Question 1
1. Pregler Inc. has 70% ownership of Sach Company, but should exclude Sach from its consolidated financial
statements if
a.
Sach is in a regulated industry.
b.
Pregler uses the equity method for Sach.
c.
Sach is in legal reorganization.
d.
Sach is in a foreign country and records its books in a foreign currency.
3.35 points
Question 2
1. Subsequent to an acquisition, the parent company and consolidated financial statement amounts would not
be the same for
a.
investments in unconsolidated subsidiaries.
b.
investments in consolidated subsidiaries.
c.
capital stock.
d.
ending retained earnings.
3.35 points
Question 3
1. On June 1, 2014, Puell Company acquired 100% of the stock of Sorrell Inc. On this date, Puell had
Retained Earnings of $100,000 and Sorrell had Retained Earnings of $50,000. On December 31, 2014,
Puell had Retained Earnings of $120,000 and Sorrell had Retained Earnings of $60,000. The amount of
Retained Earnings that appeared in the December 31, 2014 consolidated balance sheet was
a.
$120,000.
b.
$130,000.
c.
$170,000.
d.
$180,000.
3.34 points
Question 4
1. Perth Corporation acquired a 100% interest in Sansone Company for $1,600,000 when Sansone had no
liabilities. The book values and fair values of Sansone’s assets were:
Book Value
Current assets
$350,000
Equipment
150,000
Land & buildings
570,000
Total assets
$1,070,000
2.
3. Immediately following the acquisition, equipment will be included on the consolidated balance sheet at
a.
$150,000.
b.
$200,000.
c.
$210,000.
d.
$280,000.
3.33 points
Question 5
1. A newly acquired subsidiary had pre-existing goodwill on its books. The parent company’s consolidated
balance sheet will
a.
not show any value for the subsidiary’s pre-existing goodwill.
b.
treat the goodwill similarly to other intangible assets of the acquired company.
c.
not show any value for the pre-existing goodwill unless all other assets of the subsidiary are stated at
their full fair value.
d.
always show the pre-existing goodwill of the subsidiary at its book value.
Packaging
Shipaway
Assets
Liabilities
$70,000
$30,000
Capital stock
360,000
90,000
a.
$9,000.
b.
$13,500.
d.
$16,667.