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The noncontrolling interest in consolidated income when the selling affiliate is an 80% owned subsidiary is calculated by multiplying the noncontrolling minority ownership percentage by the subsidiarys reported net income Answer Selected Answer:
less unrealized profit in ending inventory plus realized profit in beginning inventory.
Correct Answer:
less unrealized profit in ending inventory plus realized profit in beginning inventory.
A 90% owned subsidiary sold merchandise at a profit to its parent company near the end of 2010. Under the partial equity method, the workpaper entry in 2011 to recognize the intercompany profit in beginning inventory realized during 2011 includes a debit to Answer Selected Answer:
Correct
Answer:
P Company owns an 80% interest in S Company. During 2011, S sells merchandise to P for $200,000 at a profit of $40,000. On December 31, 2011, 50% of this merchandise is included in Ps inventory. Income statements for P and S are summarized below: P Sales Cost of Sales Operating Expenses Net Income (2011) S
Controlling interest in consolidated net income for 2011 is: Answer Selected Answer:
$380,0 00.
Correct Answer:
$380,0 00.
P Company regularly sells merchandise to its 80%-owned subsidiary, S Corporation. In 2010, P sold merchandise that cost $192,000 to S for $240,000. Half of this merchandise remained in Ss December 31, 2010 inventory. During 2011, P sold merchandise that cost $300,000 to S for $375,000. Forty percent of this merchandise inventory remained in Ss December 31, 2011 inventory. Selected income statement information for the two affiliates for the year 2011 is as follows: P Sales Revenue Cost of Goods Sold Gross profit S
$ 360,000 $150,000
Consolidated cost of goods sold for P Company and Subsidiary for 2011 are: Answer Selected Answer:
$1,821,0 00.
Correct Answer:
$1,821,0 00.
P Company regularly sells merchandise to its 80%-owned subsidiary, S Corporation. In 2010, P sold merchandise that cost $240,000 to S for $300,000. Half of this merchandise remained in Ss December 31, 2010 inventory. During 2011, P sold merchandise that cost $375,000 to S for $468,000. Forty percent of this merchandise inventory remained in Ss December 31, 2011 inventory. Selected income statement information for the two affiliates for the year 2011 is as follows:
$ 450,000 $ 187,500
Consolidated cost of goods sold for P Company and Subsidiary for 2011 are: Answer Selected Answer:
$2,276,7 00.
Correct Answer:
$2,276,7 00.
Paige, Inc. owns 80% of Sigler, Inc. During 2011, Paige sold goods with a 40% gross profit to Sigler. Sigler sold all of these goods in 2011. For 2011 consolidated financial statements, how should the summation of Paige and Sigler income statement items be adjusted? Answer Selected Answer:
Sales and cost of goods sold should be reduced by the intercompany sales.
Correct Answer:
Sales and cost of goods sold should be reduced by the intercompany sales.
Question 7
0 out of 2 points
The material sale of inventory items by a parent company to an affiliated company: Answer Selected Answer:
enters the consolidated revenue computation only if the transfer was the result of arms length bargaining.
Correct Answer:
does not result in consolidated income until the merchandise is sold to outside parties.
P Company owns an 80% interest in S Company. During 2011, S sells merchandise to P for $150,000 at a profit of $30,000. On December 31, 2011, 50% of this merchandise is included in Ps inventory. Income statements for P and S are summarized below: P Sales Cost of Sales Operating Expenses Net Income (2011) S
Selected Answer:
$15,00 0.
Correct Answer:
$15,00 0.
Pratt Company owns 80% of Storey Companys common stock. During 2011, Storey sold $400,000 of merchandise to Pratt. At December 31, 2011, onefourth of the merchandise remained in Pratts inventory. In 2011, gross profit percentages were 25% for Pratt and 30% for Storey. The amount of unrealized intercompany profit that should be eliminated in the consolidated statements is Answer Selected Answer:
$30,00 0.
Correct Answer:
$30,00 0.
Sales from one subsidiary to another are called Answer Selected Answer:
horizontal
horizontal sales.
P Corporation acquired a 60% interest in S Corporation on January 1, 2011, at book value equal to fair value. During 2011, P sold merchandise that cost $225,000 to S for $315,000. One-third of this merchandise remained in Ss inventory at December 31, 2011. S reported net income of $200,000 for 2011. Ps income from S for 2011 is: Answer Selected Answer:
$120,0 00.
Correct Answer:
$120,0 00.
P Company owns an 80% interest in S Company. During 2011, S sells merchandise to P for $200,000 at a profit of $40,000. On December 31, 2011, 50% of this merchandise is included in Ps inventory. Income statements for P and S are summarized below: P Sales Cost of Sales S
$20,00 0.
Correct Answer:
$20,00 0.
P Corporation acquired a 60% interest in S Corporation on January 1, 2011, at book value equal to fair value. During 2011, P sold merchandise that cost $135,000 to S for $189,000. One-third of this merchandise remained in Ss inventory at December 31, 2011. S reported net income of $120,000 for 2011. Ps income from S for 2011 is: Answer Selected Answer:
$54,00 0.
Correct Answer:
$54,00 0.
A parent company regularly sells merchandise to its 80%-owned subsidiary. Which of the following statements describes the computation of noncontrolling interest income? Answer Selected Answer:
(the subsidiarys net income + unrealized profits in the beginning inventory unrealized profits in the ending inventory) 20%.
P Company regularly sells merchandise to its 80%-owned subsidiary, S Corporation. In 2010, P sold merchandise that cost $192,000 to S for $240,000. Half of this merchandise remained in Ss December 31, 2010 inventory. During 2011, P sold merchandise that cost $300,000 to S for $375,000. Forty percent of this merchandise inventory remained in Ss December 31, 2011 inventory. Selected income statement information for the two affiliates for the year 2011 is as follows: P Sales Revenue Cost of Goods Sold Gross profit S
$ 360,000 $150,000
Consolidated sales revenue for P and Subsidiary for 2011 are: Answer Selected Answer:
$2,325,0 00.
P Corporation acquired an 80% interest in S Corporation two years ago at an implied value equal to the book value of S. On January 2, 2011, S sold equipment with a five-year remaining life to P for a gain of $180,000. S reports net income of $900,000 for 2011 and pays dividends of $300,000. Ps Equity from Subsidiary Income for 2011 is: Answer Selected Answer:
$604,8 00.
Correct Answer:
$604,8 00.
Pratt Corporation owns 100% of Stone Companys common stock. On January 1, 2011, Pratt sold equipment with a book value of $210,000 to Stone for $300,000. Stone is depreciating the equipment over a ten-year life by the straight-line method. The net adjustments to compute 2011 and 2012 consolidated income would be an increase (decrease) of 2011 2012
a. ($90,000) $0
b. ($90,000) $9,000 c. ($81,000) $0 d. ($81,000) $9,000 Answer Selected Answer: d Correct Answer: d Question 18 2 out of 2 points
Gain or loss resulting from an intercompany sale of equipment between a parent and a subsidiary is Answer Selected Answer:
considered to be realized over the remaining useful life of the equipment as an adjustment to depreciation in the consolidated statements.
Correct Answer:
considered to be realized over the remaining useful life of the equipment as an adjustment to depreciation in the consolidated statements.
Parks Corporation owns 100% of Starr Companys common stock. On January 1, 2011, Parks sold equipment with a book value of $350,000 to Starr for $500,000. Starr is depreciating the equipment over a ten-year life by the
straight-line method. The net adjustments to compute 2011 and 2012 consolidated income would be an increase (decrease) of 2011 2012
a. ($150,000) $0 b. ($150,000) $15,000 c. ($135,000) $0 d. ($135,000) $15,000 Answer Selected Answer: d Correct Answer: d Question 20 0 out of 2 points
P Corporation acquired an 80% interest in S Corporation two years ago at an implied value equal to the book value of S. On January 2, 2011, S sold equipment with a five-year remaining life to P for a gain of $120,000. S reports net income of $600,000 for 2011 and pays dividends of $200,000. Ps Equity from Subsidiary Income for 2011 is: Answer Selected Answer:
$384,0 00.
Correct Answer:
$403,2 00.
In years subsequent to the upstream intercompany sale of nondepreciable assets, the necessary consolidated workpaper entry under the cost method is to debit the Answer Selected Answer:
Noncontrolling interest and Retained Earnings (Parent) accounts, and credit the nondepreciable asset.
Correct Answer:
Noncontrolling interest and Retained Earnings (Parent) accounts, and credit the nondepreciable asset.
On January 1, 2010, P Corporation sold equipment with a 3-year remaining life and a book value of $40,000 to its 70% owned subsidiary for a price of $46,000. In the consolidated workpapers for the year ended December 31, 2011, an elimination entry for this transaction will include a: Answer Selected Answer:
Correct Answer:
In January 2008, S Company, an 80% owned subsidiary of P Company, sold equipment to P Company for $1,980,000. S Companys original cost for this equipment was $2,000,000 and had accumulated depreciation of $200,000. P Company continued to depreciate the equipment over its 9 year remaining life using the straight-line method. This equipment was sold to a third party on January 1, 2011 for $1,440,000. What amount of gain should P Company record on its books in 2011? Answer Selected Answer:
$120,0 00.
Correct Answer:
$120,0 00.
In the year an 80% owned subsidiary sells equipment to its parent company at a gain, the noncontrolling interest in consolidated income is calculated by multiplying the noncontrolling interest percentage by the subsidiarys reported net income Answer Selected Answer:
Correct Answer:
In 2011, P Company sells land to its 80% owned subsidiary, S Company, at a gain of $50,000. What is the effect of this sale of land on consolidated net income assuming S Company still owns the land at the end of the year? Answer Selected Answer:
consolidated net income will be the same as if the sale had not occurred.
Correct Answer:
consolidated net income will be the same as if the sale had not occurred.
When preparing consolidated financial statement workpapers, unrealized intercompany gains, as a result of equipment or inventory sales by affiliates, are allocated proportionately by percent of ownership between parent and subsidiary only when the selling affiliate is Answer Selected Answer:
Correct Answer:
Several years ago, P Company bought land from S Company, its 80% owned subsidiary, at a gain of $50,000 to S Company. The land is still owned by P
Company. The consolidated working papers for this year will require: Answer Selected Answer:
P Company purchased land from its 80% owned subsidiary at a cost of $100,000 greater than it subsidiarys book value. Two years later P sold the land to an outside entity for $50,000 more than its cost. In its current year consolidated income statement P and its subsidiary should report a gain on the sale of land of: Answer Selected Answer:
$150,0 00.
Correct Answer:
$150,0 00.
In January 2008, S Company, an 80% owned subsidiary of P Company, sold equipment to P Company for $990,000. S Companys original cost for this equipment was $1,000,000 and had accumulated depreciation of $100,000. P Company continued to depreciate the equipment over its 9 year remaining life using the straight-line method. This equipment was sold to a third party on January 1, 2011 for $720,000. What amount of gain should P Company record
$120,0 00.
Correct Answer:
$60,00 0.
The amount of the adjustment to the noncontrolling interest in consolidated net assets is equal to the noncontrolling interests percentage of the Answer Selected Answer:
Correct Answer: