Q&A Hero

Q: Shalles Corporation, a 80%-owned subsidiary of Pani Corporation, sold inventory items to its parent at a $48,000 profit in 2012. Pani resold one-third of this inventory to outside entities. Shalles reported net income of $200,000 for 2012. Noncontrolling interest share of consolidated net income that will appear in the income statement for 2012 is A) $30,400. B) $32,000. C) $33,600. D) $40,000.

Q: A parent company regularly sells merchandise to its 70%-owned subsidiary. Which of the following statements describes the computation of noncontrolling interest share? A) The subsidiary's net income times 30% B) (The subsidiary's net income 30%) + unrealized profits in the beginning inventory - unrealized profits in the ending inventory C) (The subsidiary's net income + unrealized profits in the beginning inventory - unrealized profits in the ending inventory) 30% D) (The subsidiary's net income + unrealized profits in the ending inventory - unrealized profits in the beginning inventory) 30%

Q: Use the following information to answer the question(s) below..Pelga Company routinely receives goods from its 80%-owned subsidiary, Swede Corporation. In 2011, Swede sold merchandise that cost $80,000 to Pelga for $100,000. Half of this merchandise remained in Pelga's December 31, 2011 inventory. This inventory was sold in 2012. During 2012, Swede sold merchandise that cost $160,000 to Pelga for $200,000. $62,500 of the 2012 merchandise inventory remained in Pelga's December 31, 2012 inventory. Selected income statement information for the two affiliates for the year 2012 was as follows:Pelga SwedeSales Revenue $500,000 $400,000Cost of Goods Sold 400,000 320,000Gross profit $100,000 $80,000What amount of unrealized profit did Pelga Company have at the end of 2012?A) $10,000B) $12,500C) $50,000D) $62,500

Q: On January 1, 2011, Plastam Industries acquired an 80% interest in Sparta Company to assure a steady supply of Sparta's inventory that Plastam uses in its own manufacturing businesses. Sparta sold 100% of its output to Plastam during 2011 and 2012 at a markup of 125% of Sparta's cost. Plastam had $12,000 of these items remaining in its inventory at December 31, 2012. If Plastam neglected to eliminate unrealized profits from all intercompany sales from Sparta, the inventory on the consolidated balance sheet at December 31, 2012 was A) overstated by $1,920. B) understated by $1,920. C) overstated by $2,400. D) understated by $2,400.

Q: Use the following information to answer the question(s) below.Pew Corporation acquired 80% ownership of Sordid Incorporated, at a time when Pew's investment cost was equal to 80% of Sordid's book value. At the time of acquisition, the book values and fair values of Sordid's assets and liabilities were equal. Pew uses the equity method. During 2011, Pew sold goods to Sordid for $160,000 making a gross profit percentage of 20%. Half of these goods remained unsold in Sordid's inventory at the end of the year. Income statement information for Pew and Sordid for 2011 were as follows:Pew SordidSales Revenue $800,000 $300,000Cost of Goods Sold 500,000 160,000Operating Expenses 200,000 80,000Separate incomes $100,000 $60,000The 2011 consolidated income statement showed noncontrolling interest share ofA) $3,200.B) $6,400.C) $8,800.D) $12,000.

Q: Use the following information to answer the question(s) below.Pouch Corporation acquired an 80% interest in Shenley Corporation on January 1, 2012, when the book values of Shenley's assets and liabilities were equal to their fair values. The cost of the 80% interest was equal to 80% of the book value of Shenley's net assets. During 2012, Pouch sold merchandise that cost $70,000 to Shenley for $86,000. On December 31, 2012, three-fourths of the merchandise acquired from Pouch remained in Shenley's inventory. Separate incomes (investment income not included) of the two companies are as follows:Pouch ShenleySales Revenue $180,000 $160,000Cost of Goods Sold 120,000 90,000Operating Expenses 17,000 21,000Separate incomes $ 43,000 $ 49,000Swamp Co., a 55%-owned subsidiary of Pond Inc., made the following entry to record a sale of merchandise to Pond:Accounts Receivable 40,000Sales Revenue 40,000All Swamp sales are at 125% of cost. One-fourth of this merchandise remained in the Pond's inventory at year-end. A working paper entry to eliminate unrealized profits from consolidated inventory would include a credit to Inventory in the amount ofA) $2,000.B) $2,500.C) $8,000.D) $10,000.

Q: If the intercompany sale was an upstream sale, the total amount of consolidated cost of goods sold for 2012 will be A) $300,000. B) $430,000. C) $470,000. D) $477,000.

Q: Use the following information to answer the question(s) below.Paggle Corporation owns 80% of Spillway Inc.'s common stock that was purchased at its underlying book value. At the time of purchase, the book value and fair value of Spillway's net assets were equal. The two companies report the following information for 2011 and 2012.During 2011, one company sold inventory to the other company for $50,000 which cost the transferor $40,000. As of the end of 2011, 30% of the inventory was unsold. In 2012, the remaining inventory was resold outside the consolidated entity.2011 Selected Data: Paggle SpillwaySales Revenue $600,000 $320,000Cost of Goods Sold 320,000 155,000Other Expenses 100,000 89,000Net Income $180,000 $76,000Dividends Paid 19,000 02012 Selected Data: Paggle SpillwaySales Revenue $580,000 $445,000Cost of Goods Sold 300,000 180,000Other Expenses 130,000 171,000Net Income $150,000 $94,000Dividends Paid 16,000 5,000If the intercompany sale mentioned above was an upstream sale, what will be the reported amount of total consolidated sales revenue for 2012?A) $1,025,000B) $1,900,000C) $1,950,000D) $2,000,000

Q: A(n) ________ sale is a sale by a parent company to a subsidiary. A(n) ________ sale is a sale by a subsidiary to a parent company. A) deferred; realized. B) realized; deferred. C) upstream; downstream D) downstream; upstream

Q: Assume there are routine inventory sales between parent companies and subsidiaries. When preparing the consolidated financial statements, which of the following line items is indifferent to the sales being either upstream or downstream? A) Consolidated retained earnings B) Consolidated gross profit C) Noncontrolling interest share D) Controlling interest share of consolidated net income

Q: Phast Corporation owns a 80% interest in Stechno Company, acquired several years ago at a cost equal to book value and fair value. Stechno sells merchandise to Phast for the first time in 2011, and some is unsold at December 31, 2011. In computing income from the investee for 2011 under the equity method, Phast uses which equation? A) 80% of Stechno's income less 100% of the unrealized profit in Phast's ending inventory B) 80% of Stechno's income plus 100% of the unrealized profit in Phast's ending inventory C) 80% of Stechno's income less 80% of the unrealized profit in Phast's ending inventory D) 80% of Stechno's income plus 80% of the unrealized profit in Phast's ending inventory

Q: The material sale of inventory items by a parent company to an affiliated company A) enters the consolidated revenue computation only if the transfer was the result of arm's length bargaining. B) affects consolidated net income under a periodic inventory system but not under a perpetual inventory system. C) does not result in consolidated income until the merchandise is sold to outside parties. D) does not require a working paper adjustment if the merchandise was transferred at cost.

Q: On January 1, 2011, Persona Company acquired 80% of Sule Tooling for $332,000. At that time, Sule reported their Common stock at $150,000, Additional paid in capital at $45,000, and Retained earnings at $105,000. Sule also had equipment on their books that had a remaining life of 10 years and were undervalued on the books by $40,000, but any additional fair value/book value differential is assumed to be goodwill. During the next three years, Sule reported the following: Year Net Income Dividends Paid 2011 $35,000 $5,000 2012 45,000 7,500 2013 50,000 10,000 Required: Calculate the following. a. How much excess depreciation or amortization would be recognized in the consolidated financial statements in each of these three years? b. How much goodwill would be recognized on the balance sheet at the date of acquisition, and at the end of each year listed? c. How much investment income would be reported by Persona under the equity method for each of the three years? d. What would be the balance in the Investment in Sule account at January 1, 2011, and at the end of each of the three years listed?

Q: Pull Incorporated and Shove Company reported summarized balance sheets as shown below, on December 31, 2011. Pull Shove Current assets $420,000 $210,000 Noncurrent assets 670,000 430,000 Total assets $1,090,000 $640,000 Current liabilities $230,000 $50,000 Long-term debt 350,000 150 000 Stockholders' equity 510,000 440,000 Total liabilities and equities $1,090,000 $640,000 On January 1, 2012, Pull purchased 70% of the outstanding capital stock of Shove for $392,000, of which $92,000 was paid in cash, and $300,000 was borrowed from their bank. The debt is to be repaid in 10 annual installments beginning on December 31, 2012, with each payment consisting of $30,000 principal, plus accrued interest. The excess fair value of Shove Company over the underlying book value is allocated to inventory (60 percent) and to goodwill (40 percent). Required: Calculate the balance in each of the following accounts, on the consolidated balance sheet, immediately following the acquisition. a. Current assets b. Noncurrent assets c. Current liabilities d. Long-term debt e. Stockholders' equity

Q: On December 31, 2010, Patenne Incorporated purchased 60% of Smolin Manufacturing for $300,000. The book value and fair value of Smolin's assets and liabilities were equal with the exception of plant assets which were undervalued by $60,000 and had a remaining life of 10 years, and a patent which was undervalued by $40,000 and had a remaining life of 5 years. At December 31, 2012, the companies showed the following balances on their respective adjusted trial balances: Patenne Smolin Smolin Book Value Book Value Fair Value Assets (includes Investment in Smolin) $950,000 300,000 320,000 Plant assets - net 590,000 150,000 150,000 Patent 310,000 200,000 280,000 Expenses 800,000 300,000 Liabilities 480,000 120,000 120,000 Common Stock 300,000 100,000 Retained Earnings 890,000 330,000 Revenue 980,000 400,000 Requirement 1: Calculate the balance in the Plant assets - net and the Patent accounts on the consolidated balance sheet as of December 31, 2012. Requirement 2: Calculate consolidated net income for 2012, and the amount allocated to the controlling and noncontrolling interests. Requirement 3: Calculate the balance of the noncontrolling interest in Smolin to be reported on the consolidated balance sheet at December 31, 2012.

Q: _________________ identify and describe transactions and events and provide objective evidence and amounts for recording.

Q: On January 2, 2011, PBL Enterprises purchased 90% of Santos Incorporated outstanding common stock for $1,687,500 cash. Santos' net assets had a book value of $1,300,000 at the time. A building with a 15-year remaining life and a book value of $100,000 had a fair value of $175,000. Any other excess amount was attributed to goodwill. PBL reported net income for the first year of $350,000 (without regard for its ownership in Santos), while Santos had $175,000 in earnings. Required: 1. Calculate the amount of goodwill related to this acquisition as reported on the consolidated balance sheet at January 2, 2011. 2. Calculate the amount of consolidated net income for the year ended December 31, 2011. 3. What is the amount that will be assigned to the building on the consolidated balance sheet at the date of acquisition?

Q: The third step in the analyzing and recording process is to post the information to _________________________.

Q: On January 1, 2011, Paisley Incorporated paid $300,000 for 60% of Smarnia Company's outstanding capital stock. Smarnia reported common stock on that date of $250,000 and retained earnings of $100,000. Plant assets, which had a five-year remaining life, were undervalued in Smarnia's financial records by $10,000. Smarnia also had a patent that was not on the books, but had a market value of $60,000. The patent has a remaining useful life of 10 years. Any remaining fair value/book value differential is allocated to goodwill. Smarnia's net income and dividends paid the first three years that Paisley owned them are shown below. Net Dividends Income Paid 2011 80,000 30,000 2012 90,000 10,000 2013 60,000 20,000 Requirement 1: Calculate the noncontrolling interest share in Smarnia's income for each of the three years. Requirement 2: Calculate the noncontrolling interest that should be reported on the consolidated balance sheet at the end of each of the three years. Requirement 3: Assuming that Paisley uses the equity method to record their investment in Smarnia, calculate the ending balance in the Investment in Smarnia account for each of the three years.

Q: The second step in the analyzing and recording process is to record the transactions and events in the _____________________________.

Q: ____________________________ and _____________________ are the starting points for the analyzing and recording process.

Q: Pennack Corporation purchased 75% of the outstanding stock of Shing Corporation on January 1, 2011 for $300,000 cash. At the time of the purchase, the book value and fair value of Shing's assets and liabilities were equal. Shing's balance sheet at the time of acquisition and December 31, 2011 are shown below. Jan 1, 2011 Dec 31, 2011 Cash $75,000 80,000 Other current assets 175,000 160,000 Plant Assets net 250,000 240,000 Total assets 500,000 480,000 Liabilities 100,000 50,000 Capital stock 100,000 100,000 Retained earnings 300,000 330,000 Total liabilities and equity 500,000 480,000 Shing earned $60,000 in income during the year, and paid out $30,000 in dividends. Pennack uses the equity method to account for its investment in Shing. Requirement 1: Calculate Pennack's net income from Shing in 2011. Requirement 2: Calculate the noncontrolling interest share in Shing's income for 2011. Requirement 3: Calculate the balance in the Investment in Shing account reported on Pennack's separate general ledger at December 31, 2011. Requirement 4: Calculate the noncontrolling interest that will be reported on the consolidated balance sheet at December 31, 2011.

Q: Based on the following trial balance for Sal's Beauty Shop, prepare an income statement, statement of owner's equity, and a balance sheet. Sal made no additional investments in the company during the year.

Q: Pommu Corporation paid $78,000 for a 60% interest in Schtick Inc. on January 1, 2011, when Schtick's Capital Stock was $80,000 and its Retained Earnings $20,000. The fair values of Schtick's identifiable assets and liabilities were the same as the recorded book values on the acquisition date. Trial balances at the end of the year on December 31, 2011 are given below: Pommu Schtick Cash $4,500 $20,000 Accounts Receivable 24,000 30,000 Inventory 100,000 70,000 Investment in Schtick 78,000 Cost of Goods Sold 71,500 50,000 Operating Expenses 22,000 37,000 Dividends 15,000 10,000 $315,000 $217,000 Liabilities $47,000 $27,000 Capital stock, $10 par value 100,000 80,000 Additional Paid-in Capital 11,000 Retained Earnings 31,000 20,000 Sales Revenue 120,000 90,000 Dividend Income 6,000 $315,000 $217,000 During 2011, Pommu made only two journal entries with respect to its investment in Schtick. On January 1, 2011, it debited the Investment in Schtick account for $78,000 and on November 1, 2011, it credited Dividend Income for $6,000. Required: 1. Prepare a consolidated income statement and a statement of retained earnings for Pommu and Subsidiary for the year ended December 31, 2011. 2. Prepare a consolidated balance sheet for Pommu and Subsidiary as of December 31, 2011.

Q: Platt Corporation paid $87,500 for a 70% interest in Suve Corporation on January 1, 2011, when Suve's Capital Stock was $70,000 and its Retained Earnings $30,000. The fair values of Suve's identifiable assets and liabilities were the same as the recorded book values on the acquisition date. Trial balances at the end of the year on December 31, 2011 are given below: Platt Suve Cash $4,500 $20,000 Accounts Receivable 26,000 30,000 Inventory 100,000 80,000 Investment in Suve 87,500 Cost of Goods Sold 60,000 40,000 Operating Expenses 22,000 37,000 Dividends 15,000 10,000 $315,000 $217,000 Liabilities $47,000 $27,000 Capital stock, $10 par value 100,000 70,000 Additional Paid-in Capital 10,000 Retained Earnings 31,000 30,000 Sales Revenue 120,000 90,000 Dividend Income 7,000 0 $315,000 $217,000 During 2011, Platt made only two journal entries with respect to its investment in Suve. On January 1, 2011, it debited the Investment in Suve account for $87,500 and on November 1, 2011, it credited Dividend Income for $7,000. Required: 1. Prepare a consolidated income statement and a statement of retained earnings for Platt and Subsidiary for the year ended December 31, 2011. 2. Prepare a consolidated balance sheet for Platt and Subsidiary as of December 31, 2011.

Q: The following are all of the accounts of Flaherty Company that have a balance at the end of August. All accounts have normal balances:a. Calculate net income.b. Determine the amount of owner's equity to be shown on the August 31 balance sheet.

Q: Flagship Company has the following information collected in order to prepare a cash flow statement and uses the indirect method for Cash Flow from Operations. The annual report year end is December 31, 2011. Noncontrolling Interest Dividends Paid $17,000 Undistributed Income of Equity Investees 7,000 Depreciation Expense 80,000 Controlling Interest Share of Consolidated Net Income 325,000 Increase in Accounts Payable 26,000 Amortization of Patent 10,000 Decrease in Accounts Receivable 57,000 Increase in Inventories 72,000 Gain on sale of equipment 45,000 Noncontrolling Interest Share 27,000 Required: 1. Prepare the Cash Flow for Operations part of the cash flow statement for Flagship for the year ended December 31, 2011.

Q: The balances for the accounts of Mike's Maintenance Co. for the year ended December 31 are shown below. Each account shown had a normal balance.Calculate the correct balance for Cash and prepare a trial balance.

Q: After preparing an (unadjusted) trial balance at year-end, G. Chu of Chu Design Company discovered the following errors:1. Cash payment of the $225 telephone bill for December was recorded twice.2. Cash payment of a note payable was recorded as a debit to Cash and a debit to Notes Payable for $1,000.3. A $900 cash withdrawal by the owner was recorded to the correct accounts as $90.4. An additional investment of $5,000 cash by the owner was recorded as a debit to G. Chu, Capital and a credit to Cash.5. A credit purchase of office equipment for $1,800 was recorded as a debit to the Office Equipment account with no offsetting credit entry.Using the form below, indicate whether the error would cause the trial balance to be out of balance by placing an X in either the yes or no column.Would the error cause the trial balance to be out of balance?Would the error cause the trial balance to be out of balance?

Q: Parakeet Company has the following information collected in order to prepare a cash flow statement and uses the direct method for Cash Flow from Operations. The annual report year end is December 31, 2011. Noncontrolling Interest Dividends Paid $20,000 Dividends Received from Equity Investees 17,000 Cash Paid to Employees 37,000 Cash Paid for Other Operating Activities 34,000 Cash Paid for Interest Expense 22,300 Cash Proceeds from the Sale of Equipment 70,000 Cash Paid to Suppliers 192,700 Cash Received from Customers 412,600 Required: 1. Prepare the Cash Flow for Operations part of the cash flow statement for Parakeet for the year ended December 31, 2011.

Q: Pecan Incorporated acquired 80% of the voting stock of Shew Manufacturing for $800,000 on January 2, 2011 when Shew had outstanding common stock of $600,000 and Retained Earnings of $300,000. The book value and fair value of Shew's assets and liabilities were equal except for equipment. The entire fair value/book value differential is allocated to equipment and is fully depreciated on a straight-line basis over a 5-year period.During 2011, Shew borrowed $80,000 on a short-term non-interest-bearing note from Pecan, and on December 31, 2011, Shew mailed a check for $20,000 to Pecan in partial payment of the note. Pecan deposited the check on January 4, 2012, and recorded the entry to reduce the note balance at that time.Required:Complete the consolidation working papers for the year ended December 31, 2011.

Q: For each of the following errors, indicate on the table below the amount by which the trial balance will be out of balance and which trial balance column (debit or credit) will have the larger total as a result of the error.a. $100 debit to Cash was debited to the Cash account twice.b. $1,900 credit to Sales was posted as a $190 credit.c. $5,000 debit to Office Equipment was debited to Office Supplies.d. $625 debit to Prepaid Insurance was posted as a $62.50 debit.e. $520 credit to Accounts Payable was not posted.

Q: List the steps in recording transactions.

Q: Puddle Corporation acquired all the voting stock of Soggi Company for $500,000 on January 1, 2011 when Soggi had Capital Stock of $300,000 and Retained Earnings of $150,000. The book value of Soggi's assets and liabilities were equal to the fair value except for the plant assets. The entire cost-book value differential is allocated to plant assets and is fully depreciated on a straight-line basis over a 10-year period.During 2011, Puddle borrowed $25,000 on a short-term non-interest-bearing note from Soggi, and on December 31, 2011, Puddle mailed a check to Soggi to settle the note. Soggi deposited the check on January 5, 2012, but receipt of payment of the note was not reflected in Soggi's December 31, 2011 balance sheet.Required:Complete the consolidation working papers for the year ended December 31, 2011.

Q: Montgomery Marketing Co. had assets of $475,000; liabilities of $275,500; and equity of $199,500. Calculate its debt ratio.

Q: Powell Corporation acquired 90% of the voting stock of Santer Corporation on January 1, 2010 for $11,700 when Santer had Capital Stock of $5,000 and Retained Earnings of $4,000. The amounts reported on the financial statements approximated fair value, with the exception of inventories, which were understated on the books by $500 and were sold in 2010, land which was undervalued by $1,000, and equipment with a remaining useful life of 5 years under the straight-line method which was undervalued by $1,500. Any remainder was assigned to goodwill.Financial statements for Powell and Santer Corporations at the end of the fiscal year ended December 31, 2011 appear in the first two columns of the partially completed consolidation working papers. Powell has accounted for its investment in Santer using the equity method of accounting. Powell Corporation owed Santer Corporation $100 on open account at the end of the year. Dividends receivable in the amount of $450 payable from Santer to Powell is included in Powell's net receivables.Required:Complete the consolidation working papers for Powell Corporation and Subsidiary for the year ended December 31, 2011.

Q: Packo Company acquired all the voting stock of Sennett Corporation on January 1, 2010 for $90,000 when Sennett had Capital Stock of $50,000 and Retained Earnings of $8,000. The excess of fair value over book value was allocated as follows: (1) $5,000 to inventories(sold in 2010), (2) $16,000 to equipment with a 4-year remaining useful life(straight-line method of depreciation) and (3) the remainder to goodwill.Financial statements for Packo and Sennett at the end of the fiscal year ended December 31, 2011 (two years after acquisition), appear in the first two columns of the partially completed consolidation working papers. Packo has accounted for its investment in Sennett using the equity method of accounting.Required:Complete the consolidation working papers for Packo Company and Subsidiary for the year ending December 31, 2011.

Q: A company had total assets of $350,000 and total liabilities of $101,500 and total equity of $248,500. Calculate its debt ratio.

Q: Josephine's Bakery had the following assets and liabilities at the beginning and end of the current year:If Josephine invested an additional $12,000 in the business and withdrew $5,000 during the year, what was the amount of net income earned by Josephine's Bakery?

Q: On December 31, 2011, Paladium International purchased 70% of the outstanding common stock of Sennex Chemical. Paladium paid $140,000 for the shares and determined that the fair value of all recorded Sennex assets and liabilities approximated their book values, with the exception of a customer list that was not recorded and had a fair value of $10,000, and an expected remaining useful life of 5 years. At the time of purchase, Sennex had stockholders' equity consisting of capital stock amounting to $20,000 and retained earnings amounting to $80,000. Any remaining excess fair value was attributed to goodwill. The separate financial statements at December 31, 2012 appear in the first two columns of the consolidation workpapers shown below.Required:Complete the consolidation working papers for Paladium and Sennex for the year 2012.Paladium

Q: Parrot Corporation acquired 90% of Swallow Co. on January 1, 2011 for $27,000 cash when Swallow's stockholders' equity consisted of $10,000 of Capital Stock and $5,000 of Retained Earnings. The difference between the fair value and book value of Swallow's net assets was allocated solely to a patent amortized over 5 years. The separate company statements for Parrot and Swallow appear in the first two columns of the partially completed consolidation working papers.Required:Complete the consolidation working papers for Parrot and Swallow for the year 2011.

Q: When preparing the consolidation workpaper for a company and its controlled subsidiary, which of the following would be used for the entities being consolidated? A) Post-closing trial balances B) Adjusted trial balances C) Unadjusted trial balances D) The adjusted trial balance for the parent and the unadjusted trial balance for all controlled subsidiaries

Q: When preparing consolidated financial statements, which of the following is a subtraction in the calculation of cash flows from operating activities under the indirect method? A) The change in the balance sheet of the common stock account B) Noncontrolling interest dividends paid C) Noncontrolling interest share D) Undistributed income of equity investees

Q: Maria Sanchez began business as Sanchez Law Firm on November 1. Record the following November transactions by making entries directly to the T-accounts provided. Then, prepare a trial balance, as of November 30.a) Sanchez invested $15,000 cash and a law library valued at $6,000.b) Purchased $7,500 of office equipment from Johnson Bros. on credit.c) Completed legal work for a client and received $1,500 cash in full payment.d) Paid Johnson Bros. $3,500 cash in partial settlement of the amount owed.e) Completed $4,000 of legal work for a client on credit.f) Sanchez withdrew $2,000 cash for personal use.g) Received $2,500 cash as partial payment for the legal work completed for the client in (e).h) Paid $2,500 cash for the legal secretary's salary.

Q: In contrast with single entity organizations, consolidated financial statements include which of the following in the calculation of cash flows from operating activities under the indirect method? A) Cash paid to employees B) Noncontrolling interest dividends paid C) Noncontrolling interest share D) Proceeds from the sale of land

Q: Leonard Matson completed these transactions during December of the current year:Prepare general journal entries to record these transactions.

Q: Which of the following statements is not true with respect to the statement of cash flows for a consolidated entity? A) The statement may be prepared using either the direct or the indirect method. B) Noncontrolling interest share will be added back to cash flows from operating activities under the indirect method. C) Payment of dividends from the subsidiary to the parent will appear on the statement of cash flows as a financing activity. D) If the subsidiary does not use the same method (direct or indirect) as the parent, they must convert their separate statement of cash flows first to the same method that the parent uses, and then the two statements are consolidated.

Q: Flora Accounting Services completed these transactions in February:a. Purchased office supplies on account, $300.b. Completed work for a client on credit, $500.c. Paid cash for the office supplies purchased in (a).d. Completed work for a client and received $800 cash.e. Received $500 cash for the work described in (b).f. Received $1,000 from a client for accounting services to be performed in March.Prepare journal entries to record the above transactions. Explanations are not necessary.

Q: Which one of the following will increase consolidated retained earnings? A) An increase in the value of goodwill associated with a subsidiary subsequent to the parent's date of acquisition B) The amortization of a $10,000 excess in the fair value of a note payable over its recorded book value C) The depreciation of a $10,000 excess in the fair value of equipment over its recorded book value D) The sale of inventory by a subsidiary that had a $10,000 excess in fair value over recorded book value on the parent's date of acquisition

Q: Krenz Car Care, owned and operated by Karl Krenz, began business in September of the current year. Karl, a master mechanic, had no experience with keeping a set of books. As a result, Karl entered all of September's transactions directly to the ledger accounts. When he tried to locate a particular entry he found it confusing and time consuming. He has hired you to improve his accounting procedures. The accounts in his General Ledger follow:Prepare the general journal entries, in chronological order (a) through (e), from the T-account entries shown. Include a brief description of the probable nature of each transaction.

Q: On consolidated working papers, a subsidiary's net income is A) deducted from beginning consolidated retained earnings. B) deducted from ending consolidated retained earnings. C) allocated between the noncontrolling interest share and the parent's share. D) only an entry in the parent company's general ledger.

Q: Pigeon Corporation acquired an 80% interest in Statue Company on January 1, 2011, for $90,000 cash when Statue had Capital Stock of $60,000 and Retained Earnings of $40,000. The fair value/book value differential was attributable to equipment with a 10-year (straight-line) life. Statue suffered a $10,000 net loss in 2011 and paid no dividends. At year-end 2011, Statue owed Pigeon $18,000 on account. Pigeon's separate income for 2011 was $150,000. Controlling interest share of consolidated net income for 2011 was A) $140,000. B) $141,000. C) $142,000. D) $150,000.

Q: On February 5, Textron Stores purchased a van that cost $35,000. The firm made a down payment of $5,000 cash and signed a long-term note payable for the balance. Show the general journal entry to record this transaction.

Q: A parent company uses the equity method to account for its wholly-owned subsidiary, but has applied it incorrectly. In each of the past four full years, the company adjusted the Investment account when it received dividends from the subsidiary but did not adjust the account for any of the subsidiary's profits. The subsidiary had four years of profits and paid yearly dividends in amounts that were less than reported net incomes. Which one of the following statements is correct if the parent company discovered its mistake at the end of the fourth year, and is now preparing consolidation working papers? A) The parent company's Retained Earnings will be increased by the cumulative total of four years of subsidiary profits. B) The parent company's Retained Earnings will be increased by the cumulative total of the first three years of subsidiary profit, and the Subsidiary Income account will be increased by the profit for the current year. C) The parent company's Subsidiary Income account will be increased by the cumulative total of four years of subsidiary profits. D) A prior period adjustment must be recorded for the cumulative effect of four years of accounting errors.

Q: On December 3, the Matador Company paid $5,400 cash in salaries to office personnel. Prepare the general journal entry to record this transaction.

Q: At the beginning of 2011, Parling Food Services acquired a 90% interest in Simmons' Orchards when Simmons' book values of identifiable net assets equaled their fair values. On December 26, 2011, Simmons declared dividends of $50,000, and the dividends were unpaid at year-end. Parling had not recorded the dividend receivable at December 31. A consolidated working paper entry is necessary to A) enter $50,000 dividends receivable in the consolidated balance sheet. B) enter $45,000 dividends receivable in the consolidated balance sheet. C) reduce the dividends payable account by $45,000 in the consolidated balance sheet. D) eliminate the dividend payable account from the consolidated balance sheet.

Q: A business paid $100 cash to Karen Smith (the owner of the business) for her personal use. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts.

Q: When performing a consolidation, if the balance sheet does not balance, A) that indicates that the Investment in Subsidiary account on the parent's books should not be adjusted to -0-, because there is excess value represented in the investment. B) it is usually because of the noncontrolling interest, as these amounts do not appear on the companies' general ledgers. C) the debit and credit totals of the adjusting/eliminating columns of the consolidation working paper should be checked to confirm that they balance, and if so, then there is no need to check the individual line items. D) the amount that it is "off" will always equal the noncontrolling interest in the current year net income of the subsidiary.

Q: A company paid $2,500 cash to satisfy a previously recorded account payable. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts.

Q: Bird Corporation has several subsidiaries that are included in its consolidated financial statements and several other investments in corporations that are not consolidated. In its year-end trial balance, the following intercompany balances appear. Ostrich Corporation is the unconsolidated company; the rest are consolidated. Due from Pheasant Corporation $25,000 Due from Turkey Corporation 5,000 Cash advance to Skylark Company 8,000 Cash advance to Starling 15,000 Current receivable from Ostrich 10,000 What amount should Bird report as intercompany receivables on its consolidated balance sheet? A) $0 B) $10,000 C) $30,000 D) $63,000

Q: A company sends a $1,500 bill to a customer for delivery services rendered. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts.

Q: Use the following information to answer question(s) below.On January 1, 2011, Punch Corporation purchased 80% of the common stock of Soopy Co. Separate balance sheet data for the companies at the acquisition date(after the acquisition) are given below:Punch SoopyCash $34,000 $206,000Accounts Receivable 144,000 26,000Inventory 132,000 38,000Land 68,000 32,000Plant assets 700,000 300,000Accum. Depreciation (240,000) (60,000)Investment in Soopy 392,000Total assets $ 1,230,000 $ 542,000Accounts payable $206,000 $142,000Capital stock 800,000 300,000Retained earnings 224,000 100,000Total liabilities & equities $ 1,230,000 $ 542,000At the date of the acquisition, the book values of Soopy's net assets were equal to the fair value except for Soopy's inventory, which had a fair value of $60,000.Determine below what the consolidated balance would be for each of the requested accounts.What is the amount of total assets?A) $1,380,000B) $1,402,000C) $1,470,000D) $1,875,000

Q: Dolly Barton began Barton Office Services in October and during that month completed these transactions:a. Invested $10,000 cash, and $15,000 of computer equipment.b. Paid $500 cash for an insurance premium covering the next 12 months.c. Completed a word processing assignment for a customer and collected $1,000 cash.d. Paid $200 cash for office supplies.e. Paid $2,000 for October's rent.Prepare journal entries to record the above transactions. Explanations are unnecessary.

Q: The following is a list of accounts and identification letters A through J for Shannon Management Co.:Use the form below to identify the type of account and its normal balance. The first item is filled in as an example.

Q: Indicate whether a debit or credit entry would be made to record the following changes in each account. a. To decrease Cash b. To increase Owner, Capital c. To decrease Accounts Payable. d. To increase Salaries Expense. e. To decrease Supplies. f. To increase Revenue. g. To decrease Accounts Receivable. h. To increase Owner, Withdrawals.

Q: Identify each of the following items would likely serve as a source document by marking an X in the appropriate column. The first one is done as an example

Q: Describe the link between the income statement, the statement of owner's equity, and the balance sheet.

Q: What is a trial balance? What is its purpose?

Q: Explain the recording and posting processes.

Q: A parent corporation owns 55% of the outstanding voting common stock of one domestic subsidiary. The parent has control over the subsidiary. Which of the following statements is correct? A) The parent corporation must prepare consolidated financial statements for the economic entity. B) The parent corporation must use the fair value method. C) The parent company may use the equity method but the subsidiary cannot be consolidated. D) The parent company can use the equity method or the fair value/cost method.

Q: A parent company uses the equity method to account for its wholly-owned subsidiary. Which of the following will be a correct procedure for the Investment account? A) A debit for a subsidiary loss and a credit for dividends received B) A credit for subsidiary income and a debit for dividends received C) A debit for subsidiary dividends received and a credit for a subsidiary loss D) A credit for a subsidiary loss and a credit for dividends received

Q: Explain the debt ratio and its use in analyzing a company's financial condition.

Q: Which of the following will be debited to the Investment account when the equity method is used? A) Investee net losses B) Investee net profits C) Investee declaration of dividends D) Depreciation of excess purchase cost attributable to investee equipment

Q: Explain debits and credits and their role in the accounting system.

Q: Pattalle Co purchases Senday, Inc. on January 1 of the current year for $70,000 more than the fair value of Senday's net assets. Push-down accounting is used. At that date, the following values exist:Requirement: Determine what amounts will appear in the listed accounts on Pattalle's general ledger, on Senday's general ledger, and on the consolidated balance sheet immediately following the acquisition. Make sure you post the entry to record the investment on Pattalle's books.

Q: Explain the difference between a ledger and a chart of accounts.

Q: On January 1, 2011, Pinnead Incorporated paid $300,000 for an 80% interest in Shalle Company. At that time, Shalle's total book value was $300,000. Patents were undervalued in the amount of $10,000. Patents had a 5-year remaining useful life, and any remaining excess value was attributed to goodwill. The income statements for the year ended December 31, 2011 of Pinnead and Shalle are summarized below: Pinnead Shalle Sales $800,000 $300,000 Income from Shalle 78,400 Cost of sales (100,000) (100,000) Depreciation (70,000) (30,000) Other Expenses (130,000) (70,000) Net Income $578,400 $100,000 Requirements: 1. Calculate the goodwill that will appear in the consolidated balance sheet of Pinnead and Subsidiary at December 31, 2011. 2. Calculate consolidated net income for 2011. 3. Calculate the noncontrolling interest share for 2011.

Q: Explain how accounts are used in recording information about transactions.

Q: Petra Corporation paid $500,000 for 80% of the outstanding voting common stock of Sizable Corporation on January 2, 2011 when the book value of Sizable's net assets was $460,000. The fair values of Sizable's identifiable net assets were equal to their book values except as indicated below. Book Fair Value Value Inventories (sold in 2011) $80,000 $112,000 Buildings-net (15-year life) 200,000 170,000 Note Payable (paid in 2011) 20,000 21,250 Sizable reported net income of $75,000 during 2011; dividends of $35,000 were declared and paid during the year. Required: 1. Prepare a schedule to allocate the fair value/book value differential to the specific identifiable assets and liabilities. 2. Determine Petra's income from Sizable for 2011. 3. Determine the correct balance in the Investment in Sizable account as of December 31, 2011.

Q: Describe source documents and their purpose.