ACCT 450, Fall 2010
Quiz #2, Chpts. 3 & 4
Name ______________________________
Cashen Co. paid $2,400,000 to acquire all of the common stock of Janex Corp. on January 1, 2010. Janex's
reported earnings for 2010 totaled $432,000, and it paid $120,000 in dividends during the year. The
amortization of allocations related to the investment was $24,000. Cashen's net income, not including the
investment, was $3,180,000, and it paid dividends of $900,000.
1. On the consolidated financial statements for 2010, what amount should have been shown for Equity in
Subsidiary Earnings?
A. $432,000.
B. $-0-.
C. $408,000.
D. $120,000.
E. $288,000.
2. What is the amount of consolidated net income for the year 2010?
A. $3,180,000.
B. $3,612,000.
C. $3,300,000.
D. $3,588,000.
E. $3,420,000.
3. Red Co. acquired 100% of Green, Inc. on January 1, 2010. On that date, Green had inventory with a book
value of $42,000 and a fair value of $52,000. This inventory had not yet been sold at December 31, 2010. Also,
on the date of acquisition, Green had a building with a book value of $200,000 and a fair value of $390,000.
Green had equipment with a book value of $350,000 and a fair value of $280,000. The building had a 10-year
remaining useful life and the equipment had a 5-year remaining useful life. How much total expense will be in
the consolidated financial statements for the year ended December 31, 2010 related to the acquisition
allocations of Green?
A. $43,000.
B. $33,000.
C. $ 5,000.
D. $15,000.
E. 0.
Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2010, for $3,800 cash. As of
that date Hurley has the following trial balance;
Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an
indefinite life. FIFO inventory valuation method is used.
4. Compute goodwill, if any, at January 1, 2010.
A. $150.
B. $250.
C. $700.
D. $1,200.
E. $550.
5. Compute the amount of total expenses reported in an income statement for the year ended December 31,
2010, in order to recognize acquisition-date allocations of fair value and book value differences.
A. $140.
B. $190.
C. $260.
D. $285.
E. $310.
Following are selected accounts for Green Corporation and Vega Company as of December 31, 2013. Several
of Green's accounts have been omitted.
Green acquired 100% of Vega on January 1, 2009, by issuing 10,500 shares of its $10 par value common stock
with a fair value of $95 per share. On January 1, 2009, Vega's land was undervalued by $40,000, its buildings
were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and
the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining
life. There was no goodwill associated with this investment.
6. Compute the December 31, 2013, consolidated total expenses.
A. $620,000.
B. $280,000.
C. $900,000.
D. $909,625.
E. $299,625.
Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2010. During 2010,
Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of excess cost allocations
totaled $60,000 in 2010.
7. The noncontrolling interest's share of the earnings of Harbor Corp. is calculated to be
A. $132,000.
B. $150,000.
C. $168,000.
D. $160,000.
E. $0.
8. What is the effect of including Harbor in consolidated net income for 2010?
A. $350,000.
B. $308,000.
C. $500,000.
D. $440,000.
E. $290,000.
Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2010 when Park's book value was
$560,000. The Royce stock was not actively traded. On the date of acquisition, Park had equipment (with a tenyear life) that was undervalued in the financial records by $140,000. One year later, the following selected
figures were reported by the two companies. Additionally, no dividends have been paid.
9. What is consolidated net income for 2011 attributable to Royce's controlling interest?
A. $686,000.
B. $560,000.
C. $644,000.
D. $635,600.
E. $691,600.
10. What is the noncontrolling interest's share of the subsidiary's net income for the year ended December 31,
2011 and what is the ending balance of the noncontrolling interest in the subsidiary at December 31, 2011?
A. $56,000 and $280,000.
B. $50,400 and $218,400.
C. $56,000 and $224,000.
D. $56,000 and $336,000.
E. $50,400 and $330,400.
On January 1, 2010, Palk Corp. and Spraz Corp. had condensed balance sheets as follows:
On January 2, 2010, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common
shares of Spraz. The loan was to be paid in ten equal annual principal payments, plus interest, beginning
December 31, 2010. The excess consideration transferred over the underlying book value of the acquired net
assets was allocated 60% to inventory and 40% to goodwill.
11. What is consolidated current assets at January 2, 2010?
A. $127,000.
B. $129,800.
C. $143,800.
D. $148,000.
E. $135,400.
12. What is consolidated stockholders' equity at January 2, 2010?
A. $112,000.
B. $133,000.
C. $168,000.
D. $182,000.
E. $203,000.
a Key
Cashen Co. paid $2,400,000 to acquire all of the common stock of Janex Corp. on January 1, 2010. Janex's
reported earnings for 2010 totaled $432,000, and it paid $120,000 in dividends during the year. The
amortization of allocations related to the investment was $24,000. Cashen's net income, not including the
investment, was $3,180,000, and it paid dividends of $900,000.
Hoyle - Chapter 03
1. On the consolidated financial statements for 2010, what amount should have been shown for Equity in
Subsidiary Earnings?
A. $432,000.
B. $-0-.
C. $408,000.
D. $120,000.
E. $288,000.
AACSB: Analytic
AICPA FN: Measurement
Bloom's: Application
Difficulty: Medium
Hoyle - Chapter 03 #18
Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time.
Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial
statements.
Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records.
2. What is the amount of consolidated net income for the year 2010?
A. $3,180,000.
B. $3,612,000.
C. $3,300,000.
D. $3,588,000.
E. $3,420,000.
AACSB: Analytic
AICPA FN: Measurement
Bloom's: Application
Difficulty: Medium
Hoyle - Chapter 03 #20
Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time.
Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial
statements.
Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records.
3. Red Co. acquired 100% of Green, Inc. on January 1, 2010. On that date, Green had inventory with a book
value of $42,000 and a fair value of $52,000. This inventory had not yet been sold at December 31, 2010. Also,
on the date of acquisition, Green had a building with a book value of $200,000 and a fair value of $390,000.
Green had equipment with a book value of $350,000 and a fair value of $280,000. The building had a 10-year
remaining useful life and the equipment had a 5-year remaining useful life. How much total expense will be in
the consolidated financial statements for the year ended December 31, 2010 related to the acquisition
allocations of Green?
A. $43,000.
B. $33,000.
C. $ 5,000.
D. $15,000.
E. 0.
AACSB: Analytic
AICPA FN: Measurement
Bloom's: Application
Difficulty: Medium
Hoyle - Chapter 03 #23
Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time.
Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial
statements.
Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records.
Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2010, for $3,800 cash. As of
that date Hurley has the following trial balance;
Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an
indefinite life. FIFO inventory valuation method is used.
Hoyle - Chapter 03
4. Compute goodwill, if any, at January 1, 2010.
A. $150.
B. $250.
C. $700.
D. $1,200.
E. $550.
AACSB: Analytic
AICPA FN: Measurement
Bloom's: Application
Difficulty: Medium
Hoyle - Chapter 03 #40
Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records.
5. Compute the amount of total expenses reported in an income statement for the year ended December 31,
2010, in order to recognize acquisition-date allocations of fair value and book value differences.
A. $140.
B. $190.
C. $260.
D. $285.
E. $310.
AACSB: Analytic
AICPA FN: Measurement
Bloom's: Application
Difficulty: Medium
Hoyle - Chapter 03 #44
Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time.
Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial
statements.
Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records.
Following are selected accounts for Green Corporation and Vega Company as of December 31, 2013. Several
of Green's accounts have been omitted.
Green acquired 100% of Vega on January 1, 2009, by issuing 10,500 shares of its $10 par value common stock
with a fair value of $95 per share. On January 1, 2009, Vega's land was undervalued by $40,000, its buildings
were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and
the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining
life. There was no goodwill associated with this investment.
Hoyle - Chapter 03
6. Compute the December 31, 2013, consolidated total expenses.
A. $620,000.
B. $280,000.
C. $900,000.
D. $909,625.
E. $299,625.
AACSB: Analytic
AICPA FN: Measurement
Bloom's: Application
Difficulty: Hard
Hoyle - Chapter 03 #58
Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time.
Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial
statements.
Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records.
Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2010. During 2010,
Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of excess cost allocations
totaled $60,000 in 2010.
Hoyle - Chapter 04
7. The noncontrolling interest's share of the earnings of Harbor Corp. is calculated to be
A. $132,000.
B. $150,000.
C. $168,000.
D. $160,000.
E. $0.
AACSB: Analytic
AICPA FN: Measurement
Bloom's: Application
Difficulty: Medium
Hoyle - Chapter 04 #13
Learning Objective: 04-04 Allocate consolidated net income across the controlling and noncontrolling interests.
8. What is the effect of including Harbor in consolidated net income for 2010?
A. $350,000.
B. $308,000.
C. $500,000.
D. $440,000.
E. $290,000.
AACSB: Analytic
AICPA FN: Measurement
Bloom's: Application
Difficulty: Medium
Hoyle - Chapter 04 #14
Learning Objective: 04-04 Allocate consolidated net income across the controlling and noncontrolling interests.
Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2010 when Park's book value was
$560,000. The Royce stock was not actively traded. On the date of acquisition, Park had equipment (with a tenyear life) that was undervalued in the financial records by $140,000. One year later, the following selected
figures were reported by the two companies. Additionally, no dividends have been paid.
Hoyle - Chapter 04
9. What is consolidated net income for 2011 attributable to Royce's controlling interest?
A. $686,000.
B. $560,000.
C. $644,000.
D. $635,600.
E. $691,600.
AACSB: Analytic
AICPA FN: Measurement
Bloom's: Application
Difficulty: Medium
Hoyle - Chapter 04 #21
Learning Objective: 04-04 Allocate consolidated net income across the controlling and noncontrolling interests.
10. What is the noncontrolling interest's share of the subsidiary's net income for the year ended December 31,
2011 and what is the ending balance of the noncontrolling interest in the subsidiary at December 31, 2011?
A. $56,000 and $280,000.
B. $50,400 and $218,400.
C. $56,000 and $224,000.
D. $56,000 and $336,000.
E. $50,400 and $330,400.
AACSB: Analytic
AICPA FN: Measurement
Bloom's: Application
Difficulty: Medium
Hoyle - Chapter 04 #22
Learning Objective: 04-04 Allocate consolidated net income across the controlling and noncontrolling interests.
Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a
consolidation worksheet in the presence of a noncontrolling interest.
On January 1, 2010, Palk Corp. and Spraz Corp. had condensed balance sheets as follows:
On January 2, 2010, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common
shares of Spraz. The loan was to be paid in ten equal annual principal payments, plus interest, beginning
December 31, 2010. The excess consideration transferred over the underlying book value of the acquired net
assets was allocated 60% to inventory and 40% to goodwill.
Hoyle - Chapter 04
11. What is consolidated current assets at January 2, 2010?
A. $127,000.
B. $129,800.
C. $143,800.
D. $148,000.
E. $135,400.
AACSB: Analytic
AICPA FN: Measurement
Bloom's: Application
Difficulty: Medium
Hoyle - Chapter 04 #24
Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination.
12. What is consolidated stockholders' equity at January 2, 2010?
A. $112,000.
B. $133,000.
C. $168,000.
D. $182,000.
E. $203,000.
ACCT 450, Fall 2010
Quiz #2, Chpts. 3 & 4
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Name ______________________________