Alders Corporation 72,000Babao Corporation (30,000)Controlling interest share of consolidated net income and noncontrolling interest share, respectively, for 2010 areA) $211,200 and ($1,200).B) $211,200 and ($3,600).C) $213,600 and ($1,200).D) $213,600 and ($3,600).

Q: Use the following information to answer the question(s) below.Paint Corporation owns 82% of Achille Corporation and Achille Corporation owns 80% of Badrack Corporation. For the current year, the separate net incomes (excluding investment income) of Paint, Achille, and Badrack are $120,000, $100,000, and $50,000, respectively. The cost of each investment was equal to the book value of the investment, which was also equal to the fair value.Controlling interest share of consolidated net income for Paint Corporation and Subsidiaries is:A) $234,800.B) $244,800.C) $260,000.D) $270,000.

Q: Page Corporation acquired a 60% interest in Ace Corporation at a price $40,000 in excess of book value and fair value on January 1, 2010. On the same date, Ace acquired a 70% interest in Bader Corporation at a price $30,000 in excess of book value and fair value. The excess purchase cost paid by Page and Ace was attributed to goodwill. Separate net incomes (excluding investment income) for the three affiliates for 2010 are as follows: Page, $500,000, Ace, $300,000, and Bader, $400,000.Page's controlling interest share of consolidated net income for 2010 isA) $808,000.B) $848,000.C) $920,000.D) $960,000.

Q: 1) Pallet Corporation owns 80% of Adelt Corporation and Adelt owns 60% of Bajo Inc. Which of the following is correct?A) Bajo should not be consolidated because noncontrolling interests hold 52%.B) Bajo should be consolidated because the 60% of Bajo stock is held in the affiliate structure.C) Pallet has 8% indirect ownership of Bajo.D) Pallet has 80% indirect ownership of Bajo.

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Q: On December 31, 2011, Maria Corporation has the following stockholders' equity:Common stock, $10 par $100,000Additional paid-in capital 20,000Retained earnings 80,000Total stockholders' equity $200,000On January 1, 2012, Maria Corporation declared and issued a 10% stock dividend when the market price per share was $50.On January 2, 2012, James Corporation purchased an 80% interest in Maria Corporation for $160,000 from the open market. On January 2, 2012, the fair value of Maria's individual assets and liabilities was equal to book value.Required:Prepare the journal entry(ies) for Maria Corporation on January 1, 2012.2. Prepare the journal entry(ies) for James Corporation on January 2, 2012.3. Prepare the elimination entry(ies) for consolidating work papers on January 2, 2012.4. Prepare the elimination entry(ies) for consolidating work papers on January 2, 2012 if the 10% stock dividend is not declared and issued on January 1, 2012.

Q: On December 31, 2011, Lorna Corporation has the following information available:Common stock, $10 par $200,000Additional paid-in capital 60,000Retained earnings 40,000Total stockholders' equity $300,000On December 31, 2011, Gerald Corporation buys an 80% interest in Lorna Corporation for $240,000. On December 31, 2011, the fair value of Lorna's assets and liabilities are equal to the respective book values.Required:1.On January 1, 2012, Lorna Corporation buys 500 shares of common stock from noncontrolling stockholders at $20 per share. Prepare the journal entry for Gerald Corporation on January 1, 2012. Use four decimal places for the ownership percentage.2.On January 1, 2012, Lorna Corporation buys 500 shares of common stock from noncontrolling stockholders at $30 per share. Prepare the journal entry for Gerald Corporation on January 1, 2012. Use four decimal places for the ownership percentage.3. On January 1, 2012, Lorna Corporation buys 500 shares of common stock from noncontrolling stockholders at $10 per share. Prepare the journal entry for Gerald Corporation on January 1, 2012. Use four decimal places for the ownership percentage.

Q: On December 31, 2011, Dixie Corporation has the following information available:Common stock, $10 par $200,000Additional paid-in capital 60,000Retained earnings 40,000Total stockholders' equity $300,000On December 31, 2011, Grimsled Corporation buys an 80% interest in Dixie Corporation for $240,000. On December 31, 2011, the fair value of Dixie's assets and liabilities are equal to the respective book values.Required:1.On January 1, 2012, Dixie Corporation sells 5,000 additional shares of common stock to noncontrolling stockholders at $20 per share. Prepare the journal entry for Grimsled Corporation on January 1, 2012.2.On January 1, 2012, Dixie Corporation sells 5,000 additional shares of common stock to noncontrolling stockholders at $35 per share. Prepare the journal entry for Grimsled Corporation on January 1, 2012.3.On January 1, 2012, Dixie Corporation sells 5,000 additional shares of common stock to noncontrolling stockholders at $10 per share. Prepare the journal entry for Grimsled Corporation on January 1, 2012.

Q: On December 31, 2011, Pat Corporation has the following information available:Common stock, $10 par $100,000Additional paid-in capital 60,000Retained earnings 40,000Total stockholders' equity $200,000On December 31, 2011, Anne Corporation buys an 80% interest in Pat Corporation for $160,000. On December 31, 2011, the fair value of Pat's assets and liabilities are equal to the respective book values. Use four decimal places for the ownership percentage.Required:1.On January 1, 2012, Pat Corporation sells 2,000 additional shares of common stock to noncontrolling stockholders at $20 per share. Prepare the journal entry for Anne Corporation on January 1, 2012.2.On January 1, 2012, Pat Corporation sells 2,000 additional shares of common stock to noncontrolling stockholders at $35 per share. Prepare the journal entry for Anne Corporation on January 1, 2012.3.On January 1, 2012, Pat Corporation sells 2,000 additional shares of common stock to noncontrolling stockholders at $15 per share. Prepare the journal entry for Anne Corporation on January 1, 2012.

Q: At January 1, 2010, the stockholders' equity of Raven Corporation and its 60%-owned subsidiary, Trunk Corporation, are as follows:Raven TrunkCommon stock, $10 par value $700,000 $400,000Retained earnings 800,000 50,000Totals $1,500,000 $450,000Trunk's net income for 2010 was $40,000. No dividends were declared or paid in 2010. Raven's Investment in Trunk account balance on December 31, 2010 was equal to its underlying equity on December 31, 2010. Trunk Corporation issued 10,000 additional shares of common stock directly to Raven on January 1, 2011 at $22 per share.Required:1.Compute the balance in Raven's Investment in Trunk account on January 1, 2011 after its purchase of the additional Trunk shares.2.Determine the increase or decrease in goodwill stemming from Raven's investment in the 10,000 Trunk shares. Assume the fair value and book value of Trunk's assets and liabilities are equal.

Q: On September 1, 2011, Nelson Corporation acquired a 90% interest in Corbin Corporation for $900,000. Corbin's stockholders' equity at January 1, 2011 consisted of $200,000 of Common Stock and $600,000 of Retained Earnings. The book values of its assets and liabilities were equal to their respective fair values on this date. All excess purchase cost was attributed to goodwill.During 2011, Corbin uniformly earned $98,000 and paid dividends of $19,000 on each of four dates: February 1, June 1, August 1, and December 1.Required: Compute the following:1. Implied goodwill associated with Corbin Corporation based on Nelson's purchase price on September 1, 2011.2. Nelson's income from Corbin for 2011.3. Preacquisition income for Nelson Corporation and Subsidiary for 2011.4. Noncontrolling interest share for 2011.5. What is the balance in Nelson's Investment in Corbin account at December 31, 2011?

Q: On September 1, 2011, Beck Corporation acquired an 80% interest in Johnsen Corporation for $700,000. Johnsen's stockholders' equity at January 1, 2011 consisted of $200,000 of Common Stock and $600,000 of Retained Earnings. The book values of its assets and liabilities were equal to their respective fair values on this date. All excess purchase cost was attributed to goodwill.During 2011, Johnsen uniformly earned $78,000 and paid dividends of $9,000 on each of four dates: February 1, June 1, August 1, and December 1.Required: Compute the following:1. Implied goodwill associated with Johnsen Corporation based on Beck's purchase price on September 1, 2011.2. Beck's income from Johnsen for 2011.3. Preacquisition income for Beck Corporation and Subsidiary for 2011.4. Noncontrolling interest share for 2011.5. What is the balance in Beck's Investment in Johnsen account at December 31, 2011?

Q: Olson Corporation paid $62,000 to acquire 100% of Towing Corporation's outstanding voting common stock at book value on May 1, 2011. The stockholders' equity of Towing on January 1, 2011 consisted of $40,000 Capital Stock and $20,000 Retained Earnings. Towing's total dividends for 2011 were $6,000, paid equally on April 1 and October 1. Towing's net income was earned uniformly throughout 2011. In 2011, preacquisition sales were $10,000 and preacquisition expenses were cost of sales for $5,000. (There were no other preacquisition expenses in 2011.)During 2011, Olson made sales of $10,000 to Towing at a gross profit of $3,000. One-half of this merchandise was inventoried by Towing at year-end, and one-half of the 2011 intercompany sales were unpaid at year-end 2011.Olson sold equipment with a ten-year remaining useful life to Towing at a $2,000 gain on December 31, 2011. The straight-line depreciation method is used by both companies. The equipment has no salvage value.Financial statements of Olson and Towing Corporations for 2011 appear in the first two columns of the partially completed consolidation working papers.Required:Complete the consolidating working papers for Olson Corporation and Subsidiary for the year ending December 31, 2011.

Q: Candy Corporation paid $240,000 on April 1, 2011 for all of the common stock of Bun Corporation in a business acquisition. On January 1, 2011, Bun's stockholders' equity was equal to $195,000. Bun's first quarter 2011 net income was $10,000 and first quarter 2011 dividends were $5,000. In 2011, preacquisition sales were $32,500 and preacquisition cost of sales was $22,500. (There were no other preacquisition expenses in 2011.) Dividends are paid quarterly on March 31, June 30, September 30 and December 31. Any excess cost over book value acquired is allocated to goodwill.Additional information:1. Candy sold equipment with a 5-year remaining useful life to Bun on July 1, 2011 for a gain of $10,000. Salvage value of the equipment is zero and both companies use the straight-line depreciation method.2. Bun's accounts payable balance at December 31 includes $5,000 due to Candy from the sale of equipment.3. Candy accounts for its investment in Bun using the equity method.Required:Complete the working papers to consolidate the financial statements of Candy and Bun Corporations for the year ending December 31, 2011.

Q: At December 31, 2012 year-end, Arnold Corporation's investment in Oakes Inc. was $200,000 consisting of 80% of Oakes's $250,000 stockholders' equity on that date. On April 1, 2013, Arnold sold 20% interest (one-fourth of its holdings) in Oakes for $65,000. During 2013, Oakes had net income of $75,000 (earned uniformly) and on July 1, 2013, Oakes paid dividends of $40,000. Arnold uses the equity method to account for the investment. Required:1. What is the gain or loss on sale of the 20% interest?2. Record the journal entries for Arnold for the year ending December 31, 2013. Use the beginning-of-the-year-sale-date assumption.

Q: At December 31, 2012 year-end, Lapwing Corporation's investment in Ground Inc. was $200,000 consisting of 80% of Ground's $250,000 stockholders' equity on that date. On April 1, 2013, Lapwing sold 20% interest (one-fourth of its holdings) in Ground for $65,000. During 2013, Ground had net income of $75,000(earned uniformly) and on July 1, 2013, Ground paid dividends of $40,000. Lapwing uses the equity method to account for the investment.Required:1. What is the gain or loss on sale of the 20% interest?2. Record the journal entries for Lapwing for the year ending December 31, 2013. Use the actual-sale-date assumption.

Q: On January 1, 2011, Fly Corporation held a 60% interest in Liptin Corporation. The investment account balance was $2,100,000, consisting of 60% of Liptin's $3,500,000 of net assets.During 2011, Liptin earned $300,000 uniformly and paid dividends of $110,000 on November 1. On October 1, 2011, Fly sold 10% of its investment in Liptin for $364,000, thereby reducing its interest in Liptin to 54%.Required: Compute the following using the actual sales date assumption:1. Gain or loss on sale.2. Income from Liptin for 2011.3. Noncontrolling interest share for 2011.

Q: On January 1, 2010, Starling Corporation held an 80% interest in Twig Corporation and the investment account balance was $900,000. On January 1, 2010, Twig's total stockholders' equity was $1,125,000.During 2010, Twig uniformly earned $234,000 and paid dividends of $37,500 on April 1 and again on October 1. On August 1, 2010, Starling sold 30% of its investment in Twig for $262,500, thereby reducing its interest in Twig to 56%.Required: Compute the following using the actual sales date assumption:1. Gain or loss on sale.2. Income from Twig for 2010.3. Noncontrolling interest share for 2010.

Q: At December 31, 2010, the stockholders' equity of Pearson Corporation and its 80%-owned subsidiary, Trompeter Corporation, are as follows:TrompeterCommon stock, $10 par value $20,000 $12,000Retained earnings 8,000 6,000Totals $28,000 $18,000Pearson's Investment in Trompeter is equal to 80 percent of Trompeter's book value. Trompeter Corporation issued 400 additional shares of common stock directly to Pearson on January 1, 2011 at $10 per share.Required:1. Compute the balance in Pearson's Investment in Trompeter account on January 1, 2011 after the new investment is recorded.2. Determine the increase or decrease in goodwill from Pearson's new investment in the 400 Trompeter shares. Use four decimal places for the ownership percentage. Assume the fair value and book value of Trompeter's assets and liabilities are equal.

Q: At December 31, 2010, the stockholders' equity of Godwin Corporation and its 80%-owned subsidiary, Goldberg Corporation, are as follows:Godwin GoldbergCommon stock, $10 par value $20,000 $12,000Retained earnings 8,000 6,000Totals $28,000 $18,000Godwin's Investment in Goldberg is equal to 80 percent of Goldberg's book value. Goldberg Corporation issued 225 additional shares of common stock directly to Godwin on January 1, 2011 at $28 per share.Required:1. Compute the balance in Godwin's Investment in Goldberg account on January 1, 2011 after the new investment is recorded.2. Determine the increase or decrease in goodwill from Godwin's new investment in the 225 Goldberg shares. Use four decimal places for the ownership percentage. Assume the fair value and book value of Goldberg's assets and liabilities are equal.

Q: At December 31, 2010, the stockholders' equity of Gost Corporation and its 80%-owned subsidiary, Tree Corporation, are as follows:Gost TreeCommon stock, $10 par value $20,000 $12,000Retained earnings 8,000 6,000Totals $28,000 $18,000Gost's Investment in Tree is equal to 80 percent of Tree's book value. Tree Corporation issued 225 additional shares of common stock directly to Gost on January 1, 2011 at $18 per share.Required:1.Compute the balance in Gost's Investment in Tree account on January 1, 2011 after the new investment is recorded.2. Determine the increase or decrease in goodwill from Gost's new investment in the 225 Tree shares. Use four decimal places for the ownership percentage. Assume the fair values of Tree's assets and liabilities are equal to book values.

Q: A 15% stock dividend by a subsidiary causesA) the parent company investment account to decrease.B) the parent company investment account to remain the same.C) the parent company investment account to increase.D) the noncontrolling interest equity to increase.

Q: The acquisition of treasury stock by a subsidiary from noncontrolling shareholders at a price above book valueA) decreases the parent's share of subsidiary book value and decreases the parent's ownership percentage.B) decreases the parent's share of subsidiary book value and increases the parent's ownership percentage.C) increases the parent's share of subsidiary book value and decreases the parent's ownership percentage.D) increases the parent's share of subsidiary book value and increases the parent's ownership percentage.

Q: On April 1, 2011, Paramount Company acquires 100% of the outstanding stock of Yester Company on the open market. Paramount and Yester have December 31 fiscal year ends. Under GAAP, a consolidated income statement for the year ending December 31, 2011, will includeA) 100 percent of the revenues and expenses in 2011 of Yester Company after January 1, 2011.B) no revenues and expenses in 2011 of Yester Company.C) 80 percent of the revenues and expenses in 2011 of Yester Company.D) 100 percent of the revenues and expenses in 2011 of Yester Company after April 1, 2011.

Q: Anthony Company declared and paid $20,000 of dividends during 2011. The schedule of dividends follows:Date Dividend Declared & Paid Amount PaidMarch 31, 2011 $5,000June 30, 2011 $5,000September 30, 2011 $5,000December 31, 2011 $5,000Anthony Company was acquired on June 1, 2011 by Google Company. Google acquired 100 percent of Anthony Company. Both companies have a December 31 fiscal year end. What is the amount of preacquisition dividends in 2011?A) 0B) $5,000C) $10,000D) $15,000

Q: Use the following information to answer the question(s) below.Bower Corporation purchased a 70% interest in Stage Corporation on June 1, 2010 at a purchase price of $350,000. On June 1, 2010, the book values of Stage's assets and liabilities were equal to fair values. On June 1, 2010, Stage's stockholders' equity consisted of $290,000 of Common Stock and $210,000 of Retained Earnings. All cost-book differentials were attributed to goodwill.During 2010, Stage earned $120,000 of net income, earned uniformly throughout the year and paid $6,000 of dividends on March 1 and another $6,000 on September 1.Preacquisition income for 2010 isA) $50,000.B) $35,000.C) $44,000.D) $36,000.

Q: A subsidiary split its stock 2 for 1. Which of the following statements is false?A) A stock split does not affect the amount of net assets of the subsidiary.B) A stock split does not affect parent and noncontrolling interest ownership percentages.C) A stock split does not affect consolidation procedures.D) A 2 for 1 stock split decreases the number of shares outstanding.

Q: If a parent company and outside investors purchase shares of a subsidiary in relation to existing stock ownership (ratably), thenA) there will be an adjustment to additional paid-in capital if the stock is sold above book value.B) there will be no adjustment to additional paid-in capital regardless whether the stock is sold above or below book value.C) there will be an adjustment to additional paid-in capital if the stock is sold below book value.D) there will be the elimination of a gain.

Q: Consider a sale of stock by a subsidiary to parties outside the consolidated entity. This transaction requires an adjustment of the parent's investment and additional paid-in capital accounts except whenA) the shares are sold below book value per share.B) the shares are sold above book value per share.C) the shares are sold at book value per share.D) All of the above are correct.

Q: Use the following information to answer the question(s) below.Great Corporation acquired a 90% interest in SOS Corporation at its $810,000 book value on December 31, 2010. A summary of the stockholders' equity for SOS at the end of 2010 and 2011 is as follows:12/31/10 12/31/11Capital stock, $10 par $600,000 $600,000Additional paid-in capital 30,000 30,000Retained Earnings 270,000 420,000Total stockholders' equity $900,000 $1,050,000On January 1, 2012, SOS sold 10,000 new shares of its $10 par value common stock for $45 per share.If SOS sold the additional shares directly to Great, Great's Investment in SOS account after the sale would beA) $1,350,000.B) $1,395,000.C) $1,425,000.D) $1,500,000.

Q: Use the following information to answer the question(s) below.Goldberg Corporation owned a 70% interest in Savannah Corporation on December 31, 2010, and Goldberg's Investment in Savannah account had a balance of $3,900,000. Savannah's stockholders' equity on this date was as follows:Capital stock, $10 par value $3,000,000Retained Earnings 2,400,000Total Stockholders' Equity $5,400,000On January 1, 2011, Savannah issues 80,000 new shares of common stock to Goldberg for $16 each.On January 1, 2011, assume the fair values of Savannah's identifiable assets and liabilities equal book values. What is the change in the amount of goodwill associated with the issuance of 80,000 additional shares to Goldberg? (Use four decimal places.)A) Increase goodwill $38,176.B) Decrease goodwill $38,176.C) Increase goodwill $384,000.D) Decrease goodwill $384,000.

Q: Utah Company holds 80% of the stock of a subsidiary company. The subsidiary issues 100 additional shares of stock to Utah Company at a price above book value per share. The subsidiary does not issue any additional shares at the same time. How will Utah Company record the purchase?A) Utah Company records a gain on sale of stock.B) Utah Company increases additional paid-in capital.C) Utah Company decreases additional paid-in capital.D) Utah Company assigns any excess cost over book value acquired to increase undervalued identifiable assets or goodwill as appropriate.

Q: Jersey Company acquired 90% of York Company on April 1, 2011. Both Jersey Company and York Company have December 31 fiscal year ends. Under current GAAP, which of the following statements is false?A) The consolidated income statement in 2011 should not include York's revenues and expenses prior to April 1, 2011.B) When preparing consolidating work papers in 2011, York's revenues prior to April 1, 2011 are eliminated.C) York's earnings prior to April 1, 2011 should appear as a deduction on the consolidated income statement in 2011.D) The consolidated income statement in 2011 should include York's revenues and expenses after April 1, 2011.

Q: Bird Corporation purchased an 80% interest in Brush Corporation on July 1, 2010 at its book value, and on January 1, 2011 its Investment in Brush account was $300,000, equal to its book value. Brush's net income for 2011 was $99,000 (earned uniformly); no dividends were declared. On March 1, 2011, Bird reduced its interest in Brush by selling a 20% interest, one-fourth of its investment, for $84,000.If Bird uses the "actual-sale-date" sales assumption, its gain on the sale and income from Brush for 2011 will beA) Gain on SaleIncome from Brush$5,700$59,400B)Gain on SaleIncome from Brush$5,700$62,700C)Gain on SaleIncome from Brush$21,360$59,400D)Gain on SaleIncome from Brush$21,360$62,700

Q: Use the following information to answer the question(s) below.Bird Corporation purchased an 80% interest in Brush Corporation on July 1, 2010 at its book value, and on January 1, 2011 its Investment in Brush account was $300,000, equal to its book value. Brush's net income for 2011 was $99,000 (earned uniformly); no dividends were declared. On March 1, 2011, Bird reduced its interest in Brush by selling a 20% interest, one-fourth of its investment, for $84,000.If Bird uses a "beginning-of-the-year" sale assumption, its gain on sale and income from Brush for 2011 will beA)Gain on SaleIncome from Brush$5,700$59,400B)Gain on SaleIncome from Brush$5,700$62,700C)Gain on SaleIncome from Brush$9,000$59,40D)Gain on SaleIncome from Brush$9,000$62,70

Q: Pass Corporation owns 80% of Sindy Company, purchased at the underlying book value on January 1, 2010. On January 1, 2010, Pass also purchased $200,000 par value 6% bonds that had been issued by Sindy on January 1, 2007 with a ten-year maturity(due January 1, 2017). Annual interest is paid on December 31. Straight-line amortization is used by both companies.At year-end 2010, the following entry was made on the consolidating worksheet.Bonds Payable $200,000Bond Premium 12,000Loss on Bond Retirement 7,000Interest Income (a)Investment in Sindy Bonds $218,000Interest Expense (b)Required:How much did Pass pay for the bonds?What is the book value of the bonds on the date of purchase?What amount of interest income and interest expense must be eliminated in the entry above designated as (a) and (b)?

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