CHAPTER 4
INTERCOMPANY TRANSACTIONS
SUMMARY OF ITEMS BY TOPIC
Basic intercompany
transaction concepts
Basic intercompany plant
asset transactions
Downstream
intercompany plant asset
transactions, elimination
in year of transaction
Downstream
intercompany plant asset
transactions, elimination
in subsequent year
Basic intercompany
inventory transactions
Downstream
intercompany inventory
transactions, elimination
in year of transaction
Downstream
intercompany inventory
transactions, elimination
in subsequent year
Basic intercompany longterm debt transactions
Downstream
intercompany long-term
debt transactions,
elimination in year of
transaction
Downstream
intercompany long-term
debt transactions,
elimination in subsequent
year
TrueFalse
1-5
Conceptual
Multiple
Choice
32, 34-37
6-16
38-39
17-18
19-23
Problems
46-48, 50-52,
54-56, 58-61,
63-66, 68-71
292-299
49, 53, 57, 62,
67, 72-81
300-307
33, 40
24
25-31
Computational
Multiple
Choice
Short
Answer
436-444,
453
445-449
450-452,
454-456
82-96
308-319
97-112
320-331
41-45
457-460
113-133
332-347
134-148
348-363
Upstream intercompany
plant asset transactions,
elimination in year of
transaction
Upstream intercompany
plant asset transactions,
elimination in subsequent
year
Upstream intercompany
inventory transactions,
elimination in year of
transaction
Upstream intercompany
inventory transactions,
elimination in subsequent
year
Upstream intercompany
long-term debt
transactions, elimination
in year of transaction
Upstream intercompany
long-term debt
transactions, elimination
in subsequent year
149-152, 155158, 161-164,
167-171, 174178, 181-185
153-154, 159160, 165-166,
172-173, 179180, 186-199
200-219
364-371
220-243
392-403
244-270
404-419
271-291
420-435
372-379
380-391
True-False Statements
1.
An intercompany transaction occurs when one unit of an entity is involved in a
transaction with another unit of the same entity.
2.
An intercompany transaction must involve the parent and a subsidiary.
3.
An intercompany transaction flowing from the parent to the subsidiary is called a
downstream transaction.
4.
An intercompany transaction flowing from one subsidiary to another subsidiary is called
an upstream transaction.
5.
An intercompany transaction flowing from the subsidiary to the parent is called a
realized transaction.
6.
When an intercompany plant asset transaction occurs, the historical cost of the asset on
the consolidated balance sheet will be the cost of the asset to the original owner.
7.
In the period of an intercompany plant asset transaction, the gain or loss on the sale of
the plant asset will be completely eliminated from the consolidated income statement.
8.
In the period of an intercompany plant asset transaction, the accumulated depreciation
account will be completely eliminated.
9.
If the intercompany sale of plant assets occurs at the end of the accounting period, there
will not be an adjustment to depreciation expense when the consolidation worksheet
eliminations are prepared.
10.
If the intercompany sale of plant assets occurs at the end of the accounting period, there
will not be an adjustment to accumulated depreciation when the consolidation worksheet
eliminations are prepared.
11.
The worksheet elimination to a plant asset account resulting from an intercompany
transaction is the same regardless of when the intercompany transaction occurs.
12.
When an intercompany plant transaction occurs during the period, there will likely be
two income statement accounts in the worksheet elimination.
13.
When there is an intercompany sale of plant assets, the purchaser of the plant assets must
keep the same remaining economic life as the seller.
14.
Consolidated depreciation expense on an asset sold internally is based on the original
owner’s cost and estimated life before the intercompany transaction date and the new
owner’s cost and estimated life after the intercompany transaction date.
15.
When there is an intercompany sale of plant assets during the period, the depreciation
expense recognized prior to the sale has no impact on the worksheet elimination to
remove the intercompany sale from the consolidated financial statements.
16.
The worksheet elimination to the accumulated depreciation account will get smaller
every period until it reaches zero at the date the machine is fully depreciated.
17.
The worksheet elimination to the plant asset account in periods subsequent to a
downstream sale of a plant asset will be the same dollar amount as the worksheet
elimination to the plant asset account at the date of the sale.
18.
The retained earnings worksheet elimination is created at the dollar amount of the gain or
loss on the sale of plant assets in the preceding period and the worksheet elimination will
remain at the same dollar amount until the asset is sold to an unrelated party or discarded.
19.
A worksheet elimination is not required when an intercompany inventory transaction
occurs at cost.
20.
If inventory is sold to a related party at an amount different than cost, the cost of goods
sold account must be adjusted in the period of the intercompany transaction and in the
period when the inventory is sold to an unrelated party.
21.
The entire intercompany sale of inventory must be eliminated regardless of whether any
of the inventory has been sold to an unrelated party before the end of the accounting
period.
22.
The cost of goods sold worksheet elimination resulting from the intercompany sale of
inventory is always the cost of the inventory sold by one party to a related entity,
regardless of whether any of the inventory has been sold to an unrelated party or not.
23.
In the period of an intercompany inventory transaction, a maximum of three accounts
will exist in the worksheet elimination.
24.
In periods subsequent to the downstream sale of inventory, the adjustment to retained
earnings represents the unrealized profit on the intercompany sale.
25.
All types of intercompany debt transactions involve an unrelated party.
26.
The purchase of the parent’s debt instrument from an unrelated party by the subsidiary is
viewed by the consolidated entity as an early retirement of debt.
27.
On the date of a parent’s acquisition of a subsidiary’s debt from an unrelated party, both
the parent and the subsidiary will record a journal entry pertaining to the parent’s
purchase of the debt.
28.
When one party acquires a debt instrument of a related party from an unrelated party, the
consolidated entity views the transaction as an early retirement of debt.
29.
The worksheet elimination pertaining to an indirect intercompany debt transaction
eliminates the gain or loss on the early retirement of debt.
30.
The recognized Interest Revenue resulting from an intercompany debt transaction is
always completely eliminated from the consolidated income statement.
31.
The Investment in Bonds account created as a result of an intercompany debt transaction
is always completely eliminated from the consolidated balance sheet.
True-False Statement Solutions
1.
T
2.
F, Intercompany transactions can also occur between two subsidiaries.
3.
T
4.
F, An intercompany transaction flowing from one subsidiary to another subsidiary is
called a lateral transaction.
5.
F, An intercompany transaction flowing from the subsidiary to the parent is called an
upstream transaction.
6.
T
7.
T
8.
F, The accumulated depreciation account will be recreated to the amount that would have
existed had the asset not been sold internally
9.
T
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
F, The accumulated depreciation account must be reestablished to the amount that existed
before the intercompany transaction occurred
T
T
F, The estimated remaining economic life of plant assets can change when an
intercompany transaction occurs.
F, The consolidated depreciation expense before the intercompany transaction date is
based on the original owner’s cost and estimated life and after the intercompany
transaction depreciation expense is based on the original owner’s cost and the new
owner’s estimated remaining life.
T
F, The worksheet elimination to the accumulated depreciation account will change in
value each period, either getting larger or smaller, until it reaches the dollar amount of
the worksheet elimination to the plant asset account. This occurs when the plant asset is
fully depreciated.
T
F, The retained earnings worksheet elimination dollar amount is the gain or loss
eliminated at the date of sale reduced by the cumulative difference between the
depreciation expense recognized by the new owner of the plant asset and the depreciation
expense for that plant asset on the consolidated income statement.
F, Regardless of the dollar amount of an intercompany inventory transaction, sales and
cost of goods sold are misstated if the transaction is not eliminated.
T
T
F, The complete cost of goods sold internally must be eliminated. However, when the
inventory is sold to an unrelated party, an additional amount of cost of goods sold must
be eliminated because the entity selling to the unrelated party is recognizing cost of
goods sold based on a different cost basis than will be recognized by the consolidated
entity.
T
T
F, Indirect intercompany debt transactions involve an unrelated party but direct
intercompany debt transactions do not.
T
F, The parent will record the acquisition of an investment but the subsidiary will not
record an entry pertaining to the parent’s investment. From the subsidiary’s perspective,
the debt instrument is still outstanding; there has just been a change of ownership.
T
F, The loss or gain on early retirement of debt is created, not eliminated, in the worksheet
elimination.
T
T
Conceptual Multiple Choice Questions
32.
Which of the following is not an intercompany transaction?
a.
The parent company acquires inventory from the subsidiary
b.
The subsidiary purchases a machine from another subsidiary
c.
d.
The parent purchases inventory from a supplier
The subsidiary purchases the parent’s bond payable from an independent investor
33.
The parent acquires inventory from a subsidiary. On whose financial records is this
intercompany transaction recorded?
a.
The books of the subsidiary only because the subsidiary made the sale and the
consolidated financial statements are prepared for the parent company
stockholders
b.
The books of the parent only because the parent knows the subsidiary’s identity
so the parent knows it is an intercompany transaction
c.
Neither the parent nor the subsidiary would record the transaction because it is an
intercompany transaction
d.
The parent and the subsidiary both record the transaction and it is eliminated
during the consolidation process
34.
The sale of inventory from the parent to the subsidiary is called what type of transaction?
a.
Downstream intercompany transaction
b.
Upstream intercompany transaction
c.
Lateral intercompany transaction
d.
Realized intercompany transaction
35.
The sale of equipment from the subsidiary to the parent is called what type of
transaction?
a.
Downstream intercompany transaction
b.
Upstream intercompany transaction
c.
Lateral intercompany transaction
d.
Realized intercompany transaction
36.
The purchase of a subsidiary’s bond payable from an independent investor by another
subsidiary is called what type of transaction?
a.
Downstream intercompany transaction
b.
Upstream intercompany transaction
c.
Lateral intercompany transaction
d.
Realized intercompany transaction
37.
When there is an intercompany transaction, how much of any profit or loss created as a
result of the transaction is eliminated during the consolidation process?
a.
None of the profit or loss is eliminated
b.
All of the profit or loss is eliminated
c.
The parent’s ownership interest in the profit or loss is eliminated
d.
It is not possible to determine how much of the profit or loss is eliminated
without knowing whether the transaction is upstream or downstream
38.
In the period of an intercompany asset transaction, the consolidated balance sheet will
present what amount in the asset account?
a.
The purchase price by the new owner
b.
The purchase price by the original owner
c.
d.
The purchase price by the original owner plus the parent’s ownership percentage
of the gain or loss on the sale recognized at the time of the intercompany
transaction
The purchase price by the original owner plus the noncontrolling interests’
percentage of the gain or loss on the sale recognized at the time of the
intercompany transaction
39.
What amount of gain or loss from the intercompany sale of plant assets is included in the
consolidated income statement?
a.
The entire gain or loss is recognized
b.
The parent’s ownership interest in the gain or loss is recognized
c.
The seller’s portion of the gain or loss is recognized
d.
There is no gain or loss recognized
40.
When an intercompany inventory transaction occurs at a price greater than cost, what
account on the purchaser’s financial records is initially affected because of the gross
profit on the sale?
a.
Sales
b.
Cost of Goods Sold
c.
Gross Profit
d.
Inventory
41.
Sampson Company is having a cash flow problem. Sampson borrows $500,000 from its
parent, Nelson Group. What is this type of transaction called?
a.
Lateral debt transaction
b.
Indirect intercompany debt transaction
c.
Direct intercompany debt transaction
d.
Negotiated transfer
42.
What is the transaction called when the parent acquires a subsidiary’s debt instrument
from an unrelated party?
a.
Direct intercompany debt transaction
b.
Indirect intercompany debt transaction
c.
Negotiated transfer
d.
Lateral debt transaction
43.
On the date when a subsidiary acquires some of the parent’s outstanding debt from an
unrelated party, which entity records a journal entry with respect to the long-term debt?
a.
Subsidiary
b.
Parent
c.
Parent and subsidiary
d.
Neither party records a journal entry
44.
At the date when the parent acquires some of the subsidiary’s outstanding debt from an
unrelated party, how is the debt instrument viewed by the parties?
a.
The parent views the debt instrument as an investment
b.
The consolidated entity views the transaction as retired
c.
The subsidiary views the debt instrument as an outstanding liability
d.
45.
All of the above are correct
Over time, what will happen to the dollar amount of the discount or premium included in
a worksheet elimination of an indirect intercompany debt transaction?
a.
The discount or premium worksheet elimination amount will not change in value
over time
b.
The discount or premium worksheet elimination amount will get larger in value
over time
c.
The discount or premium worksheet elimination amount will get smaller over
time
d.
It is not possible to determine what will happen to the dollar amount of the
discount or premium worksheet elimination amount
Conceptual Multiple Choice Question Difficulty and Solutions
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
easy
easy
easy
easy
easy
easy
easy
easy
moderate
easy
easy
easy
easy
moderate
c
d
a
b
c
b
b
d
d
c
b
a
d
c
Computational Multiple Choice Questions
46.
The parent sells its 80 percent subsidiary equipment for $25,000 on December 31, 2005.
At that date, the equipment has a cost and accumulated depreciation on the parent’s
financial records of $40,000 and $10,000, respectively. What is the worksheet
elimination to the equipment account if consolidated financial statements are prepared on
December 31, 2005?
a.
$15,000 credit
b.
$15,000 debit
c.
$12,000 credit
d.
$12,000 debit
47.
The parent sells its 80 percent subsidiary equipment for $25,000 on December 31, 2005.
At that date, the equipment has a cost and accumulated depreciation on the parent’s
financial records of $40,000 and $10,000, respectively. What is the worksheet
elimination to the gain or loss on sale of equipment account if consolidated financial
statements are prepared on December 31, 2005?
a.
b.
c.
d.
$5,000 credit
$5,000 debit
$4,000 credit
$4,000 debit
48.
The parent sells its 80 percent subsidiary equipment for $25,000 on December 31, 2005.
At that date, the equipment has a cost and accumulated depreciation on the parent’s
financial records of $40,000 and $10,000, respectively. What is the worksheet
elimination to the accumulated depreciation account if consolidated financial statements
are prepared on December 31, 2005?
a.
$8,000 credit
b.
$8,000 debit
c.
$10,000 credit
d.
$10,000 debit
49.
The parent sells its 80 percent subsidiary equipment for $25,000 on December 31, 2005.
At that date, the equipment has a cost and accumulated depreciation on the parent’s
financial records of $40,000 and $10,000, respectively. What is the worksheet
elimination to the retained earnings account if consolidated financial statements are
prepared on December 31, 2006?
a.
$5,000 debit
b.
$5,000 credit
c.
$4,000 debit
d.
$4,000 credit
50.
The 70 percent subsidiary acquires equipment from its parent on December 31, 2005 for
$160,000. At that date, the equipment has a cost and accumulated depreciation on the
parent’s books of $130,000 and $60,000, respectively. What is the worksheet elimination
to the equipment account if consolidated financial statements are prepared on December
31, 2005?
a.
$21,000 credit
b.
$21,000 debit
c.
$30,000 credit
d.
$30,000 debit
51.
The 70 percent subsidiary acquires equipment from its parent on December 31, 2005 for
$160,000. At that date, the equipment has a cost and accumulated depreciation on the
parent’s books of $130,000 and $60,000, respectively. What is the worksheet elimination
to the gain or loss on sale of equipment account if consolidated financial statements are
prepared on December 31, 2005?
a.
$90,000 credit
b.
$90,000 debit
c.
$63,000 credit
d.
$63,000 debit
52.
The 70 percent subsidiary acquires equipment from its parent on December 31, 2005 for
$160,000. At that date, the equipment has a cost and accumulated depreciation on the
parent’s books of $130,000 and $60,000, respectively. What is the worksheet elimination
to the accumulated depreciation account if consolidated financial statements are prepared
on December 31, 2005?
a.
$60,000 credit
b.
$60,000 debit
c.
$42,000 credit
d.
$42,000 debit
53.
The 70 percent subsidiary acquires equipment from its parent on December 31, 2005 for
$160,000. At that date, the equipment has a cost and accumulated depreciation on the
parent’s books of $130,000 and $60,000, respectively. What is the worksheet elimination
to the retained earnings account if consolidated financial statements are prepared on
December 31, 2006?
a.
$63,000 credit
b.
$63,000 debit
c.
$90,000 credit
d.
$90,000 debit
54.
The parent sells its 60 percent subsidiary a machine for $60,000 on December 31, 2005.
At that date, the machine has a cost and accumulated depreciation on the parent’s
financial records of $80,000 and $30,000, respectively. What is the worksheet
elimination to the machine account if consolidated financial statements are prepared on
December 31, 2005?
a.
$20,000 debit
b.
$20,000 credit
c.
$12,000 debit
d.
$12,000 credit
55.
The parent sells its 60 percent subsidiary a machine for $60,000 on December 31, 2005.
At that date, the machine has a cost and accumulated depreciation on the parent’s
financial records of $80,000 and $30,000, respectively. What is the worksheet
elimination to the gain or loss on sale of machine account if consolidated financial
statements are prepared on December 31, 2005?
a.
$10,000 credit
b.
$10,000 debit
c.
$6,000 credit
d.
$6,000 debit
56.
The parent sells its 60 percent subsidiary a machine for $60,000 on December 31, 2005.
At that date, the machine has a cost and accumulated depreciation on the parent’s
financial records of $80,000 and $30,000, respectively. What is the worksheet
elimination to the accumulated depreciation account if consolidated financial statements
are prepared on December 31, 2005?
a.
$18,000 credit
b.
$18,000 debit
c.
$30,000 credit
d.
$30,000 debit
57.
The parent sells its 60 percent subsidiary a machine for $60,000 on December 31, 2005.
At that date, the machine has a cost and accumulated depreciation on the parent’s
financial records of $80,000 and $30,000, respectively. What is the worksheet
elimination to the retained earnings account if consolidated financial statements are
prepared on December 31, 2006?
a.
$10,000 debit
b.
$10,000 credit
c.
$6,000 debit
d.
$6,000 credit
58.
Aztec, the parent, sells its 90 percent subsidiary, Navajo, equipment for $36,000 on May
1, 2005. At that date, the equipment has a cost and accumulated depreciation on Aztec’s
financial records of $60,000 and $31,200, respectively. The equipment had a remaining
life of four years on Aztec’s books and was assigned a life of six years by Navajo. What
is the worksheet elimination to the equipment account if consolidated financial
statements are prepared on December 31, 2005?
a.
$21,600 credit
b.
$21,600 debit
c.
$24,000 credit
d.
$24,000 debit
59.
Aztec, the parent, sells its 90 percent subsidiary, Navajo, equipment for $36,000 on May
1, 2005. At that date, the equipment has a cost and accumulated depreciation on Aztec’s
financial records of $60,000 and $31,200, respectively. The equipment had a remaining
life of four years on Aztec’s books and was assigned a life of six years by Navajo. What
is the worksheet elimination to the gain or loss on sale of equipment account if
consolidated financial statements are prepared on December 31, 2005?
a.
$7,200 credit
b.
$7,200 debit
c.
$6,480 credit
d.
$6,480 debit
60.
Aztec, the parent, sells its 90 percent subsidiary, Navajo, equipment for $36,000 on May
1, 2005. At that date, the equipment has a cost and accumulated depreciation on Aztec’s
financial records of $60,000 and $31,200, respectively. The equipment had a remaining
life of four years on Aztec’s books and was assigned a life of six years by Navajo. What
is the worksheet elimination to the depreciation expense account if consolidated financial
statements are prepared December 31, 2005?
a.
$1,200 credit
b.
$1,200 debit
c.
$800 credit
d.
$800 debit
61.
Aztec, the parent, sells its 90 percent subsidiary, Navajo, equipment for $36,000 on May
1, 2005. At that date, the equipment has a cost and accumulated depreciation on Aztec’s
financial records of $60,000 and $31,200, respectively. The equipment had a remaining
life of four years on Aztec’s books and was assigned a life of six years by Navajo. What
is the worksheet elimination to the accumulated depreciation account if consolidated
financial statements are prepared on December 31, 2005?
a.
$30,400 credit
b.
$30,400 debit
c.
$31,200 credit
d.
$31,200 debit
62.
Aztec, the parent, sells its 90 percent subsidiary, Navajo, equipment for $36,000 on May
1, 2005. At that date, the equipment has a cost and accumulated depreciation on Aztec’s
financial records of $60,000 and $31,200, respectively. The equipment had a remaining
life of four years on Aztec’s books and was assigned a life of six years by Navajo. What
is the worksheet elimination to the retained earnings account if consolidated financial
statements are prepared on December 31, 2006?
a.
$6,000 debit
b.
$6,000 credit
c.
$6,400 debit
d.
$6,400 credit
63.
The 80 percent subsidiary (Scottsdale) acquires a building from its parent (Phoenix) on
October 1, 2005 for $640,000. At that date, the building has a cost and accumulated
depreciation on Phoenix’s books of $500,000 and $350,000, respectively. The building
had a remaining life of six years on Phoenix’s books and was assigned a life of ten years
by Scottsdale. What is the worksheet elimination to the building account if consolidated
financial statements are prepared on December 31, 2005?
a.
$140,000 credit
b.
$140,000 debit
c.
$112,000 credit
d.
$112,000 debit
64.
The 80 percent subsidiary (Scottsdale) acquires a building from its parent (Phoenix) on
October 1, 2005 for $640,000. At that date, the building has a cost and accumulated
depreciation on Phoenix’s books of $500,000 and $350,000, respectively. The building
had a remaining life of six years on Phoenix’s books and was assigned a life of ten years
by Scottsdale. What is the worksheet elimination to the gain or loss on sale of building
account if consolidated financial statements are prepared on December 31, 2005?
a.
$490,000 credit
b.
$490,000 debit
c.
$392,000 credit
d.
$392,000 debit
65.
The 80 percent subsidiary (Scottsdale) acquires a building from its parent (Phoenix) on
October 1, 2005 for $640,000. At that date, the building has a cost and accumulated
depreciation on Phoenix’s books of $500,000 and $350,000, respectively. The building
had a remaining life of six years on Phoenix’s books and was assigned a life of ten years
by Scottsdale. What is the worksheet elimination to the depreciation expense account if
consolidated financial statements are prepared December 31, 2005?
a.
$9,750 credit
b.
$9,750 debit
c.
d.
$12,250 credit
$12,250 debit
66.
The 80 percent subsidiary (Scottsdale) acquires a building from its parent (Phoenix) on
October 1, 2005 for $640,000. At that date, the building has a cost and accumulated
depreciation on Phoenix’s books of $500,000 and $350,000, respectively. The building
had a remaining life of six years on Phoenix’s books and was assigned a life of ten years
by Scottsdale. What is the worksheet elimination to the accumulated depreciation
account if consolidated financial statements are prepared on December 31, 2005?
a.
$340,250 debit
b.
$340,250 credit
c.
$337,750 debit
d.
$337,750 credit
67.
The 80 percent subsidiary (Scottsdale) acquires a building from its parent (Phoenix) on
October 1, 2005 for $640,000. At that date, the building has a cost and accumulated
depreciation on Phoenix’s books of $500,000 and $350,000, respectively. The building
had a remaining life of six years on Phoenix’s books and was assigned a life of ten years
by Scottsdale. What is the worksheet elimination to the retained earnings account if
consolidated financial statements are prepared on December 31, 2006?
a.
$477,750 debit
b.
$477,750 credit
c.
$441,000 debit
d.
$441,000 credit
68.
The parent, Farley Corporation, sells its 70 percent subsidiary, GolfWorld, a machine for
$90,000 on April 1, 2005. At that date, the machine has a cost and accumulated
depreciation on Farley’s financial records of $160,000 and $60,000, respectively. The
machine had a remaining life of eight years on Farley’s books and was assigned a life of
ten years by GolfWorld. What is the worksheet elimination to the machine account if
consolidated financial statements are prepared on December 31, 2005?
a.
$49,000 debit
b.
$49,000 credit
c.
$70,000 debit
d.
$70,000 credit
69.
The parent, Farley Corporation, sells its 70 percent subsidiary, GolfWorld, a machine for
$90,000 on April 1, 2005. At that date, the machine has a cost and accumulated
depreciation on Farley’s financial records of $160,000 and $60,000, respectively. The
machine had a remaining life of eight years on Farley’s books and was assigned a life of
ten years by GolfWorld. What is the worksheet elimination to the gain or loss on sale of
machine account if consolidated financial statements are prepared on December 31,
2005?
a.
$10,000 debit
b.
$10,000 credit
c.
$7,000 debit
d.
$7,000 credit
70.
The parent, Farley Corporation, sells its 70 percent subsidiary, GolfWorld, a machine for
$90,000 on April 1, 2005. At that date, the machine has a cost and accumulated
depreciation on Farley’s financial records of $160,000 and $60,000, respectively. The
machine had a remaining life of eight years on Farley’s books and was assigned a life of
ten years by GolfWorld. What is the worksheet elimination to the depreciation expense
account if consolidated financial statements are prepared December 31, 2005?
a.
$750 debit
b.
$750 credit
c.
$1,000 debit
d.
$1,000 credit
71.
The parent, Farley Corporation, sells its 70 percent subsidiary, GolfWorld, a machine for
$90,000 on April 1, 2005. At that date, the machine has a cost and accumulated
depreciation on Farley’s financial records of $160,000 and $60,000, respectively. The
machine had a remaining life of eight years on Farley’s books and was assigned a life of
ten years by GolfWorld. What is the worksheet elimination to the accumulated
depreciation account if consolidated financial statements are prepared on December 31,
2005?
a.
$59,250 debit
b.
$59,250 credit
c.
$60,750 debit
d.
$60,750 credit
72.
The parent, Farley Corporation, sells its 70 percent subsidiary, GolfWorld, a machine for
$90,000 on April 1, 2005. At that date, the machine has a cost and accumulated
depreciation on Farley’s financial records of $160,000 and $60,000, respectively. The
machine had a remaining life of eight years on Farley’s books and was assigned a life of
ten years by GolfWorld. What is the worksheet elimination to the retained earnings
account if consolidated financial statements are prepared on December 31, 2006?
a.
$9,250 debit
b.
$9,250 credit
c.
$9,000 debit
d.
$9,000 credit
73.
Matz Corporation, an 80 percent subsidiary, acquired equipment from Ronald Company,
its parent, on March 1, 2005 for $84,000. On that date, the equipment and accumulated
depreciation on Ronald’s books were $120,000 and $15,000 respectively. The equipment
has a five-year remaining life on Ronald’s books and was assigned a life of seven years
by Matz. What is the worksheet elimination to the equipment account if consolidated
financial statements are prepared on December 31, 2006?
a.
$21,000 credit
b.
$21,000 debit
c.
$36,000 credit
d.
$36,000 debit
74.
Matz Corporation, an 80 percent subsidiary, acquired equipment from Ronald Company,
its parent, on March 1, 2005 for $84,000. On that date, the equipment and accumulated
depreciation on Ronald’s books were $120,000 and $15,000 respectively. The equipment
has a five-year remaining life on Ronald’s books and was assigned a life of seven years
by Matz. What is the depreciation expense on the 2006 consolidated income statement?
a.
$7,000
b.
$15,000
c.
$12,000
d.
$21,000
75.
Matz Corporation, an 80 percent subsidiary, acquired equipment from Ronald Company,
its parent, on March 1, 2005 for $84,000. On that date, the equipment and accumulated
depreciation on Ronald’s books were $120,000 and $15,000 respectively. The equipment
has a five-year remaining life on Ronald’s books and was assigned a life of seven years
by Matz. What is the worksheet elimination to the accumulated depreciation account if
consolidated financial statements are prepared on December 31, 2006?
a.
$20,500
b.
$17,500
c.
$14,000
d.
$16,400
76.
Most Corporation sold a machine to its 90 percent subsidiary, Ruggle Company on
October 1, 2005 for $270,000. On that date, the machine and accumulated depreciation
on Most’s books were $430,000 and $136,000, respectively. The machine has a sevenyear remaining life on Most’s books and was assigned a life of ten years by Ruggle.
What is the worksheet elimination to the machine account if consolidated financial
statements are prepared on December 31, 2006?
a.
$160,000 debit
b.
$160,000 credit
c.
$24,000 debit
d.
$24,000 credit
77.
Most Corporation sold a machine to its 90 percent subsidiary, Ruggle Company on
October 1, 2005 for $270,000. On that date, the machine and accumulated depreciation
on Most’s books were $430,000 and $136,000, respectively. The machine has a sevenyear remaining life on Most’s books and was assigned a life of ten years by Ruggle.
What is the depreciation expense on the 2006 consolidated income statement?
a.
$43,000
b.
$29,400
c.
$27,000
d.
$41,000
78.
Most Corporation sold a machine to its 90 percent subsidiary, Ruggle Company on
October 1, 2005 for $270,000. On that date, the machine and accumulated depreciation
on Most’s books were $430,000 and $136,000, respectively. The machine has a sevenyear remaining life on Most’s books and was assigned a life of ten years by Ruggle.
What is the worksheet elimination to the accumulated depreciation account if
consolidated financial statements are prepared on December 31, 2006?
a.
$136,000
b.
$133,000
c.
$139,000
d.
$140,800
79.
Piazza Corporation sold a machine to its 70 percent subsidiary, Scott Company on June
1, 2005 for $150,000. On that date, the machine and accumulated depreciation on
Piazza’s books were $320,000 and $140,000, respectively. The machine has an eightyear remaining life on Piazza’s books and was assigned a life of ten years by Scott. What
is the worksheet elimination to the machine account if consolidated financial statements
are prepared on December 31, 2006?
a.
$50,000 debit
b.
$50,000 credit
c.
$170,000 debit
d.
$170,000 credit
80.
Piazza Corporation sold a machine to its 70 percent subsidiary, Scott Company on June
1, 2005 for $150,000. On that date, the machine and accumulated depreciation on
Piazza’s books were $320,000 and $140,000, respectively. The machine has an eightyear remaining life on Piazza’s books and was assigned a life of ten years by Scott. What
is the depreciation expense on the 2006 consolidated income statement?
a.
$3,000
b.
$32,000
c.
$15,000
d.
$18,000
81.
Piazza Corporation sold a machine to its 70 percent subsidiary, Scott Company on June
1, 2005 for $150,000. On that date, the machine and accumulated depreciation on
Piazza’s books were $320,000 and $140,000, respectively. The machine has an eightyear remaining life on Piazza’s books and was assigned a life of ten years by Scott. What
is the worksheet elimination to the accumulated depreciation account if consolidated
financial statements are prepared on December 31, 2006?
a.
$135,250
b.
$144,750
c.
$140,000
d.
$98,525
82.
Fairchild Corporation sells $20,000 of inventory for $25,000 to its 70 percent subsidiary
(Phillips Company) on December 10, 2005. None of the inventory is sold to unrelated
parties before year-end. What is the amount of the worksheet elimination to sales when
the 2005 consolidated financial statements are prepared?
a.
$0
b.
$20,000
c.
$17,500
d.
$25,000
83.
Fairchild Corporation sells $20,000 of inventory for $25,000 to its 70 percent subsidiary
(Phillips Company) on December 10, 2005. None of the inventory is sold to unrelated
parties before year-end. What is the amount of the worksheet elimination to cost of
goods sold when the 2005 consolidated financial statements are prepared?
a.
$14,000
b.
c.
d.
$20,000
$25,000
$17,500
84.
Fairchild Corporation sells $20,000 of inventory for $25,000 to its 70 percent subsidiary
(Phillips Company) on December 10, 2005. None of the inventory is sold to unrelated
parties before year-end. What is the amount of the worksheet elimination to inventory
when the 2005 consolidated financial statements are prepared?
a.
$0
b.
$20,000
c.
$5,000
d.
$14,000
85.
Core Corporation sells $56,000 of inventory for $75,000 to its 80 percent subsidiary
(Hale Company) on December 15, 2005. None of the inventory is sold to unrelated
parties before year-end. What is the amount of the worksheet elimination to sales when
the 2005 consolidated financial statements are prepared?
a.
$0
b.
$75,000
c.
$60,000
d.
$56,000
86.
Core Corporation sells $56,000 of inventory for $75,000 to its 80 percent subsidiary
(Hale Company) on December 15, 2005. None of the inventory is sold to unrelated
parties before year-end. What is the amount of the worksheet elimination to cost of
goods sold when the 2005 consolidated financial statements are prepared?
a.
$56,000
b.
$0
c.
$75,000
d.
$44,800
87.
Core Corporation sells $56,000 of inventory for $75,000 to its 80 percent subsidiary
(Hale Company) on December 15, 2005. None of the inventory is sold to unrelated
parties before year-end. What is the amount of the worksheet elimination to inventory
when the 2005 consolidated financial statements are prepared?
a.
$0
b.
$56,000
c.
$11,200
d.
$19,000
88.
Goldwater, Incorporated sells $46,000 of inventory for $60,000 to its 70 percent
subsidiary (Atkinson Company) on December 1, 2005. By the end of 2005, Atkinson
sells 40 percent of this inventory to unrelated parties for $31,000. What is the amount of
the worksheet elimination to sales when the 2005 consolidated financial statements are
prepared?
a.
$42,000
b.
$60,000
c.
$81,700
d.
$91,000
89.
Goldwater, Incorporated sells $46,000 of inventory for $60,000 to its 70 percent
subsidiary (Atkinson Company) on December 1, 2005. By the end of 2005, Atkinson
sells 40 percent of this inventory to unrelated parties for $31,000. What is the amount of
the worksheet elimination to cost of goods sold when the 2005 consolidated financial
statements are prepared?
a.
$51,600
b.
$46,000
c.
$5,600
d.
$40,400
90.
Goldwater, Incorporated sells $46,000 of inventory for $60,000 to its 70 percent
subsidiary (Atkinson Company) on December 1, 2005. By the end of 2005, Atkinson
sells 40 percent of this inventory to unrelated parties for $31,000. What is the amount of
the worksheet elimination to inventory when the 2005 consolidated financial statements
are prepared?
a.
$16,000
b.
$0
c.
$8,400
d.
$4,200
91.
Faulkner, Incorporated sells $20,000 of inventory for $26,000 to its 60 percent subsidiary
(Cassidy Company) on December 6, 2005. By the end of 2005, Cassody sells 70 percent
of this inventory to unrelated parties for $23,000. What is the amount of the worksheet
elimination to sales when the 2005 consolidated financial statements are prepared?
a.
$26,000
b.
$38,600
c.
$39,800
d.
$49,000
92.
Faulkner, Incorporated sells $20,000 of inventory for $26,000 to its 60 percent subsidiary
(Cassidy Company) on December 6, 2005. By the end of 2005, Cassody sells 70 percent
of this inventory to unrelated parties for $23,000. What is the amount of the worksheet
elimination to cost of goods sold when the 2005 consolidated financial statements are
prepared?
a.
$20,000
b.
$38,200
c.
$18,200
d.
$24,200
93.
Faulkner, Incorporated sells $20,000 of inventory for $26,000 to its 60 percent subsidiary
(Cassidy Company) on December 6, 2005. By the end of 2005, Cassody sells 70 percent
of this inventory to unrelated parties for $23,000. What is the amount of the worksheet
elimination to inventory when the 2005 consolidated financial statements are prepared?
a.
$0
b.
$1,800
c.
$6,000
d.
$7,800
94.
Baird Corporation sells $62,000 of inventory for $70,000 to its 90 percent subsidiary
(Day Company) on December 10, 2005. By the end of 2005, Day sells 40 percent of this
inventory to unrelated parties for $35,000. What is the amount of the worksheet
elimination to sales when the 2005 consolidated financial statements are prepared?
a.
$63,000
b.
$70,000
c.
$105,000
d.
$98,000
95.
Baird Corporation sells $62,000 of inventory for $70,000 to its 90 percent subsidiary
(Day Company) on December 10, 2005. By the end of 2005, Day sells 40 percent of this
inventory to unrelated parties for $35,000. What is the amount of the worksheet
elimination to cost of goods sold when the 2005 consolidated financial statements are
prepared?
a.
$90,000
b.
$55,800
c.
$65,200
d.
$97,000
96.
Baird Corporation sells $62,000 of inventory for $70,000 to its 90 percent subsidiary
(Day Company) on December 10, 2005. By the end of 2005, Day sells 40 percent of this
inventory to unrelated parties for $35,000. What is the amount of the worksheet
elimination to inventory when the 2005 consolidated financial statements are prepared?
a.
$4,800
b.
$0
c.
$3,200
d.
$21,000
97.
Power Corporation sells $50,000 of inventory for $65,000 to its 80 percent subsidiary
(Bollen Company) on December 29, 2005. None of this inventory was sold to unrelated
parties by the end of 2005. During 2006, 90 percent of this inventory is sold to unrelated
parties for $72,000. What is the amount of the worksheet elimination to retained
earnings when the 2006 consolidated financial statements are prepared?
a.
$15,000
b.
$12,000
c.
$13,500
d.
$10,800
98.
Power Corporation sells $50,000 of inventory for $65,000 to its 80 percent subsidiary
(Bollen Company) on December 29, 2005. None of this inventory was sold to unrelated
parties by the end of 2005. During 2006, 90 percent of this inventory is sold to unrelated
parties for $72,000. What is the amount of the worksheet elimination to sales when the
2006 consolidated financial statements are prepared?
a.
$72,000
b.
$13,500
c.
$0
d.
$10,800
99.
Power Corporation sells $50,000 of inventory for $65,000 to its 80 percent subsidiary
(Bollen Company) on December 29, 2005. None of this inventory was sold to unrelated
parties by the end of 2005. During 2006, 90 percent of this inventory is sold to unrelated
parties for $72,000. What is the amount of the worksheet elimination to cost of goods
sold when the 2006 consolidated financial statements are prepared?
a.
$0
b.
$15,000
c.
$12,000
d.
$13,500
100.
Power Corporation sells $50,000 of inventory for $65,000 to its 80 percent subsidiary
(Bollen Company) on December 29, 2005. None of this inventory was sold to unrelated
parties by the end of 2005. During 2006, 90 percent of this inventory is sold to unrelated
parties for $72,000. What is the amount of the worksheet elimination to inventory when
the 2006 consolidated financial statements are prepared?
a.
$0
b.
$1,500
c.
$1,350
d.
$1,200
101.
Wayne Corporation sells $34,000 of inventory for $46,000 to its 70 percent subsidiary
(Focus Company) on December 22, 2005. None of this inventory was sold to unrelated
parties by the end of 2005. During 2006, 60 percent of this inventory is sold to unrelated
parties for $25,000. What is the amount of the worksheet elimination to retained
earnings when the 2006 consolidated financial statements are prepared?
a.
$8,400
b.
$7,200
c.
$12,000
d.
$20,400
102.
Wayne Corporation sells $34,000 of inventory for $46,000 to its 70 percent subsidiary
(Focus Company) on December 22, 2005. None of this inventory was sold to unrelated
parties by the end of 2005. During 2006, 60 percent of this inventory is sold to unrelated
parties for $25,000. What is the amount of the worksheet elimination to sales when the
2006 consolidated financial statements are prepared?
a.
$46,000
b.
$25,000
c.
$15,000
d.
$0
103.
Wayne Corporation sells $34,000 of inventory for $46,000 to its 70 percent subsidiary
(Focus Company) on December 22, 2005. None of this inventory was sold to unrelated
parties by the end of 2005. During 2006, 60 percent of this inventory is sold to unrelated
parties for $25,000. What is the amount of the worksheet elimination to cost of goods
sold when the 2006 consolidated financial statements are prepared?
a.
$7,200
b.
c.
d.
$12,000
$0
$8,400
104.
Wayne Corporation sells $34,000 of inventory for $46,000 to its 70 percent subsidiary
(Focus Company) on December 22, 2005. None of this inventory was sold to unrelated
parties by the end of 2005. During 2006, 60 percent of this inventory is sold to unrelated
parties for $25,000. What is the amount of the worksheet elimination to inventory when
the 2006 consolidated financial statements are prepared?
a.
$0
b.
$4,800
c.
$3,600
d.
$27,600
105.
Jefferson Corporation sells $64,000 of inventory for $80,000 to its 90 percent subsidiary
(Wilson Company) on November 22, 2005. Forty percent of this inventory is sold to
unrelated parties for $38,000 by the end of 2005. During 2006, the remaining 60 percent
is sold to unrelated parties for $55,000. What is the amount of the worksheet elimination
to retained earnings when the 2006 consolidated financial statements are prepared?
a.
$16,000
b.
$9,600
c.
$14,400
d.
$8,640
106.
Jefferson Corporation sells $64,000 of inventory for $80,000 to its 90 percent subsidiary
(Wilson Company) on November 22, 2005. Forty percent of this inventory is sold to
unrelated parties for $38,000 by the end of 2005. During 2006, the remaining 60 percent
is sold to unrelated parties for $55,000. What is the amount of the worksheet elimination
to sales when the 2006 consolidated financial statements are prepared?
a.
$80,000
b.
$42,000
c.
$0
d.
$118,000
107.
Jefferson Corporation sells $64,000 of inventory for $80,000 to its 90 percent subsidiary
(Wilson Company) on November 22, 2005. Forty percent of this inventory is sold to
unrelated parties for $38,000 by the end of 2005. During 2006, the remaining 60 percent
is sold to unrelated parties for $55,000. What is the amount of the worksheet elimination
to cost of goods sold when the 2006 consolidated financial statements are prepared?
a.
$9,600
b.
$33,000
c.
$0
d.
$14,400
108.
Jefferson Corporation sells $64,000 of inventory for $80,000 to its 90 percent subsidiary
(Wilson Company) on November 22, 2005. Forty percent of this inventory is sold to
unrelated parties for $38,000 by the end of 2005. During 2006, the remaining 60 percent
is sold to unrelated parties for $55,000. What is the amount of the worksheet elimination
to inventory when the 2006 consolidated financial statements are prepared?
a.
$26,000
b.
$6,400
c.
$9,600
d.
$0
109.
Davis Corporation sells $35,000 of inventory for $51,000 to Miller Company, its 90
percent subsidiary, on December 11, 2005. Thirty percent of this inventory is sold to
unrelated parties for $20,000 by the end of 2005. During 2006, another 60 percent of
this inventory is sold to unrelated parties for $37,000. What is the amount of the
worksheet elimination to retained earnings when the 2006 consolidated financial
statements are prepared?
a.
$11,200
b.
$16,000
c.
$14,400
d.
$9,600
110.
Davis Corporation sells $35,000 of inventory for $51,000 to Miller Company, its 90
percent subsidiary, on December 11, 2005. Thirty percent of this inventory is sold to
unrelated parties for $20,000 by the end of 2005. During 2006, another 60 percent of
this inventory is sold to unrelated parties for $37,000. What is the amount of the
worksheet elimination to sales when the 2006 consolidated financial statements are
prepared?
a.
$51,000
b.
$71,000
c.
$0
d.
$57,000
111.
Davis Corporation sells $35,000 of inventory for $51,000 to Miller Company, its 90
percent subsidiary, on December 11, 2005. Thirty percent of this inventory is sold to
unrelated parties for $20,000 by the end of 2005. During 2006, another 60 percent of
this inventory is sold to unrelated parties for $37,000. What is the amount of the
worksheet elimination to cost of goods sold when the 2006 consolidated financial
statements are prepared?
a.
$0
b.
$16,000
c.
$22,200
d.
$9,600
112.
Davis Corporation sells $35,000 of inventory for $51,000 to Miller Company, its 90
percent subsidiary, on December 11, 2005. Thirty percent of this inventory is sold to
unrelated parties for $20,000 by the end of 2005. During 2006, another 60 percent of
this inventory is sold to unrelated parties for $37,000. What is the amount of the
worksheet elimination to inventory when the 2006 consolidated financial statements are
prepared?
a.
$0
b.
$1,600
c.
d.
$16,000
$9,600
113.
Belden Corporation acquires $200,000 of Caldwell’s (parent) outstanding bonds payable
on December 31 for $215,000. At that date, the bonds have a $6,000 unamortized
discount on Caldwell’s financial records. What is the dollar amount of gain or loss that
would be disclosed on the consolidated income statement with regard to this transaction?
a.
$15,000
b.
$6,000
c.
$21,000
d.
$4,000
114.
Miami Corporation acquires $300,000 of Tampa’s (parent) outstanding bonds payable on
December 31 for $295,000. At that date, the bonds have a $4,000 unamortized premium
on Tampa’s financial records. What is the dollar amount of gain or loss that would be
disclosed on the consolidated income statement with regard to this transaction?
a.
$9,000
b.
$5,000
c.
$4,000
d.
$1,000
115.
Skaler Corporation acquires $400,000 of Avery’s (parent) outstanding bonds payable on
December 31 for $375,000. At that date, the bonds have an $18,000 unamortized
discount on Avery’s financial records. What is the dollar amount of gain or loss that
would be disclosed on the consolidated income statement with regard to this transaction?
a.
$25,000
b.
$18,000
c.
$19,000
d.
$7,000
116.
National Corporation acquires $150,000 of Regional’s (parent) 7 percent outstanding
bonds payable on May 31, 2005 for $160,000. At that date, the bonds have an $8,000
unamortized discount on Regional’s financial records and a remaining life of 80 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the gain or loss on early debt retirement account?
a.
$18,000 credit
b.
$18,000 debit
c.
$8,000 credit
d.
$8,000 debit
117.
National Corporation acquires $150,000 of Regional’s (parent) 7 percent outstanding
bonds payable on May 31, 2005 for $160,000. At that date, the bonds have an $8,000
unamortized discount on Regional’s financial records and a remaining life of 80 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the bonds payable account?
a.
$150,000
b.
$160,000
c.
$158,000
d.
$142,000
118.
National Corporation acquires $150,000 of Regional’s (parent) 7 percent outstanding
bonds payable on May 31, 2005 for $160,000. At that date, the bonds have an $8,000
unamortized discount on Regional’s financial records and a remaining life of 80 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the discount on bonds payable account?
a.
$7,500
b.
$7,300
c.
$8,000
d.
$8,700
119.
National Corporation acquires $150,000 of Regional’s (parent) 7 percent outstanding
bonds payable on May 31, 2005 for $160,000. At that date, the bonds have an $8,000
unamortized discount on Regional’s financial records and a remaining life of 80 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the investment in bonds account?
a.
$160,000
b.
$150,000
c.
$158,500
d.
$159,125
120.
National Corporation acquires $150,000 of Regional’s (parent) 7 percent outstanding
bonds payable on May 31, 2005 for $160,000. At that date, the bonds have an $8,000
unamortized discount on Regional’s financial records and a remaining life of 80 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the interest expense account?
a.
$11,200
b.
$10,500
c.
$6,825
d.
$7,325
121.
National Corporation acquires $150,000 of Regional’s (parent) 7 percent outstanding
bonds payable on May 31, 2005 for $160,000. At that date, the bonds have an $8,000
unamortized discount on Regional’s financial records and a remaining life of 80 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the interest revenue account?
a.
$5,250
b.
$9,625
c.
$10,500
d.
$7,000
122.
Agri Corporation acquires $300,000 of Canner’s (parent) 6 percent outstanding bonds
payable on September 1, 2005 for $282,000. At that date, the bonds have a $15,000
unamortized premium on Canner’s financial records and a remaining life of 60 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the gain or loss on early debt retirement account?
a.
$33,000 credit
b.
c.
d.
$33,000 debit
$18,000 credit
$18,000 debit
123.
Agri Corporation acquires $300,000 of Canner’s (parent) 6 percent outstanding bonds
payable on September 1, 2005 for $282,000. At that date, the bonds have a $15,000
unamortized premium on Canner’s financial records and a remaining life of 60 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the bonds payable account?
a.
$282,000
b.
$315,000
c.
$300,000
d.
$315,000
124.
Agri Corporation acquires $300,000 of Canner’s (parent) 6 percent outstanding bonds
payable on September 1, 2005 for $282,000. At that date, the bonds have a $15,000
unamortized premium on Canner’s financial records and a remaining life of 60 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the premium on bonds payable account?
a.
$15,000
b.
$12,000
c.
$18,000
d.
$14,000
125.
Agri Corporation acquires $300,000 of Canner’s (parent) 6 percent outstanding bonds
payable on September 1, 2005 for $282,000. At that date, the bonds have a $15,000
unamortized premium on Canner’s financial records and a remaining life of 60 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the investment in bonds account?
a.
$283,200
b.
$282,000
c.
$285,600
d.
$280,800
126.
Agri Corporation acquires $300,000 of Canner’s (parent) 6 percent outstanding bonds
payable on September 1, 2005 for $282,000. At that date, the bonds have a $15,000
unamortized premium on Canner’s financial records and a remaining life of 60 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the interest expense account?
a.
$18,000
b.
$5,000
c.
$6,000
d.
$15,000
127.
Agri Corporation acquires $300,000 of Canner’s (parent) 6 percent outstanding bonds
payable on September 1, 2005 for $282,000. At that date, the bonds have a $15,000
unamortized premium on Canner’s financial records and a remaining life of 60 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the interest revenue account?
a.
$18,000
b.
$21,600
c.
$9,600
d.
$7,200
128.
Macro Corporation acquires $650,000 of Apex’s (parent) 6 percent outstanding bonds
payable on February 1, 2005 for $627,500. At that date, the bonds have a $6,000
unamortized discount on Apex’s financial records and a remaining life of 75 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the gain or loss on early debt retirement account?
a.
$22,500 credit
b.
$22,500 debit
c.
$16,500 credit
d.
$16,500 debit
129.
Macro Corporation acquires $650,000 of Apex’s (parent) 6 percent outstanding bonds
payable on February 1, 2005 for $627,500. At that date, the bonds have a $6,000
unamortized discount on Apex’s financial records and a remaining life of 75 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the bonds payable account?
a.
$644,000
b.
$650,000
c.
$627,500
d.
$656,000
130.
Macro Corporation acquires $650,000 of Apex’s (parent) 6 percent outstanding bonds
payable on February 1, 2005 for $627,500. At that date, the bonds have a $6,000
unamortized discount on Apex’s financial records and a remaining life of 75 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the discount on bonds payable account?
a.
$5,120
b.
$880
c.
$960
d.
$5,040
131.
Macro Corporation acquires $650,000 of Apex’s (parent) 6 percent outstanding bonds
payable on February 1, 2005 for $627,500. At that date, the bonds have a $6,000
unamortized discount on Apex’s financial records and a remaining life of 75 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the investment in bonds account?
a.
$644,880
b.
$650,000
c.
$630,800
d.
$627,500
132.
Macro Corporation acquires $650,000 of Apex’s (parent) 6 percent outstanding bonds
payable on February 1, 2005 for $627,500. At that date, the bonds have a $6,000
unamortized discount on Apex’s financial records and a remaining life of 75 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the interest expense account?
a.
$34,870
b.
$35,750
c.
$36,630
d.
$39,880
133.
Macro Corporation acquires $650,000 of Apex’s (parent) 6 percent outstanding bonds
payable on February 1, 2005 for $627,500. At that date, the bonds have a $6,000
unamortized discount on Apex’s financial records and a remaining life of 75 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2005
worksheet elimination to the interest revenue account?
a.
$35,750
b.
$32,450
c.
$42,600
d.
$39,050
134.
Dryer Corporation acquires $250,000 of Ghost’s (parent) 6 percent outstanding bonds
payable on March 1, 2005 for $269,200. At that date, the bonds have a $16,000
unamortized discount on Ghost’s financial records and a remaining life of 64 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2006
worksheet elimination to the retained earnings?
a.
$29,700 credit
b.
$29,700 debit
c.
$16,200 credit
d.
$16,200 debit
135.
Dryer Corporation acquires $250,000 of Ghost’s (parent) 6 percent outstanding bonds
payable on March 1, 2005 for $269,200. At that date, the bonds have a $16,000
unamortized discount on Ghost’s financial records and a remaining life of 64 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2006
worksheet elimination to the discount on bonds payable account?
a.
$10,500
b.
$16,000
c.
$13,500
d.
$13,000
136.
Dryer Corporation acquires $250,000 of Ghost’s (parent) 6 percent outstanding bonds
payable on March 1, 2005 for $269,200. At that date, the bonds have a $16,000
unamortized discount on Ghost’s financial records and a remaining life of 64 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2006
worksheet elimination to the investment in bonds account?
a.
$250,000
b.
$266,200
c.
$269,200
d.
$262,600
137.
Dryer Corporation acquires $250,000 of Ghost’s (parent) 6 percent outstanding bonds
payable on March 1, 2005 for $269,200. At that date, the bonds have a $16,000
unamortized discount on Ghost’s financial records and a remaining life of 64 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2006
worksheet elimination to the interest expense account?
a.
$15,000
b.
$15,500
c.
$18,000
d.
$14,040
138.
Dryer Corporation acquires $250,000 of Ghost’s (parent) 6 percent outstanding bonds
payable on March 1, 2005 for $269,200. At that date, the bonds have a $16,000
unamortized discount on Ghost’s financial records and a remaining life of 64 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2006
worksheet elimination to the interest revenue account?
a.
$11,400
b.
$16,152
c.
$10,500
d.
$8,900
139.
Smiley Corporation acquires $400,000 of Prestige’s (parent) 6 percent outstanding bonds
payable on October 1, 2005 for $380,200. At that date, the bonds have a $15,000
unamortized premium on Prestige’s financial records and a remaining life of 60 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2006
worksheet elimination to the retained earnings account?
a.
$33,060 debit
b.
$33,060 credit
c.
$26,100 debit
d.
$26,100 credit
140.
Smiley Corporation acquires $400,000 of Prestige’s (parent) 6 percent outstanding bonds
payable on October 1, 2005 for $380,200. At that date, the bonds have a $15,000
unamortized premium on Prestige’s financial records and a remaining life of 60 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2006
worksheet elimination to the premium on bonds payable account?
a.
$11,250
b.
$15,000
c.
$14,250
d.
$12,000
141.
Smiley Corporation acquires $400,000 of Prestige’s (parent) 6 percent outstanding bonds
payable on October 1, 2005 for $380,200. At that date, the bonds have a $15,000
unamortized premium on Prestige’s financial records and a remaining life of 60 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2006
worksheet elimination to the investment in bonds account?
a.
$380,200
b.
c.
d.
$381,190
$385,150
$384,160
142.
Smiley Corporation acquires $400,000 of Prestige’s (parent) 6 percent outstanding bonds
payable on October 1, 2005 for $380,200. At that date, the bonds have a $15,000
unamortized premium on Prestige’s financial records and a remaining life of 60 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2006
worksheet elimination to the interest expense account?
a.
$24,000
b.
$27,000
c.
$24,750
d.
$21,000
143.
Smiley Corporation acquires $400,000 of Prestige’s (parent) 6 percent outstanding bonds
payable on October 1, 2005 for $380,200. At that date, the bonds have a $15,000
unamortized premium on Prestige’s financial records and a remaining life of 60 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2006
worksheet elimination to the interest revenue account?
a.
$20,040
b.
$24,000
c.
$27,960
d.
$6,990
144.
Schmidt Corporation acquires $500,000 of Peterson’s (parent) 9 percent outstanding
bonds payable on June 1, 2005 for $579,200. At that date, the bonds have a $23,760
unamortized discount on Peterson’s financial records and a remaining life of 72 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2006
worksheet elimination to the retained earnings account?
a.
$75,790 debit
b.
$75,790 credit
c.
$92,950 debit
d.
$92,950 credit
145.
Schmidt Corporation acquires $500,000 of Peterson’s (parent) 9 percent outstanding
bonds payable on June 1, 2005 for $579,200. At that date, the bonds have a $23,760
unamortized discount on Peterson’s financial records and a remaining life of 72 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2006
worksheet elimination to the discount on bonds payable account?
a.
$17,490
b.
$23,760
c.
$19,800
d.
$21,450
146.
Schmidt Corporation acquires $500,000 of Peterson’s (parent) 9 percent outstanding
bonds payable on June 1, 2005 for $579,200. At that date, the bonds have a $23,760
unamortized discount on Peterson’s financial records and a remaining life of 72 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2006
worksheet elimination to the investment in bonds account?
a.
$600,100
b.
$579,200
c.
$566,000
d.
$558,300
147.
Schmidt Corporation acquires $500,000 of Peterson’s (parent) 9 percent outstanding
bonds payable on June 1, 2005 for $579,200. At that date, the bonds have a $23,760
unamortized discount on Peterson’s financial records and a remaining life of 72 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2006
worksheet elimination to the interest expense account?
a.
$48,960
b.
$45,000
c.
$28,560
d.
$41,040
148.
Schmidt Corporation acquires $500,000 of Peterson’s (parent) 9 percent outstanding
bonds payable on June 1, 2005 for $579,200. At that date, the bonds have a $23,760
unamortized discount on Peterson’s financial records and a remaining life of 72 months.
Discounts and premiums are amortized straight-line. What is the December 31, 2006
worksheet elimination to the interest revenue account?
a.
$58,200
b.
$31,800
c.
$18,550
d.
$45,000
149.
Driver is a 70 percent subsidiary of Forbes. On December 31, 2005, Driver sells
equipment to Forbes for $80,000. At that date, the equipment has a cost and accumulated
depreciation on Driver’s financial records of $170,000 and $60,000, respectively. Driver
and Forbes have income in 2005 of $290,000 and $640,000, respectively. What is the
worksheet elimination to the equipment account if consolidated financial statements are
prepared on December 31, 2005?
a.
$63,000 credit
b.
$63,000 debit
c.
$90,000 credit
d.
$90,000 debit
150.
Driver is a 70 percent subsidiary of Forbes. On December 31, 2005, Driver sells
equipment to Forbes for $80,000. At that date, the equipment has a cost and accumulated
depreciation on Driver’s financial records of $170,000 and $60,000, respectively. Driver
and Forbes have income in 2005 of $290,000 and $640,000, respectively. What is the
worksheet elimination to the gain or loss on sale of equipment account if consolidated
financial statements are prepared on December 31, 2005?
a.
$30,000 credit
b.
$30,000 debit
c.
$21,000 credit
d.
$21,000 debit
151.
Driver is a 70 percent subsidiary of Forbes. On December 31, 2005, Driver sells
equipment to Forbes for $80,000. At that date, the equipment has a cost and accumulated
depreciation on Driver’s financial records of $170,000 and $60,000, respectively. Driver
and Forbes have income in 2005 of $290,000 and $640,000, respectively. What is the
worksheet elimination to the accumulated depreciation account if consolidated financial
statements are prepared on December 31, 2005?
a.
$60,000 credit
b.
$60,000 debit
c.
$42,000 credit
d.
$42,000 debit
152.
Driver is a 70 percent subsidiary of Forbes. On December 31, 2005, Driver sells
equipment to Forbes for $80,000. At that date, the equipment has a cost and accumulated
depreciation on Driver’s financial records of $170,000 and $60,000, respectively. Driver
and Forbes have income in 2005 of $290,000 and $640,000, respectively. What is the
income to noncontrolling interest in 2005?
a.
$78,000
b.
$96,000
c.
$87,000
d.
$203,000
153.
Driver is a 70 percent subsidiary of Forbes. On December 31, 2005, Driver sells
equipment to Forbes for $80,000. At that date, the equipment has a cost and accumulated
depreciation on Driver’s financial records of $170,000 and $60,000, respectively. Driver
and Forbes have income in 2005 of $290,000 and $640,000, respectively. What is the
worksheet elimination to the retained earnings account if consolidated financial
statements are prepared on December 31, 2006?
a.
$30,000 debit
b.
$30,000 credit
c.
$21,000 debit
d.
$21,000 credit
154.
Driver is a 70 percent subsidiary of Forbes. On December 31, 2005, Driver sells
equipment to Forbes for $80,000. At that date, the equipment has a cost and accumulated
depreciation on Driver’s financial records of $170,000 and $60,000, respectively. Driver
and Forbes have income in 2005 of $290,000 and $640,000, respectively. What is the
worksheet elimination to the noncontrolling interest account if consolidated financial
statements are prepared on December 31, 2006?
a.
$30,000 credit
b.
$30,000 debit
c.
$9,000 credit
d.
$9,000 debit
155.
Grambo is an 80 percent subsidiary of Campbell. On December 31, 2005, Grambo sells
equipment to Campbell for $270,000. At that date, the equipment has a cost and
accumulated depreciation on Grambo’s books of $400,000 and $180,000, respectively.
Grambo and Campbell have income in 2005 of $463,000 and $890,000, respectively.
What is the worksheet elimination to the equipment account if consolidated financial
statements are prepared on December 31, 2005?
a.
$104,000 debit
b.
$104,000 credit
c.
$130,000 debit
d.
$130,000 credit
156.
Grambo is an 80 percent subsidiary of Campbell. On December 31, 2005, Grambo sells
equipment to Campbell for $270,000. At that date, the equipment has a cost and
accumulated depreciation on Grambo’s books of $400,000 and $180,000, respectively.
Grambo and Campbell have income in 2005 of $463,000 and $890,000, respectively.
What is the worksheet elimination to the gain or loss on sale of equipment account if
consolidated financial statements are prepared on December 31, 2005?
a.
$50,000 debit
b.
$50,000 credit
c.
$40,000 debit
d.
$40,000 credit
157.
Grambo is an 80 percent subsidiary of Campbell. On December 31, 2005, Grambo sells
equipment to Campbell for $270,000. At that date, the equipment has a cost and
accumulated depreciation on Grambo’s books of $400,000 and $180,000, respectively.
Grambo and Campbell have income in 2005 of $463,000 and $890,000, respectively.
What is the worksheet elimination to the accumulated depreciation account if
consolidated financial statements are prepared on December 31, 2005?
a.
$144,000 credit
b.
$144,000 debit
c.
$180,000 credit
d.
$180,000 debit
158.
Grambo is an 80 percent subsidiary of Campbell. On December 31, 2005, Grambo sells
equipment to Campbell for $270,000. At that date, the equipment has a cost and
accumulated depreciation on Grambo’s books of $400,000 and $180,000, respectively.
Grambo and Campbell have income in 2005 of $463,000 and $890,000, respectively.
What is the income to noncontrolling interest in 2005?
a.
$513,000
b.
$102,600
c.
$413,000
d.
$82,600
159.
Grambo is an 80 percent subsidiary of Campbell. On December 31, 2005, Grambo sells
equipment to Campbell for $270,000. At that date, the equipment has a cost and
accumulated depreciation on Grambo’s books of $400,000 and $180,000, respectively.
Grambo and Campbell have income in 2005 of $463,000 and $890,000, respectively.
What is the worksheet elimination to the retained earnings account if consolidated
financial statements are prepared on December 31, 2006?
a.
$40,000 credit
b.
$40,000 debit
c.
$50,000 credit
d.
$50,000 debit
160.
Grambo is an 80 percent subsidiary of Campbell. On December 31, 2005, Grambo sells
equipment to Campbell for $270,000. At that date, the equipment has a cost and
accumulated depreciation on Grambo’s books of $400,000 and $180,000, respectively.
Grambo and Campbell have income in 2005 of $463,000 and $890,000, respectively.
What is the worksheet elimination to the noncontrolling interest account if consolidated
financial statements are prepared on December 31, 2006?
a.
$10,000 debit
b.
$10,000 credit
c.
$50,000 debit
d.
$50,000 credit
161.
Townsend is a 60 percent subsidiary of Caldwell. On December 31, 2005, Townsend
sells a machine to Caldwell for $230,000. At that date, the machine has a cost and
accumulated depreciation on Townsend’s financial records of $250,000 and $80,000,
respectively. Townsend and Caldwell have income in 2005 of $517,000 and $736,000,
respectively. What is the worksheet elimination to the machine account if consolidated
financial statements are prepared on December 31, 2005?
a.
$20,000 credit
b.
$20,000 debit
c.
$12,000 credit
d.
$12,000 debit
162.
Townsend is a 60 percent subsidiary of Caldwell. On December 31, 2005, Townsend
sells a machine to Caldwell for $230,000. At that date, the machine has a cost and
accumulated depreciation on Townsend’s financial records of $250,000 and $80,000,
respectively. Townsend and Caldwell have income in 2005 of $517,000 and $736,000,
respectively. What is the worksheet elimination to the gain or loss on sale of machine
account if consolidated financial statements are prepared on December 31, 2005?
a.
$36,000 credit
b.
$36,000 debit
c.
$60,000 credit
d.
$60,000 debit
163.
Townsend is a 60 percent subsidiary of Caldwell. On December 31, 2005, Townsend
sells a machine to Caldwell for $230,000. At that date, the machine has a cost and
accumulated depreciation on Townsend’s financial records of $250,000 and $80,000,
respectively. Townsend and Caldwell have income in 2005 of $517,000 and $736,000,
respectively. What is the worksheet elimination to the accumulated depreciation account
if consolidated financial statements are prepared on December 31, 2005?
a.
$80,000 debit
b.
$80,000 credit
c.
$48,000 debit
d.
$48,000 credit
164.
Townsend is a 60 percent subsidiary of Caldwell. On December 31, 2005, Townsend
sells a machine to Caldwell for $230,000. At that date, the machine has a cost and
accumulated depreciation on Townsend’s financial records of $250,000 and $80,000,
respectively. Townsend and Caldwell have income in 2005 of $517,000 and $736,000,
respectively. What is the income to noncontrolling interest in 2005?
a.
$346,200
b.
$274,200
c.
$182,800
d.
$230,800
165.
Townsend is a 60 percent subsidiary of Caldwell. On December 31, 2005, Townsend
sells a machine to Caldwell for $230,000. At that date, the machine has a cost and
accumulated depreciation on Townsend’s financial records of $250,000 and $80,000,
respectively. Townsend and Caldwell have income in 2005 of $517,000 and $736,000,
respectively. What is the worksheet elimination to the retained earnings account if
consolidated financial statements are prepared on December 31, 2006?
a.
$60,000 debit
b.
$60,000 credit
c.
$36,000 debit
d.
$36,000 credit
166.
Townsend is a 60 percent subsidiary of Caldwell. On December 31, 2005, Townsend
sells a machine to Caldwell for $230,000. At that date, the machine has a cost and
accumulated depreciation on Townsend’s financial records of $250,000 and $80,000,
respectively. Townsend and Caldwell have income in 2005 of $517,000 and $736,000,
respectively. What is the worksheet elimination to the noncontrolling interest account if
consolidated financial statements are prepared on December 31, 2006?
a.
$24,000 credit
b.
$24,000 debit
c.
$60,000 credit
d.
$60,000 debit
167.
Gilbert is a 90 percent subsidiary of Ferrante. On September 1, 2005, Gilbert sells
Ferrante equipment for $72,000. At that date, the equipment has a cost and accumulated
depreciation on Gilbert’s financial records of $96,000 and $36,600, respectively. The
equipment had a remaining life of six years on Gilbert’s books and was assigned a life of
five years by Ferrante. Gilbert and Ferrante have income in 2005 of $243,000 and
$523,000, respectively. What is the worksheet elimination to the equipment account if
consolidated financial statements are prepared on December 31, 2005?
a.
$21,600 credit
b.
$21,600 debit
c.
$24,000 credit
d.
$24,000 debit
168.
Gilbert is a 90 percent subsidiary of Ferrante. On September 1, 2005, Gilbert sells
Ferrante equipment for $72,000. At that date, the equipment has a cost and accumulated
depreciation on Gilbert’s financial records of $96,000 and $36,600, respectively. The
equipment had a remaining life of six years on Gilbert’s books and was assigned a life of
five years by Ferrante. Gilbert and Ferrante have income in 2005 of $243,000 and
$523,000, respectively. What is the worksheet elimination to the gain or loss on sale of
equipment account if consolidated financial statements are prepared on December 31,
2005?
a.
$12,600 debit
b.
$12,600 credit
c.
$11,340 debit
d.
$11,340 credit
169.
Gilbert is a 90 percent subsidiary of Ferrante. On September 1, 2005, Gilbert sells
Ferrante equipment for $72,000. At that date, the equipment has a cost and accumulated
depreciation on Gilbert’s financial records of $96,000 and $36,600, respectively. The
equipment had a remaining life of six years on Gilbert’s books and was assigned a life of
five years by Ferrante. Gilbert and Ferrante have income in 2005 of $243,000 and
$523,000, respectively. What is the worksheet elimination to the depreciation expense
account if consolidated financial statements are prepared December 31, 2005?
a.
$840 credit
b.
$840 debit
c.
$2,520 credit
d.
$2,520 debit
170.
Gilbert is a 90 percent subsidiary of Ferrante. On September 1, 2005, Gilbert sells
Ferrante equipment for $72,000. At that date, the equipment has a cost and accumulated
depreciation on Gilbert’s financial records of $96,000 and $36,600, respectively. The
equipment had a remaining life of six years on Gilbert’s books and was assigned a life of
five years by Ferrante. Gilbert and Ferrante have income in 2005 of $243,000 and
$523,000, respectively. What is the worksheet elimination to the accumulated
depreciation account if consolidated financial statements are prepared on December 31,
2005?
a.
$35,760 debit
b.
$35,760 credit
c.
$34,080 debit
d.
$34,080 credit
171.
Gilbert is a 90 percent subsidiary of Ferrante. On September 1, 2005, Gilbert sells
Ferrante equipment for $72,000. At that date, the equipment has a cost and accumulated
depreciation on Gilbert’s financial records of $96,000 and $36,600, respectively. The
equipment had a remaining life of six years on Gilbert’s books and was assigned a life of
five years by Ferrante. Gilbert and Ferrante have income in 2005 of $243,000 and
$523,000, respectively. What is the income to noncontrolling interest in 2005?
a.
$22,956
b.
$25,476
c.
$23,124
d.
$23,040
172.
Gilbert is a 90 percent subsidiary of Ferrante. On September 1, 2005, Gilbert sells
Ferrante equipment for $72,000. At that date, the equipment has a cost and accumulated
depreciation on Gilbert’s financial records of $96,000 and $36,600, respectively. The
equipment had a remaining life of six years on Gilbert’s books and was assigned a life of
five years by Ferrante. Gilbert and Ferrante have income in 2005 of $243,000 and
$523,000, respectively. What is the worksheet elimination to the retained earnings
account if consolidated financial statements are prepared on December 31, 2006?
a.
$10,584 debit
b.
$10,584 credit
c.
$11,760 debit
d.
$11,760 credit
173.
Gilbert is a 90 percent subsidiary of Ferrante. On September 1, 2005, Gilbert sells
Ferrante equipment for $72,000. At that date, the equipment has a cost and accumulated
depreciation on Gilbert’s financial records of $96,000 and $36,600, respectively. The
equipment had a remaining life of six years on Gilbert’s books and was assigned a life of
five years by Ferrante. Gilbert and Ferrante have income in 2005 of $243,000 and
$523,000, respectively. What is the worksheet elimination to the noncontrolling interest
account if consolidated financial statements are prepared on December 31, 2006?
a.
$1,176 credit
b.
$1,176 debit
c.
$1,260 credit
d.
$1,260 debit
174.
Cooley is an 80 percent subsidiary of Kirby. On March 1, 2005, Cooley sells a building
to Kirby for $360,000. At that date, the building has a cost and accumulated depreciation
on Cooley’s books of $600,000 and $254,400, respectively. The building had a
remaining life of ten years on Cooley’s books and was assigned a life of 12 years by
Kirby. Cooley and Kirby have income in 2005 of $530,000 and $960,000, respectively.
What is the worksheet elimination to the building account if consolidated financial
statements are prepared on December 31, 2005?
a.
$192,000 debit
b.
$192,000 credit
c.
$240,000 debit
d.
$240,000 credit
175.
Cooley is an 80 percent subsidiary of Kirby. On March 1, 2005, Cooley sells a building
to Kirby for $360,000. At that date, the building has a cost and accumulated depreciation
on Cooley’s books of $600,000 and $254,400, respectively. The building had a
remaining life of ten years on Cooley’s books and was assigned a life of 12 years by
Kirby. Cooley and Kirby have income in 2005 of $530,000 and $960,000, respectively.
What is the worksheet elimination to the gain or loss on sale of building account if
consolidated financial statements are prepared on December 31, 2005?
a.
$11,600 debit
b.
$11,600 credit
c.
$14,400 debit
d.
$14,400 credit
176.
Cooley is an 80 percent subsidiary of Kirby. On March 1, 2005, Cooley sells a building
to Kirby for $360,000. At that date, the building has a cost and accumulated depreciation
on Cooley’s books of $600,000 and $254,400, respectively. The building had a
remaining life of ten years on Cooley’s books and was assigned a life of 12 years by
Kirby. Cooley and Kirby have income in 2005 of $530,000 and $960,000, respectively.
What is the worksheet elimination to the depreciation expense account if consolidated
financial statements are prepared December 31, 2005?
a.
$1,200 debit
b.
$1,200 credit
c.
$1,000 debit
d.
$1,000 credit
177.
Cooley is an 80 percent subsidiary of Kirby. On March 1, 2005, Cooley sells a building
to Kirby for $360,000. At that date, the building has a cost and accumulated depreciation
on Cooley’s books of $600,000 and $254,400, respectively. The building had a
remaining life of ten years on Cooley’s books and was assigned a life of 12 years by
Kirby. Cooley and Kirby have income in 2005 of $530,000 and $960,000, respectively.
What is the worksheet elimination to the accumulated depreciation account if
consolidated financial statements are prepared on December 31, 2005?
a.
$253,400 debit
b.
$253,400 credit
c.
$255,400 debit
d.
$255,400 credit
178.
Cooley is an 80 percent subsidiary of Kirby. On March 1, 2005, Cooley sells a building
to Kirby for $360,000. At that date, the building has a cost and accumulated depreciation
on Cooley’s books of $600,000 and $254,400, respectively. The building had a
remaining life of ten years on Cooley’s books and was assigned a life of 12 years by
Kirby. Cooley and Kirby have income in 2005 of $530,000 and $960,000, respectively.
What is the income to noncontrolling interest in 2005?
a.
$102,290
b.
$103,320
c.
$109,080
d.
$108,680
179.
Cooley is an 80 percent subsidiary of Kirby. On March 1, 2005, Cooley sells a building
to Kirby for $360,000. At that date, the building has a cost and accumulated depreciation
on Cooley’s books of $600,000 and $254,400, respectively. The building had a
remaining life of ten years on Cooley’s books and was assigned a life of 12 years by
Kirby. Cooley and Kirby have income in 2005 of $530,000 and $960,000, respectively.
What is the worksheet elimination to the retained earnings account if consolidated
financial statements are prepared on December 31, 2006?
a.
$10,720 debit
b.
$10,720 credit
c.
$13,400 debit
d.
$13,400 credit
180.
Cooley is an 80 percent subsidiary of Kirby. On March 1, 2005, Cooley sells a building
to Kirby for $360,000. At that date, the building has a cost and accumulated depreciation
on Cooley’s books of $600,000 and $254,400, respectively. The building had a
remaining life of ten years on Cooley’s books and was assigned a life of 12 years by
Kirby. Cooley and Kirby have income in 2005 of $530,000 and $960,000, respectively.
What is the worksheet elimination to the noncontrolling interest account if consolidated
financial statements are prepared on December 31, 2006?
a.
$3,080 debit
b.
$3,080 credit
c.
$2,680 debit
d.
$2,680 credit
181.
Wilcox is a 70 percent subsidiary of Prater. On June 1, 2005, Wilcox sells a machine to
Prater for $384,000. At that date, the machine has a cost and accumulated depreciation
on Wilcox’s financial records of $750,000 and $308,400, respectively. The machine had
a remaining life of eight years on Wilcox’s books and was assigned a life of ten years by
Prater. Wilcox and Prater have income in 2005 of $580,000 and $880,000, respectively.
What is the worksheet elimination to the machine account if consolidated financial
statements are prepared on December 31, 2005?
a.
$366,000 debit
b.
$366,000 credit
c.
$256,200 debit
d.
$256,200 credit
182.
Wilcox is a 70 percent subsidiary of Prater. On June 1, 2005, Wilcox sells a machine to
Prater for $384,000. At that date, the machine has a cost and accumulated depreciation
on Wilcox’s financial records of $750,000 and $308,400, respectively. The machine had
a remaining life of eight years on Wilcox’s books and was assigned a life of ten years by
Prater. Wilcox and Prater have income in 2005 of $580,000 and $880,000, respectively.
What is the worksheet elimination to the gain or loss on sale of machine account if
consolidated financial statements are prepared on December 31, 2005?
a.
$40,320 credit
b.
$40,320 debit
c.
$57,600 credit
d.
$57,600 debit
183.
Wilcox is a 70 percent subsidiary of Prater. On June 1, 2005, Wilcox sells a machine to
Prater for $384,000. At that date, the machine has a cost and accumulated depreciation
on Wilcox’s financial records of $750,000 and $308,400, respectively. The machine had
a remaining life of eight years on Wilcox’s books and was assigned a life of ten years by
Prater. Wilcox and Prater have income in 2005 of $580,000 and $880,000, respectively.
What is the worksheet elimination to the depreciation expense account if consolidated
financial statements are prepared December 31, 2005?
a.
$5,760 credit
b.
$5,760 debit
c.
$3,360 credit
d.
$3,360 debit
184.
Wilcox is a 70 percent subsidiary of Prater. On June 1, 2005, Wilcox sells a machine to
Prater for $384,000. At that date, the machine has a cost and accumulated depreciation
on Wilcox’s financial records of $750,000 and $308,400, respectively. The machine had
a remaining life of eight years on Wilcox’s books and was assigned a life of ten years by
Prater. Wilcox and Prater have income in 2005 of $580,000 and $880,000, respectively.
What is the worksheet elimination to the accumulated depreciation account if
consolidated financial statements are prepared on December 31, 2005?
a.
$311,760 credit
b.
$311,760 debit
c.
$218,232 credit
d.
$218,232 debit
185.
Wilcox is a 70 percent subsidiary of Prater. On June 1, 2005, Wilcox sells a machine to
Prater for $384,000. At that date, the machine has a cost and accumulated depreciation
on Wilcox’s financial records of $750,000 and $308,400, respectively. The machine had
a remaining life of eight years on Wilcox’s books and was assigned a life of ten years by
Prater. Wilcox and Prater have income in 2005 of $580,000 and $880,000, respectively.
What is the income to noncontrolling interest in 2005?
a.
$192,288
b.
$155,712
c.
$157,728
d.
$190,272
186.
Wilcox is a 70 percent subsidiary of Prater. On June 1, 2005, Wilcox sells a machine to
Prater for $384,000. At that date, the machine has a cost and accumulated depreciation
on Wilcox’s financial records of $750,000 and $308,400, respectively. The machine had
a remaining life of eight years on Wilcox’s books and was assigned a life of ten years by
Prater. Wilcox and Prater have income in 2005 of $580,000 and $880,000, respectively.
What is the worksheet elimination to the retained earnings account if consolidated
financial statements are prepared on December 31, 2006?
a.
$37,968 debit
b.
$37,968 credit
c.
$40,320 debit
d.
$40,320 credit
187.
Wilcox is a 70 percent subsidiary of Prater. On June 1, 2005, Wilcox sells a machine to
Prater for $384,000. At that date, the machine has a cost and accumulated depreciation
on Wilcox’s financial records of $750,000 and $308,400, respectively. The machine had
a remaining life of eight years on Wilcox’s books and was assigned a life of ten years by
Prater. Wilcox and Prater have income in 2005 of $580,000 and $880,000, respectively.
What is the worksheet elimination to the noncontrolling interest account if consolidated
financial statements are prepared on December 31, 2006?
a.
$16,272 credit
b.
$16,272 debit
c.
$17,280 debit
d.
$17,280 credit
188.
Fairfield is an 80 percent subsidiary of Patterson. Patterson acquired equipment from
Fairfield on May 1, 2005 for $63,000. On that date, the equipment and accumulated
depreciation on Fairfield’s books were $95,000 and $19,400, respectively. The
equipment has a five-year remaining life on Fairfield’s books and was assigned a life of
seven years by Patterson. Fairfield and Patterson have income in 2006 of $238,000 and
$530,000, respectively. What is the worksheet elimination to the equipment account if
consolidated financial statements are prepared on December 31, 2006?
a.
$32,000 credit
b.
$32,000 debit
c.
$25,600 credit
d.
$25,600 debit
189.
Fairfield is an 80 percent subsidiary of Patterson. Patterson acquired equipment from
Fairfield on May 1, 2005 for $63,000. On that date, the equipment and accumulated
depreciation on Fairfield’s books were $95,000 and $19,400, respectively. The
equipment has a five-year remaining life on Fairfield’s books and was assigned a life of
seven years by Patterson. Fairfield and Patterson have income in 2006 of $238,000 and
$530,000, respectively. What is the depreciation expense on the 2006 consolidated
income statement?
a.
$10,800
b.
$15,120
c.
$12,600
d.
$9,000
190.
Fairfield is an 80 percent subsidiary of Patterson. Patterson acquired equipment from
Fairfield on May 1, 2005 for $63,000. On that date, the equipment and accumulated
depreciation on Fairfield’s books were $95,000 and $19,400, respectively. The
equipment has a five-year remaining life on Fairfield’s books and was assigned a life of
seven years by Patterson. Fairfield and Patterson have income in 2006 of $238,000 and
$530,000, respectively. What is the worksheet elimination to the accumulated
depreciation account if consolidated financial statements are prepared on December 31,
2006?
a.
$22,400
b.
$16,400
c.
$17,920
d.
$13,120
191.
Fairfield is an 80 percent subsidiary of Patterson. Patterson acquired equipment from
Fairfield on May 1, 2005 for $63,000. On that date, the equipment and accumulated
depreciation on Fairfield’s books were $95,000 and $19,400, respectively. The
equipment has a five-year remaining life on Fairfield’s books and was assigned a life of
seven years by Patterson. Fairfield and Patterson have income in 2006 of $238,000 and
$530,000, respectively. What is the income to noncontrolling interest in 2006?
a.
$47,600
b.
$47,240
c.
$47,960
d.
$49,760
192.
Gibson Corporation is a 90 percent subsidiary of Kemsley Company. Gibson sold a
machine to Kemsley on February 1, 2005 for $120,000. On that date, the machine and
accumulated depreciation on Gibson’s books were $170,000 and $35,600 respectively.
The machine has an eight-year remaining life on Gibson’s books and was assigned a life
of ten years by Kemsley. Gibson and Kemsley have income in 2006 of $192,000 and
$302,000, respectively. What is the worksheet elimination to the machine account if
consolidated financial statements are prepared on December 31, 2006?
a.
$45,000 credit
b.
$45,000 debit
c.
$50,000 credit
d.
$50,000 debit
193.
Gibson Corporation is a 90 percent subsidiary of Kemsley Company. Gibson sold a
machine to Kemsley on February 1, 2005 for $120,000. On that date, the machine and
accumulated depreciation on Gibson’s books were $170,000 and $35,600 respectively.
The machine has an eight-year remaining life on Gibson’s books and was assigned a life
of ten years by Kemsley. Gibson and Kemsley have income in 2006 of $192,000 and
$302,000, respectively. The machine has a seven-year remaining life on Gibson’s books
and was assigned a life of ten years by Kemsley. What is the depreciation expense on the
2006 consolidated income statement?
a.
$19,200
b.
$17,280
c.
$13,440
d.
$12,096
194.
Gibson Corporation is a 90 percent subsidiary of Kemsley Company. Gibson sold a
machine to Kemsley on February 1, 2005 for $120,000. On that date, the machine and
accumulated depreciation on Gibson’s books were $170,000 and $35,600 respectively.
The machine has an eight-year remaining life on Gibson’s books and was assigned a life
of ten years by Kemsley. Gibson and Kemsley have income in 2006 of $192,000 and
$302,000, respectively. What is the worksheet elimination to the accumulated
depreciation account if consolidated financial statements are prepared on December 31,
2006?
a.
$32,840
b.
$38,360
c.
$29,556
d.
34,524
195.
Gibson Corporation is a 90 percent subsidiary of Kemsley Company. Gibson sold a
machine to Kemsley on February 1, 2005 for $120,000. On that date, the machine and
accumulated depreciation on Gibson’s books were $170,000 and $35,600 respectively.
The machine has an eight-year remaining life on Gibson’s books and was assigned a life
of ten years by Kemsley. Gibson and Kemsley have income in 2006 of $192,000 and
$302,000, respectively. What is the income to noncontrolling interest in 2006?
a.
$19,056
b.
$171,504
c.
$172,800
d.
$19,200
196.
Cook Corporation is a 70 percent subsidiary of Reinstein Company. Cook sold a machine
to Reinstein on June 1, 2005 for $211,200. On that date, the machine and accumulated
depreciation on Cook’s books were $370,000 and $130,000 respectively. The machine
has a five-year remaining life on Cook’s books and was assigned a life of eight years by
Reinstein. Cook and Reinstein have income in 2006 of $254,000 and $550,000,
respectively. What is the worksheet elimination to the machine account if consolidated
financial statements are prepared on December 31, 2006?
a.
$111,160 debit
b.
$111,160 credit
c.
$158,800 debit
d.
$158,800 credit
197.
Cook Corporation is a 70 percent subsidiary of Reinstein Company. Cook sold a machine
to Reinstein on June 1, 2005 for $211,200. On that date, the machine and accumulated
depreciation on Cook’s books were $370,000 and $130,000 respectively. The machine
has a five-year remaining life on Cook’s books and was assigned a life of eight years by
Reinstein. Cook and Reinstein have income in 2006 of $254,000 and $550,000,
respectively. What is the depreciation expense on the 2006 consolidated income
statement?
a.
$21,000
b.
$30,000
c.
$26,400
d.
$18,480
198.
Cook Corporation is a 70 percent subsidiary of Reinstein Company. Cook sold a machine
to Reinstein on June 1, 2005 for $211,200. On that date, the machine and accumulated
depreciation on Cook’s books were $370,000 and $130,000 respectively. The machine
has a five-year remaining life on Cook’s books and was assigned a life of eight years by
Reinstein. Cook and Reinstein have income in 2006 of $254,000 and $550,000,
respectively. What is the worksheet elimination to the accumulated depreciation account
if consolidated financial statements are prepared on December 31, 2006?
a.
$135,700
b.
$133,990
c.
$124,300
d.
$126,010
199.
Cook Corporation is a 70 percent subsidiary of Reinstein Company. Cook sold a machine
to Reinstein on June 1, 2005 for $211,200. On that date, the machine and accumulated
depreciation on Cook’s books were $370,000 and $130,000 respectively. The machine
has a five-year remaining life on Cook’s books and was assigned a life of eight years by
Reinstein. Cook and Reinstein have income in 2006 of $254,000 and $550,000,
respectively. What is the income to noncontrolling interest in 2006?
a.
$175,280
b.
$75,120
c.
$180,320
d.
$77,280
200.
Runyan Company is a 70 percent subsidiary of Young Corporation. Runyan sells
$65,000 of inventory for $73,000 to Young on December 10, 2005. None of the
inventory is sold to unrelated parties before year-end. Runyan and Young have income in
2005 of $162,000 and $285,000, respectively. What is the amount of the worksheet
elimination to sales when the 2005 consolidated financial statements are prepared?
a.
$73,000
b.
$8,000
c.
$0
d.
$65,000
201.
Runyan Company is a 70 percent subsidiary of Young Corporation. Runyan sells
$65,000 of inventory for $73,000 to Young on December 10, 2005. None of the
inventory is sold to unrelated parties before year-end. Runyan and Young have income in
2005 of $162,000 and $285,000, respectively. What is the amount of the worksheet
elimination to cost of goods sold when the 2005 consolidated financial statements are
prepared?
a.
$0
b.
$8,000
c.
$65,000
d.
$73,000
202.
Runyan Company is a 70 percent subsidiary of Young Corporation. Runyan sells
$65,000 of inventory for $73,000 to Young on December 10, 2005. None of the
inventory is sold to unrelated parties before year-end. Runyan and Young have income in
2005 of $162,000 and $285,000, respectively. What is the amount of the worksheet
elimination to inventory when the 2005 consolidated financial statements are prepared?
a.
$0
b.
$3,500
c.
$1,500
d.
$8,000
203.
Runyan Company is a 70 percent subsidiary of Young Corporation. Runyan sells
$65,000 of inventory for $73,000 to Young on December 10, 2005. None of the
inventory is sold to unrelated parties before year-end. Runyan and Young have income in
2005 of $162,000 and $285,000, respectively. What is the income to noncontrolling
interest in 2005?
a.
$48,600
b.
$46,200
c.
$51,000
d.
$43,000
204.
Krogstad Company is an 80 percent subsidiary of Carter Corporation. Krogstad sells
$86,000 of inventory for $98,000 to Carter on December 15, 2005. None of the
inventory is sold to unrelated parties before year-end. Krogstad and Carter have income
in 2005 of $274,000 and $640,000. What is the amount of the worksheet elimination to
sales when the 2005 consolidated financial statements are prepared?
a.
$0
b.
$86,000
c.
$98,000
d.
$78,400
205.
Krogstad Company is an 80 percent subsidiary of Carter Corporation. Krogstad sells
$86,000 of inventory for $98,000 to Carter on December 15, 2005. None of the
inventory is sold to unrelated parties before year-end. Krogstad and Carter have income
in 2005 of $274,000 and $640,000. What is the amount of the worksheet elimination to
cost of goods sold when the 2005 consolidated financial statements are prepared?
a.
$0
b.
$86,000
c.
$68,800
d.
$78,400
206.
Krogstad Company is an 80 percent subsidiary of Carter Corporation. Krogstad sells
$86,000 of inventory for $98,000 to Carter on December 15, 2005. None of the
inventory is sold to unrelated parties before year-end. Krogstad and Carter have income
in 2005 of $274,000 and $640,000. What is the amount of the worksheet elimination to
inventory when the 2005 consolidated financial statements are prepared?
a.
$12,000
b.
$0
c.
$9,600
d.
$15,000
207.
Krogstad Company is an 80 percent subsidiary of Carter Corporation. Krogstad sells
$86,000 of inventory for $98,000 to Carter on December 15, 2005. None of the
inventory is sold to unrelated parties before year-end. Krogstad and Carter have income
in 2005 of $274,000 and $640,000. What is the income to noncontrolling interest in
2005?
a.
$45,200
b.
$57,200
c.
$52,400
d.
$54,800
208.
Cripps Company is a 70 percent subsidiary of Ross Corporation. Cripps sells $52,000 of
inventory for $70,000 to Ross on December 1, 2005. By the end of 2005, Ross sells 60
percent of this inventory to unrelated parties for $46,000. Cripps and Ross have income
in 2005 of $157,000 and $229,000, respectively. What is the amount of the worksheet
elimination to sales when the 2005 consolidated financial statements are prepared?
a.
$0
b.
$52,000
c.
$70,000
d.
$49,000
209.
Cripps Company is a 70 percent subsidiary of Ross Corporation. Cripps sells $52,000 of
inventory for $70,000 to Ross on December 1, 2005. By the end of 2005, Ross sells 60
percent of this inventory to unrelated parties for $46,000. Cripps and Ross have income
in 2005 of $157,000 and $229,000, respectively. What is the amount of the worksheet
elimination to cost of goods sold when the 2005 consolidated financial statements are
prepared?
a.
$52,000
b.
$62,800
c.
d.
$41,200
$47,200
210.
Cripps Company is a 70 percent subsidiary of Ross Corporation. Cripps sells $52,000 of
inventory for $70,000 to Ross on December 1, 2005. By the end of 2005, Ross sells 60
percent of this inventory to unrelated parties for $46,000. Cripps and Ross have income
in 2005 of $157,000 and $229,000, respectively. What is the amount of the worksheet
elimination to inventory when the 2005 consolidated financial statements are prepared?
a.
$0
b.
$18,000
c.
$5,040
d.
$7,200
211.
Cripps Company is a 70 percent subsidiary of Ross Corporation. Cripps sells $52,000 of
inventory for $70,000 to Ross on December 1, 2005. By the end of 2005, Ross sells 60
percent of this inventory to unrelated parties for $46,000. Cripps and Ross have income
in 2005 of $157,000 and $229,000, respectively. What is the income to noncontrolling
interest in 2005?
a.
$47,100
b.
$41,700
c.
$44,940
d.
$50,340
212.
Tearney Company is a 60 percent subsidiary of Capone, Incorporated. Tearney sells
$34,000 of inventory for $41,000 to Capone on December 2, 2005. By the end of 2005,
Capone sells 80 percent of this inventory to unrelated parties for $50,000. Tearney and
Capone have income in 2005 of $210,000 and $520,000, respectively. What is the
amount of the worksheet elimination to sales when the 2005 consolidated financial
statements are prepared?
a.
$0
b.
$50,000
c.
$71,000
d.
$41,000
213.
Tearney Company is a 60 percent subsidiary of Capone, Incorporated. Tearney sells
$34,000 of inventory for $41,000 to Capone on December 2, 2005. By the end of 2005,
Capone sells 80 percent of this inventory to unrelated parties for $50,000. Tearney and
Capone have income in 2005 of $210,000 and $520,000, respectively. What is the
amount of the worksheet elimination to cost of goods sold when the 2005 consolidated
financial statements are prepared?
a.
$34,000
b.
$39,600
c.
$5,600
d.
$28,400
214.
Tearney Company is a 60 percent subsidiary of Capone, Incorporated. Tearney sells
$34,000 of inventory for $41,000 to Capone on December 2, 2005. By the end of 2005,
Capone sells 80 percent of this inventory to unrelated parties for $50,000. Tearney and
Capone have income in 2005 of $210,000 and $520,000, respectively. What is the
amount of the worksheet elimination to inventory when the 2005 consolidated financial
statements are prepared?
a.
$0
b.
$7,000
c.
$1,400
d.
$5,600
215.
Tearney Company is a 60 percent subsidiary of Capone, Incorporated. Tearney sells
$34,000 of inventory for $41,000 to Capone on December 2, 2005. By the end of 2005,
Capone sells 80 percent of this inventory to unrelated parties for $50,000. Tearney and
Capone have income in 2005 of $210,000 and $520,000, respectively. What is the
income to noncontrolling interest in 2005?
a.
$83,440
b.
$84,000
c.
$81,200
d.
$86,240
216.
Ford Company is a 90 percent subsidiary of Davis Corporation. Ford sells $94,000 of
inventory for $115,000 to Davis on November 27, 2005. By the end of 2005, Davis sells
40 percent of this inventory to unrelated parties for $65,000. Ford and Davis have
income in 2005 of $320,000 and $698,000, respectively. What is the amount of the
worksheet elimination to sales when the 2005 consolidated financial statements are
prepared?
a.
$94,000
b.
$141,000
c.
$115,000
d.
$180,000
217.
Ford Company is a 90 percent subsidiary of Davis Corporation. Ford sells $94,000 of
inventory for $115,000 to Davis on November 27, 2005. By the end of 2005, Davis sells
40 percent of this inventory to unrelated parties for $65,000. Ford and Davis have
income in 2005 of $320,000 and $698,000, respectively. What is the amount of the
worksheet elimination to cost of goods sold when the 2005 consolidated financial
statements are prepared?
a.
$140,000
b.
$120,000
c.
$94,000
d.
$102,400
218.
Ford Company is a 90 percent subsidiary of Davis Corporation. Ford sells $94,000 of
inventory for $115,000 to Davis on November 27, 2005. By the end of 2005, Davis sells
40 percent of this inventory to unrelated parties for $65,000. Ford and Davis have
income in 2005 of $320,000 and $698,000, respectively. What is the amount of the
worksheet elimination to inventory when the 2005 consolidated financial statements are
prepared?
a.
$0
b.
$12,600
c.
d.
$21,000
$46,000
219.
Ford Company is a 90 percent subsidiary of Davis Corporation. Ford sells $94,000 of
inventory for $115,000 to Davis on November 27, 2005. By the end of 2005, Davis sells
40 percent of this inventory to unrelated parties for $65,000. Ford and Davis have
income in 2005 of $320,000 and $698,000, respectively. What is the income to
noncontrolling interest in 2005?
a.
$30,740
b.
$32,840
c.
$32,000
d.
$33,260
220.
Wendell Company is an 80 percent subsidiary of King Corporation. Wendell sells
$93,000 of inventory for $125,000 to King on December 23, 2005. None of this
inventory was sold to unrelated parties by the end of 2005. During 2006, 70 percent of
this inventory is sold to unrelated parties for $170,000. Wendell and King have income
in 2006 of $293,000 and $802,000, respectively. What is the amount of the worksheet
elimination to retained earnings when the 2006 consolidated financial statements are
prepared?
a.
$32,000
b.
$25,600
c.
$9,600
d.
$7,680
221.
Wendell Company is an 80 percent subsidiary of King Corporation. Wendell sells
$93,000 of inventory for $125,000 to King on December 23, 2005. None of this
inventory was sold to unrelated parties by the end of 2005. During 2006, 70 percent of
this inventory is sold to unrelated parties for $170,000. Wendell and King have income
in 2006 of $293,000 and $802,000, respectively. What is the amount of the worksheet
elimination to noncontrolling interest when the 2006 consolidated financial statements
are prepared?
a.
$32,000
b.
$18,600
c.
$6,400
d.
$25,000
222.
Wendell Company is an 80 percent subsidiary of King Corporation. Wendell sells
$93,000 of inventory for $125,000 to King on December 23, 2005. None of this
inventory was sold to unrelated parties by the end of 2005. During 2006, 70 percent of
this inventory is sold to unrelated parties for $170,000. Wendell and King have income
in 2006 of $293,000 and $802,000, respectively. What is the amount of the worksheet
elimination to sales when the 2006 consolidated financial statements are prepared?
a.
$93,000
b.
$125,000
c.
$170,000
d.
$0
223.
Wendell Company is an 80 percent subsidiary of King Corporation. Wendell sells
$93,000 of inventory for $125,000 to King on December 23, 2005. None of this
inventory was sold to unrelated parties by the end of 2005. During 2006, 70 percent of
this inventory is sold to unrelated parties for $170,000. Wendell and King have income
in 2006 of $293,000 and $802,000, respectively. What is the amount of the worksheet
elimination to cost of goods sold when the 2006 consolidated financial statements are
prepared?
a.
$22,400
b.
$25,600
c.
$0
d.
$65,100
224.
Wendell Company is an 80 percent subsidiary of King Corporation. Wendell sells
$93,000 of inventory for $125,000 to King on December 23, 2005. None of this
inventory was sold to unrelated parties by the end of 2005. During 2006, 70 percent of
this inventory is sold to unrelated parties for $170,000. Wendell and King have income
in 2006 of $293,000 and $802,000, respectively. What is the amount of the worksheet
elimination to inventory when the 2006 consolidated financial statements are prepared?
a.
$0
b.
$6,400
c.
$9,600
d.
$27,900
225.
Wendell Company is an 80 percent subsidiary of King Corporation. Wendell sells
$93,000 of inventory for $125,000 to King on December 23, 2005. None of this
inventory was sold to unrelated parties by the end of 2005. During 2006, 70 percent of
this inventory is sold to unrelated parties for $170,000. Wendell and King have income
in 2006 of $293,000 and $802,000, respectively. What is the income to noncontrolling
interest in 2006?
a.
$63,080
b.
$54,120
c.
$53,480
d.
$58,600
226.
Brown Company is a 70 percent subsidiary of Denison Corporation. Brown sells
$28,000 of inventory for $37,000 to Denison on December 27, 2005. None of this
inventory was sold to unrelated parties by the end of 2005. During 2006, 60 percent of
this inventory is sold to unrelated parties for $33,000. Brown and Denison have income
in 2006 of $184,000 and $298,000, respectively. What is the amount of the worksheet
elimination to retained earnings when the 2006 consolidated financial statements are
prepared?
a.
$9,000
b.
$2,700
c.
$5,400
d.
$6,300
227.
Brown Company is a 70 percent subsidiary of Denison Corporation. Brown sells
$28,000 of inventory for $37,000 to Denison on December 27, 2005. None of this
inventory was sold to unrelated parties by the end of 2005. During 2006, 60 percent of
this inventory is sold to unrelated parties for $33,000. Brown and Denison have income
in 2006 of $184,000 and $298,000, respectively. What is the amount of the worksheet
elimination to noncontrolling interest when the 2006 consolidated financial statements
are prepared?
a.
$3,600
b.
$2,700
c.
$9,000
d.
$6,300
228.
Brown Company is a 70 percent subsidiary of Denison Corporation. Brown sells
$28,000 of inventory for $37,000 to Denison on December 27, 2005. None of this
inventory was sold to unrelated parties by the end of 2005. During 2006, 60 percent of
this inventory is sold to unrelated parties for $33,000. Brown and Denison have income
in 2006 of $184,000 and $298,000, respectively. What is the amount of the worksheet
elimination to sales when the 2006 consolidated financial statements are prepared?
a.
$0
b.
$33,000
c.
$8,027
d.
$9,000
229.
Brown Company is a 70 percent subsidiary of Denison Corporation. Brown sells
$28,000 of inventory for $37,000 to Denison on December 27, 2005. None of this
inventory was sold to unrelated parties by the end of 2005. During 2006, 60 percent of
this inventory is sold to unrelated parties for $33,000. Brown and Denison have income
in 2006 of $184,000 and $298,000, respectively. What is the amount of the worksheet
elimination to cost of goods sold when the 2006 consolidated financial statements are
prepared?
a.
$3,000
b.
$5,400
c.
$2,400
d.
$6,300
230.
Brown Company is a 70 percent subsidiary of Denison Corporation. Brown sells
$28,000 of inventory for $37,000 to Denison on December 27, 2005. None of this
inventory was sold to unrelated parties by the end of 2005. During 2006, 60 percent of
this inventory is sold to unrelated parties for $33,000. Brown and Denison have income
in 2006 of $184,000 and $298,000, respectively. What is the amount of the worksheet
elimination to inventory when the 2006 consolidated financial statements are prepared?
a.
$0
b.
$2,000
c.
$3,600
d.
$1,600
231.
Brown Company is a 70 percent subsidiary of Denison Corporation. Brown sells
$28,000 of inventory for $37,000 to Denison on December 27, 2005. None of this
inventory was sold to unrelated parties by the end of 2005. During 2006, 60 percent of
this inventory is sold to unrelated parties for $33,000. Brown and Denison have income
in 2006 of $184,000 and $298,000, respectively. What is the income to noncontrolling
interest in 2006?
a.
$53,580
b.
$56,820
c.
$55,200
d.
$71,080
232.
Johnson Company is a 90 percent subsidiary of Kline Corporation. Johnson sells
$84,000 of inventory for $98,000 to Kline on November 13, 2005. Sixty percent of this
inventory is sold to unrelated parties for $102,000 by the end of 2005. During 2006, the
remaining 40 percent is sold to unrelated parties for $65,000. Johnson and Kline have
income in 2006 of $372,000 and $928,000, respectively. What is the amount of the
worksheet elimination to retained earnings when the 2006 consolidated financial
statements are prepared?
a.
$8,400
b.
$7,560
c.
$5,600
d.
$5,040
233.
Johnson Company is a 90 percent subsidiary of Kline Corporation. Johnson sells
$84,000 of inventory for $98,000 to Kline on November 13, 2005. Sixty percent of this
inventory is sold to unrelated parties for $102,000 by the end of 2005. During 2006, the
remaining 40 percent is sold to unrelated parties for $65,000. Johnson and Kline have
income in 2006 of $372,000 and $928,000, respectively. What is the amount of the
worksheet elimination to noncontrolling interest when the 2006 consolidated financial
statements are prepared?
a.
$1,400
b.
$840
c.
$560
d.
5,040
234.
Johnson Company is a 90 percent subsidiary of Kline Corporation. Johnson sells
$84,000 of inventory for $98,000 to Kline on November 13, 2005. Sixty percent of this
inventory is sold to unrelated parties for $102,000 by the end of 2005. During 2006, the
remaining 40 percent is sold to unrelated parties for $65,000. Johnson and Kline have
income in 2006 of $372,000 and $928,000, respectively. What is the amount of the
worksheet elimination to sales when the 2006 consolidated financial statements are
prepared?
a.
$40,800
b.
$5,600
c.
$26,000
d.
$0
235.
Johnson Company is a 90 percent subsidiary of Kline Corporation. Johnson sells
$84,000 of inventory for $98,000 to Kline on November 13, 2005. Sixty percent of this
inventory is sold to unrelated parties for $102,000 by the end of 2005. During 2006, the
remaining 40 percent is sold to unrelated parties for $65,000. Johnson and Kline have
income in 2006 of $372,000 and $928,000, respectively. What is the amount of the
worksheet elimination to cost of goods sold when the 2006 consolidated financial
statements are prepared?
a.
$8,400
b.
$5,600
c.
$0
d.
$26,000
236.
Johnson Company is a 90 percent subsidiary of Kline Corporation. Johnson sells
$84,000 of inventory for $98,000 to Kline on November 13, 2005. Sixty percent of this
inventory is sold to unrelated parties for $102,000 by the end of 2005. During 2006, the
remaining 40 percent is sold to unrelated parties for $65,000. Johnson and Kline have
income in 2006 of $372,000 and $928,000, respectively. What is the amount of the
worksheet elimination to inventory when the 2006 consolidated financial statements are
prepared?
a.
$5,600
b.
$26,000
c.
$8,400
d.
$0
237.
Johnson Company is a 90 percent subsidiary of Kline Corporation. Johnson sells
$84,000 of inventory for $98,000 to Kline on November 13, 2005. Sixty percent of this
inventory is sold to unrelated parties for $102,000 by the end of 2005. During 2006, the
remaining 40 percent is sold to unrelated parties for $65,000. Johnson and Kline have
income in 2006 of $372,000 and $928,000, respectively. What is the income to
noncontrolling interest in 2006?
a.
$37,200
b.
$36,640
c.
$37,760
d.
$35,800
238.
Hartman Company is a 90 percent subsidiary of Tobin Corporation. Hartman sells
$52,000 of inventory for $65,000 to Tobin on December 1, 2005. Twenty percent of this
inventory is sold to unrelated parties for $22,000 by the end of 2005. During 2006,
another 70 percent of this inventory is sold to unrelated parties for $80,000. Hartman
and Tobin have income in 2006 of $312,000 and $539,000, respectively. What is the
amount of the worksheet elimination to retained earnings when the 2006 consolidated
financial statements are prepared?
a.
$11,700
b.
$9,360
c.
$14,040
d.
$3,510
239.
Hartman Company is a 90 percent subsidiary of Tobin Corporation. Hartman sells
$52,000 of inventory for $65,000 to Tobin on December 1, 2005. Twenty percent of this
inventory is sold to unrelated parties for $22,000 by the end of 2005. During 2006,
another 70 percent of this inventory is sold to unrelated parties for $80,000. Hartman
and Tobin have income in 2006 of $312,000 and $539,000, respectively. What is the
amount of the worksheet elimination to noncontrolling interest when the 2006
consolidated financial statements are prepared?
a.
$1,300
b.
$1,560
c.
$1,040
d.
$910
240.
Hartman Company is a 90 percent subsidiary of Tobin Corporation. Hartman sells
$52,000 of inventory for $65,000 to Tobin on December 1, 2005. Twenty percent of this
inventory is sold to unrelated parties for $22,000 by the end of 2005. During 2006,
another 70 percent of this inventory is sold to unrelated parties for $80,000. Hartman
and Tobin have income in 2006 of $312,000 and $539,000, respectively. What is the
amount of the worksheet elimination to sales when the 2006 consolidated financial
statements are prepared?
a.
$65,000
b.
$56,000
c.
$80,000
d.
$0
241.
Hartman Company is a 90 percent subsidiary of Tobin Corporation. Hartman sells
$52,000 of inventory for $65,000 to Tobin on December 1, 2005. Twenty percent of this
inventory is sold to unrelated parties for $22,000 by the end of 2005. During 2006,
another 70 percent of this inventory is sold to unrelated parties for $80,000. Hartman
and Tobin have income in 2006 of $312,000 and $539,000, respectively. What is the
amount of the worksheet elimination to cost of goods sold when the 2006 consolidated
financial statements are prepared?
a.
$9,100
b.
$13,000
c.
$11,700
d.
$0
242.
Hartman Company is a 90 percent subsidiary of Tobin Corporation. Hartman sells
$52,000 of inventory for $65,000 to Tobin on December 1, 2005. Twenty percent of this
inventory is sold to unrelated parties for $22,000 by the end of 2005. During 2006,
another 70 percent of this inventory is sold to unrelated parties for $80,000. Hartman
and Tobin have income in 2006 of $312,000 and $539,000, respectively. What is the
amount of the worksheet elimination to inventory when the 2006 consolidated financial
statements are prepared?
a.
$0
b.
$3,900
c.
$1,300
d.
$10,400
243.
Hartman Company is a 90 percent subsidiary of Tobin Corporation. Hartman sells
$52,000 of inventory for $65,000 to Tobin on December 1, 2005. Twenty percent of this
inventory is sold to unrelated parties for $22,000 by the end of 2005. During 2006,
another 70 percent of this inventory is sold to unrelated parties for $80,000. Hartman
and Tobin have income in 2006 of $312,000 and $539,000, respectively. What is the
income to noncontrolling interest in 2006?
a.
$30,290
b.
$32,110
c.
$31,200
d.
$30,030
244.
Sevin is a 70 percent subsidiary of Klein. Klein acquires $300,000 of Sevin’s
outstanding bonds payable on December 31 for $320,000. At that date, the bonds have a
$4,000 unamortized discount on Sevin’s financial records. Sevin and Klein have income
of $138,000 and $294,000, respectively. What is the dollar amount of gain or loss that
would be disclosed on the consolidated income statement with regard to this transaction?
a.
$0
b.
$24,000
c.
$20,000
d.
$16,000
245.
Sevin is a 70 percent subsidiary of Klein. Klein acquires $300,000 of Sevin’s
outstanding bonds payable on December 31 for $320,000. At that date, the bonds have a
$4,000 unamortized discount on Sevin’s financial records. Sevin and Klein have income
of $138,000 and $294,000, respectively. What is the income to noncontrolling interest?
a.
$34,200
b.
$114,000
c.
$79,800
d.
$48,600
246.
Ratliff is a 90 percent subsidiary of Arnold. Arnold acquires $100,000 of Ratliff
outstanding bonds payable on December 31 for $98,000. At that date, the bonds have a
$3,000 unamortized premium on Ratliff’s financial records. Ratliff and Arnold have
income of $129,000 and $293,000, respectively. What is the dollar amount of gain or
loss that would be disclosed on the consolidated income statement with regard to this
transaction?
a.
$1,000
b.
$4,500
c.
$5,000
d.
$0
247.
Ratliff is a 90 percent subsidiary of Arnold. Arnold acquires $100,000 of Ratliff
outstanding bonds payable on December 31 for $98,000. At that date, the bonds have a
$3,000 unamortized premium on Ratliff’s financial records. Ratliff and Arnold have
income of $129,000 and $293,000, respectively. What is the income to noncontrolling
interest?
a.
$12,900
b.
$12,400
c.
$13,000
d.
$13,400
248.
Trotter is an 80 percent subsidiary of White. White acquires $200,000 of Trotter’s
outstanding bonds payable on December 31 for $193,000. At that date, the bonds have a
$3,000 unamortized discount on Trotter’s financial records. Trotter and White have
income of $429,000 and $974,000, respectively. What is the dollar amount of gain or
loss that would be disclosed on the consolidated income statement with regard to this
transaction?
a.
$0
b.
$10,000
c.
$3,200
d.
$4,000
249.
Trotter is an 80 percent subsidiary of White. White acquires $200,000 of Trotter’s
outstanding bonds payable on December 31 for $193,000. At that date, the bonds have a
$3,000 unamortized discount on Trotter’s financial records. Trotter and White have
income of $429,000 and $974,000, respectively. What is the income to noncontrolling
interest?
a.
$85,000
b.
$85,160
c.
$86,600
d.
$85,800
250.
Kelly Company is a 60 percent subsidiary of Hughes Corporation. Hughes acquires
$250,000 of Kelly’s 6 percent outstanding bonds payable on August 31, 2005 for
$272,500. At that date, the bonds have a $9,000 unamortized discount on Kelly’s
financial records and a remaining life of 75 months. Discounts and premiums are
amortized straight-line. Kelly and Hughes have income in 2005 of $375,000 and
$820,000, respectively. What is the December 31, 2005 worksheet elimination to the
gain or loss on early debt retirement account?
a.
$18,900 credit
b.
$18,900 debit
c.
$31,500 debit
d.
$31,500 credit
251.
Kelly Company is a 60 percent subsidiary of Hughes Corporation. Hughes acquires
$250,000 of Kelly’s 6 percent outstanding bonds payable on August 31, 2005 for
$272,500. At that date, the bonds have a $9,000 unamortized discount on Kelly’s
financial records and a remaining life of 75 months. Discounts and premiums are
amortized straight-line. Kelly and Hughes have income in 2005 of $375,000 and
$820,000, respectively. What is the December 31, 2005 worksheet elimination to the
bonds payable account?
a.
$150,000
b.
$250,000
c.
$100,000
d.
$241,000
252.
Kelly Company is a 60 percent subsidiary of Hughes Corporation. Hughes acquires
$250,000 of Kelly’s 6 percent outstanding bonds payable on August 31, 2005 for
$272,500. At that date, the bonds have a $9,000 unamortized discount on Kelly’s
financial records and a remaining life of 75 months. Discounts and premiums are
amortized straight-line. Kelly and Hughes have income in 2005 of $375,000 and
$820,000, respectively. What is the December 31, 2005 worksheet elimination to the
discount on bonds payable account?
a.
$9,000
b.
$5,112
c.
$8,520
d.
$21,300
253.
Kelly Company is a 60 percent subsidiary of Hughes Corporation. Hughes acquires
$250,000 of Kelly’s 6 percent outstanding bonds payable on August 31, 2005 for
$272,500. At that date, the bonds have a $9,000 unamortized discount on Kelly’s
financial records and a remaining life of 75 months. Discounts and premiums are
amortized straight-line. Kelly and Hughes have income in 2005 of $375,000 and
$820,000, respectively. What is the December 31, 2005 worksheet elimination to the
investment in bonds account?
a.
$271,300
b.
$273,700
c.
$251,200
d.
$271,000
254.
Kelly Company is a 60 percent subsidiary of Hughes Corporation. Hughes acquires
$250,000 of Kelly’s 6 percent outstanding bonds payable on August 31, 2005 for
$272,500. At that date, the bonds have a $9,000 unamortized discount on Kelly’s
financial records and a remaining life of 75 months. Discounts and premiums are
amortized straight-line. Kelly and Hughes have income in 2005 of $375,000 and
$820,000, respectively. What is the December 31, 2005 worksheet elimination to the
interest expense account?
a.
$4,520
b.
$14,520
c.
$15,480
d.
$5,480
255.
Kelly Company is a 60 percent subsidiary of Hughes Corporation. Hughes acquires
$250,000 of Kelly’s 6 percent outstanding bonds payable on August 31, 2005 for
$272,500. At that date, the bonds have a $9,000 unamortized discount on Kelly’s
financial records and a remaining life of 75 months. Discounts and premiums are
amortized straight-line. Kelly and Hughes have income in 2005 of $375,000 and
$820,000, respectively. What is the December 31, 2005 worksheet elimination to the
interest revenue account?
a.
$6,200
b.
$3,800
c.
$13,800
d.
$16,200
256.
Kelly Company is a 60 percent subsidiary of Hughes Corporation. Hughes acquires
$250,000 of Kelly’s 6 percent outstanding bonds payable on August 31, 2005 for
$272,500. At that date, the bonds have a $9,000 unamortized discount on Kelly’s
financial records and a remaining life of 75 months. Discounts and premiums are
amortized straight-line. Kelly and Hughes have income in 2005 of $375,000 and
$820,000, respectively. What is the income to noncontrolling interest in 2005?
a.
$242,892
b.
$138,072
c.
$161,928
d.
$207,108
257.
Lampe Company is a 60 percent subsidiary of Finkler Corporation. Finkler acquires
$450,000 of Lampe’s 8 percent outstanding bonds payable on June 1, 2005 for $436,080.
At that date, the bonds have a $23,040 unamortized premium on Lampe’s financial
records and a remaining life of 96 months. Discounts and premiums are amortized
straight-line. Lampe and Finkler have income in 2005 of $493,000 and $1,930,000,
respectively. What is the December 31, 2005 worksheet elimination to the gain or loss
on early debt retirement account?
a.
$36,960 debit
b.
$36,960 credit
c.
$25,872 debit
d.
$25,872 credit
258.
Lampe Company is a 60 percent subsidiary of Finkler Corporation. Finkler acquires
$450,000 of Lampe’s 8 percent outstanding bonds payable on June 1, 2005 for $436,080.
At that date, the bonds have a $23,040 unamortized premium on Lampe’s financial
records and a remaining life of 96 months. Discounts and premiums are amortized
straight-line. Lampe and Finkler have income in 2005 of $493,000 and $1,930,000,
respectively. What is the December 31, 2005 worksheet elimination to the bonds payable
account?
a.
$315,000
b.
$436,080
c.
$473,040
d.
$450,000
259.
Lampe Company is a 60 percent subsidiary of Finkler Corporation. Finkler acquires
$450,000 of Lampe’s 8 percent outstanding bonds payable on June 1, 2005 for $436,080.
At that date, the bonds have a $23,040 unamortized premium on Lampe’s financial
records and a remaining life of 96 months. Discounts and premiums are amortized
straight-line. Lampe and Finkler have income in 2005 of $493,000 and $1,930,000,
respectively. What is the December 31, 2005 worksheet elimination to the premium on
bonds payable account?
a.
$21,360
b.
$23,040
c.
$14,952
d.
$16,128
260.
Lampe Company is a 60 percent subsidiary of Finkler Corporation. Finkler acquires
$450,000 of Lampe’s 8 percent outstanding bonds payable on June 1, 2005 for $436,080.
At that date, the bonds have a $23,040 unamortized premium on Lampe’s financial
records and a remaining life of 96 months. Discounts and premiums are amortized
straight-line. Lampe and Finkler have income in 2005 of $493,000 and $1,930,000,
respectively. What is the December 31, 2005 worksheet elimination to the investment in
bonds account?
a.
$435,065
b.
$437,095
c.
$450,000
d.
$437,820
261.
Lampe Company is a 60 percent subsidiary of Finkler Corporation. Finkler acquires
$450,000 of Lampe’s 8 percent outstanding bonds payable on June 1, 2005 for $436,080.
At that date, the bonds have a $23,040 unamortized premium on Lampe’s financial
records and a remaining life of 96 months. Discounts and premiums are amortized
straight-line. Lampe and Finkler have income in 2005 of $493,000 and $1,930,000,
respectively. What is the December 31, 2005 worksheet elimination to the interest
expense account?
a.
$25,920
b.
$19,320
c.
$22,080
d.
$22,680
262.
Lampe Company is a 60 percent subsidiary of Finkler Corporation. Finkler acquires
$450,000 of Lampe’s 8 percent outstanding bonds payable on June 1, 2005 for $436,080.
At that date, the bonds have a $23,040 unamortized premium on Lampe’s financial
records and a remaining life of 96 months. Discounts and premiums are amortized
straight-line. Lampe and Finkler have income in 2005 of $493,000 and $1,930,000,
respectively. What is the December 31, 2005 worksheet elimination to the interest
revenue account?
a.
$25,160
b.
$24,000
c.
$22,840
d.
$22,015
263.
Lampe Company is a 60 percent subsidiary of Finkler Corporation. Finkler acquires
$450,000 of Lampe’s 8 percent outstanding bonds payable on June 1, 2005 for $436,080.
At that date, the bonds have a $23,040 unamortized premium on Lampe’s financial
records and a remaining life of 96 months. Discounts and premiums are amortized
straight-line. Lampe and Finkler have income in 2005 of $493,000 and $1,930,000,
respectively. What is the income to noncontrolling interest in 2005?
a.
$213,600
b.
$210,368
c.
$210,906
d.
$210,752
264.
Hall Company is a 70 percent subsidiary of Benjamin Corporation. Benjamin acquires
$600,000 of Hall’s 7 percent outstanding bonds payable on September 1, 2005 for
$583,200. At that date, the bonds have a $9,240 unamortized discount on Hall’s financial
records and a remaining life of 84 months. Discounts and premiums are amortized
straight-line. Hall and Benjamin have income in 2005 of $392,000 and $529,000,
respectively. What is the December 31, 2005 worksheet elimination to the gain or loss
on early debt retirement account?
a.
$5,292 debit
b.
$5,292 credit
c.
$7,560 debit
d.
$7,560 credit
265.
Hall Company is a 70 percent subsidiary of Benjamin Corporation. Benjamin acquires
$600,000 of Hall’s 7 percent outstanding bonds payable on September 1, 2005 for
$583,200. At that date, the bonds have a $9,240 unamortized discount on Hall’s financial
records and a remaining life of 84 months. Discounts and premiums are amortized
straight-line. Hall and Benjamin have income in 2005 of $392,000 and $529,000,
respectively. What is the December 31, 2005 worksheet elimination to the bonds payable
account?
a.
$590,760
b.
$583,200
c.
$600,000
d.
$420,000
266.
Hall Company is a 70 percent subsidiary of Benjamin Corporation. Benjamin acquires
$600,000 of Hall’s 7 percent outstanding bonds payable on September 1, 2005 for
$583,200. At that date, the bonds have a $9,240 unamortized discount on Hall’s financial
records and a remaining life of 84 months. Discounts and premiums are amortized
straight-line. Hall and Benjamin have income in 2005 of $392,000 and $529,000,
respectively. What is the December 31, 2005 worksheet elimination to the discount on
bonds payable account?
a.
$6,160
b.
$8,800
c.
$8,910
d.
$6,237
267.
Hall Company is a 70 percent subsidiary of Benjamin Corporation. Benjamin acquires
$600,000 of Hall’s 7 percent outstanding bonds payable on September 1, 2005 for
$583,200. At that date, the bonds have a $9,240 unamortized discount on Hall’s financial
records and a remaining life of 84 months. Discounts and premiums are amortized
straight-line. Hall and Benjamin have income in 2005 of $392,000 and $529,000,
respectively. What is the December 31, 2005 worksheet elimination to the investment in
bonds account?
a.
$600,000
b.
$583,200
c.
$584,200
d.
$584,000
268.
Hall Company is a 70 percent subsidiary of Benjamin Corporation. Benjamin acquires
$600,000 of Hall’s 7 percent outstanding bonds payable on September 1, 2005 for
$583,200. At that date, the bonds have a $9,240 unamortized discount on Hall’s financial
records and a remaining life of 84 months. Discounts and premiums are amortized
straight-line. Hall and Benjamin have income in 2005 of $392,000 and $529,000,
respectively. What is the December 31, 2005 worksheet elimination to the interest
expense account?
a.
$16,950
b.
$18,050
c.
$13,560
d.
$14,440
269.
Hall Company is a 70 percent subsidiary of Benjamin Corporation. Benjamin acquires
$600,000 of Hall’s 7 percent outstanding bonds payable on September 1, 2005 for
$583,200. At that date, the bonds have a $9,240 unamortized discount on Hall’s financial
records and a remaining life of 84 months. Discounts and premiums are amortized
straight-line. Hall and Benjamin have income in 2005 of $392,000 and $529,000,
respectively. What is the December 31, 2005 worksheet elimination to the interest
revenue account?
a.
$14,800
b.
$14,000
c.
$13,200
d.
$18,500
270.
Hall Company is a 70 percent subsidiary of Benjamin Corporation. Benjamin acquires
$600,000 of Hall’s 7 percent outstanding bonds payable on September 1, 2005 for
$583,200. At that date, the bonds have a $9,240 unamortized discount on Hall’s financial
records and a remaining life of 84 months. Discounts and premiums are amortized
straight-line. Hall and Benjamin have income in 2005 of $392,000 and $529,000,
respectively. What is the income to noncontrolling interest in 2005?
a.
$119,976
b.
$119,760
c.
$115,224
d.
$115,440
271.
Vogel Company is an 80 percent subsidiary of Maser Corporation. Maser acquires
$200,000 of Vogel’s 6 percent outstanding bonds payable on November 1, 2005 for
$213,860. At that date, the bonds have a $6,600 unamortized discount on Vogel’s
financial records and a remaining life of 66 months. Discounts and premiums are
amortized straight-line. Vogel and Maser have income in 2006 of $247,000 and
$632,000, respectively. What is the December 31, 2006 worksheet elimination to the
retained earnings?
a.
$19,840 debit
b.
$19,840 credit
c.
$15,872 debit
d.
$15,872 credit
272.
Vogel Company is an 80 percent subsidiary of Maser Corporation. Maser acquires
$200,000 of Vogel’s 6 percent outstanding bonds payable on November 1, 2005 for
$213,860. At that date, the bonds have a $6,600 unamortized discount on Vogel’s
financial records and a remaining life of 66 months. Discounts and premiums are
amortized straight-line. Vogel and Maser have income in 2006 of $247,000 and
$632,000, respectively. What is the December 31, 2006 worksheet elimination to the
noncontrolling interest?
a.
$3,968 debit
b.
$3,968 credit
c.
$3,782 debit
d.
$3,782 credit
273.
Vogel Company is an 80 percent subsidiary of Maser Corporation. Maser acquires
$200,000 of Vogel’s 6 percent outstanding bonds payable on November 1, 2005 for
$213,860. At that date, the bonds have a $6,600 unamortized discount on Vogel’s
financial records and a remaining life of 66 months. Discounts and premiums are
amortized straight-line. Vogel and Maser have income in 2006 of $247,000 and
$632,000, respectively. What is the December 31, 2006 worksheet elimination to the
discount on bonds payable account?
a.
$4,160
b.
$5,200
c.
$6,400
d.
$5,120
274.
Vogel Company is an 80 percent subsidiary of Maser Corporation. Maser acquires
$200,000 of Vogel’s 6 percent outstanding bonds payable on November 1, 2005 for
$213,860. At that date, the bonds have a $6,600 unamortized discount on Vogel’s
financial records and a remaining life of 66 months. Discounts and premiums are
amortized straight-line. Vogel and Maser have income in 2006 of $247,000 and
$632,000, respectively. What is the December 31, 2006 worksheet elimination to the
investment in bonds account?
a.
$210,920
b.
$216,800
c.
$168,736
d.
$173,440
275.
Vogel Company is an 80 percent subsidiary of Maser Corporation. Maser acquires
$200,000 of Vogel’s 6 percent outstanding bonds payable on November 1, 2005 for
$213,860. At that date, the bonds have a $6,600 unamortized discount on Vogel’s
financial records and a remaining life of 66 months. Discounts and premiums are
amortized straight-line. Vogel and Maser have income in 2006 of $247,000 and
$632,000, respectively. What is the December 31, 2006 worksheet elimination to the
interest expense account?
a.
$8,640
b.
$10,560
c.
$10,800
d.
$13,200
276.
Vogel Company is an 80 percent subsidiary of Maser Corporation. Maser acquires
$200,000 of Vogel’s 6 percent outstanding bonds payable on November 1, 2005 for
$213,860. At that date, the bonds have a $6,600 unamortized discount on Vogel’s
financial records and a remaining life of 66 months. Discounts and premiums are
amortized straight-line. Vogel and Maser have income in 2006 of $247,000 and
$632,000, respectively. What is the December 31, 2006 worksheet elimination to the
interest revenue account?
a.
$14,520
b.
$9,480
c.
$11,616
d.
$7,584
277.
Vogel Company is an 80 percent subsidiary of Maser Corporation. Maser acquires
$200,000 of Vogel’s 6 percent outstanding bonds payable on November 1, 2005 for
$213,860. At that date, the bonds have a $6,600 unamortized discount on Vogel’s
financial records and a remaining life of 66 months. Discounts and premiums are
amortized straight-line. Vogel and Maser have income in 2006 of $247,000 and
$632,000, respectively. What is the income to noncontrolling interest in 2006?
a.
$50,144
b.
$48,656
c.
$46,052
d.
$44,564
278.
Boyd Company is a 70 percent subsidiary of Kissinger Corporation. Kissinger acquires
$300,000 of Boyd’s 7 percent outstanding bonds payable on August 31, 2005 for
$284,880. At that date, the bonds have a $12,960 unamortized premium on Boyd’s
financial records and a remaining life of 72 months. Discounts and premiums are
amortized straight-line. Boyd and Kissinger have income in 2006 of $370,000 and
$827,000, respectively. What is the December 31, 2006 worksheet elimination to the
retained earnings account?
a.
$26,520 credit
b.
$26,520 debit
c.
$18,564 credit
d.
$18,564 debit
279.
Boyd Company is a 70 percent subsidiary of Kissinger Corporation. Kissinger acquires
$300,000 of Boyd’s 7 percent outstanding bonds payable on August 31, 2005 for
$284,880. At that date, the bonds have a $12,960 unamortized premium on Boyd’s
financial records and a remaining life of 72 months. Discounts and premiums are
amortized straight-line. Boyd and Kissinger have income in 2006 of $370,000 and
$827,000, respectively. What is the December 31, 2006 worksheet elimination to the
noncontrolling interest?
a.
$7,956 credit
b.
$7,956 debit
c.
$8,073 credit
d.
$8,073 debit
280.
Boyd Company is a 70 percent subsidiary of Kissinger Corporation. Kissinger acquires
$300,000 of Boyd’s 7 percent outstanding bonds payable on August 31, 2005 for
$284,880. At that date, the bonds have a $12,960 unamortized premium on Boyd’s
financial records and a remaining life of 72 months. Discounts and premiums are
amortized straight-line. Boyd and Kissinger have income in 2006 of $370,000 and
$827,000, respectively. What is the December 31, 2006 worksheet elimination to the
premium on bonds payable account?
a.
$7,056
b.
$10,080
c.
$12,960
d.
$9,072
281.
Boyd Company is a 70 percent subsidiary of Kissinger Corporation. Kissinger acquires
$300,000 of Boyd’s 7 percent outstanding bonds payable on August 31, 2005 for
$284,880. At that date, the bonds have a $12,960 unamortized premium on Boyd’s
financial records and a remaining life of 72 months. Discounts and premiums are
amortized straight-line. Boyd and Kissinger have income in 2006 of $370,000 and
$827,000, respectively. What is the December 31, 2006 worksheet elimination to the
investment in bonds account?
a.
$281,520
b.
$284,880
c.
$287,400
d.
$288,240
282.
Boyd Company is a 70 percent subsidiary of Kissinger Corporation. Kissinger acquires
$300,000 of Boyd’s 7 percent outstanding bonds payable on August 31, 2005 for
$284,880. At that date, the bonds have a $12,960 unamortized premium on Boyd’s
financial records and a remaining life of 72 months. Discounts and premiums are
amortized straight-line. Boyd and Kissinger have income in 2006 of $370,000 and
$827,000, respectively. What is the December 31, 2006 worksheet elimination to the
interest expense account?
a.
$18,840
b.
$21,000
c.
$23,160
d.
$20,280
283.
Boyd Company is a 70 percent subsidiary of Kissinger Corporation. Kissinger acquires
$300,000 of Boyd’s 7 percent outstanding bonds payable on August 31, 2005 for
$284,880. At that date, the bonds have a $12,960 unamortized premium on Boyd’s
financial records and a remaining life of 72 months. Discounts and premiums are
amortized straight-line. Boyd and Kissinger have income in 2006 of $370,000 and
$827,000, respectively. What is the December 31, 2006 worksheet elimination to the
interest revenue account?
a.
$18,480
b.
$16,464
c.
$21,000
d.
$23,520
284.
Boyd Company is a 70 percent subsidiary of Kissinger Corporation. Kissinger acquires
$300,000 of Boyd’s 7 percent outstanding bonds payable on August 31, 2005 for
$284,880. At that date, the bonds have a $12,960 unamortized premium on Boyd’s
financial records and a remaining life of 72 months. Discounts and premiums are
amortized straight-line. Boyd and Kissinger have income in 2006 of $370,000 and
$827,000, respectively. What is the income to noncontrolling interest in 2006?
a.
$120,828
b.
$118,020
c.
$112,404
d.
$109,596
285.
Gerber Company is an 80 percent subsidiary of Clark Corporation. Clark acquires
$600,000 of Gerber’s 8 percent outstanding bonds payable on November 1, 2005 for
$644,640. At that date, the bonds have a $30,960 unamortized discount on Gerber’s
financial records and a remaining life of 72 months. Gerber and Clark have income in
2006 of $520,000 and $928,000, respectively. Discounts and premiums are amortized
straight-line. What is the December 31, 2006 worksheet elimination to the retained
earnings account?
a.
$73,500 credit
b.
$73,500 debit
c.
$58,800 credit
d.
$58,800 debit
286
Gerber Company is an 80 percent subsidiary of Clark Corporation. Clark acquires
$600,000 of Gerber’s 8 percent outstanding bonds payable on November 1, 2005 for
$644,640. At that date, the bonds have a $30,960 unamortized discount on Gerber’s
financial records and a remaining life of 72 months. Gerber and Clark have income in
2006 of $520,000 and $928,000, respectively. Discounts and premiums are amortized
straight-line. What is the December 31, 2006 worksheet elimination to the
noncontrolling interest?
a.
$14,700 credit
b.
$14,700 debit
c.
$19,862 credit
d.
$19,862 debit
287.
Gerber Company is an 80 percent subsidiary of Clark Corporation. Clark acquires
$600,000 of Gerber’s 8 percent outstanding bonds payable on November 1, 2005 for
$644,640. At that date, the bonds have a $30,960 unamortized discount on Gerber’s
financial records and a remaining life of 72 months. Gerber and Clark have income in
2006 of $520,000 and $928,000, respectively. Discounts and premiums are amortized
straight-line. What is the December 31, 2006 worksheet elimination to the discount on
bonds payable account?
a.
$19,952
b.
$24,940
c.
$30,960
d.
$24,510
288.
Gerber Company is an 80 percent subsidiary of Clark Corporation. Clark acquires
$600,000 of Gerber’s 8 percent outstanding bonds payable on November 1, 2005 for
$644,640. At that date, the bonds have a $30,960 unamortized discount on Gerber’s
financial records and a remaining life of 72 months. Gerber and Clark have income in
2006 of $520,000 and $928,000, respectively. Discounts and premiums are amortized
straight-line. What is the December 31, 2006 worksheet elimination to the investment in
bonds account?
a.
$635,960
b.
$643,400
c.
$637,200
d.
$652,080
289.
Gerber Company is an 80 percent subsidiary of Clark Corporation. Clark acquires
$600,000 of Gerber’s 8 percent outstanding bonds payable on November 1, 2005 for
$644,640. At that date, the bonds have a $30,960 unamortized discount on Gerber’s
financial records and a remaining life of 72 months. Gerber and Clark have income in
2006 of $520,000 and $928,000, respectively. Discounts and premiums are amortized
straight-line. What is the December 31, 2006 worksheet elimination to the interest
expense account?
a.
$42,528
b.
$53,160
c.
$48,000
d.
$42,840
290.
Gerber Company is an 80 percent subsidiary of Clark Corporation. Clark acquires
$600,000 of Gerber’s 8 percent outstanding bonds payable on November 1, 2005 for
$644,640. At that date, the bonds have a $30,960 unamortized discount on Gerber’s
financial records and a remaining life of 72 months. Gerber and Clark have income in
2006 of $520,000 and $928,000, respectively. Discounts and premiums are amortized
straight-line. What is the December 31, 2006 worksheet elimination to the interest
revenue account?
a.
$44,352
b.
$55,440
c.
$40,560
d.
$32,448
291.
Gerber Company is an 80 percent subsidiary of Clark Corporation. Clark acquires
$600,000 of Gerber’s 8 percent outstanding bonds payable on November 1, 2005 for
$644,640. At that date, the bonds have a $30,960 unamortized discount on Gerber’s
financial records and a remaining life of 72 months. Gerber and Clark have income in
2006 of $520,000 and $928,000, respectively. Discounts and premiums are amortized
straight-line. What is the income to noncontrolling interest in 2006?
a.
$91,400
b.
$101,480
c.
$86,360
d.
$106,520
Computational Multiple Choice Question Difficulty and Solutions
46.
easy
b
$40,000 - $25,000 = $15,000 debit
47.
moderate
a
$25,000 - ($40,000 - $10,000) = $5,000 loss (credit)
48.
easy
c
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
71.
$10,000 credit, entire accumulated depreciation is reestablished
moderate
b
$25,000 - ($40,000 - $10,000) = $5,000 loss (credit)
easy
c
$160,000 - $130,000 = $30,000 credit
moderate
b
$160,000 - ($130,000 - $60,000) = $90,000 gain (debit)
easy
a
$60,000 credit, entire accumulated depreciation is reestablished
moderate
d
$160,000 - ($130,000 - $60,000) = $90,000 gain (debit)
easy
a
$80,000 - $60,000 = $20,000 debit
moderate
b
$60,000 - ($80,000 - $30,000) = $10,000 gain (debit)
easy
c
$30,000 credit, entire accumulated depreciation is reestablished
moderate
a
$60,000 - ($80,000 - $30,000) = $10,000 gain (debit)
easy
d
$60,000 - $36,000 = $24,000 debit
moderate
b
$36,000 - ($60,000 - $31,200) = $7,200 gain (debit)
difficult
c
($36,000/6)(8/12) - [($60,000 - $31,200)/6](8/12) = $800 credit
difficult
a
$31,200 - {($36,000/6)(8/12) - [($60,000 - $31,200)/6](8/12)} = $30,400 credit
difficult
c
$36,000 - ($60,000 - $31,200) = $7,200 gain (debit)
($36,000/6)(8/12) - [($60,000 - $31,200)/6](8/12) = $800 credit
easy
a
$640,000 - $500,000 = $140,000 credit
moderate
b
$640,000 - ($500,000 - $350,000) = $490,000 gain (debit)
difficult
c
($640,000/10)(3/12) - [($500,000 - $350,000)/10](3/12) = $12,250 credit
difficult
d
$350,000 - {($640,000/10)(3/12) - [($500,000 - $350,000)/10](3/12)} = $337,750 credit
difficult
a
$640,000 - ($500,000 - $350,000) = $490,000 gain (debit)
($640,000/10)(3/12) - [($500,000 - $350,000)/10](3/12) = $12,250 credit
easy
c
$160,000 - $90,000 = $70,000 debit
moderate
b
$90,000 - ($160,000 - $60,000) = $10,000 loss (credit)
difficult
a
($90,000/10)(9/12) - [($160,000 - $60,000)/10](9/12) = $750 debit
difficult
d
72.
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
87.
88.
89.
90.
91.
92.
93.
94.
95.
96.
97.
98.
$60,000 + ($90,000/10)(9/12) - [($160,000 - $60,000)/10](9/12) = $60,750 credit
difficult
b
$90,000 - ($160,000 - $60,000) = $10,000 loss (credit)
($90,000/10)(9/12) - [($160,000 - $60,000)/10](9/12) = $750 debit
easy
d
$120,000 - $84,000 = $36,000 debit
moderate
b
($120,000 - $15,000)/7 = $15,000
difficult
a
$15,000 + {[($120,000 - $15,000)/7](22/12) - ($84,000/7)(22/12)
easy
a
$430,000 - $270,000 = $160,000 debit
moderate
b
($430,000 - $136,000)/10 = $29,400
difficult
c
$136,000 + {[($430,000 - $136,000)/10](15/12) - ($270,000/10)(15/12)
easy
c
$320,000 - $150,000 = $170,000 debit
moderate
d
($320,000 - $140,000)/10 = $18,000
difficult
b
$140,000 + {[($320,000 - $140,000)/10](19/12) - ($150,000/10)(19/12)
easy
d
easy
b
easy
c
$25,000 - $20,000 = $5,000
easy
b
easy
a
easy
d
$75,000 - $56,000 = $19,000
easy
b
moderate
a
$46,000 + ($60,000 - $46,000).4
moderate
c
($60,000 - $46,000) .6
easy
a
moderate
d
$20,000 + ($26,000 - $20,000).7
moderate
b
($26,000 - $20,000) .3
easy
b
moderate
c
$62,000 + ($70,000 - $62,000).4
moderate
a
($70,000 - $62,000) .6
easy
a
$65,000 - $50,000
easy
c
99.
100.
101.
102.
103.
104.
105.
106.
107.
108.
109.
110.
111.
112.
113.
114.
115.
116.
117.
118.
119.
120.
121.
122.
123.
124.
moderate
d
($65,000 - $50,000) .9
moderate
b
($65,000 - $50,000) .1
easy
c
$46,000 - $34,000
easy
d
moderate
a
($46,000 - $34,000) .6
moderate
b
($46,000 - $34,000) .4
moderate
b
($80,000 - $64,000) - ($80,000 - $64,000) .4
easy
c
moderate
a
($80,000 - $64,000) .6
easy
d
moderate
a
($51,000 - $35,000) - ($51,000 - $35,000) .3
easy
c
moderate
d
($51,000 - $35,000) .6
moderate
b
($51,000 - $35,000) - ($51,000 - $35,000) (.30 + .60)
moderate
c
$215,000 - $194,000 = $21,000 loss
moderate
a
$295,000 - $304,000 = $9,000 gain
moderate
d
$375,000 - $382,000 = $7,000 gain
moderate
b
$160,000 - $148,000 = $18,000 loss
easy
a
The face value of the bonds payable is eliminated
moderate
b
$8,000 - ($8,000/80)7 = $7,300
moderate
d
$160,000 - [($160,000 - $150,000)/80]7 = $159,125
difficult
c
($150,000 x .07)(7/12) + ($8,000/80)7 = $6,825
difficult
a
($150,000 x .07)(7/12) - [($160,000 - $150,000)/80]7 = $5,250
moderate
a
$282,000 - $315,000 = $33,000 gain
easy
c
The face value of the bonds payable is eliminated
moderate
d
$15,000 - ($15,000/60)4 = $14,000
125.
126.
127.
128.
129.
130.
131.
132.
133.
134.
135.
136.
137.
138.
139.
140.
141.
142.
143.
144.
145.
146.
147.
148.
moderate
a
$282,000 + [($300,000 - $282,000)/60]4 = $283,200
difficult
b
($300,000 x .06)(4/12) - ($15,000/60)4 = $5,000
difficult
d
($300,000 x .06)(4/12) + [($300,000 - $282,000)/60]4 = $7,200
moderate
c
$644,000 - $627,500 = $16,500 gain
easy
b
The face value of the bonds payable is eliminated
moderate
a
$6,000 - ($6,000/75)11 = $5,120
moderate
c
$627,500 + [($650,000 - $627,500)/75]11 = $630,800
difficult
c
($650,000 x .06)(11/12) + ($6,000/75)11 = $36,630
difficult
d
($650,000 x .06)(11/12) + [($650,000 - $627,500)/75]11 = $39,050
difficult
b
($269,200 - $234,000)(64-10)/64 = $29,700 debit
moderate
a
$16,000 x (64-10-12)/64 = $10,500
moderate
d
$269,200 - [($269,200 - $250,000)/64](10 + 12) = $262,600
moderate
c
($250,000 x .06) + ($16,000/64)12 = $18,000
moderate
a
($250,000 x .06) - [($269,200 - $250,000)/64]12 = $11,400
difficult
b
($415,000 - $380,200)(60-3)/60 = $33,060 credit
moderate
a
$15,000 x [(60-3-12)/60] = $11,250
moderate
c
$380,200 + [($400,000 - $380,200)/60](3 + 12) = $385,150
moderate
d
($400,000 x .06) - ($15,000/60)12 = $21,000
moderate
c
($400,000 x .06) + [($400,000 - $380,200)/60]12 = 27,960
difficult
c
($579,200 - $476,240)(72-7)/72 = $92,950 debit
moderate
a
$23,760 x (72-7-12)/72 = $17,490
moderate
d
$579,200 - [($579,200 - $500,000)/72](7 + 12) = $558,300
moderate
a
($500,000 x .09) + ($23,760/72)12 = $48,960
moderate
b
($500,000 x .09) - [($579,200 - $500,000)/72]12 = $31,800
149.
150.
151.
152.
153.
154.
155.
156.
157.
158.
159.
160.
161.
162.
163.
164.
165.
166.
167.
168.
169.
170.
171.
easy
d
$170,000 - $80,000 = $90,000 debit
moderate
a
$80,000 - ($170,000 - $60,000) = $30,000 loss (credit)
easy
a
$60,000 credit, entire accumulated depreciation is reestablished
moderate
b
$80,000 - ($170,000 - $60,000) = $30,000
($290,000 + $30,000) .3 = $96,000
moderate
d
[$80,000 - ($170,000 - $60,000)].7 = $21,000 credit
moderate
c
[$80,000 - ($170,000 - $60,000)].3 = $9,000 credit
easy
c
$400,000 - $270,000 = $130,000 debit
moderate
a
$270,000 - ($400,000 - $180,000) = $50,000 gain (debit)
easy
c
$180,000 credit, entire accumulated depreciation is reestablished
moderate
d
$270,000 - ($400,000 - $180,000) = $50,000
($463,000 - $50,000) .2 = $82,600
moderate
b
[$270,000 - ($400,000 - $180,000)].8 = $40,000 debit
moderate
a
[$270,000 - ($400,000 - $180,000)].2 = $10,000 debit
easy
b
$250,000 - $230,000 = $20,000 debit
moderate
d
$230,000 - ($250,000 - $80,000) = $60,000 gain (debit)
easy
b
$80,000 credit, entire accumulated depreciation is reestablished
moderate
c
$230,000 - ($250,000 - $80,000) = $60,000
($517,000 - $60,000) .4 = $182,800
moderate
c
[$230,000 - ($250,000 - $80,000)].6 = $36,000 debit
moderate
b
[$230,000 - ($250,000 - $80,000)].4 = $24,000 debit
easy
d
$96,000 - $72,000 = $24,000 debit
moderate
a
$72,000 - ($96,000 - $36,600) = $12,600 gain (debit)
difficult
a
($72,000/5)(4/12) - [($96,000 - $36,600)/5](4/12) = $840 credit
difficult
b
$36,600 - {($72,000/5)(4/12) - [($96,000 - $36,600)/5](4/12)} = $35,760 credit
difficult
c
172.
173.
174.
175.
176.
177.
178.
179.
180.
181.
182.
183.
184.
185.
186.
187.
($72,000/5)(4/12) - [($96,000 - $36,600)/5](4/12) = $840
{$243,000 - [$72,000 - ($96,000 - $36,600)] + $840} .1 = $23,124
difficult
a
$72,000 - ($96,000 - $36,600) = $12,600 gain (debit)
($72,000/5)(4/12) - [($96,000 - $36,600)/5](4/12) = $840 (credit)
($12,600 - $840) .9 = $10,584 debit
difficult
b
$72,000 - ($96,000 - $36,600) = $12,600 gain (debit)
($72,000/5)(4/12) - [($96,000 - $36,600)/5](4/12) = $840 (credit)
($12,600 - $840) .1 = $1,176 debit
easy
d
$600,000 - $360,000 = $240,000 credit
moderate
c
$360,000 - ($600,000 - $254,400) = $14,400 gain (debit)
difficult
d
($360,000/12)(10/12) - [($600,000 - $254,400)/12](10/12) = $1,000 credit
difficult
b
$254,400 - {($360,000/12)(10/12) - [($600,000 - $254,400)/12](10/12)} = $253,400
credit
difficult
b
($360,000/12)(10/12) - [($600,000 - $254,400)/12](10/12) = $1,000
{$530,000 - [$360,000 - ($600,000 - $254,400)] + $1,000} .2 = $103,320
difficult
a
$360,000 - ($600,000 - $254,400) = $14,400 gain (debit)
($360,000/12)(10/12) - [($600,000 - $254,400)/12](10/12) = $1,000 credit
($14,400 - $1,000) .8 = $10,720 debit
difficult
c
$360,000 - ($600,000 - $254,400) = $14,400 gain (debit)
($360,000/12)(10/12) - [($600,000 - $254,400)/12](10/12) = $1,000 credit
($14,400 - $1,000) .2 = $2,680 debit
easy
a
$750,000 - $384,000 = $366,000 debit
moderate
c
$384,000 - ($750,000 - $308,400) = $57,600 loss (credit)
difficult
d
($384,000/10)(7/12) - [($750,000 - $308,400)/10](7/12) = $3,360 debit
difficult
a
$308,400 + ($384,000/10)(7/12) - [($750,000 - $308,400)/10](7/12) = $311,760 credit
difficult
d
$384,000 - ($750,000 - $308,400) = $57,600
($384,000/10)(7/12) - [($750,000 - $308,400)/10](7/12) = $3,360
($580,000 + $57,600 - $3,360) .3 = $190,272
difficult
b
$384,000 - ($750,000 - $308,400) = $57,600 loss (credit)
($384,000/10)(7/12) - [($750,000 - $308,400)/10](7/12) = $3,360 debit
($57,600 -$3,360) .7 = $37,968 credit
difficult
a
$384,000 - ($750,000 - $308,400) = $57,600 loss (credit)
188.
189.
190.
191.
192.
193.
194.
195.
196.
197.
198.
199.
200.
201.
202.
203.
204.
205.
206.
207.
208.
209.
210.
211.
($384,000/10)(7/12) - [($750,000 - $308,400)/10](7/12) = $3,360 debit
($57,600 -$3,360) .3 = $16,272 credit
easy
b
$95,000 - $63,000 = $32,000 debit
moderate
a
($95,000 - $19,400)/7 = $10,800
difficult
a
$19,400 + {[($95,000 - $19,400)/84](20) - ($63,000/84)(20) = $22,400
difficult
b
[($95,000 - $19,400)/7] - ($63,000/7) = $1,800
($238,000 - $1,800) .2 = $47,240
easy
d
$170,000 - $120,000 = $50,000 debit
moderate
c
($170,000 - $35,600)/10 = $13,440
difficult
b
$35,600 + {[($170,000 - $35,600)/120](23) - ($120,000/120)(23)}
moderate
a
[($170,000 - $35,600)/10] - ($120,000/10) = $1,440
($192,000 - $1,440) .1 = $19,056
easy
c
$370,000 - $211,200 = $158,800 debit
moderate
b
($370,000 - $130,000)/8 = $30,000
difficult
a
$130,000 + {[($370,000 - $130,000)/96](19) - ($211,200/96)(19)}
difficult
b
[($370,000 - $130,000)/8] - ($211,200/8) = $3,600
($254,000 - $3,600) .3 = $75,120
easy
a
easy
c
easy
d
$73,000 - $65,000 = $8,000
moderate
b
[$162,000 - ($73,000 - $65,000)] .3 = $46,200
easy
c
easy
b
easy
a
$98,000 - $86,000 = $12,000
moderate
c
[$274,000 - ($98,000 - $86,000)] .2 = $46,200
easy
c
moderate
b
$52,000 + ($70,000 - $52,000).6
moderate
d
($70,000 - $52,000) .4
moderate
c
[$157,000 - ($70,000 - $52,000) + ($70,000 - $52,000).6] .3 = $44,940
212.
213.
214.
215.
216.
217.
218.
219.
220.
221.
222.
223.
224.
225.
226.
227.
228.
229.
230.
231.
232.
233.
234.
235.
236.
237.
238.
easy
d
moderate
b
$34,000 + ($41,000 - $34,000).8
moderate
c
($41,000 - $34,000) .2
moderate
a
[$210,000 - ($41,000 - $34,000) + ($41,000 - $34,000) .8].4 = $83,440
easy
c
moderate
d
$94,000 + ($115,000 - $94,000).4
moderate
b
($115,000 - $94,000) .6
moderate
a
[$320,000 - ($115,000 - $94,000) + ($115,000 - $94,000) .4] .1 = $30,740
moderate
b
($125,000 - $93,000) .8 = $25,600
moderate
c
($125,000 - $93,000) .2 = $6,400
easy
d
moderate
a
($125,000 - $93,000) .7
moderate
c
($125,000 - $93,000) .3
moderate
a
[$293,000 + ($125,000 - $93,000) .7] .2 = $63,080
moderate
d
($37,000 - $28,000) .7 = $6,300
moderate
b
($37,000 - $28,000) .3 = $2,700
easy
a
moderate
b
($37,000 - $28,000) .6
moderate
c
($37,000 - $28,000) .4
moderate
b
[$184,000 + ($37,000 - $28,000) .6] .3 = $56,820
difficult
d
[($98,000 - $84,000) - ($98,000 - $84,000) .6] .9 = $5,040
difficult
c
[($98,000 - $84,000) - ($98,000 - $84,000) .6] .1 = $560
easy
d
moderate
b
($98,000 - $84,000) .4
easy
a
moderate
c
[$372,000 + ($98,000 - $84,000) .4] .1 = $37,760
moderate
b
[($65,000 - $52,000) - ($65,000 - $52,000) .2] .9 = $9,360
239.
240.
241.
242.
243.
244.
245.
246.
247.
248.
249.
250.
251.
252.
253.
254.
255.
256.
257.
258.
259.
260.
261.
moderate
c
[($65,000 - $52,000) - ($65,000 - $52,000) .2] .1 = $1,040
easy
d
moderate
a
($65,000 - $52,000) .7
moderate
c
($65,000 - $52,000) - ($65,000 - $52,050) (.20 + .70)
moderate
b
[$312,000 + ($65,000 - $52,000) .7] .1 = $32,110
moderate
b
$320,000 - $296,000 = $24,000 loss
moderate
a
[$138,000 - ($320,000 - $296,000)] .3
moderate
c
$98,000 - $103,000 = $5,000 gain
moderate
d
[$129,000 + ($103,000 - $98,000)] .1 = $13,400
moderate
d
$193,000 - $197,000 = $4,000 gain
moderate
c
[$429,000 + ($197,000 - $193,000)] .2 = $86,600
moderate
c
$272,500 - $241,000 = $31,500 loss
easy
b
The face value of the bonds payable is eliminated
moderate
c
$9,000 - ($9,000/75)4 = $8,520
moderate
a
$272,500 - [($272,500 - $250,000)/75]4 = $271,300
difficult
d
($250,000 x .06)(4/12) + ($9,000/75)4 = $5,480
difficult
b
($250,000 x .06)(4/12) - [($272,500 - $250,000)/75]4 = $3,800
difficult
b
$272,500 - $241,000 = $31,500 loss
($250,000 x .06)(4/12) + ($9,000/75)4 = $5,480 interest expense
($250,000 x .06)(4/12) - [($272,500 - $250,000)/75]4 = $3,800 interest revenue
($375,000 - $31,500 + $5,480 - $3,800) .4 = $138,072
moderate
b
$473,040 - $436,080 = $36,960 gain
easy
d
The face value of the bonds payable is eliminated
moderate
a
$23,040 - ($23,040/96)7 = $21,360
moderate
b
$436,080 + [($450,000 - $436,080)/96]7 = $437,095
difficult
b
($450,000 x .08)(7/12) - ($23,040/96)7 = $19,320
262.
263.
264.
265.
266.
267.
268.
269.
270.
271.
272.
273.
274.
275.
276.
277.
278.
279.
280.
281.
difficult
d
($450,000 x .08)(7/12) + [($450,000 - $436,080)/96]7 = $22,015
difficult
c
$473,040 - $436,080 = $36,960 gain
($450,000 x .08)(7/12) - ($23,040/96)7 = $19,320 interest expense
($450,000 x .08)(7/12) + [($450,000 - $436,080)/96]7 = $22,015 interest revenue
($493,000 + $36,960 + $19,320 - $22,015) .4 = $210,906
moderate
d
($600,000 - $9,240) - $583,200 = $7,560 gain
easy
c
The face value of the bonds payable is eliminated
moderate
b
$9,240 - ($9,240/84)4 = $8,800
moderate
d
$583,200 + [($600,000 - $583,200)/84]4 = $584,000
difficult
d
($600,000 x .07)(4/12) + ($9,240/84)4 = $14,440
difficult
a
($600,000 x .07)(4/12) + [($600,000 - $583,200)/84]4 = $14,800
difficult
b
($600,000 - $9,240) - $583,200 = $7,560 gain
($600,000 x .07)(4/12) + ($9,240/84)4 = $14,440 interest expense
($600,000 x .07)(4/12) + [($600,000 - $583,200)/84]4 = $14,800 interest revenue
($392,000 + $7,560 + $14,440 - $14,800) .3 = $119,760
difficult
c
[($213,860 - $193,400)(66-2)/66] .8 = $15,872 debit
difficult
a
[($213,860 - $193,400)(66-2)/66] .2 = $3,968 debit
moderate
b
$6,600 x (66-2-12)/66 = $5,200
moderate
a
$213,860 - [($213,860 - $200,000)/66](2 + 12) = $210,920
moderate
d
($200,000 x .06) + (6,600/66)12 = $13,200
moderate
b
($200,000 x .06) - [($213,860 - $200,000)/66]12 = $9,480
difficult
a
($200,000 x .06) + (6,600/66)12 = $13,200 interest expense
($200,000 x .06) - [($213,860 - $200,000)/66]12 = $9,480 interest revenue
($247,000 - $9,480 + $13,200) .2 = $50,144
difficult
c
[($312,960 - $284,880)(72-4)/72] .7 = $18,564 credit
difficult
a
[($312,960 - $284,880)(72-4)/72] .3 = $7,956 credit
moderate
b
$12,960 x [(72-4-12)/72] = $10,080
moderate
d
$284,880 + [($300,000 - $284,880)/72](4 + 12) = $288,240
282.
283.
284.
285.
286
287.
288.
289.
290.
291.
moderate
a
($300,000 x .07) - ($12,960/72)12 = $18,840
moderate
d
($300,000 x .07) + [($300,000 - $284,880)/72]12 = $23,520
difficult
d
($300,000 x .07) - ($12,960/72)12 = $18,840 interest expense
($300,000 x .07) + [($300,000 - $284,880)/72]12 = $23,520 interest revenue
($370,000 + $18,840 - $23,520) .3 = $109,596
difficult
d
{[$644,640 - ($600,000 - $30,960)][(72-2)/72]} .8 = $58,800 debit
difficult
b
{[$644,640 - ($600,000 - $30,960)][(72-2)/72]} .2 = $14,700 debit
moderate
b
$30,960 x (72-2-12)/72 = $24,940
moderate
a
$644,640 - [($644,640 - $600,000)/72](2 + 12) = $635,960
moderate
b
($600,000 x .08) + ($30,960/72)12 = $53,160
moderate
c
($600,000 x .08) - [($644,640 - $600,000)/72]12 = $40,560
difficult
d
($600,000 x .08) + ($30,960/72)12 = $53,160 interest expense
($600,000 x .08) - [($644,640 - $600,000)/72]12 = $40,560 interest revenue
($520,000 - $40,560 + $53,160) .2 = $106,520
Problems
292.
(10 Points) easy
Patton Corporation sells a machine to its 70 percent subsidiary, Lisko Enterprises for
$180,000 December 31, 2005. At that date, the machine and accumulated depreciation
accounts on Patton’s financial records are $300,000 and $90,000, respectively. The
machine has a remaining life of six years for Patton and is assigned a life of ten years
when acquired by Lisko.
Required:
a.
Record the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2005.
b.
What is the income to noncontrolling interest in 2005 if Lisko has reported net
income of $170,000.
Answer:
Part a.
Machine ($300,000 - $180,000)
Loss on Sale of Machine [$180,000 - ($300,000 $90,000)]
Accumulated Depreciation
Part b.
120,000
30,000
90,000
Income to Noncontrolling Interest = $170,000 x .3 = $51,000
293.
(10 Points) easy
Janson Corporation sells equipment to its 90 percent subsidiary, Miami Enterprises for
$300,000 on December 31, 2005. At that date, the equipment and accumulated
depreciation accounts on Janson’s financial records are $550,000 and $200,000,
respectively. The equipment has a remaining life of five years for Janson and is assigned
a life of six years when acquired by Miami.
Required:
a.
Record the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2005.
b.
What is the income to noncontrolling interest in 2005 if Miami has reported net
income of $69,000.
Answer:
Part a.
Machine ($550,000 - $300,000)
250,000
Loss on Sale of Equipment [$300,000 - ($550,000 $200,000)]
Accumulated Depreciation
50,000
200,000
Part b.
Income to Noncontrolling Interest = $69,000 x .1 = $6,900
294.
(10 Points) easy
Hamilton Corporation sells a machine to its 80 percent subsidiary, Gregory Enterprises
for $40,000 on December 31, 2005. At that date, the machine and accumulated
depreciation accounts on Hamilton’s financial records are $60,000 and $35,000,
respectively. The machine has a remaining life of five years for Hamilton and is assigned
a life of four years when acquired by Gregory.
Required:
a.
Record the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2005.
b.
What is the income to noncontrolling interest in 2005 if Gregory has reported net
income of $328,000?
Answer:
Part a.
Machine ($60,000 - $40,000)
20,000
Gain on Sale of Machine [$40,000 - ($60,000 - $35,000)] 15,000
Accumulated Depreciation
Part b.
Income to Noncontrolling Interest = $328,000 x .2 = $65,600
295.
(10 Points) easy
35,000
Chong Corporation sells a building to its 70 percent subsidiary, James Enterprises for
$540,000 on December 31, 2005. At that date, the building and accumulated
depreciation accounts on Chong’s financial records are $480,000 and $90,000,
respectively. The building has a remaining life of seven years for Chong and is assigned
a life of nine years when acquired by James.
Required:
a.
Record the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2005.
b.
What is the income to noncontrolling interest in 2005 if James has reported net
income of $273,000?
Answer:
Part a.
Gain on Sale of Building [$540,000 - ($480,000 $90,000)]
Building ($540,000 - $480,000)
Accumulated Depreciation
150,000
60,000
90,000
Part b.
Income to Noncontrolling Interest = $273,000 x .3 = $81,900
296.
(15 Points) moderate
Jensen Corporation sells a machine to its 80 percent subsidiary, Dukes Enterprises for
$120,000 on March 1, 2005. At that date, the machine and accumulated depreciation
accounts on Jensen’s financial records are $260,000 and $80,000, respectively. The
machine has a remaining life of six years for Jensen and is assigned a life of ten years
when acquired by Dukes.
Required:
a.
Record the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2005.
b.
What is the income to noncontrolling interest in 2005 if Dukes has reported net
income of $184,000?
Answer:
Part a.
Machine ($260,000 - $120,000)
Depreciation Expense [($120,000/120) 10] –
[($260,000 - $80,000)/120] 10
Loss on Sale of Machine [$120,000 - ($260,000 $80,000)]
Accumulated Depreciation ($80,000 + $5,000)
140,000
5,000
Part b.
Income to Noncontrolling Interest = $184,000 x .2 = $36,800
297.
(15 Points) moderate
60,000
85,000
Flexor Corporation sells equipment to its 70 percent subsidiary, Tubing Enterprises for
$210,000 on May 1, 2005. At that date, the equipment and accumulated depreciation
accounts on Flexor’s financial records are $680,000 and $282,500, respectively. The
equipment has a remaining life of seven years for Flexor and is assigned a life of five
years when acquired by Tubing.
Required:
a.
Record the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2005.
b.
What is the income to noncontrolling interest in 2005 if Tubing has reported net
income of $327,000?
Answer:
Part a.
Machine ($680,000 - $210,000)
470,000
Depreciation Expense ($210,000/5)(8/12) - [($680,000 25,000
$282,500)/5](8/12)
Loss on Sale of Equipment [$210,000 - ($680,000 $282,500)]
Accumulated Depreciation ($282,500 + $25,000)
187,500
307,500
Part b.
Income to Noncontrolling Interest = $327,000 x .3 = $98,100
298.
(15 Points) moderate
Burnaby Corporation sells a machine to its 90 percent subsidiary, Flagstone Enterprises
for $24,000 on October 1, 2005. At that date, the machine and accumulated depreciation
accounts on Burnaby’s financial records are $65,000 and $45,000, respectively. The
machine has a remaining life of five years for Burnaby and is assigned a life of four years
when acquired by Flagstone.
Required:
a.
Record the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2005.
b.
What is the income to noncontrolling interest in 2005 if Flagstone has reported
net income of $126,000?
Answer:
Part a.
Machine ($65,000 - $24,000)
41,000
Gain on Sale of Machine [$24,000 - ($65,000 - $45,000)] 4,000
Depreciation Expense ($24,000/4)(3/12) [($65,000 - $45,000)/4](3/12)
Accumulated Depreciation ($45,000 - $250)
Part b.
Income to Noncontrolling Interest = $126,000 x .1 = $12,600
250
44,750
299.
(15 Points) moderate
Chip Corporation sells a building to its 60 percent subsidiary, Dale Enterprises for
$356,400 on February 1, 2005. At that date, the building and accumulated depreciation
accounts on Chip’s financial records are $500,000 and $197,600, respectively. The
building has a remaining life of seven years for Chip and is assigned a life of nine years
when acquired by Dale.
Required:
a.
Record the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2005.
b.
What is the income to noncontrolling interest in 2005 if Dale has reported net
income of $483,000?
Answer:
Part a.
Building ($500,000 - $356,400)
Gain on Sale of Building [$356,400 - ($500,000 $197,600)]
Depreciation Expense ($356,400/9)(11/12) [($500,000 - $197,600)/9](11/12)
Accumulated Depreciation ($197,600 - $5,500)
143,600
54,000
5,500
192,100
Part b.
Income to Noncontrolling Interest = $483,000 x .4 = $193,200
300.
(20 Points) moderate
Garvey Company sells a machine to its 80 percent subsidiary, Marks Enterprises for
$80,000 on December 31, 2005. At that date, the machine and accumulated depreciation
accounts on Garvey’s financial records are $180,000 and $60,000, respectively. The
machine has a remaining life of six years for Garvey and is assigned a life of ten years
when acquired by Marks.
Required:
a.
Record the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Marks has reported net
income of $193,000?
Answer:
Part a.
Machine ($180,000 - $80,000)
100,000
Depreciation Expense ($80,000/10) - [($180,000 4,000
$60,000)]/10
Retained Earnings [$80,000 - ($180,000 - $60,000)]
Accumulated Depreciation ($60,000 + $4,000)
Part b.
Income to Noncontrolling Interest = $193,000 x .2 = $38,600
40,000
64,000
301.
(20 Points) moderate
Roller Corporation sells equipment to its 90 percent subsidiary, Bearing Enterprises for
$160,000 on December 31, 2005. At that date, the equipment and accumulated
depreciation accounts on Roller’s financial records are $250,000 and $50,000,
respectively. The equipment has a remaining life of five years for Roller and is assigned
a life of eight years when acquired by Bearing.
Required:
a.
Record the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Bearing has reported net
income of $285,000?
Answer:
Part a.
Machine ($250,000 - $160,000)
90,000
Depreciation Expense ($160,000/8) - [$250,000 5,000
$50,000)/8]
Retained Earnings [$160,000 - ($250,000 - $50,000)]
Accumulated Depreciation ($50,000 + $5,000)
40,000
55,000
Part b.
Income to Noncontrolling Interest = $285,000 x .1 = $28,500
302.
(20 Points) moderate
Langly Corporation sells a machine to its 60 percent subsidiary, Pentagon Enterprises for
$250,000 on December 31, 2005. At that date, the machine and accumulated
depreciation accounts on Langly’s financial records are $350,000 and $140,000,
respectively. The machine has a remaining life of seven years for Langly and is assigned
a life of five years when acquired by Pentagon.
Required:
a.
Record the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Pentagon has reported net
income of $320,000?
Answer:
Part a.
Machine ($350,000 - $250,000)
100,000
Retained Earnings [$250,000 - ($350,000 - $140,000)]
40,000
Depreciation Expense ($250,000/5) - [($350,000 $140,000)/5]
Accumulated Depreciation ($140,000 - 8,000)
Part b.
Income to Noncontrolling Interest = $320,000 x .4 = $128,000
8,000
132,000
303.
(20 Points) moderate
Cesar Company sells a building to its 80 percent subsidiary, Brutus Enterprises for
$660,000 on December 31, 2005. At that date, the building and accumulated
depreciation accounts on Cesar’s financial records are $720,000 and $180,000,
respectively. The building has a remaining life of eight years for Cesar and is assigned a
life of ten years when acquired by Brutus.
Required:
a.
Record the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Brutus has reported net
income of $215,000?
Answer:
Part a.
Building ($720,000 - $660,000)
60,000
Retained Earnings [$660,000 - ($720,000 - $180,000)]
120,000
Depreciation Expense ($660,000/10) - [($720,000 $180,000)/10]
Accumulated Depreciation ($180,000 - $12,000)
12,000
168,000
Part b.
Income to Noncontrolling Interest = $215,000 x .2 = $43,000
304.
(20 Points) difficult
Kenned Company sells a machine to its 70 percent subsidiary, Eyeware Enterprises for
$90,000 on June 1, 2005. At that date, the machine and accumulated depreciation
accounts on Kenned’s financial records are $210,000 and $75,000, respectively. The
machine has a remaining life of six years for Kenned and is assigned a life of ten years
when acquired by Eyeware.
Required:
a.
Record the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Eyeware has reported net
income of $135,000?
Answer:
Part a.
Machine ($210,000 - $90,000)
120,000
Depreciation Expense ($90,000/10) - [($210,000 4,500
$75,000)/10]
Retained Earnings [$90,000 - ($210,000 - $75,000)] ($90,000/10) (7/12) - [($210,000 - $75,000)/10] (7/12)}
Accumulated Depreciation $75,000 + {($90,000/10)
(7/12) - [($210,000 - $75,000)/10] (7/12)} + $4,500
42,375
82,125
Part b.
Income to Noncontrolling Interest = $135,000 x .3 = $40,500
305.
(20 Points) difficult
Bear Corporation sells equipment to its 90 percent subsidiary, Tiger Enterprises for
$160,000 on October 1, 2005. At that date, the equipment and accumulated depreciation
accounts on Bear’s financial records are $300,000 and $120,000, respectively. The
equipment has a remaining life of six years for Bear and is assigned a life of eight years
when acquired by Tiger.
Required:
a.
Record the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Tiger has reported net
income of $361,000?
Answer:
Part a.
Machine ($300,000 - $160,000)
140,000
Depreciation Expense [($300,000 - $120,000)/8] 2,500
($160,000/8)
Retained Earnings [$160,000 - ($300,000 $120,000)] - {($160,000/8)(3/12) - [($300,000 $120,000)/8](3/12)}
Accumulated Depreciation ($120,000 + {($160,000/8)
(3/12) - [($300,000 - $120,000)8](3/12)} + $2,500)
19,375
123,125
Part b.
Income to Noncontrolling Interest = $361,000 x .1 = $36,100
306.
(25 Points) difficult
Pearson Company sells a machine to its 80 percent subsidiary, Shreck Enterprises for
$244,800 on May 1, 2005. At that date, the machine and accumulated depreciation
accounts on Pearson’s financial records are $320,000 and $122,000, respectively. The
machine has a remaining life of eight years for Pearson and is assigned a life of six years
when acquired by Shreck.
Required:
a.
Record the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Shreck has reported net
income of $186,000?
Answer:
Part a.
Machine ($320,000 - $244,800)
Retained Earnings [$244,800 - ($320,000 - $122,000)] {[($244,800/6)(8/12)] - [($320,000 - $122,000)/6](8/12)}
75,200
41,600
Depreciation Expense ($244,800/6) - [($320,000 $122,000)/6]
Accumulated Depreciation $122,000 - {[($244,800/6)
(8/12)] - [($320,000 - $122,000)/6](8/12)} - $7,800
7,800
109,000
Part b.
Income to Noncontrolling Interest = $186,000 x .2 = $37,200
307.
(15 Points) difficult
O’Keefe Corporation sells a building to its 90 percent subsidiary, Collins Enterprises for
$480,000 on September 1, 2005. At that date, the building and accumulated depreciation
accounts on O’Keefe’s financial records are $600,000 and $204,000, respectively. The
building has a remaining life of fifteen years for O’Keefe and is assigned a life of twenty
years when acquired by Collins.
Required:
a.
Record the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Collins has reported net
income of $217,000?
Answer:
Part a.
Building ($600,000 - $480,000)
120,000
Retained Earnings [$480,000 - ($600,000 - $204,000)] 82,600
{[($480,000/20)(4/12)] - [($600,000 - 204,000)/20](4/12)}
Depreciation Expense ($480,000/20) - [($600,000 $204,600)/20]
Accumulated Depreciation $204,000 - {[($480,000/20)
(4/12)] - [($600,000 - $204,000)/20](4/12)} - $4,200
4,200
198,400
Part b.
Income to Noncontrolling Interest = $217,000 x .1 = $21,700
308.
(5 Points) easy
King Corporation owns 100 percent of Joker Company’s stock. On December 29, 2005,
King sells inventory with a cost of $30,000 to Joker for $35,000. Assuming none of this
inventory is sold to an unrelated party by the end of 2005, prepare the intercompany
transaction worksheet elimination for the preparation of the 2005 consolidated financial
statements.
Answer:
Sales
Cost of Goods Sold
Inventory
309.
(5 Points) easy
35,000
30,000
5,000
Large Corporation sells inventory costing $48,000 to its 100 percent subsidiary (Tiny
Company) on December 21, 2005 for $55,000. None of this inventory is sold to an
unrelated party by the end of 2005. Prepare the intercompany transaction worksheet
elimination for the preparation of the 2005 consolidated financial statements.
Answer:
Sales
Cost of Goods Sold
Inventory
310.
55,000
48,000
7,000
(10 Points) easy
Wasp Corporation owns 80 percent of Stinger Company’s stock. On December 30, 2005,
Wasp sells inventory with a cost of $63,000 to Stinger for $75,000.
Required:
a.
Assuming none of this inventory is sold to an unrelated party by the end of 2005,
prepare the intercompany transaction worksheet elimination for the preparation of
the 2005 consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Stinger has reported net
income of $263,000?
Answer:
Part a.
Sales
Cost of Goods Sold
Inventory
75,000
63,000
12,000
Part b.
Income to Noncontrolling Interest = $263,000 x .2 = $52,600
311.
(10 Points) easy
Pristine Corporation sells inventory costing $15,000 to its 70 percent subsidiary (Slim
Company) on December 15, 2005 for $18,000. None of this inventory is sold to an
unrelated party by the end of 2005.
Required:
a.
Prepare the intercompany transaction worksheet elimination for the preparation of
the 2005 consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Slim has reported net
income of $152,000?
Answer:
Part a.
Sales
Cost of Goods Sold
Inventory
Part b.
18,000
15,000
3,000
Income to Noncontrolling Interest = $152,000 x .3 = $45,600
312.
(10 Points) moderate
Agri Corporation owns 100 percent of Commodity Company’s stock. On November 29,
2005, Agri sells inventory with a cost of $70,000 to Commodity for $92,000. Assume
that 60 percent of this inventory is sold to an unrelated party by the end of 2005 for
$72,000. Prepare the intercompany transaction worksheet elimination for the preparation
of the 2005 consolidated financial statements.
Answer:
Sales
Cost of Goods Sold [$70,000 + ($92,000 $70,000) .6]
Inventory ($92,000 - $70,000) .4
313.
83,200
8,800
(10 Points) moderate
Marine Corporation sells inventory costing $50,000 to its 100 percent subsidiary (Terry
Company) on October 28, 2005 for $65,000. Terry sells 30 percent of this inventory to
an unrelated party by the end of 2005 for $24,000. Prepare the intercompany transaction
worksheet elimination for the preparation of the 2005 consolidated financial statements.
Answer:
Sales
Cost of Goods Sold [$50,000 + ($65,000 $50,000) .3]
Inventory ($65,000 - $50,000) .7
314.
92,000
65,000
54,500
10,500
(10 Points) moderate
Wyoming Corporation owns 90 percent of Colorado Company’s stock. On December 1,
2005, Wyoming sells inventory with a cost of $62,000 to Colorado for $80,000. Assume
that 70 percent of this inventory is sold to an unrelated party by the end of 2005 for
$60,000.
Required:
a.
Prepare the intercompany transaction worksheet elimination for the preparation of
the 2005 consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Colorado has reported net
income of $326,000?
Answer:
Part a.
Sales
Cost of Goods Sold [$62,000 + ($80,000 $62,000) .7]
Inventory ($80,000 - $62,000) .3
80,000
Part b.
Income to Noncontrolling Interest = $326,000 x .1 = $32,600
74,600
5,400
315.
(10 Points) moderate
Elastic Corporation sells inventory costing $31,000 to its 80 percent subsidiary (Ribbon
Company) on September 15, 2005 for $40,000. Ribbon sells 90 percent of this inventory
to an unrelated party by the end of 2005 for $46,000.
Required:
a.
Prepare the intercompany transaction worksheet elimination for the preparation of
the 2005 consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Ribbon has reported net
income of $203,000?
Answer:
Part a.
Sales
Cost of Goods Sold [$31,000 - ($40,000 $31,000) .9]
Inventory ($40,000 - $31,000) .1
40,000
39,100
900
Part b.
Income to Noncontrolling Interest = $203,000 x .2 = $40,600
316.
(5 Points) easy
Whaler Corporation owns 100 percent of Scrod Company’s stock. On August 29, 2005,
Whaler sells inventory with a cost of $35,000 to Scrod for $47,000. Assume that this
entire inventory is sold to an unrelated party by the end of 2005 for $65,000. Prepare the
intercompany transaction worksheet elimination for the preparation of the 2005
consolidated financial statements.
Answer:
Sales
Cost of Goods Sold
317.
47,000
(5 Points) easy
Jacobs Corporation sells inventory costing $56,000 to its 100 percent subsidiary (Son
Company) on September 28, 2005 for $65,000. Son sells this entire inventory to an
unrelated party by the end of 2005 for $90,000. Prepare the intercompany transaction
worksheet elimination for the preparation of the 2005 consolidated financial statements.
Answer:
Sales
Cost of Goods Sold
318.
47,000
65,000
65,000
(5 Points) easy
Casper Corporation owns 70 percent of Larimar Company’s stock. On November 10,
2005, Casper sells inventory with a cost of $27,000 to Larimar for $31,000. Assume that
this entire inventory is sold to an unrelated party by the end of 2005 for $40,000.
Required:
a.
Prepare the intercompany transaction worksheet elimination for the preparation of
the 2005 consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Larimar has reported net
income of $168,000?
Answer:
Part a.
Sales
Cost of Goods Sold
31,000
31,000
Part b.
Income to Noncontrolling Interest = $168,000 x .3 = $50,400
319.
(5 Points) easy
Whisper Corporation sells inventory costing $62,000 to its 90 percent subsidiary (Shout
Company) on October 22, 2005 for $80,000. Shout sells this entire inventory to an
unrelated party by the end of 2005 for $96,000.
Required:
a.
Prepare the intercompany transaction worksheet elimination for the preparation of
the 2005 consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Shout has reported net
income of $389,000.
Answer:
Part a.
Sales
Cost of Goods Sold
80,000
80,000
Part b.
Income to Noncontrolling Interest = $389,000 x .1 = $38,900
320.
(10 Points) moderate
Paul Corporation owns 100 percent of Sally Company’s stock. On December 29, 2005,
Paul sells inventory with a cost of $15,000 to Sally for $18,000. Assuming none of this
inventory is sold to an unrelated party by the end of 2005 and 40 percent is sold to an
unrelated party in 2006 for $9,500, prepare the intercompany transaction worksheet
elimination for the preparation of the 2006 consolidated financial statements.
Answer:
Retained Earnings ($18,000 - $15,000)
Cost of Goods Sold ($18,000 - $15,000) .4
Inventory ($18,000 - $15,000) .6
321.
3,000
1,200
1,800
(10 Points) moderate
Car Corporation sells inventory costing $70,000 to its 100 percent subsidiary (Van
Company) on December 18, 2005 for $88,000. None of this inventory is sold to an
unrelated party by the end of 2005. However, 80 percent is sold to unrelated parties in
2006 for $79,000. Prepare the intercompany transaction worksheet elimination for the
preparation of the 2006 consolidated financial statements.
Answer:
Retained Earnings ($88,000 - $70,000)
Cost of Goods Sold ($88,000 - $70,000) .8
Inventory ($88,000 - $70,000) .2
322.
18,000
14,400
3,600
(15 Points) moderate
Atlanta Corporation owns 80 percent of Montgomery Company’s stock. On December
28, 2005, Atlanta sells inventory with a cost of $59,000 to Montgomery for $73,000.
Assume that none of this inventory is sold to an unrelated party by the end of 2005 and
70 percent is sold to unrelated parties in 2006.
Required:
a.
Prepare the intercompany transaction worksheet elimination for the preparation of
the 2006 consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Montgomery has reported
net income of $242,000?
Answer:
Part a.
Retained Earnings ($73,000 - $59,000)
Cost of Goods Sold ($73,000 - $59,000) .7
Inventory ($73,000 - $59,000) .3
14,000
9,800
4,200
Part b.
Income to Noncontrolling Interest = $242,000 x .2 = $48,400
323.
(15 Points) moderate
Quantum Corporation sells inventory costing $63,000 to its 80 percent subsidiary (Time
Company) on December 10, 2005 for $78,000. None of this inventory is sold to an
unrelated party by the end of 2005. However, 90 percent is sold to unrelated parties in
2006 for $82,000.
Required:
a.
Prepare the intercompany transaction worksheet elimination for the preparation of
the 2006 consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Time has reported net
income of $436,000?
Answer:
Part a.
Retained Earnings ($78,000 - $63,000)
Cost of Goods Sold ($78,000 - $63,000) .9
Inventory ($78,000 - $63,000) .1
15,000
13,500
1,500
Part b.
Income to Noncontrolling Interest = $436,000 x .2 = $87,200
324.
(10 Points) moderate
Able Corporation owns 100 percent of Door Company’s stock. On October 29, 2005,
Able sells inventory with a cost of $37,000 to Door for $52,000. Assume that 60 percent
of this inventory is sold to unrelated parties by the end of 2005 for $42,000 and the
remainder is sold to unrelated parties in 2006 for $27,000. Prepare the relevant
worksheet elimination for the preparation of the 2006 consolidated financial statements.
Answer:
Retained Earnings ($52,000 - $37,000) - ($52,000 $37,000) .6
Cost of Goods Sold ($52,000 - $37,000) .4
325.
6,000
(10 Points) moderate
Claire Corporation sells inventory costing $60,000 to its 100 percent subsidiary (Sled
Company) on October 15, 2005 for $70,000. Sled sells 70 percent of this inventory to
unrelated parties by the end of 2005 for $58,000 and the remainder is sold to unrelated
parties in 2006 for $29,000. Prepare the relevant worksheet elimination for the
preparation of the 2006 consolidated financial statements.
Answer:
Retained Earnings ($70,000 - $60,000) - ($70,000 $60,000) .7
Cost of Goods Sold ($70,000 - $60,000) .3
326.
6,000
3,000
3,000
(15 Points) moderate
Portland Corporation owns 60 percent of Seattle Company’s stock. On December 12,
2005, Portland sells inventory with a cost of $24,000 to Seattle for $35,000. Assume that
20 percent of this inventory is sold to unrelated parties by the end of 2005 for $9,500 and
the remainder is sold to unrelated parties in 2006 for $31,000.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Seattle has reported net
income of $225,000?
Answer:
Part a.
Retained Earnings ($35,000 - $24,000) - ($35,000 $24,000) .2
Cost of Goods Sold ($35,000 - $24,000) .8
8,800
Part b.
Income to Noncontrolling Interest = $225,000 x .4 = $90,000
8,800
327.
(15 Points) moderate
Dallas Corporation sells inventory costing $76,000 to its 90 percent subsidiary (Houston
Company) on September 1, 2005 for $93,000. Houston sells 70 percent of this inventory
to unrelated parties by the end of 2005 for $81,000 and the remainder is sold to unrelated
parties by the end of 2006 for $35,000.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Houston has reported net
income of $256,000?
Answer:
Part a.
Retained Earnings ($93,000 - $76,000) - ($93,000 $76,000) .7
Cost of Goods Sold ($93,000 - $76,000) .3
5,100
5,100
Part b.
Income to Noncontrolling Interest = $256,000 x .1 = $25,600
328.
(10 Points) moderate
Philadelphia Corporation owns 100 percent of Sacramento Company’s stock. On
November 29, 2005, Philadelphia sells inventory with a cost of $82,000 to Sacramento
for $112,000. Assume that 10 percent of this inventory is sold to unrelated parties by the
end of 2005 for $17,000 and that an additional 70 percent is sold to unrelated parties in
2006 for $94,000. Prepare the relevant worksheet elimination for the preparation of the
2006 consolidated financial statements.
Answer:
Retained Earnings ($112,000 - $82,000) - ($112,000 $82,000) .1
Cost of Goods Sold ($112,000 - $82,000) .7
Inventory ($112,000 - $82,000) .2
329.
27,000
21,000
6,000
(10 Points) moderate
Chicago Corporation sells inventory costing $70,000 to its 100 percent subsidiary
(Milwaukee Company) on November 15, 2005 for $92,000. Milwaukee sells 20 percent
of this inventory to unrelated parties by the end of 2005 for $38,000 and an additional 70
percent is sold to unrelated parties in 2006 for $71,000. Prepare the relevant worksheet
elimination for the preparation of the 2006 consolidated financial statements.
Answer:
Retained Earnings ($92,000 - $70,000) - ($92,000 $70,000) .2
Cost of Goods Sold ($92,000 - $70,000) .7
Inventory ($92,000 - $70,000) .1
17,600
15,400
2,200
330.
(15 Points) moderate
Nationwide Corporation owns 70 percent of Regional Company’s stock. On December
12, 2005, Nationwide sells inventory with a cost of $34,000 to Regional for $41,000.
Assume that 20 percent of this inventory is sold to unrelated parties by the end of 2005
for $10,000 and an additional 70 percent is sold to unrelated parties in 2006 for $33,000.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Regional has reported net
income of $218,000?
Answer:
Part a.
Retained Earnings ($41,000 - $34,000) - ($41,000 $34,000) .2
Cost of Goods Sold ($41,000 - $34,000) .7
Inventory ($41,000 - $34,000) .1
5,600
4,900
700
Part b.
Income to Noncontrolling Interest = $218,000 x .3 = $65,400
331.
(15 Points) moderate
Denver Corporation sells inventory costing $54,000 to its 80 percent subsidiary (Laramie
Company) on December 1, 2005 for $72,000. Laramie sells 10 percent of this inventory
to unrelated parties by the end of 2005 for $8,000 and an additional 70 percent is sold to
unrelated parties by the end of 2006 for $56,000.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Laramie has reported net
income of $324,000?
Answer:
Part a.
Retained Earnings ($72,000 - $54,000) - ($72,000 $54,000) .1
Cost of Goods Sold ($72,000 - $54,000) .7
Inventory ($72,000 - $54,000) .2
16,200
12,600
3,600
Part b.
Income to Noncontrolling Interest = $324,000 x .2 = $64,800
332.
(5 Points) easy
Gordon Enterprises purchases $80,000 of Meyer’s (parent) outstanding bonds payable for
$77,000 on December 31, 2005. At that date, the bonds have a $5,000 unamortized
discount on Meyer’s financial records and a remaining life of five years. Prepare the
worksheet elimination for December 31, 2005.
Answer:
Bonds Payable
Loss on Early Debt Retirement
Discount on Bonds Payable
Investment in Bonds
333.
2,000
6,000
142,000
200,000
15,000
5,000
210,000
(5 Points) easy
Giroux Corporation purchases $90,000 of Holt’s (parent) outstanding bonds payable for
$94,000 on December 31, 2005. At that date, the bonds have a $3,500 unamortized
discount on Holt’s financial records and a remaining life of four years. Prepare the
worksheet elimination for December 31, 2005.
Answer:
Bonds Payable
Loss on Early Debt Retirement
Discount on Bonds Payable
Investment in Bonds
336.
150,000
(5 Points) easy
Tucker Corporation purchases $200,000 of Wade’s (parent) outstanding bonds payable
for $210,000 on December 31, 2005. At that date, the bonds have a $5,000 unamortized
discount on Wade’s financial records and a remaining life of ten years. Prepare the
worksheet elimination for December 31, 2005.
Answer:
Bonds Payable
Loss on Early Debt Retirement
Discount on Bonds Payable
Investment in Bonds
335.
5,000
77,000
(5 Points) easy
Euske Enterprises purchases $150,000 of Frank’s (parent) outstanding bonds payable for
$142,000 on December 31, 2005. At that date, the bonds have a $6,000 unamortized
discount on Frank’s financial records and a remaining life of four years. Prepare the
worksheet elimination for December 31, 2005.
Answer:
Bonds Payable
Gain on Early Retirement of Debt
Discount on Bonds Payable
Investment in Bonds
334.
80,000
2,000
90,000
7,500
3,500
94,000
(5 Points) easy
Johnson Corporation purchases $140,000 of Pearson’s (parent) outstanding bonds
payable for $138,000 on December 31, 2005. At that date, the bonds have a $3,000
unamortized premium on Pearson’s financial records and a remaining life of five years.
Prepare the worksheet elimination for December 31, 2005.
Answer:
Bonds Payable
Premium on Bonds Payable
Gain on Early Debt Retirement
Investment in Bonds
337.
9,000
246,000
150,000
12,000
4,000
158,000
(5 Points) easy
Lehman Corporation purchases $200,000 of Cappel’s (parent) outstanding bonds payable
for $210,000 on December 31, 2005. At that date, the bonds have a $6,000 unamortized
premium on Cappel’s financial records and a remaining life of six years. Prepare the
worksheet elimination for December 31, 2005.
Answer:
Bonds Payable
Premium on Bonds Payable
Loss on Early Debt Retirement
Investment in Bonds
340.
250,000
5,000
(5 Points) easy
Smith Corporation purchases $150,000 of Rude’s (parent) outstanding bonds payable for
$158,000 on December 31, 2005. At that date, the bonds have a $12,000 unamortized
premium on Rude’s financial records and a remaining life of ten years. Prepare the
worksheet elimination for December 31, 2005.
Answer:
Bonds Payable
Premium on Bonds Payable
Gain on Early Debt Retirement
Investment in Bonds
339.
5,000
138,000
(5 Points) easy
Mitchell Corporation purchases $250,000 of Osborne’s (parent) outstanding bonds
payable for $246,000 on December 31, 2005. At that date, the bonds have a $5,000
unamortized premium on Osborne’s financial records and a remaining life of ten years.
Prepare the worksheet elimination for December 31, 2005.
Answer:
Bonds Payable
Premium on Bonds Payable
Gain on Early Debt Retirement
Investment in Bonds
338.
140,000
3,000
200,000
6,000
4,000
210,000
(15 Points) moderate
LaPlante Enterprises purchases $40,000 of Chen’s (parent) 6 percent outstanding bonds
payable for $37,480 on May 1, 2005. At that date, the bonds have a $3,360 unamortized
discount on Chen’s financial records and a remaining life of seven years. Discounts and
premiums are amortized straight-line. Prepare the worksheet elimination for December
31, 2005.
Answer:
Bonds Payable
40,000
Loss on Early Debt Retirement [$37,480 - ($40,000 840
$3,360)]
Interest Revenue ($40,000 x .06) (8/12) + ($40,000 1,840
$37,480) (8/84)
Interest Expense ($40,000 x .06) (8/12) +
($3,360 x 8/84)
Discount on Bonds Payable ($3,360 x 76/84)
Investment in Bonds [$37,480 + ($40,000 - $37,480) (8/84)]
341.
3,040
37,720
(15 Points) moderate
Gray Enterprises purchases $150,000 of Teeter’s (parent) 4 percent outstanding bonds
payable for $132,720 on November 1, 2005. At that date, the bonds have a $12,000
unamortized discount on Teeter’s financial records and a remaining life of 8 years.
Discounts and premiums are amortized straight-line. Prepare the worksheet elimination
for December 31, 2005.
Answer:
Bonds Payable
Interest Revenue ($150,000 x .04)(2/12) + ($150,000 $132,720) (2/96)
Interest Expense ($150,000 x .04)(2/12) +
($12,000 x 2/96)
Gain on Early Debt Retirement ($150,000 $12,000) - $132,720
Discount on Bonds Payable ($12,000 x 94/96)
Investment in Bonds [$132,720 + ($150,000 $132,720) (2/96)]
342.
1,920
150,000
1,360
1,250
5,280
11,750
133,080
(15 Points) moderate
Kamen Corporation purchases $50,000 of Otte’s (parent) 6 percent outstanding bonds
payable for $52,880 on May 31, 2005. At that date, the bonds have a $2,160
unamortized discount on Otte’s financial records and a remaining life of six years.
Prepare the worksheet elimination for December 31, 2005.
Answer:
Bonds Payable
Loss on Early Debt Retirement [$52,880 - ($50,000 $2,160)]
Interest Revenue [($50,000 x .06)(7/12) - ($52,880 $50,000) (7/72)]
Interest Expense ($50,000 x .06)(7/12) +
($2,160/72)7
50,000
5,040
1,470
1,960
Discount on Bonds Payable ($2,160/72)65
Investment in Bonds {$52,880 - [($52,880 $50,000)/72]7}
343.
(15 Points) moderate
Miller Corporation purchases $100,000 of Prensky’s (parent) 9 percent outstanding bonds
payable for $102,160 on May 31, 2005. At that date, the bonds have a $1,800
unamortized discount on Prensky’s financial records and a remaining life of six years.
Prepare the worksheet elimination for December 31, 2005.
Answer:
Bonds Payable
Loss on Early Debt Retirement [$102,160 - ($100,000 $1,800)]
Interest Revenue ($100,000 x .09)(7/12) - ($102,160 $100,000) (7/72)
Interest Expense ($100,000 x .09)(7/12) +
$1,800 x 7/72
Discount on Bonds Payable $1,800 x 65/72
Investment in Bonds [$102,160 - ($102,160 $100,000) 7/72]
344.
100,000
3,960
5,040
5,425
1,625
101,950
(15 Points) moderate
Bryan Corporation purchases $300,000 of Melton’s (parent) 6 percent outstanding bonds
payable for $275,040 on October 31, 2005. At that date, the bonds have a $17,280
unamortized premium on Melton’s financial records and a remaining life of eight years.
Prepare the worksheet elimination for December 31, 2005.
Answer:
Bonds Payable
Premium on Bonds Payable ($17,280 x 94/96)
Interest Revenue [($300,000 x .06) (2/12) + [($300,000 $275,040) 2/96)]
Interest Expense [($300,000 x .06) (2/12) ($17,280 x 2/96)]
Gain on Early Debt Retirement [$275,040 ($300,000 + $17,280)]
Investment in Bonds {$275,040 + [($300,000 $275,040) 2/96)]}
345.
1,950
52,600
300,000
16,920
3,520
2,640
42,240
275,560
(15 Points) moderate
Hays Corporation purchases $150,000 of Mapp’s (parent) 7 percent outstanding bonds
payable for $145,500 on September 30, 2005. At that date, the bonds have a $6,000
unamortized premium on Mapp’s financial records and a remaining life of five years.
Prepare the worksheet elimination for December 31, 2005.
Answer:
Bonds Payable
150,000
Premium on Bonds Payable ($6,000 x 57/60)
Interest Revenue ($150,000 x .07 x 3/12) + ($150,000 $145,500) (3/60)
Interest Expense [($150,000 x .07) (3/12) ($6,000 x 3/60)]
Gain on Early Debt Retirement [$145,500 ($150,000 + $6,000)]
Investment in Bonds {$145,500 + [($150,000 $145,500) 3/60}
346.
10,500
145,725
200,000
6,450
14,400
14,250
1,440
205,160
(15 Points) moderate
Wright Enterprises purchases $200,000 of Berman’s (parent) 6 percent outstanding bonds
payable for $224,000 on May 1, 2005. At that date, the bonds have a $19,200
unamortized premium on Berman’s financial records and a remaining life of ten years.
Prepare the worksheet elimination for December 31, 2005.
Answer:
Bonds Payable
Premium on Bonds Payable ($19,200 x 112/120)
Loss on Early Debt Retirement [$224,000 - ($200,000 +
$19,200)]
Interest Revenue ($200,000 x .06 x 8/12) - ($224,000 $200,000) (8/120)
Interest Expense [($200,000 x .06) (8/12) ($19,200 x 8/120)]
Investment in Bonds {$224,000 - [($224,000 $200,000) 8/120]}
348.
2,325
(15 Points) moderate
Jones Corporation purchases $200,000 of Mauldin’s (parent) 9 percent outstanding bonds
payable for $205,760 on March 1, 2005. At that date, the bonds have a $7,200
unamortized premium on Mauldin’s financial records and a remaining life of eight years.
Prepare the worksheet elimination for December 31, 2005.
Answer:
Bonds Payable
Premium on Bonds Payable ($7,200 x 86/96)
Interest Revenue ($200,000 x .09 x 10/12) - ($205,760 $200,000) (10/96)
Interest Expense [($200,000 x .09) (10/12) ($7,200 x 10/96)]
Gain on Early Debt Retirement [$205,760 ($200,000 + $7,200)]
Investment in Bonds {$205,760 - [($205,760 $200,000) 10/96]}
347.
5,700
2,850
(20 Points) moderate
200,000
17,920
4,800
6,400
6,720
222,400
Brown Enterprises (80 percent subsidiary) purchases $100,000 of Hanwell’s (parent)
outstanding 9 percent bonds payable for $96,160 on December 31, 2005. At that date,
the bonds have a $5,280 unamortized discount on Hanwell’s financial records and a
remaining life of eight years.
Required:
a.
Prepare the worksheet elimination for December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Brown has reported net
income of $68,000?
Answer:
Part a.
Bonds Payable
Interest Revenue [$100,000 x .09 + ($100,000 $96,160/8)]
Retained Earnings [$96,160 - ($100,000 - $5,280)]
Discount on Bonds Payable ($5,280 x 7/8)
Interest Expense [$100,000 x .09 + ($5,280/8)]
Investment in Bonds [$96,160 + ($100,000 $96,160/8)]
100,000
9,480
1,440
4,620
9,660
96,640
Part b.
Income to Noncontrolling Interest = $68,000 x .2 = $13,600
349.
(20 Points) moderate
Farmer Corporation (70 percent subsidiary) purchases $250,000 of Dock’s (parent)
outstanding 8 percent bonds payable for $242,000 on December 31, 2005. At that date,
the bonds have a $6,400 unamortized discount on Dock’s financial records and a
remaining life of eight years.
Required:
a.
Prepare the worksheet elimination for December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Farmer has reported net
income of $116,000?
Answer:
Part a.
Bonds Payable
250,000
Interest Revenue [$250,000 x .08 + ($250,000 21,000
$242,000/8)]
Retained Earnings ($250,000 - $6,400) - $242,000
Discount on Bonds Payable [$6,400 x 7/8)]
Interest Expense ($250,000 x .08 + $6,400/8)
Investment in Bonds [$242,000 + ($250,000 $242,000/8)]
Part b.
Income to Noncontrolling Interest = $116,000 x .3 = $34,800
1,600
5,600
20,800
243,000
350.
(20 Points) moderate
Braun Enterprises (60 percent subsidiary) purchases $300,000 of Wier’s (parent)
outstanding 7 percent bonds payable for $313,000 on December 31, 2005. At that date,
the bonds have an $8,600 unamortized discount on Wier’s financial records and a
remaining life of four years.
Required:
a.
Prepare the worksheet elimination for December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Braun has reported net
income of $54,000?
Answer:
Part a.
Bonds Payable
Interest Revenue [$300,000 x .07 - ($313,000 $300,000/4)]
Retained Earnings $313,000 - ($300,000 - $8,600)
Discount on Bonds Payable ($8,600 x 3/4)
Interest Expense [$300,000 x .07 + ($8,600/4)]
Investment in Bonds [$313,000 - ($313,000 $300,000/4)]
300,000
17,750
21,600
6,450
23,150
309,750
Part b.
Income to Noncontrolling Interest = $64,000 x .4 = $25,600
351.
(20 Points) moderate
Jamal Corporation (80 percent subsidiary) purchases $200,000 of Krause’s (parent)
outstanding 4 percent bonds payable for $213,000 on December 31, 2005. At that date,
the bonds have a $9,200 unamortized discount on Krause’s financial records and a
remaining life of five years.
Required:
a.
Prepare the worksheet elimination for December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Jamal has reported net
income of $136,000?
Answer:
Part a.
Bonds Payable
200,000
Interest Revenue [$200,000 x .04 - ($213,000 5,400
$200,000/5)]
Retained Earnings $213,000 - ($200,000 - $9,200)
22,200
Discount on Bonds Payable [$9,200 x 4/5)]
Interest Expense ($200,000 x .04 + $9,200/5)
Investment in Bonds [$213,000 - ($213,000 - $200,000/5)]
Part b.
7,360
9,840
210,400
Income to Noncontrolling Interest = $136,000 x .2 = $27,200
352.
(20 Points) moderate
Wells Enterprises (90 percent subsidiary) purchases $80,000 of Drexel’s (parent)
outstanding 6 percent bonds payable for $77,000 on December 31, 2005. At that date,
the bonds have a $2,500 unamortized premium on Drexel’s financial records and a
remaining life of five years.
Required:
a.
Prepare the worksheet elimination for December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Wells has reported net
income of $216,000?
Answer:
Part a.
Bonds Payable
80,000
Premium on Bonds Payable ($2,500 x 4/5)
2,000
Interest Revenue [$80,000 x .06 + ($80,000 - $77,000/5)] 5,400
Retained Earnings ($80,000 + $2,500) - $77,000
Interest Expense [$80,000 x .06 - ($2,500/5)]
Investment in Bonds [$77,000 + ($80,000 –
$77,000/5)]
5,500
4,300
77,600
Part b.
Income to Noncontrolling Interest = $216,000 x .1 = $21,600
353.
(20 Points) moderate
Chester Corporation (70 percent subsidiary) purchases $300,000 of Denison’s (parent)
outstanding 5 percent bonds payable for $284,000 on December 31, 2005. At that date,
the bonds have a $12,000 unamortized premium on Denison’s financial records and a
remaining life of eight years.
Required:
a.
Prepare the worksheet elimination for December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Chester has reported net
income of $152,000?
Answer:
Part a.
Bonds Payable
300,000
Premium on Bonds Payable [$12,000 x 7/8)]
10,500
Interest Revenue [$300,000 x .05 + ($300,000 17,000
$284,000/8)]
Retained Earnings ($300,000 + $12,000) - $284,000
28,000
Interest Expense ($300,000 x .05 - $12,000/8)
Investment in Bonds [$284,000 + ($300,000 –
$284,000/8)]
13,500
286,000
Part b.
Income to Noncontrolling Interest = $152,000 x .3 = $45,600
354.
(20 Points) moderate
Zeff Enterprises (70 percent subsidiary) purchases $100,000 of Roy’s (parent)
outstanding 8 percent bonds payable for $118,000 on December 31, 2005. At that date,
the bonds have a $12,000 unamortized premium on Roy’s financial records and a
remaining life of three years.
Required:
a.
Prepare the worksheet elimination for December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Zeff has reported net
income of $263,000?
Answer:
Part a.
Bonds Payable
100,000
Premium on Bonds Payable ($12,000 x 2/3)
8,000
Retained Earnings $118,000 - ($100,000 + $12,000)
6,000
Interest Revenue [$100,000 x .08 - ($118,000 –
2,000
$110,000/3)]
Interest Expense [$100,000 x .08 - ($12,000/3)]
4,000
Investment in Bonds [$118,000 - ($118,000 –
112,000
$100,000/3)]
Part b.
Income to Noncontrolling Interest = $263,000 x .3 = $78,900
355.
(15 Points) moderate
Chase Corporation (90 percent subsidiary) purchases $350,000 of Lawson’s (parent)
outstanding 6 percent bonds payable for $383,000 on December 31, 2005. At that date,
the bonds have a $46,000 unamortized premium on Lawson’s financial records and a
remaining life of 10 years.
Required:
a.
Prepare the worksheet elimination for December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Chase has reported net
income of $188,000?
Answer:
Part a.
Bonds Payable
350,000
Premium on Bonds Payable [$46,000 x 9/10)]
41,400
Interest Revenue [$350,000 x .06 - ($383,000 17,700
$350,000/10)]
Retained Earnings ($350,000 + $46,000) - $383,000
13,000
Interest Expense ($350,000 x .06 - $46,000/10)
16,400
Investment in Bonds [$383,000 - ($383,000 - $350,000/10)]
379,700
Part b.
Income to Noncontrolling Interest = $188,000 x .1 = $18,800
356.
(25 Points) difficult
Shaw Enterprises (70 percent subsidiary) purchases $150,000 of Cunningham’s (parent)
outstanding 6 percent bonds payable for $146,040 on June 1, 2005. At that date, the
bonds have a $5,760 unamortized discount on Cunningham’s financial records and a
remaining life of six years.
Required:
a.
Prepare the worksheet elimination for December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Shaw has reported net
income of $268,000?
Answer:
Part a.
Bonds Payable
Interest Revenue [($150,000 x .06) + ($150,000 $146,040/6)]
Retained Earnings {[$146,040 - ($150,000 - $5,760)] ($1,800 x 7/72)}
Discount on Bonds Payable ($5,760 x 53/72)
Interest Expense [$150,000 x .06 + ($5,760/6)]
Investment in Bonds [$146,040 + ($150,000 $146,040) (19/72)]
150,000
9,660
1,625
4,240
9,960
147,085
Part b.
Income to Noncontrolling Interest = $268,000 x .3 = $80,400
357.
(25 Points) difficult
Rigoli Corporation (90 percent subsidiary) purchases $400,000 of Whitaker’s (parent)
outstanding 6 percent bonds payable for $376,000 on September 30, 2005. At that date,
the bonds have a $15,000 unamortized discount on Whitaker’s financial records and a
remaining life of 10 years.
Required:
a.
Prepare the worksheet elimination for December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Rigoli has reported net
income of $629,000?
Answer:
Part a.
Bonds Payable
Interest Revenue [$400,000 x .06 + ($400,000 $376,000/10)]
Retained Earnings {[$376,000 - ($400,000 -
400,000
26,400
8,775
$15,000)] + ($9,000 x 3/120)}
Discount on Bonds Payable [$15,000 x 105/120)]
Interest Expense ($400,000 x .06 + $15,000/10)
Investment in Bonds [$376,000 + ($400,000 $376,000) (15/120)]
13,125
25,500
379,000
Part b.
Income to Noncontrolling Interest = $629,000 x .1 = $62,900
358.
(25 Points) difficult
Krull Enterprises (70 percent subsidiary) purchases $100,000 of Austin’s (parent)
outstanding 9 percent bonds payable for $103,600 on March 1, 2005. At that date, the
bonds have a $2,520 unamortized discount on Austin’s financial records and a remaining
life of five years.
Required:
a.
Prepare the worksheet elimination for December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Krull has reported net
income of $219,000?
Answer:
Part a.
Bonds Payable
Interest Revenue [$100,000 x .09 - ($103,600 $100,000/5)]
Retained Earnings [$103,600 - ($100,000 - $2,520)] ($6,120 x 10/60)
Discount on Bonds Payable ($2,520 x 38/60)
Interest Expense [$100,000 x .09 + ($2,520/5)]
Investment in Bonds [$103,600 - ($103,600 $100,000) (22/60)]
100,000
8,280
5,100
1,596
9,504
102,280
Part b.
Income to Noncontrolling Interest = $219,000 x .3 = $65,700
359.
(25 Points) difficult
Reed Corporation (60 percent subsidiary) purchases $200,000 of Carlin’s (parent)
outstanding 6 percent bonds payable for $215,360 on August 31, 2005. At that date, the
bonds have a $12,480 unamortized discount on Carlin’s financial records and a remaining
life of eight years.
Required:
a.
Prepare the worksheet elimination for December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Reed has reported net
income of $538,000?
Answer:
Part a.
Bonds Payable
Interest Revenue [$200,000 x .06 - ($215,360 $200,000/8)]
Retained Earnings {$215,360 - ($200,000 - $12,480) ($27,840 x 4/96)}
Discount on Bonds Payable [$12,480 x 80/96)]
Interest Expense ($200,000 x .06 + $12,480/8)
Investment in Bonds [$215,360 - ($215,360 $200,000) (16/96)]
200,000
10,080
26,680
10,400
13,560
212,800
Part b.
Income to Noncontrolling Interest = $538,000 x .4 = $215,200
360.
(25 Points) difficult
Vance Enterprises (80 percent subsidiary) purchases $360,000 of Moore’s (parent)
outstanding 5 percent bonds payable for $342,720 on July 31, 2005. At that date, the
bonds have a $5,760 unamortized premium on Moore’s financial records and a remaining
life of 12 years.
Required:
a.
Prepare the worksheet elimination for December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Vance has reported net
income of $374,000?
Answer:
Part a.
Bonds Payable
Premium on Bonds Payable ($5,760 x 127/144)
Interest Revenue [$360,000 x .05 + ($360,000 $342,720/12]
Retained Earnings [$342,720 - ($360,000 +
$5,760)] + ($23,040 x 5/144)
Interest Expense [$360,000 x .05 - ($5,760/12)]
Investment in Bonds [$342,720 + ($360,000 $342,720) (17/144)]
360,000
5,080
19,440
22,240
17,520
344,760
Part b.
Income to Noncontrolling Interest = $374,000 x .2 = $74,800
361.
(25 Points) difficult
Crain Corporation (80 percent subsidiary) purchases $255,000 of Braun’s (parent)
outstanding 8 percent bonds payable for $244,200 on February 1, 2005. At that date, the
bonds have a $16,560 unamortized premium on Braun’s financial records and a
remaining life of six years.
Required:
a.
Prepare the worksheet elimination for December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Crain has reported net
income of $229,000?
Answer:
Part a.
Bonds Payable
Premium on Bonds Payable [$16,560 x 49/72)]
Interest Revenue [$255,000 x .08 + ($255,000 $244,200/6)]
Retained Earnings [$244,200 - ($255,000 +
$16,560)] + ($27,360 x 11/72)
Interest Expense ($255,000 x .08 - $16,560/6)
Investment in Bonds [$244,200 + ($255,000 $244,200) (23/72)]
255,000
11,270
22,200
23,180
17,640
247,650
Part b.
Income to Noncontrolling Interest = $229,000 x .2 = $45,800
362.
(25 Points) difficult
Green Enterprises (80 percent subsidiary) purchases $300,000 of Brown’s (parent)
outstanding 7 percent bonds payable for $318,480 on July 31, 2005. At that date, the
bonds have a $13,440 unamortized premium on Brown’s financial records and a
remaining life of seven years.
Required:
a.
Prepare the worksheet elimination for December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Green has reported net
income of $392,000?
Answer:
Part a.
Bonds Payable
Premium on Bonds Payable ($13,440 x 67/84)
Retained Earnings [$318,480 - ($300,000 + $13,440)] ($5,040 x 5/84)
Interest Revenue [$300,000 x .07 - ($318,480 $300,000/7)]
Interest Expense [$300,000 x .07 - ($13,440/7)]
Investment in Bonds [$318,480 - ($318,480 $300,000) (17/84)]
300,000
10,720
4,740
18,360
19,080
314,740
Part b.
Income to Noncontrolling Interest = $392,000 x .2 = $78,400
363.
(20 Points) difficult
Fischer Corporation (80 percent subsidiary) purchases $120,000 of Booth’s (parent)
outstanding 8 percent bonds payable for $123,600 on November 30, 2005. At that date,
the bonds have a $5,100 unamortized premium on Booth’s financial records and a
remaining life of five years.
Required:
a.
Prepare the worksheet elimination for December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Fischer has reported net
income of $194,000?
Answer:
Part a.
Bonds Payable
Premium on Bonds Payable [$5,100 x 47/60)]
Interest Revenue [$120,000 x .08 - ($123,600 $120,000/5)]
Retained Earnings [$123,600 - ($120,000 +
$5,100)] + ($1,500 x 1/60)
Interest Expense ($120,000 x .08 - $5,100/5)
120,000
3,995
8,880
1,475
8,580
Investment in Bonds [$123,600 - ($123,600 $120,000) (13/60)]
122,820
Part b.
Income to Noncontrolling Interest = $194,000 x .2 = $38,800
364.
(10 Points) easy
Anderson Corporation (a 70 percent subsidiary) sells a machine to its parent, Turetsky
Enterprises, for $65,000 on December 31, 2005. At that date, the machine and
accumulated depreciation accounts on Anderson’s financial records are $140,000 and
$60,000, respectively. The machine has a remaining life of five years for Anderson and
is assigned a life of eight years when acquired by Turetsky.
Required:
a.
Prepare the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2005.
b.
What is the income to noncontrolling interest in 2005 if Anderson has reported
net income of $243,000?
Answer:
Part a,
Machine ($140,000 - $65,000)
Loss on Sale of Machine [$65,000 - ($140,000
- $60,000)]
Accumulated Depreciation
75,000
Part b.
Income to Noncontrolling Interest = ($243,000 + $15,000) .2 = $51,600
365.
(10 Points) easy
15,000
60,000
Willard Corporation (a 90 percent subsidiary) sells equipment to its parent, Brock
Enterprises, for $250,000 on December 31, 2005. At that date, the equipment and
accumulated depreciation accounts on Willard’s financial records are $460,000 and
$170,000, respectively. The equipment has a remaining life of six years for Willard and
is assigned a life of five years when acquired by Brock.
Required:
a.
Prepare the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2005.
b.
What is the income to noncontrolling interest in 2005 if Willard has reported net
income of $178,000?
Answer:
Part a.
Equipment ($460,000 - $250,000)
210,000
Loss on Sale of Equipment [$250,000 - ($460,000 $170,000)]
Accumulated Depreciation
40,000
170,000
Part b.
Income to Noncontrolling Interest = ($178,000 + $40,000) .1 = $21,800
366.
(10 Points) easy
Martin Corporation (an 80 percent subsidiary) sells a machine to its parent, Carnes
Enterprises, for $70,000 on December 31, 2005. At that date, the machine and
accumulated depreciation accounts on Martin’s financial records are $90,000 and
$32,000, respectively. The machine has a remaining life of five years for Martin and is
assigned a life of four years when acquired by Carnes.
Required:
a.
Prepare the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2005.
b.
What is the income to noncontrolling interest in 2005 if Martin has reported net
income of $320,000?
Answer:
Part a.
Machine ($90,000 - $70,000)
20,000
Gain on Sale of Machine [$70,000 - ($90,000 - $32,000)] 12,000
Accumulated Depreciation
32,000
Part b.
Income to Noncontrolling Interest = ($320,000 - $12,000) .2 = $61,600
367.
(10 Points) easy
Dearden Corporation (a 70 percent subsidiary) sells a building to its parent, Cox
Enterprises, for $370,000 on December 31, 2005. At that date, the building and
accumulated depreciation accounts on Dearden’s financial records are $350,000 and
$110,000, respectively. The building has a remaining life of ten years for Dearden and is
assigned a life of fifteen years when acquired by Cox.
Required:
a.
Prepare the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2005.
b.
What is the income to noncontrolling interest in 2005 if Dearden has reported net
income of $548,000?
Answer:
Part a.
Gain on Sale of Building [$370,000 - ($350,000 $110,000)]
Building ($370,000 - $350,000)
Accumulated Depreciation
130,000
20,000
110,000
Part b.
Income to Noncontrolling Interest = ($548,000 - $130,000) .3 = $125,400
368.
(15 Points) moderate
Bailey Corporation (an 80 percent subsidiary) sells a machine to its parent, Prentice
Enterprises, for $159,000 on May 1, 2005. At that date, the machine and accumulated
depreciation accounts on Bailey’s financial records are $400,000 and $114,400,
respectively. The machine has a remaining life of eight years for Bailey and is assigned a
life of ten years when acquired by Prentice.
Required:
a.
Prepare the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2005.
b.
What is the income to noncontrolling interest in 2005 if Bailey has reported net
income of $253,000?
Answer:
Part a.
Machine ($400,000 - $159,000)
Depreciation Expense [($159,000/120) 8] - [($400,000 $114,400)/120] 8
Loss on Sale of Machine [$159,000 - ($400,000 $114,400)]
Accumulated Depreciation ($114,400 + $8,440)
241,000
8,440
126,600
122,840
Part b.
Income to Noncontrolling Interest = ($253,000 + $126,600 - $8,440) .2 = $74,232
369.
(15 Points) moderate
Swindle Corporation (a 70 percent subsidiary) sells equipment to its parent, Valentine
Enterprises, for $324,000 on August 1, 2005. At that date, the equipment and
accumulated depreciation accounts on Swindle’s financial records are $750,000 and
$404,400, respectively. The equipment has a remaining life of eight years for Swindle
and is assigned a life of six years when acquired by Valentine.
Required:
a.
Prepare the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2005.
b.
What is the income to noncontrolling interest in 2005 if Swindle has reported net
income of $278,000?
Answer:
Part a.
Machine ($750,000 - $324,000)
Depreciation Expense [($324,000/72)5] - [($750,000 $404,400)/72]5
Loss on Sale of Equipment [$324,000 ($750,000 - $404,400)]
Accumulated Depreciation ($404,400 + $1,500)
426,000
1,500
21,600
405,900
Part b.
Income to Noncontrolling Interest = ($278,000 + $21,600 - $1,500) .3 = $89,430
370.
(15 Points) moderate
Stockard Corporation (a 90 percent subsidiary) sells a machine to its parent, Howell
Enterprises, for $51,000 on October 1, 2005. At that date, the machine and accumulated
depreciation accounts on Stockard’s financial records are $65,000 and $20,000,
respectively. The machine has a remaining life of six years for Stockard and is assigned
a life of five years when acquired by Howell.
Required:
a.
Prepare the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2005.
b.
What is the income to noncontrolling interest in 2005 if Stockard has reported net
income of $157,000?
Answer:
Part a.
Machine ($65,000 - $51,000)
14,000
Gain on Sale of Machine [$51,000 - ($65,000 - $20,000)] 6,000
Depreciation Expense [($51,000/60)3] [($65,000 - $20,000)/60] 3
Accumulated Depreciation ($20,000 - $300)
300
19,700
Part b.
Income to Noncontrolling Interest = ($157,000 - $6,000 + $300) .1 = $15,130
371.
(15 Points) moderate
Brenan Corporation (a 60 percent subsidiary) sells a building to its parent, Rasch
Enterprises, for $432,000 on February 1, 2005. At that date, the building and
accumulated depreciation accounts on Brenan’s financial records are $620,000 and
$242,000, respectively. The building has a remaining life of seven years for Brenan and
is assigned a life of nine years when acquired by Rasch.
Required:
a.
Prepare the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2005.
b.
What is the income to noncontrolling interest in 2005 if Brenan has reported net
income of $847,000?
Answer:
Part a.
Building ($620,000 - $432,000)
Gain on Sale of Building [$432,000 - ($620,000 $242,000)]
Depreciation Expense ($432,000/108) (11) [($620,000 - $242,000)/108] (11)
Accumulated Depreciation ($242,000 - $5,500)
188,000
54,000
5,500
236,500
Part b.
Income to Noncontrolling Interest = ($847,000 - $54,000 + $5,500) .4 = $319,400
372.
(15 Points) moderate
Alexander Company (an 80 percent subsidiary) sells a machine to its parent, Gurley
Enterprises, for $121,800 on December 31, 2005. At that date, the machine and
accumulated depreciation accounts on Alexander’s financial records are $260,000 and
$129,800, respectively. The machine has a remaining life of seven years for Alexander
and is assigned a life of ten years when acquired by Gurley.
Required:
a.
Prepare the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Alexander has reported
net income of $214,000?
Answer:
Part a.
Machine ($260,000 - $121,800)
Depreciation Expense ($121,800/10) - [($260,000 $129,800)]/10
Retained Earnings [$121,800 - ($260,000 $129,800)] .8
Noncontrolling Interest [$121,800 - ($260,000 $129,800)] .2
Accumulated Depreciation ($129,800 + $840)
138,200
840
Part b.
Income to Noncontrolling Interest = ($214,000 - $840) .2 = $42,632
6,720
1,680
130,640
373.
(15 Points) moderate
Wolff Corporation (a 90 percent subsidiary) sells equipment to its parent, Hartman
Enterprises, for $144,000 on December 31, 2005. At that date, the equipment and
accumulated depreciation accounts on Wolff’s financial records are $200,000 and
$50,000, respectively. The equipment has a remaining life of eight years for Wolff and is
assigned a life of six years when acquired by Hartman.
Required:
a.
Prepare the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Wolff has reported net
income of $362,000?
Answer:
Part a.
Machine ($200,000 - $144,000)
Depreciation Expense ($144,000/6) - [$200,000 $50,000)/6]
Retained Earnings [$144,000 - ($200,000 $50,000)] .9
Noncontrolling Interest [$144,000 - ($200,000 $50,000)] .1
Accumulated Depreciation ($50,000 + $1,000)
56,000
1,000
5,400
600
51,000
Part b.
Income to Noncontrolling Interest = ($362,000 - $1,000) .1 = $36,100
374.
(15 Points) moderate
Brannan Corporation (a 60 percent subsidiary) sells a machine to its parent, Jones
Enterprises, for $288,000 on December 31, 2005. At that date, the machine and
accumulated depreciation accounts on Brannan’s financial records are $400,000 and
$130,000, respectively. The machine has a remaining life of ten years for Brannan and is
assigned a life of five years when acquired by Jones.
Required:
a.
Prepare the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Brannan has reported net
income of $426,000?
Answer:
Part a.
Machine ($400,000 - $288,000)
112,000
Retained Earnings [$288,000 - ($400,000 - $130,000)] .6
10,800
Noncontrolling Interest [$288,000 - ($400,000 7,200
$130,000)] .4
Depreciation Expense ($288,000/5) - [($400,000 -
3,600
$130,000)/5]
Accumulated Depreciation ($130,000 - 3,600)
126,400
Part b.
Income to Noncontrolling Interest = ($426,000 + $3,600) .4 = $171,840
375.
(15 Points) moderate
Craig Company (an 80 percent subsidiary) sells a building to its parent, Ashton
Enterprises, for $540,000 on December 31, 2005. At that date, the building and
accumulated depreciation accounts on Craig’s financial records are $610,000 and
$154,000, respectively. The building has a remaining life of eight years for Craig and is
assigned a life of ten years when acquired by Ashton.
Required:
a.
Prepare the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Craig has reported net
income of $257,000?
Answer:
Part a.
Building ($610,000 - $540,000)
70,000
Retained Earnings [$540,000 - ($610,000 - $154,000)] .8
67,200
Noncontrolling Interest [$540,000 - ($610,000 16,800
$154,000)] .2
Depreciation Expense ($540,000/10) - [($610,000 $154,000)/10]
Accumulated Depreciation ($154,000 - $8,400)
8,400
145,600
Part b.
Income to Noncontrolling Interest = ($257,000 + $8,400) .2 = $53,080
376.
(20 Points) difficult
Shanahan Company (a 70 percent subsidiary) sells a machine to its parent, Hatch
Enterprises, for $126,000 on June 1, 2005. At that date, the machine and accumulated
depreciation accounts on Shanahan’s financial records are $210,000 and $78,000,
respectively. The machine has a remaining life of six years for Shanahan and is assigned
a life of ten years when acquired by Hatch.
Required:
a.
Prepare the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Shanahan has reported
net income of $134,000?
Answer:
Part a.
Machine ($210,000 - $126,000)
84,000
Depreciation Expense ($126,000/10) - [($210,000 $78,000)/10]
Retained Earnings {[$126,000 - ($210,000 $78,000)] - {($126,000/120) (7) - [($210,000 $78,000)/120] (7)}} .7
Noncontrolling Interest {[$126,000 - ($210,000 $78,000)] - {($126,000/120) (7) - [($210,000 $78,000)/120] (7)}} .3
Accumulated Depreciation $78,000 +
{($126,000/120) (7) - [($210,000 $78,000)/120] (7)} + $600
600
3,955
1,695
78,950
Part b.
Income to Noncontrolling Interest = ($134,000 - $600) .3 = $40,020
377.
(20 Points) difficult
Miller Corporation (a 90 percent subsidiary) sells equipment to its parent, Huss
Enterprises, for $180,000 on October 1, 2005. At that date, the equipment and
accumulated depreciation accounts on Miller’s financial records are $350,000 and
$134,000, respectively. The equipment has a remaining life of six years for Miller and is
assigned a life of five years when acquired by Huss.
Required:
a.
Prepare the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Miller has reported net
income of $146,000?
Answer:
Part a.
Machine ($350,000 - $180,000)
170,000
Depreciation Expense [($350,000 - $134,000)/5] 7,200
($180,000/5)
Retained Earnings {[$180,000 - ($350,000 30,780
$134,000)] - {($180,000/60)(3) - [($350,000 $134,000)/60](3)}}.9
Noncontrolling Interest {[$180,000 - ($350,000 3,420
$134,000)] - {($180,000/60)(3) - [($350,000 $134,000)/60](3)}.1
Accumulated Depreciation {$134,000 +
143,000
{[($350,000 - $134,000)/60](3) ($180,000/60) (3)} + $7,200}
Part b.
Income to Noncontrolling Interest = ($146,000 - $7,200) .1 = $13,880
378.
(20 Points) difficult
Grant Company (an 80 percent subsidiary) sells a machine to its parent, Krissek
Enterprises, for $331,200 on May 1, 2005. At that date, the machine and accumulated
depreciation accounts on Grant’s financial records are $400,000 and $119,200,
respectively. The machine has a remaining life of eight years for Grant and is assigned a
life of six years when acquired by Krissek.
Required:
a.
Prepare the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Grant has reported net
income of $273,000?
Answer:
Part a.
Machine ($400,000 - $331,200)
68,800
Retained Earnings {[$331,200 - ($400,000 - $119,200)] - 35,840
{[($331,200/72)(8)] - [($400,000 - $119,200)/72](8)}}.8
Noncontrolling Interest {[$331,200 - ($400,000 8,960
$119,200)] - {[($331,200/72)(8)] - [($400,000 $119,200)/72](8)}}.2
Depreciation Expense ($331,200/6) - [($400,000 $119,200)/6]
Accumulated Depreciation $119,200 {[($331,200/72) (8)] - [($400,000 $119,200)/72] (8)} - $8,400
8,400
105,200
Part b.
Income to Noncontrolling Interest = ($273,000 + $8,400) .2 = $56,280
379.
(20 Points) difficult
Jensen Corporation (a 90 percent subsidiary) sells a building to its parent, May
Enterprises, for $390,000 on September 1, 2005. At that date, the building and
accumulated depreciation accounts on Jensen’s financial records are $500,000 and
$140,000, respectively. The building has a remaining life of fifteen years for Jensen and
is assigned a life of twenty years when acquired by May.
Required:
a.
Prepare the worksheet elimination for the intercompany transaction assuming that
the consolidation occurs on December 31, 2006.
b.
What is the income to noncontrolling interest in 2006 if Jensen has reported net
income of $152,000?
Answer:
Part a.
Building ($500,000 - $390,000)
110,000
Retained Earnings {[$390,000 - ($500,000 - $140,000)] - 26,550
{[($390,000/240) (4)] - [($500,000 - 140,000)/240] (4)}}.9
Noncontrolling Interest {[$390,000 - ($500,000 2,950
$140,000)] - {[($390,000/240) (4)] - [($500,000 140,000)/240] (4)}}.1
Depreciation Expense ($390,000/20) - [($500,000
- $140,000)/20]
Accumulated Depreciation $140,000 {[($390,000/240) (4)] - [($500,000 $140,000)/240] (4)} - $1,500
1,500
138,000
Part b.
Income to Noncontrolling Interest = ($152,000 + $1,500) .1 = $15,350
380.
(5 Points) easy
Jones Corporation owns 100 percent of Davis Company’s stock. On December 29, 2005,
Davis sells inventory with a cost of $70,000 to Jones for $82,000. Assuming none of this
inventory is sold to an unrelated party by the end of 2005, prepare the worksheet
elimination for this intercompany transaction for the preparation of the 2005 consolidated
financial statements.
Answer:
Sales
Cost of Goods Sold
Inventory
381.
70,000
12,000
(5 Points) easy
Snow Corporation (100 percent subsidiary) sells inventory costing $42,000 to its parent
(Barbor Company) on December 21, 2005 for $47,000. None of this inventory is sold to
an unrelated party by the end of 2005. Prepare the worksheet elimination for this
intercompany transaction for the preparation of the 2005 consolidated financial
statements.
Answer:
Sales
Cost of Goods Sold
Inventory
382.
82,000
47,000
42,000
5,000
(10 Points) easy
Billings Corporation owns 80 percent of Ewing Company’s stock. On December 30,
2005, Ewing sells inventory with a cost of $86,000 to Billings for $95,000. None of this
inventory is sold to an unrelated party by the end of 2005.
Required:
a.
Prepare the worksheet elimination for this intercompany transaction for the
preparation of the 2005 consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Ewing has reported net
income of $253,000?
Answer:
Part a.
Sales
Cost of Goods Sold
95,000
86,000
Inventory
9,000
Part b.
Income to Noncontrolling Interest = ($253,000 - $95,000 + $86,000) .2 = $48,800
383.
(10 Points) easy
Michelman Corporation (a 70 percent subsidiary) sells inventory costing $23,000 to its
parent (Cottrill Company) on December 15, 2005 for $28,000. None of this inventory is
sold to an unrelated party by the end of 2005.
Required:
a.
Prepare the worksheet elimination for this intercompany transaction for the
preparation of the 2005 consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Michelman has reported
net income of $73,000?
Answer:
Part a.
Sales
Cost of Goods Sold
Inventory
28,000
23,000
5,000
Part b.
Income to Noncontrolling Interest = ($73,000 - $28,000 + $23,000) .3 = $20,400
384.
(10 Points) moderate
Thorne Corporation owns 100 percent of Schilder Company’s stock. On November 15,
2005, Schilder sells inventory with a cost of $68,000 to Thorne for $80,000. Assume
that 70 percent of this inventory is sold to an unrelated party by the end of 2005 for
$64,000. Prepare the worksheet elimination for this intercompany transaction for the
preparation of the 2005 consolidated financial statements.
Answer:
Sales
Cost of Goods Sold [$68,000 + ($80,000 $68,000) .7]
Inventory ($80,000 - $68,000) .3
385.
80,000
76,400
3,600
(10 Points) moderate
Heitger Corporation (a 100 percent subsidiary) sells inventory costing $53,000 to its
parent (Goodson Company) on October 22, 2005 for $73,000. Goodson sells 40 percent
of this inventory to an unrelated party by the end of 2005 for $34,000. Prepare the
worksheet elimination for this intercompany transaction for the preparation of the 2005
consolidated financial statements.
Answer:
Sales
Cost of Goods Sold [$53,000 + ($73,000 -
73,000
61,000
$53,000) .4]
Inventory ($73,000 - $53,000) .6
386.
12,000
(15 Points) moderate
Henry Corporation owns 90 percent of Smith Company’s stock. On December 4, 2005,
Smith sells inventory with a cost of $56,000 to Henry for $62,000. Assume that 70
percent of this inventory is sold to an unrelated party by the end of 2005 for $49,000.
Required:
a.
Prepare the worksheet elimination for this intercompany transaction for the
preparation of the 2005 consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Henry has reported net
income of $81,000?
Answer:
Part a.
Sales
Cost of Goods Sold [$56,000 + ($62,000 $56,000) .7]
Inventory ($62,000 - $56,000) .3
62,000
60,200
1,800
Part b.
Income to Noncontrolling Interest = ($81,000 - $62,000 + $60,200) .1 = $7,920
387.
(15 Points) moderate
Kovar Corporation (an 80 percent subsidiary) sells inventory costing $76,000 to its
parent (Healy Company) on September 26, 2005 for $88,000. Healy sells 90 percent of
this inventory to an unrelated party by the end of 2005 for $103,000.
Required:
a.
Prepare the worksheet elimination for this intercompany transaction for the
preparation of the 2005 consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Kovar has reported net
income of $152,000?
Answer:
Part a.
Sales
Cost of Goods Sold [$76,000 - ($88,000 $76,000) .9]
Inventory ($88,000 - $76,000) .1
88,000
86,800
1,200
Part b.
Income to Noncontrolling Interest = ($152,000 - $88,000 + $86,800) .2 = $30,160
388.
(5 Points) easy
Meeting Corporation owns 100 percent of Frasier Company’s stock. On August 16,
2005, Frasier sells inventory with a cost of $47,000 to Meeting for $53,000. Assume that
this entire inventory is sold to an unrelated party by the end of 2005 for $62,000.
Prepare the worksheet elimination for this intercompany transaction for the preparation
of the 2005 consolidated financial statements.
Answer:
Sales
Cost of Goods Sold
389.
53,000
(5 Points) easy
Skelly Corporation (a 100 percent subsidiary) sells inventory costing $80,000 to its
parent (Goran Company) on September 19, 2005 for $87,000. Goran sells this entire
inventory to an unrelated party by the end of 2005 for $94,000. Prepare the worksheet
elimination for this intercompany transaction for the preparation of the 2005 consolidated
financial statements.
Answer:
Sales
Cost of Goods Sold
390.
53,000
87,000
87,000
(10 Points) easy
White Corporation owns 70 percent of Shockley Company’s stock. On November 13,
2005, Shockley sells inventory with a cost of $38,000 to White for $41,000. Assume that
this entire inventory is sold to an unrelated party by the end of 2005 for $46,000.
Required:
a.
Prepare the worksheet elimination for this intercompany transaction for the
preparation of the 2005 consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Shockley has reported net
income of $97,000?
Answer:
Part a.
Sales
Cost of Goods Sold
41,000
41,000
Part b.
Income to Noncontrolling Interest = ($97,000 - $41,000 + $41,000) .3 = $29,100
391.
(10 Points) easy
Hardy Corporation (a 90 percent subsidiary) sells inventory costing $69,000 to its parent
(Larson Company) on October 14, 2005 for $77,000. Larson sells this entire inventory
to an unrelated party by the end of 2005 for $82,000.
Required:
a.
Prepare the worksheet elimination for this intercompany transaction for the
preparation of the 2005 consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Hardy has reported net
income of $88,000?
Answer:
Part a.
Sales
Cost of Goods Sold
77,000
77,000
Part b.
Income to Noncontrolling Interest = ($88,000 - $77,000 + $77,000) .1 = $8,800
392.
(10 Points) moderate
Norgaard Corporation owns 100 percent of Kelly Company’s stock. On December 29,
2005, Kelly sells inventory with a cost of $37,000 to Norgaard for $46,000. Assuming
none of this inventory is sold to an unrelated party by the end of 2005 and 60 percent is
sold to an unrelated party in 2006 for $31,000, prepare the intercompany transaction
worksheet elimination for the preparation of the 2006 consolidated financial statements.
Answer:
Retained Earnings ($46,000 - $37,000)
Cost of Goods Sold ($46,000 - $37,000) .6
Inventory ($46,000 - $37,000) .4
393.
5,400
3,600
(10 Points) moderate
Harden Corporation (a 100 percent subsidiary) sells inventory costing $81,000 to its
parent (Luna Company) on December 16, 2005 for $89,000. None of this inventory is
sold to an unrelated party by the end of 2005. However, 70 percent is sold to unrelated
parties in 2006 for $75,000. Prepare the intercompany transaction worksheet elimination
for the preparation of the 2006 consolidated financial statements.
Answer:
Retained Earnings ($89,000 - $81,000)
Cost of Goods Sold ($89,000 - $81,000) .7
Inventory ($89,000 - $81,000) .3
394.
9,000
8,000
5,600
2,400
(15 Points) moderate
Wehrley Corporation owns 80 percent of Rupert Company’s stock. On December 19,
2005, Rupert sells inventory with a cost of $52,000 to Wehrley for $61,000. None of this
inventory is sold to an unrelated party by the end of 2005 and 70 percent is sold to
unrelated parties in 2006.
Required:
a.
Prepare the intercompany transaction worksheet elimination for the preparation of
the 2006 consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Rupert has reported net
income of $58,000?
Answer:
Part a.
Retained Earnings ($61,000 - $52,000) .8
7,200
Noncontrolling Interest ($61,000 - $52,000) .2
Cost of Goods Sold ($61,000 - $52,000) .7
Inventory ($61,000 - $52,000) .3
1,800
6,300
2,700
Part b.
Income to Noncontrolling Interest = ($58,000 + $6,300) .2 = $12,860
395.
(15 Points) moderate
Schwartz Corporation (an 80 percent subsidiary) sells inventory costing $83,000 to its
parent (Whitmore Company) on December 17, 2005 for $88,000. None of this inventory
is sold to an unrelated party by the end of 2005. However, 90 percent is sold to unrelated
parties in 2006 for $91,000.
Required:
a.
Prepare the intercompany transaction worksheet elimination for the preparation of
the 2006 consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Schwartz has reported net
income of $168,000?
Answer:
Part a.
Retained Earnings ($88,000 - $83,000) .8
Noncontrolling Interest ($88,000 - $83,000) .2
Cost of Goods Sold ($88,000 - $83,000) .9
Inventory ($88,000 - $83,000) .1
4,000
1,000
4,500
500
Part b.
Income to Noncontrolling Interest = ($168,000 + $4,500) .2 = $34,500
396.
(10 Points) moderate
Patton Corporation owns 100 percent of Bolin Company’s stock. On October 22, 2005,
Bolin sells inventory with a cost of $29,000 to Patton for $41,000. Assume that 40
percent of this inventory is sold to unrelated parties by the end of 2005 for $20,000 and
the remainder is sold to unrelated parties in 2006 for $31,000. Prepare the relevant
worksheet elimination for the preparation of the 2006 consolidated financial statements.
Answer:
Retained Earnings ($41,000 - $29,000) - ($41,000 $29,000) .4
Cost of Goods Sold ($41,000 - $29,000) .6
397.
7,200
7,200
(10 Points) moderate
Smith Corporation (a 100 percent subsidiary) sells inventory costing $56,000 to its parent
(Nelson Company) on October 15, 2005 for $62,000. Nelson sells 70 percent of this
inventory to unrelated parties by the end of 2005 for $48,000 and the remainder is sold to
unrelated parties in 2006 for $23,000. Prepare the relevant worksheet elimination for the
preparation of the 2006 consolidated financial statements.
Answer:
Retained Earnings ($62,000 - $56,000) - ($62,000 $56,000) .7
Cost of Goods Sold ($62,000 - $56,000) .3
398.
1,800
1,800
(15 Points) moderate
Miller Corporation owns 70 percent of Simon Company’s stock. On December 1, 2005,
Simon sells inventory with a cost of $29,000 to Miller for $36,000. Assume that 20
percent of this inventory is sold to unrelated parties by the end of 2005 for $9,000 and
the remainder is sold to unrelated parties in 2006 for $34,000.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Simon has reported net
income of $58,000?
Answer:
Part a.
Retained Earnings [($36,000 - $29,000) - ($36,000 3,920
$29,000) .2] .7
Noncontrolling Interest [($36,000 - $29,000) - ($36,000 - 1,680
$29,000) .2] .3
Cost of Goods Sold ($36,000 - $29,000) .8
5,600
Part b.
Income to Noncontrolling Interest = ($58,000 + $5,600) .3 = $19,080
399.
(15 Points) moderate
Kang Corporation (a 90 percent subsidiary) sells inventory costing $70,000 to its parent
(Johnson Company) on September 18, 2005 for $83,000. Johnson sells 70 percent of this
inventory to unrelated parties by the end of 2005 for $60,000 and the remainder is sold to
unrelated parties by the end of 2006 for $32,000.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Kang has reported net
income of $160,000?
Answer:
Part a.
Retained Earnings [($83,000 - $70,000) - ($83,000 3,510
$70,000) .7] .9
Noncontrolling Interest [($83,000 - $70,000) - ($83,000 390
$70,000) .7] .1
Cost of Goods Sold ($83,000 - $70,000) .3
3,900
Part b.
Income to Noncontrolling Interest = ($160,000 + $3,900) .1 = $16,390
400.
(10 Points) moderate
Freeman Corporation owns 100 percent of Teather Company’s stock. On November 26,
2005, Teather sells inventory with a cost of $80,000 to Freeman for $92,000. Assume
that 10 percent of this inventory is sold to unrelated parties by the end of 2005 for
$15,000 and that an additional 70 percent is sold to unrelated parties in 2006 for $72,000.
Prepare the relevant worksheet elimination for the preparation of the 2006 consolidated
financial statements.
Answer:
Retained Earnings ($92,000 - $80,000) - ($92,000 $80,000) .1
Cost of Goods Sold ($92,000 - $80,000) .7
Inventory ($92,000 - $80,000) .2
401.
8,400
2,400
(10 Points) moderate
Danile Corporation (a 100 percent subsidiary) sells inventory costing $75,000 to its
parent (Jennings Company) on November 13, 2005 for $86,000. Jennings sells 20
percent of this inventory to unrelated parties by the end of 2005 for $24,000 and an
additional 70 percent is sold to unrelated parties in 2006 for $67,000. Prepare the
relevant worksheet elimination for the preparation of the 2006 consolidated financial
statements.
Answer:
Retained Earnings ($86,000 - $75,000) - ($86,000 $75,000) .2
Cost of Goods Sold ($86,000 - $75,000) .7
Inventory ($86,000 - $75,000) .1
402.
10,800
8,800
7,700
1,100
(15 Points) moderate
Broden Corporation owns 70 percent of Kelly Company’s stock. On December 15, 2005,
Kelly sells inventory with a cost of $37,000 to Broden for $45,000. Assume that 10
percent of this inventory is sold to unrelated parties by the end of 2005 for $13,000 and
an additional 65 percent is sold to unrelated parties in 2006 for $36,000.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Kelly has reported net
income of $153,000?
Answer:
Part a.
Retained Earnings [($45,000 - $37,000) - ($45,000 $37,000) .1] .7
Noncontrolling Interest [($45,000 - $37,000) -
5,040
2,160
($45,000 - $37,000) .1] .3
Cost of Goods Sold ($45,000 - $37,000) .65
Inventory ($45,000 - $37,000) .25
5,200
2,000
Part b.
Income to Noncontrolling Interest = ($153,000 + $5,200) .3 = $47,460
403.
(15 Points) moderate
Steed Corporation (an 80 percent subsidiary) sells inventory costing $57,000 to its parent
(Pant Company) on December 3, 2005 for $65,000. Pant sells 10 percent of this
inventory to unrelated parties by the end of 2005 for $8,000 and an additional 75 percent
is sold to unrelated parties by the end of 2006 for $72,000.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Steed has reported net
income of $205,000?
Answer:
Part a.
Retained Earnings [($65,000 - $57,000) - ($65,000 $57,000) .1] .8
Noncontrolling Interest [($65,000 - $57,000) ($65,000 - $57,000) .1] .2
Cost of Goods Sold ($65,000 - $57,000) .75
Inventory ($65,000 - $57,000) .15
5,760
1,440
6,000
1,200
Part b.
Income to Noncontrolling Interest = ($205,000 + $6,000) .2 = $42,200
404.
(10 Points) easy
Brown Enterprises purchases $100,000 of Grey’s (70 percent subsidiary) outstanding
bonds payable for $96,000 on December 31, 2005. At that date, the bonds have a $5,000
unamortized discount on Grey’s financial records and a remaining life of five years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2005
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Grey has reported net
income of $180,000?
Answer:
Part a.
Bonds Payable
Loss on Early Debt Retirement
Discount on Bonds Payable
Investment in Bonds
100,000
1,000
5,000
96,000
Part b.
Income to Noncontrolling Interest = ($180,000 - $1,000) .3 = $53,700
405.
(10 Points) easy
Alexander Enterprises purchases $50,000 of Shaker’s (60 percent subsidiary) outstanding
bonds payable for $48,000 on December 31, 2005. At that date, the bonds have a $1,200
unamortized discount on Shaker’s financial records and a remaining life of four years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2005
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Shaker has reported net
income of $125,000?
Answer:
Part a.
Bonds Payable
Gain on Early Retirement of Debt
Discount on Bonds Payable
Investment in Bonds
50,000
800
1,200
48,000
Part b.
Income to Noncontrolling Interest = ($125,000 + $800) .4 = $50,320
406.
(10 Points) easy
Perry Corporation purchases $150,000 of Reed’s (80 percent subsidiary) outstanding
bonds payable for $168,000 on December 31, 2005. At that date, the bonds have a
$4,500 unamortized discount on Reed’s financial records and a remaining life of three
years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2005
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Reed has reported net
income of $268,000?
Answer:
Part a.
Bonds Payable
Loss on Early Debt Retirement
Discount on Bonds Payable
Investment in Bonds
150,000
22,500
Part b.
Income to Noncontrolling Interest = ($268,000 - $22,500) .2 = $49,100
407.
(10 Points) easy
4,500
168,000
Heel Corporation purchases $70,000 of Shoe’s (70 percent subsidiary) outstanding bonds
payable for $76,000 on December 31, 2005. At that date, the bonds have a $2,400
unamortized discount on Shoe’s financial records and a remaining life of four years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2005
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Shoe has reported net
income of $180,000?
Answer:
Part a.
Bonds Payable
Loss on Early Debt Retirement
Discount on Bonds Payable
Investment in Bonds
70,000
8,400
2,400
76,000
Part b.
Income to Noncontrolling Interest = ($180,000 - $8,400) .3 = $51,480
408.
(10 Points) easy
Brewer Corporation purchases $90,000 of Wilson’s (90 percent subsidiary) outstanding
bonds payable for $88,000 on December 31, 2005. At that date, the bonds have a $5,000
unamortized premium on Wilson’s financial records and a remaining life of five years
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2005
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Wilson has reported net
income of $128,000?
Answer:
Part a.
Bonds Payable
Premium on Bonds Payable
Gain on Early Debt Retirement
Investment in Bonds
90,000
5,000
7,000
88,000
Part b.
Income to Noncontrolling Interest = ($128,000 + $7,000) .1 = $13,500
409.
(10 Points) easy
Tahoe Corporation purchases $250,000 of Reno’s (80 percent subsidiary) outstanding
bonds payable for $242,000 on December 31, 2005. At that date, the bonds have a
$15,000 unamortized premium on Reno’s financial records and a remaining life of ten
years.
Required:
a.
b.
Prepare the relevant worksheet elimination for the preparation of the 2005
consolidated financial statements.
What is the income to noncontrolling interest in 2005 if Reno has reported net
income of $290,000?
Answer:
Part a.
Bonds Payable
Premium on Bonds Payable
Gain on Early Debt Retirement
Investment in Bonds
250,000
15,000
23,000
242,000
Part b.
Income to Noncontrolling Interest = ($290,000 + $23,000) .2 = $62,600
410.
(10 Points) easy
Pasta Corporation purchases $200,000 of Spaghetti’s (70 percent subsidiary) outstanding
bonds payable for $212,000 on December 31, 2005. At that date, the bonds have a
$16,000 unamortized premium on Spaghetti’s financial records and a remaining life of
eight years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2005
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Spaghetti has reported
net income of $272,000?
Answer:
Part a.
Bonds Payable
Premium on Bonds Payable
Gain on Early Debt Retirement
Investment in Bonds
200,000
16,000
4,000
212,000
Part b.
Income to Noncontrolling Interest = ($272,000 + $4,000) .3 = $82,800
411.
(10 Points) easy
Regna Corporation purchases $300,000 of Dudley’s (60 percent subsidiary) outstanding
bonds payable for $340,000 on December 31, 2005. At that date, the bonds have a
$30,000 unamortized premium on Dudley’s financial records and a remaining life of six
years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2005
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Dudley has reported net
income of $352,000?
Answer:
Part a.
Bonds Payable
Premium on Bonds Payable
Loss on Early Debt Retirement
Investment in Bonds
300,000
30,000
10,000
340,000
Part b.
Income to Noncontrolling Interest = ($352,000 - $10,000) .4 = $136,800
412.
(20 Points) moderate
Clark Enterprises purchases $50,000 of Bishop’s (80 percent subsidiary) 9 percent
outstanding bonds payable for $47,000 on March 1, 2005. At that date, the bonds have a
$4,200 unamortized discount on Bishop’s financial records and a remaining life of five
years. Discounts and premiums are amortized straight-line.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2005
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Bishop has reported net
income of $163,000?
Answer:
Part a.
Bonds Payable
Loss on Early Debt Retirement [$47,000 - ($50,000 $4,200)]
Interest Revenue ($50,000 x .09) (10/12) + ($50,000 $47,000) (10/60)
Interest Expense ($50,000 x .09) (10/12) +
($4,200 x 10/60)
Discount on Bonds Payable ($4,200 x 50/60)
Investment in Bonds [$47,000 + ($50,000 $47,000) (10/60)]
50,000
1,200
4,250
4,450
3,500
47,500
Part b.
Income to Noncontrolling Interest = ($163,000 - $1,200 - $4,250 + $4,450) .2 = $32,400
413.
(20 Points) moderate
Aaron Enterprises purchases $300,000 of Spelling’s (90 percent subsidiary) 6 percent
outstanding bonds payable for $282,000 on August 1, 2005. At that date, the bonds have
a $15,000 unamortized discount on Spelling’s financial records and a remaining life of
75 months. Discounts and premiums are amortized straight-line.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2005
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Spelling has reported net
income of $251,000.
Answer:
Part a.
Bonds Payable
Interest Revenue ($300,000 x .06)(5/12) + ($300,000 $282,000) (5/75)
Interest Expense ($300,000 x .06)(5/12) +
($15,000 x 5/75)
Gain on Early Debt Retirement ($300,000 $15,000) - $288,000
Discount on Bonds Payable ($15,000 x 70/75)
Investment in Bonds [$282,000 + ($300,000
- $282,000) (5/75)]
300,000
8,700
8,500
3,000
14,000
283,200
Part b.
Income to Noncontrolling Interest = ($251,000 + $3,000 + 8,500 - $8,700) .1 = $25,380
414.
(20 Points) moderate
East Coast Corporation purchases $250,000 of Midwest’s (80 percent subsidiary) 4
percent outstanding bonds payable for $275,500 on September 30, 2005. At that date,
the bonds have a $12,000 unamortized discount on Midwest’s financial records and a
remaining life of five years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2005
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Midwest has reported net
income of $384,000?
Answer:
Part a.
Bonds Payable
Loss on Early Debt Retirement [$275,500 - ($250,000
- $12,000)]
Interest Revenue [($250,000 x .04)(3/12) - ($275,500 $250,000) (3/60)]
Interest Expense ($250,000 x .04)(3/12) +
($12,000/60) 3
Discount on Bonds Payable ($12,000/60) 57
Investment in Bonds {$275,500 - [($275,500 $250,000)/60] 3}
250,000
37,500
1,225
3,100
11,400
274,225
Part b.
Income to Noncontrolling Interest = ($384,000 - $37,500 - $1,225 + $3,100) .2 =
$69,675
415.
(20 Points) moderate
Flagstone Corporation purchases $200,000 of Quary’s (90 percent subsidiary) 5 percent
outstanding bonds payable for $218,000 on March 31, 2005. At that date, the bonds have
a $10,800 unamortized discount on Quary’s financial records and a remaining life of six
years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2005
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Quary has reported net
income of $315,000?
Answer:
Part a.
Bonds Payable
Loss on Early Debt Retirement [$218,000 ($200,000 - $10,800)]
Interest Revenue ($200,000 x .05)(9/12) ($218,000 - $200,000) (9/72)
Interest Expense ($200,000 x .05)(9/12) +
$10,800 x 9/72
Discount on Bonds Payable $10,800 x 63/72
Investment in Bonds [$218,000 - ($218,000 $200,000) 9/72]
200,000
28,800
5,250
8,850
9,450
215,750
Part b.
Income to Noncontrolling Interest = ($315,000 - $28,800 - $5,250 + $8,850) .1 =
$28,980
416.
(20 Points) moderate
Milton Corporation purchases $200,000 of McDermott’s (60 percent subsidiary) 6
percent outstanding bonds payable for $180,800 on May 31, 2005. At that date, the
bonds have a $4,800 unamortized premium on McDermott’s financial records and a
remaining life of four years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2005
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if McDermott has reported
net income of $184,000?
Answer:
Part a.
Bonds Payable
Premium on Bonds Payable ($4,800 x 41/48)
Interest Revenue [($200,000 x .06) (7/12) +
[($200,000 - $180,800) 7/48)]
Interest Expense [($200,000 x .06) (7/12) -
200,000
4,100
9,800
6,300
($4,800 x 7/48)]
Gain on Early Debt Retirement [$180,800 ($200,000 + $4,800)]
Investment in Bonds {$180,800 + [($200,000 $180,800) 7/48)]}
24,000
183,600
Part b.
Income to Noncontrolling Interest = ($184,000 + $24,000 + $6,300 - $9,800) .4 =
$81,800
417.
(20 Points) moderate
Cooper Corporation purchases $100,000 of Gardner’s (80 percent subsidiary) 5 percent
outstanding bonds payable for $94,000 on September 30, 2005. At that date, the bonds
have a $9,000 unamortized premium on Gardner’s financial records and a remaining life
of five years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2005
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Gardner has reported net
income of $163,000?
Answer:
Part a.
Bonds Payable
100,000
Premium on Bonds Payable ($9,000 x 57/60)
8,550
Interest Revenue ($100,000 x .05 x 3/12) +
1,550
($100,000 - $94,000) (3/60)
Interest Expense [($100,000 x .05) (3/12) ($9,000 x 3/60)]
Gain on Early Debt Retirement [$94,000 ($100,000 + $9,000)]
Investment in Bonds {$94,000 +
[($100,000 - $94,000) 3/60}
800
15,000
94,300
Part b.
Income to Noncontrolling Interest = ($163,000 + $15,000 + $800 - $1,550) .2 = $35,450
418.
(20 Points) moderate
Kelley Corporation purchases $150,000 of Green’s (90 percent subsidiary) 9 percent
outstanding bonds payable for $160,800 on November 1, 2005. At that date, the bonds
have an $18,000 unamortized premium on Green’s financial records and a remaining life
of six years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2005
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Green has reported net
income of $82,000?
Answer:
Part a.
Bonds Payable
Premium on Bonds Payable ($18,000 x 70/72)
Interest Revenue ($150,000 x .09 x 2/12) ($160,800 - $150,000) (2/72)
Interest Expense [($150,000 x .09) (2/12) ($18,000 x 2/72)]
Gain on Early Debt Retirement [$160,800 ($150,000 + $18,000)]
Investment in Bonds {$160,800 [($160,800 - $150,000) 2/72]}
150,000
17,500
1,950
1,750
7,200
160,500
Part b.
Income to Noncontrolling Interest = ($82,000 + $7,200 + $1,750 - $1,950) .1 = $8,900
419.
(20 Points) moderate
Mangold Enterprises purchases $300,000 of Joyce’s (80 percent subsidiary) 10 percent
outstanding bonds payable for $360,000 on March 1, 2005. At that date, the bonds have
a $45,000 unamortized premium on Joyce’s financial records and a remaining life of ten
years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2005
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2005 if Joyce has reported net
income of $640,000?
Answer:
Part a.
Bonds Payable
Premium on Bonds Payable ($45,000 x 110/120)
Loss on Early Debt Retirement [$360,000 ($300,000 + $45,000)]
Interest Revenue ($300,000 x .10 x 10/12) ($360,000 - $300,000) (10/120)
Interest Expense [($300,000 x .10) (10/12) ($45,000 x 10/120)]
Investment in Bonds {$360,000 - [($360,000 $300,000) 10/120]}
300,000
41,250
15,000
20,000
21,250
355,000
Part b.
Income to Noncontrolling Interest = ($640,000 - $15,000 - $20,000 + $21,250) .2 =
$125,250
420.
(20 Points) moderate
CCRI Enterprises purchases $200,000 of Simone’s (80 percent subsidiary) outstanding 9
percent bonds payable for $191,000 on December 31, 2005. At that date, the bonds have
a $12,000 unamortized discount on Simone’s financial records and a remaining life of six
years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Simone has reported net
income of $248,000?
Answer:
Part a.
Bonds Payable
Interest Revenue [$200,000 x .09 + ($200,000 $191,000/6)]
Retained Earnings [$191,000 - ($200,000 - $12,000)] .8
Noncontrolling Interest [$191,000 - ($200,000 $12,000)] .2
Discount on Bonds Payable [$12,000 ($12,000/6)]
Interest Expense [$200,000 x .09 +
($12,000/6)]
Investment in Bonds [$191,000 + ($200,000 $191,000/6)]
200,000
19,500
2,400
600
10,000
20,000
192,500
Part b.
Income to Noncontrolling Interest = ($248,000 - $19,500 + $20,000) .2 = $49,700
421.
(20 Points) moderate
El Paso Corporation purchases $150,000 of Santa Fe’s (70 percent subsidiary)
outstanding 6 percent bonds payable for $147,000 on December 31, 2005. At that date,
the bonds have a $2,400 unamortized discount on Santa Fe’s financial records and a
remaining life of 12 years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Santa Fe has reported net
income of $341,000?
Answer:
Part a.
Bonds Payable
Interest Revenue [$150,000 x .06 + ($150,000 $147,000/12)]
Retained Earnings [$147,000 - ($150,000 -
150,000
9,250
420
$2,400)] .7
Noncontrolling Interest [$147,000 - ($150,000 $2,400)] .3
Discount on Bonds Payable [$2,400 x 11/12)]
Interest Expense ($150,000 x .06 + $2,400/12)
Investment in Bonds [$147,000 + ($150,000 $147,000/12)]
180
2,200
9,200
147,250
Part b.
Income to Noncontrolling Interest = ($341,000 - $9,250 + $9,200) .3 = $102,285
422.
(20 Points) moderate
Benjamin Enterprises purchases $500,000 of Simpson’s (60 percent subsidiary)
outstanding 8 percent bonds payable for $524,000 on December 31, 2005. At that date,
the bonds have a $15,000 unamortized discount on Simpson’s financial records and a
remaining life of five years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Simpson has reported net
income of $405,000?
Answer:
Part a.
Bonds Payable
Interest Revenue [$500,000 x .08 - ($524,000 $500,000/5)]
Retained Earnings [$524,000 - ($500,000 - $15,000)] .6
Noncontrolling Interest [$524,000 - ($500,000 $15,000)] .4
Discount on Bonds Payable ($15,000 x 4/5)
Interest Expense [$500,000 x .08 + ($15,000/5)]
Investment in Bonds [$524,000 - ($524,000 $500,000/5)]
500,000
35,200
23,400
15,600
12,000
43,000
519,200
Part b.
Income to Noncontrolling Interest = ($405,000 - $35,200 + $43,000) .4 = $165,120
423.
(20 Points) moderate
Parks Corporation purchases $250,000 of Schmidt’s (80 percent subsidiary) outstanding
8 percent bonds payable for $270,000 on December 31, 2005. At that date, the bonds
have a $12,000 unamortized discount on Schmidt’s financial records and a remaining life
of 10 years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Schmidt has reported net
income of $138,000?
Answer:
Part a.
Bonds Payable
Interest Revenue [$250,000 x .08 - ($270,000 $250,000/10)]
Retained Earnings [$270,000 - ($250,000 - $12,000)] .8
Noncontrolling Interest [$270,000 - ($250,000 $12,000)] .2
Discount on Bonds Payable [$12,000 x 9/10)]
Interest Expense ($250,000 x .08 + $12,000/10)
Investment in Bonds [$270,000 - ($270,000 $250,000/10)]
250,000
18,000
25,600
6,400
10,800
21,200
268,000
Part b.
Income to Noncontrolling Interest = ($138,000 - $18,000 + $21,200) .2 = $28,240
424.
(20 Points) moderate
Macklin Enterprises purchases $100,000 of Berry’s (90 percent subsidiary) outstanding 6
percent bonds payable for $94,000 on December 31, 2005. At that date, the bonds have a
$12,000 unamortized premium on Berry’s financial records and a remaining life of six
years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Berry has reported net
income of $186,000?
Answer:
Part a.
Bonds Payable
Premium on Bonds Payable ($12,000 x 5/6)
Interest Revenue [$100,000 x .06 + ($100,000 $94,000/6)]
Retained Earnings [$94,000 - ($100,000 +
$12,000)] .9
Noncontrolling Interest [$94,000 - ($100,000 +
$12,000)] .1
Interest Expense [$100,000 x .06 ($12,000/6)]
Investment in Bonds [$94,000 + ($100,000 $94,000/6)]
100,000
10,000
7,000
16,200
1,800
4,000
95,000
Part b.
Income to Noncontrolling Interest = ($186,000 - $7,000 + $4,000) .1 = $18,300
425.
(20 Points) moderate
Werley Corporation purchases $200,000 of Krause’s (70 percent subsidiary) outstanding
7 percent bonds payable for $187,000 on December 31, 2005. At that date, the bonds
have a $9,000 unamortized premium on Krause’s financial records and a remaining life
of 10 years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Krause has reported net
income of $184,000?
Answer:
Part a.
Bonds Payable
Premium on Bonds Payable [$9,000 x 9/10)]
Interest Revenue [$200,000 x .07 + ($200,000 $187,000/10)]
Retained Earnings [$187,000 - ($200,000 +
$9,000)] .7
Noncontrolling Interest [$187,000 - ($200,000 +
$9,000)] .3
Interest Expense ($200,000 x .07 $9,000/10)
Investment in Bonds [$187,000 + ($200,000 $187,000/10)]
200,000
8,100
15,300
15,400
6,600
13,100
188,300
Part b.
Income to Noncontrolling Interest = ($184,000 - $15,300 + $13,100) .3 = $54,540
426.
(20 Points) moderate
Judd Enterprises purchases $300,000 of McKnight’s (70 percent subsidiary) outstanding
8 percent bonds payable for $324,000 on December 31, 2005. At that date, the bonds
have a $15,000 unamortized premium on McKnight’s financial records and a remaining
life of six years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if McKnight has reported
net income of $438,000?
Answer:
Part a.
Bonds Payable
Premium on Bonds Payable ($15,000 x 5/6)
Retained Earnings [$324,000 - ($300,000 + $15,000)] .7
300,000
12,500
6,300
Noncontrolling Interest [$324,000 - ($300,000 +
$15,000)] .3
Interest Revenue [$300,000 x .08 - ($324,000 $300,000/6)]
Interest Expense [$300,000 x .08 ($15,000/6)]
Investment in Bonds [$324,000 - ($324,000 $300,000/6)]
2,700
20,000
21,500
320,000
Part b.
Income to Noncontrolling Interest = ($438,000 - $20,000 + $21,500) .3 = $131,850
427.
(20 Points) moderate
Griffin Corporation purchases $150,000 of Sullivan’s (90 percent subsidiary) outstanding
9 percent bonds payable for $165,000 on December 31, 2005. At that date, the bonds
have a $19,000 unamortized premium on Sullivan’s financial records and a remaining
life of 10 years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Sullivan has reported net
income of $285,000?
Answer:
Part a.
Bonds Payable
Premium on Bonds Payable [$19,000 x 9/10)]
Interest Revenue [$150,000 x .09 - ($165,000 $150,000/10)]
Retained Earnings [$165,000 - ($150,000 +
$19,000)] .9
Noncontrolling Interest [$165,000 - ($150,000 +
$19,000)] .1
Interest Expense ($150,000 x .09 $19,000/10)
Investment in Bonds [$165,000 - ($165,000 $150,000/10)]
150,000
17,100
12,000
3,600
400
11,600
163,500
Part b.
Income to Noncontrolling Interest = ($285,000 - $12,000 + $11,600) .1 = $28,460
428.
(25 Points) difficult
Lexington Enterprises purchases $100,000 of Frankfort’s (70 percent subsidiary)
outstanding 3 percent bonds payable for $97,900 on July 31, 2005. At that date, the
bonds have a $3,900 unamortized discount on Frankfort’s financial records and a
remaining life of five years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Frankfort has reported
net income of $129,000?
Answer:
Part a.
Bonds Payable
Interest Revenue [($100,000 x .03) + ($100,000 $97,900/5)]
Retained Earnings {[$97,900 - ($100,000 $3,900)] - ($1,800 x 5/60)} .7
Noncontrolling Interest {[$97,900 - ($100,000 $3,900)] - ($1,800 x 5/60)} .3
Discount on Bonds Payable ($3,900 x 43/60)
Interest Expense [$100,000 x .03 +
($3,900/5)]
Investment in Bonds [$97,900 + ($100,000 $97,900) (17/60)]
100,000
3,420
1,155
495
2,795
3,780
98,495
Part b.
Income to Noncontrolling Interest = ($129,000 - $3,420 + $3,780) .3 = $38,808
429.
(25 Points) difficult
Dallas Corporation purchases $250,000 of Houston’s (90 percent subsidiary) outstanding
6 percent bonds payable for $238,000 on October 31, 2005. At that date, the bonds have
a $9,000 unamortized discount on Houston’s financial records and a remaining life of 10
years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Houston has reported net
income of $330,000?
Answer:
Part a.
Bonds Payable
Interest Revenue [$250,000 x .06 + ($250,000 $238,000/10)]
Retained Earnings {[$238,000 - ($250,000 $9,000)] + ($3,000 x 2/120)} .9
Noncontrolling Interest {[$238,000 - ($250,000 $9,000)] + ($3,000 x 2/120)} .1
Discount on Bonds Payable [$9,000 x 106/120)]
Interest Expense ($250,000 x .06 + $9,000/10)
Investment in Bonds [$238,000 + ($250,000 -
250,000
16,200
2,655
295
7,950
15,900
239,400
$238,000) (14/120)]
Part b.
Income to Noncontrolling Interest = ($330,000 - $16,200 + $15,900) .1 = $32,970
430.
(25 Points) difficult
Pauline Enterprises purchases $200,000 of Sam’s (70 percent subsidiary) outstanding 9
percent bonds payable for $230,000 on March 1, 2005. At that date, the bonds have a
$3,000 unamortized discount on Sam’s financial records and a remaining life of five
years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Sam has reported net
income of $175,000?
Answer:
Part a.
Bonds Payable
Interest Revenue [$200,000 x .09 - ($230,000 $200,000/5)]
Retained Earnings {[$230,000 - ($200,000 $3,000)] - ($33,000 x 10/60)} .7
Noncontrolling Interest {[$230,000 - ($200,000 $3,000)] - ($33,000 x 10/60)} .3
Discount on Bonds Payable ($3,000 x 38/60)
Interest Expense [$200,000 x .09 + ($3,000/5)]
Investment in Bonds [$230,000 - ($230,000 $200,000) (22/60)]
200,000
12,000
19,250
8,250
1,900
18,600
219,000
Part b.
Income to Noncontrolling Interest = ($175,000 - $12,000 + $18,600) .3 = $54,480
431.
(25 Points) difficult
Rigoli Corporation purchases $300,000 of Whitaker’s (60 percent subsidiary) outstanding
6 percent bonds payable for $324,000 on August 31, 2005. At that date, the bonds have a
$15,000 unamortized discount on Whitaker’s financial records and a remaining life of 10
years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Whitaker has reported net
income of $617,000?
Answer:
Part a.
Bonds Payable
Interest Revenue [$300,000 x .06 - ($324,000 $300,000/10)]
Retained Earnings [$324,000 - ($300,000 - $15,000) ($39,000 x 4/120)] .6
Noncontrolling Interest [$324,000 - ($300,000 $15,000) - ($39,000 x 4/120)] .4
Discount on Bonds Payable [$15,000 x
104/120)]
Interest Expense ($300,000 x .06 +
$15,000/10)
Investment in Bonds [$324,000 - ($324,000 $300,000) (16/120)]
300,000
15,600
22,620
15,080
13,000
19,500
320,800
Part b.
Income to Noncontrolling Interest = ($617,000 - $15,600 + $19,500) .4 = $248,360
432.
(25 Points) difficult
Carter Enterprises purchases $100,000 of Malloy’s (80 percent subsidiary) outstanding 5
percent bonds payable for $98,200 on March 31, 2005. At that date, the bonds have a
$6,000 unamortized premium on Malloy’s financial records and a remaining life of five
years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Malloy has reported net
income of $86,000?
Answer:
Part a.
Bonds Payable
Premium on Bonds Payable ($6,000 x 39/60)
Interest Revenue [$100,000 x .05 + ($100,000 $98,200/5)]
Retained Earnings {[$98,200 - ($100,000 +
$6,000)] + ($7,800 x 9/60)} .8
Noncontrolling Interest {[$98,200 - ($100,000 +
$6,000)] + ($7,800 x 9/60)} .2
Interest Expense [$100,000 x .05 - ($6,000/5)]
Investment in Bonds [$98,200 + ($100,000 $98,000) (21/60)]
100,000
3,900
5,360
5,304
1,326
3,800
98,830
Part b.
Income to Noncontrolling Interest = ($86,000 - $5,360 + $3,800) .2 = $16,888
433.
(25 Points) difficult
Kunz Corporation purchases $250,000 of Greenberg’s (80 percent subsidiary)
outstanding 8 percent bonds payable for $232,000 on September 30, 2005. At that date,
the bonds have a $15,000 unamortized premium on Greenberg’s financial records and a
remaining life of 10 years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Greenberg has reported
net income of $297,000?
Answer:
Part a.
Bonds Payable
250,000
Premium on Bonds Payable [$15,000 x 105/120)]
13,125
Interest Revenue [$250,000 x .08 + ($250,000 21,800
$232,000/10)]
Retained Earnings {[$232,000 - ($250,000 +
$15,000)] + ($33,000 x 3/120)} .8
Noncontrolling Interest {[$232,000 - ($250,000 +
$15,000)] + ($33,000 x 3/120)} .2
Interest Expense ($250,000 x .08 - $15,000/10)
Investment in Bonds [$232,000 + ($250,000 $232,000) (15/120)]
25,740
6,435
18,500
234,250
Part b.
Income to Noncontrolling Interest = ($297,000 - $21,800 + $18,500) .2 = $58,740
434.
(25 Points) difficult
Lane Enterprises purchases $150,000 of Stoner’s (80 percent subsidiary) outstanding 6
percent bonds payable for $171,000 on January 31, 2005. At that date, the bonds have a
$15,000 unamortized premium on Stoner’s financial records and a remaining life of five
years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Stoner has reported net
income of $228,000?
Answer:
Part a.
Bonds Payable
Premium on Bonds Payable ($15,000 x 37/60)
Retained Earnings {[$171,000 - ($150,000 +
$15,000)] - ($6,000 x 11/60)}.8
Noncontrolling Interest {[$171,000 - ($150,000 +
$15,000)] - ($6,000 x 11/60)}.2
150,000
9,250
3,920
980
Interest Revenue [$150,000 x .06 - ($171,000 $150,000/5)]
Interest Expense [$150,000 x .06 - ($15,000/5)]
Investment in Bonds [$171,000 - ($171,000 $150,000) (23/60)]
4,800
6,000
162,950
Part b.
Income to Noncontrolling Interest = ($228,000 - $4,800 + $6,000) .2 = $45,840
435.
(25 Points) difficult
Lambert Corporation purchases $150,000 of Cameron’s (80 percent subsidiary)
outstanding 9 percent bonds payable for $168,000 on November 30, 2005. At that date,
the bonds have a $24,000 unamortized premium on Cameron’s financial records and a
remaining life of 10 years.
Required:
a.
Prepare the relevant worksheet elimination for the preparation of the 2006
consolidated financial statements.
b.
What is the income to noncontrolling interest in 2006 if Cameron has reported net
income of $272,000?
Answer:
Part a.
Bonds Payable
150,000
Premium on Bonds Payable [$24,000 x 107/120)]
21,400
Interest Revenue [$150,000 x .09 - ($168,000 11,700
$150,000/10)]
Retained Earnings {[$168,000 - ($150,000 +
$24,000)] + ($6,000 x 1/120)} .8
Noncontrolling Interest {[$168,000 - ($150,000 +
$24,000)] + ($6,000 x 1/120)} .2
Interest Expense ($150,000 x .09 - $24,000/10)
Investment in Bonds [$168,000 - ($168,000 $150,000) (13/120)]
4,760
1,190
11,100
166,050
Part b.
Income to Noncontrolling Interest = ($272,000 - $11,700 + $11,100) .2 = $54,280
Short Answer Questions
436.
David is a new accountant in the controller’s office. He recently was in a group where
the elimination of intercompany transactions was discussed. He is confused because
these are transaction that did occur. Cash did transfer between one party and another and
the inventory was shipped. Explain to David why these types of transactions must be
eliminated from the consolidated financial statements.
Answer: From the consolidated entity’s perspective, the transaction is unrealized because
unrelated parties are not involved. As a result, the transaction must be removed from the
consolidated financial statements so they are not misleading.
437.
Rachel is reading the annual report of a company whose stock she owns. This is the first
time she has really looked at any of the financial information and she is confused about
the term intercompany transaction. Prepare a short note explaining what is meant by the
term and how it impacts the financial statements.
Answer: Intercompany transactions occur when one unit of an entity is involved in a
transaction with another unit of the same entity. Failure to remove these transactions
from the consolidated financial statements would misstate income statement and balance
sheet accounts and may mislead financial statement users.
438.
Jack Harris is a new board member of a local corporation. During a recent board
meeting, the consolidated financial statements were presented and discussed. The
controller commented that upstream and downstream intercompany transactions were
eliminated, but there were no lateral transactions this period. Jack is confused by the
terms upstream, downstream, and lateral. Prepare a short note explaining what the
controller was discussing.
Answer: A downstream transaction exists when there is a transaction that flows from the
parent to the subsidiary such as the parent selling inventory to the subsidiary. An
upstream transaction occurs when the flow is from the subsidiary to the parent, such as
the parent purchasing a bond initially issued by the subsidiary. A lateral transaction
occurs when the flow is from one subsidiary to another subsidiary, such as one subsidiary
selling equipment to another subsidiary.
439.
You have been assigned the task of discussing the implications of purchasing a subsidiary
with a group of owners about to engage in their first acquisition. The discussion
develops smoothly until you reach the subject of intercompany transactions. The owners
do not need to understand the accounting procedures for these transactions but they are
very confused about why the issue must be addressed. Prepare a brief memo to the
owners explaining the general objective of the consolidation process insofar as
intercompany transactions are concerned.
Answer: Intercompany transactions exist when the two parties involved in the transaction
are not independent of each other, i.e., they are related. If the intercompany transaction
is not removed from the consolidated financial statements, the company will be
disclosing a transaction that occurred with itself. As a result, the financial statements will
be misleading. The published financial statements may only include the results of
transactions that the entity has had with unrelated parties.
440.
A new manager for a client has called requesting an interpretation regarding the
worksheet eliminations prepared for her division. She understands that intercompany
profits must be eliminated in the period of the transaction but she is confused about
subsequent adjustment(s) to retained earnings for downstream transactions. She is even
more confused about subsequent adjustments(s) to retained earnings and noncontrolling
interest for upstream transactions. Prepare a brief memo to the manager explaining why
the subsequent period adjustments are necessary.
Answer: The profits pertaining to a downstream sale are closed to the parent’s retained
earnings at the end of the period when the transaction occurred. As a result, the retained
earnings are misstated by the amount of the unrealized profit from the intercompany
transaction. This results in an adjustment to retained earnings to correct this
misstatement.
When the intercompany transaction is upstream, the profit is closed to the subsidiary’s
retained earnings at the end of the period in which the transaction occurred. The parent’s
share of the unrealized profit is transferred to the parent’s income statement and
subsequently to the parent’s retained earnings via the equity method journal entries.
Therefore, the parent’s retained earnings must be adjusted for the parent’s share of the
unrealized profit. When the subsidiary’s beginning retained earnings is eliminated, the
noncontrolling interest portion of the unrealized profit is transferred to the noncontrolling
interest account. As a result, the noncontrolling interest is misstated by its share of the
unrealized profit so the noncontrolling interest account must also be adjusted.
441.
Philip is a new staff accountant helping prepare the worksheet eliminations prior to
compiling the consolidated financial statements. He asks why eliminating some of the
intercompany transactions results in an adjustment to the Income to Noncontrolling
Interest while other intercompany transactions do not result in such an adjustment even
for the same subsidiary? How do you respond to Philip?
Answer: Intercompany transactions can be upstream (subsidiary sells to or borrows from
the parent) or downstream (parent sells to or borrows from the subsidiary). When the
transaction is upstream, the income statement effects are on the subsidiary’s books so the
subsidiary’s income statement must be adjusted. An adjustment to the subsidiary’s
income statement changes the income allocated to the noncontrolling interest. When the
transaction is downstream, the income statement effects are on the parent’s financial
records so the subsidiary’s income statement is not adjusted. As a result, the income
allocated to the noncontrolling interest is not altered by downstream transactions.
442.
Why does an upstream or lateral intercompany transaction in the current period impact
the basic worksheet eliminations while a downstream intercompany transaction does not?
Answer: The upstream and lateral intercompany transactions have income statement
implications for the subsidiary while the downstream intercompany transaction only has
income statement implications for the parent. The parent uses the subsidiary income
statement to allocate income to noncontrolling interest so this amount must be modified.
443.
A member of management has just been promoted to a level where he will receive part of
his compensation based on the company’s overall performance. As a result of this
change in compensation, this manager has become more interested in how the
consolidated financial statements are prepared. He recently asked why upstream
intercompany transactions in prior periods do not have to be considered when eliminating
the subsidiary’s stockholders’ equity. He goes on to state that the transaction’s impact the
subsidiary’s prior period net income so it would impact this period’s retained earnings.
Prepare a response to this manager.
Answer: The amount of income or loss resulting from the upstream intercompany
transaction in a prior period became part of the subsidiary’s net income. As a result the
subsidiary’s retained earnings did change; however, the parent’s investment income
reflected the parent’s ownership interest in the income or loss so the parent’s investment
in subsidiary account also changed. The worksheet elimination completely removes the
subsidiary’s retained earnings and the investment income and the noncontrolling interest
portion of the income or loss is assigned to the noncontrolling interest. As a result, the
upstream intercompany transaction is self-correcting because the amounts automatically
change to reflect the change in retained earnings and investment in subsidiary.
444.
Why is the additional worksheet elimination needed to remove the impact of an
intercompany transaction not altered by the direction of the transaction in the period of
the intercompany transaction?
Answer: The difference that exists among upstream, downstream, and lateral
intercompany transactions exist because of the allocation of gains and losses to equity. In
the period of the intercompany transaction, the income statement has not been closed to
retained earnings so any gain or loss that exists has not been allocated to equity so the
worksheet elimination needed is the same regardless of the transaction’s direction.
445.
Jack is a new manager in a regional company. This is his first position where
consolidated financial statements are important to his job. Jack wants to understand the
statements and the controller has shown him the elimination process. After looking over
the last three years of worksheet eliminations, Jack calls with a question. He asks, “Why
do we adjust the plant asset account for the same dollar amount every period? It looks
like we are writing down the same asset every period. Does this not understate the
assets?” How do you respond?
Answer: The same asset is being adjusted every period. This is necessary because the
worksheet eliminations exist only on the consolidation worksheet. They are not posted to
the financial records of any company. As a result, the plant asset account is not really
changed on the books. The adjustment every period accomplishes the same result; it
restates the asset to the historical cost of the original owner.
446.
Explain how the dollar amount of the worksheet elimination resulting from the
intercompany sale of a plant asset is determined in the period of the transaction. In
addition, also explain how the dollar amount of the adjustment to plant assets is
determined in periods subsequent to the intercompany transaction.
Answer The dollar amount of the plant asset worksheet elimination is the difference
between the original cost of the asset and the dollar amount of the intercompany
transaction. The dollar amount of the plant asset worksheet elimination will be the same
in all periods until the asset is transferred to an external party or scrapped.
447.
Two of your classmates are discussing intercompany transactions in preparation for an
upcoming exam. They have a disagreement about a technical issue relating to the
worksheet elimination for plant assets. Sally states that she heard the professor say that
the worksheet elimination for an intercompany sale of plant assets in the period of the
transaction is the same regardless of the month in which the transaction occurred.
Richard says that he is not certain that Sally heard things correctly. He said it seems that
the timing of the transaction would affect the worksheet elimination. You just got into
the conversation, what is your opinion on this issue?
Answer: Parts of the worksheet elimination are the same regardless of when the
transaction occurs while other parts are different. If the transaction occurs at the end of
the period, there is no adjustment to depreciation expense. However, if the transaction
occurs during the period, a depreciation expense adjustment is needed and given a sale at
a particular price, parts of the worksheet elimination are affected by the exact timing of
the sale. The adjustment to restore the historical cost will be the same. However, the
calculated amount of gain or loss, the adjustment to depreciation expense, and the
adjustment to accumulated depreciation will be affected by the transaction date. The
latter three items are affected because the book value on the seller’s financial records at
the transaction date changes as the year progresses.
448.
Worksheet eliminations are prepared to eliminate 100 percent of the unrealized profit
from the land account in a downstream sale of land. Is 100 percent also eliminated for an
upstream sale of land? Explain.
Answer: Regardless of the direction of the transaction, from the consolidated entity’s
perspective, the transaction does not exist. As a result, all of the intercompany gain or
loss must be eliminated and the land must be restated to its original historical cost.
449.
Occasionally, a plant asset acquired in an intercompany sale is disposed of prior to the
expiration of its estimated useful life. From a consolidated viewpoint, explain the
accounting treatment necessary to record this event.
Answer: The gain or loss recognized on the consolidated income statement at the disposal
date is based on the original historical cost because the intercompany transaction is
viewed as if it had not occurred.
450.
Allison, a new assistant controller, has been reviewing the intercompany transaction
worksheet elimination for her new company. This is the first time she has worked for a
company where intercompany inventory transactions have existed. She notices that this
subsidiary is engaged in inventory transactions with several other related companies. In
some instances the inventory sold internally is still all on the purchasers financial records
while in other instances part of the inventory has been sold to unrelated parties. Allison
is confused about the elimination of the intercompany sales amount. It seems that the
full intercompany sales amount is eliminated regardless of whether any of the inventory
has been sold externally or not. Prepare a short note explaining to Allison the reason that
the complete intercompany sale must be eliminated in all situations.
Answer: The elimination of intercompany sales is independent of whether any of the
inventory has been sold to unrelated parties. The sale was to a related party so the
inventory did not leave the consolidated entity. As a result, the consolidated financial
statements will fully remove the intercompany sale of inventory.
451.
Rachel, a new assistant controller, has been reviewing the intercompany transaction
worksheet elimination for her new company. This is the first time she has worked for a
company where intercompany inventory transactions have existed. She notices that this
subsidiary is engaged in inventory transactions with several other related companies. In
some instances the inventory sold internally is still all on the purchasers financial records
while in other instances part of the inventory has been sold to unrelated parties. Rachel
is confused about the elimination to the cost of good sold account. It seems that the
dollar amount of this adjustment differs depending on whether any of the inventory has
been sold externally or not. Prepare a short note explaining to Rachel the reason that the
cost of goods sold elimination changes as a result of sales made to unrelated parties.
Answer: The cost of goods sold adjustment is comprised of two components. One
component is the elimination of the intercompany sale. This part of the adjustment will
completely remove the cost of the inventory sold to a related party. The second part of
the adjustment is based on the inventory sold by the purchaser to an unrelated party. The
cost of goods, sold when the inventory is sold to an unrelated party, is based on the
intercompany transfer price. Given that this is not the inventory’s cost to the
consolidated entity, the cost of goods sold is misstated when the inventory is sold to an
unrelated party. The worksheet elimination must adjust the cost of good sold to result in
the consolidated cost of goods sold amount based on the inventory’s cost to the
consolidated entity.
452.
Why is it important to distinguish between upstream and downstream sales in the
analysis of confirmed and unconfirmed intercompany profits?
Answer: It is important to determine the company where the profits have been recorded.
If the profits are on the subsidiary’s financial records, then the income to noncontrolling
interest must be adjusted.
453.
Explain the difference between worksheet eliminations for an unrealized intercompany
profit made when the selling entity is a less than wholly owned subsidiary and those
made when the selling entity is a wholly owned subsidiary.
Answer: When the selling entity is less than wholly owned, there is a noncontrolling
interest in the entity. As a result, the income to noncontrolling interest in the period of
the sale, and possibly in subsequent periods, must be adjusted. If the selling entity is
wholly owned, there is no noncontrolling interest and therefore no adjustment to the
income to noncontrolling interest.
454.
The audit partner has been discussing the inventory worksheet elimination with an
important client. Just before leaving, the partner states that the “unconfirmed profit must
be removed from the consolidated financial statements.” The client looks to you for
clarification on the meaning of unconfirmed profit and asks, “When does the profit
become confirmed and what does that mean to my company?”
Answer: The profit becomes confirmed when the inventory is sold to an unrelated party.
The profit is deferred until the inventory is sold to an independent party.
455.
You are the controller for a large manufacturing company. One division manager has
come to you with a concern. Certain expenses are allocated to the division based on the
division’s contribution to consolidated gross profit. The manager notices that the cost of
goods sold assigned to his division is not the same as the cost of goods sold determined
by the divisional controller. Explain why the corporate controller may change the cost of
goods sold value.
Answer: The divisional controller is unaware of the division’s intercompany transactions.
Cost of goods sold on the consolidated income statement must represent the cost to the
original owner, not the cost to the ultimate sales division. The cost to the original owner
represents the amount of resources expended by the consolidated entity to bring the asset
to the consolidated entity.
456.
A board of directors member was reviewing the consolidation worksheet immediately
before a board meeting. During the board meeting this member asked if she could get a
clarification on a technical matter. She states that she understands why sales and cost of
goods sold are restated as a result of intercompany transactions but she does not
understand why inventory is also part of the restatement. Prepare a brief note explaining
why inventory must be restated due to intercompany transactions.
Answer: When inventory is sold to a related party, the inventory’s cost basis changes
from the original owner’s historical cost to the new owner’s historical cost. The new
owner’s historical cost includes the profit recognized by the original owner as a result of
the intercompany transaction. The consolidation process must remove the gross profit
from the inventory that was recognized by the original owner. As a result, inventory is
revalued as part of the worksheet eliminations to remove intercompany transactions.
457.
We recently informed a client that the consolidation process includes worksheet
eliminations to remove intercompany interest expense and revenue from a bond
transaction. The client is concerned that interest revenue and interest expense are not the
same dollar amounts even though the parent now owns 100 percent of the bond issued by
the subsidiary. Explain to the manager why this difference exists and the amount to
which these differences will sum over the life of the bond.
Answer: Interest revenue and interest expense will be equal only if the bond is acquired
for the bond’s book value on the issuer’s financial records. The amount that the purchase
price differs from the bond’s book value at the acquisition date is the gain or loss on early
retirement of debt. This is also the amount that the interest revenue and interest expense
will differ over the remaining life of the bond.
458.
In regard to unconfirmed profit on an intercompany sale of a depreciable asset, the effect
of the worksheet elimination is to initially defer the profit recorded by the selling entity
and to recognize it over the remaining life of the asset. Compare these results with those
produced by the worksheet eliminations related to intercompany bond holdings.
Answer: When an intercompany bond transaction occurs, the gain or loss on the early
retirement of debt is recognized immediately even though neither entity recognized the
gain or loss. The recognition occurs because a transaction with an unrelated party
(investor) did occur whereas with an intercompany sale of plant assets, an unrelated party
is not involved. The gain or loss on the sale of a plant asset is recognized over the asset’s
life through an adjustment to depreciation expense. In contrast, when there is an
intercompany debt transaction, the difference between the interest expense and interest
revenue on the separate entities’ financial records results in the gradual recognition of the
income statement effect place on the consolidated income statement at the transaction
date.
459.
Sam Reynolds works in the controller’s office. He has substantial experience eliminating
intercompany asset transactions but is not familiar with intercompany debt transactions.
As a result, he is confused when he reviews the elimination of an indirect intercompany
debt transaction that occurred this year. Sam asks why the loss on early retirement of
debt is debited in the worksheet elimination. In the past he has always credited losses as
part of the worksheet elimination to remove the item.
Answer: Intercompany asset transactions are recognized on both entities’ financial
records but do not exist for consolidated purposes. As a result, losses are credited to
remove them from the consolidated income statement. An indirect intercompany debt
transaction is a recognized transaction because it involves an unrelated party. The issue
that must be addressed is that it is a retirement of debt from the consolidated entity’s
perspective while it is an outstanding debt and an investment from the perspective of the
individual entities. Neither party has recognized the retirement. As a result, the loss
must be created rather than eliminated.
460.
Jim, a new manger in the controller department is not familiar with indirect
intercompany bond transactions. He has asked for an explanation why the consolidated
entity is recognizing a loss on early debt retirement when the bond is still on the issuer’s
books. Prepare a response to Jim’s question.
Answer: The bond is still on the issuer’s books but it has been retired from the
consolidated entity’s perspective. The acquirer of the bond recorded an investment at the
acquisition date while the issuer of the debt still disclosed a liability. From the
consolidated entity’s perspective, the bond has been retired because a member of the
consolidated entity acquired it. This is a case where the transaction results in the
recognition of a gain or loss on the consolidated income statement even thought there is
no income statement disclosure on the books of either entity involved in the transaction.