Last Name
|_|_|_|_|_|_|_|_|_|_|_|_|
First Name
|_|_|_|_|_|_|_|_|_|_|_|_|
Accounting & MIS 4200
Exam II
Spring 2013
Instructions:
1.
Read each question carefully and answer fully. Unless otherwise
specified, subsidiaries do not use the push-down method of accounting.
All consolidations are handled as purchases (not pooling) unless
indicated. All firms use a calendar year. Use post-December 2008 GAAP
unless otherwise told to do so. Round all answers to nearest whole
dollar.
2.
Problems not supported by relevant and readable computations are
subject to point loss. Where appropriate, terms like “net income,” “net
loss,” etc. must be included with number answers.
3.
Budget your time carefully. It is generally better to finish half of each
problem than to complete all of half the problems. Students who continue
to work on exams after instructed to stop will receive a zero on this exam.
4.
It is the student's responsibility to verify that all the listed problems and
pages are contained is this booklet. Unanswered questions receive zero
points regardless of reason.
Approximate
Points
Approximate
Time
Problem
Pages
I
2-5
75
27 – 33 minutes
II
6-8
50
18 – 22 minutes
125
45 - 55 minutes
Total
Page 2 of 8
PROBLEM I
Presented below is the partially completed worksheet for Parent and Sub immediately
after Parent acquired 80% of Sub. The current and book value of all of Sub’s recorded assets
were the same except as follows. Inventory (LIFO) has a fair value of $450. Property, Plant &
Equipment (10 years remaining) has a fair value of $1,350. Land (indefinite life) has a fair
value of $580. Long-term Liabilities (6 years remaining) has a $770 current value. The Sub
was determined to have previously unrecorded Trademarks worth $200. The fair market value
of the non-controlling interest was $679 at the acquisition date.
Part A. Required: Complete the worksheet. {19 points}
1 Jan 20x1
Cash & Receivables
Inventory
Property, P, E, net
Land
Parent
1,645
1,000
900
1,200
Investment in S
2,915
Current Liabilities
Long-term Liabilities
Common Stock
Ret. Earnings, end
7,660
Sub
1,180
500
1,100
650
Adjustments
700
450
180
800
10
6,500
7,660
50
2,400
3,430
3,430
Consolidated
Page 3 of 8
PROBLEM I (continued)
Part B. Below is the worksheet at the end of the first year under the complete equity method.
Goodwill (if any) has not been impaired. Trademarks are worth $150.
Required: Complete the worksheet. {25 points}
31 Dec 20x1
Parent
Sub
Sales
5,000
3,000
Cost of Sales
500
1,250
Oper. Expenses
3,300
1,150
Equity in S Income
Consolidated Net Inc.
NCI in Net Income
Net Income/Loss Parent
424
1,624
600
1,624
600
Ret. Earnings, beg.
Net Income/Loss
Dividends Declared
6,500
1,624
2,400
600
30
Ret. Earnings, end
200
8,094
Cash & Receivables
Inventory
Property, P, E, net
Land
3,075
900
750
1,200
Investment in S
3,179
Current Liabilities
Long-term Liabilities
Common Stock
Ret. Earnings, end
9,104
2,800
1,840
400
940
650
550
450
180
800
10
8,094
9,104
50
2,800
3,830
3,830
Adjustments
Consolidated
Page 4 of 8
PROBLEM I (continued)
Part C. Below is the worksheet for the second year. Goodwill (if any) has lost 25% of its value.
Trademarks are worth $175.
Required: Fill out the entire worksheet (including missing amounts in Parent’s columns) under
the complete equity method. {19 points}
31 Dec 20x2
Sales
Cost of Sales
Oper. Expenses
Parent
5,400
630
3,450
Sub
2,800
1,270
1,200
Equity in S Income
Consolidated Net Inc.
NCI in Net Income
Net Income/Loss Parent
Ret. Earnings, beg.
Net Income/Loss
Dividends Declared
330
330
8,094
60
2,800
330
150
Ret. Earnings, end
Cash & Receivables
Inventory
Property, P, E, net
Land
Adjustments
2,980
4,835
500
690
1,200
1,912
600
880
650
Investment in S
Current Liabilities
Long-term Liabilities
470
450
212
800
Common Stock
Ret. Earnings, end
10
50
2,980
4,042
4,042
Consolidated
Page 5 of 8
PROBLEM I (continued)
Part D. This will draw upon GAAP from prior December 2008.
Required: Calculate what is requested below: {12 points}
NCI in net assets under full revaluation
$
NCI in net assets under partial revaluation
$
Page 6 of 8
PROBLEM II
Parent created Sub in many years ago. The Sub’s only source of inventory in 20x1 and
20x2 were items purchased from Parent. Sub uses a weighted-average inventory flow for these
homogeneous items.
Part A. Required: Complete the following worksheet for 20x1 under partial equity. {19 points}
12/31/20x1
Partial Equity
Sales
CGS
Expenses
Intercompany Sales
Intercompany CGS
Parent
Sub
2000
1200
140
Adjustments
800
400
60
500
350
Eq. in Net Inc. of Sub.
Net Income/Loss
340
1150
340
Ret. Earnings, beg.
Net Income/Loss
Dividends Declared
Ret. Earnings, end
2000
1150
450
340
100
10
3050
Inventory
810
Investment in Sub.
785
Other Assets
Liabilities
Common Stock
Ret. Earnings, end
1805
3400
780
100
715
250
100
3050
3400
815
30
5
780
815
Consolidated
Page 7 of 8
Problem II (continued)
Part B. Required: Complete the following worksheet for 20x2 under partial equity. {13 points}
12/31/20x2
Partial Equity
Sales
CGS
Expenses
Intercompany Sales
Intercompany CGS
Parent
1450
920
330
Adjustments
900
640
120
800
605
Eq. in Net Inc. of Sub.
Net Income/Loss
Ret. Earnings, beg.
Net Income/Loss
Dividends Declared
Ret. Earnings, end
Sub
140
535
140
3050
535
780
140
100
30
3485
Inventory
555
Investment in Sub.
895
Other Assets
Liabilities
Common Stock
Ret. Earnings, end
2180
3630
890
260
680
45
100
3485
3630
940
45
5
890
940
Consolidated
Page 8 of 8
Problem II (continued)
Part C. Required: Present, in general journal form, all the adjusting “entries” that would
appear on the 20x1 worksheet if Parent had used the complete equity method to account for the
investment in Sub. {9 points}
PART D. Required: Present, in general journal form, all the adjusting “entries” that would
appear on the 20x2 worksheet if Parent had used the complete equity method to account for the
investment in Sub. {9 points}