[QUESTION]
46. Which of the following statements is true concerning an intra–entity transfer of a depreciable asset?
A) Net income attributable to the noncontrolling interest is never affected by a gain on the transfer.
B) Net income attributable to the noncontrolling interest is always affected by a gain on the transfer.
C) Net income attributable to the noncontrolling interest is affected by a downstream gain only.
D) Net income attributable to the noncontrolling interest is affected only when the transfer is upstream.
E) Net income attributable to the noncontrolling interest is increased by an upstream gain in the year of
transfer.
47. Compute the equity in earnings of Gargiulo reported on Posito’s books for 2017.
A) $63,000.
B) $62,730.
C) $63,270.
D) $70,000.
E) $62,700.
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AICPA: FN Measurement
Feedback: Parent’s Part of Net Income for 2017 ($70,000 X .90) $63,000 – Earnings Adjustment for
Intra-Entity Gross profit on Which Recognition is Deferred for Subsidiary for 2017 ($1,200 X .25 X .90)
$270 = $62,730
[QUESTION]
REFER TO: 05-07
48. Compute the equity in earnings of Gargiulo reported on Posito’s books for 2018.
A) $76,500.
B) $77,130.
C) $75,870.
D) $75,600.
E) $75,800.
49. Compute the equity in earnings of Gargiulo reported on Posito’s books for 2019.
A) $84,600.
B) $84,375.
C) $83,925.
D) $84,825.
E) $84,850.
50. Assuming there are no excess amortizations associated with the consolidation, and no other intra-
2017.
A) $6,970.
B) $7,000.
C) $7,030.
D) $6,270.
E) $6,230.
51. Assuming there are no excess amortizations associated with the consolidation, and no other intra-
2018.
A) $8,500.
B) $8,570.
C) $8,430.
D) $8,400.
E) $7,580.
52. Assuming there are no excess amortizations associated with the consolidation, and no other intra-
2019.
A) $9,400.
B) $9,375.
C) $9,425.
D) $9,325.
E) $8,485.
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Education.
Page 5-24
Answer: C
Learning Objective: 05-05
Topic: Noncontrolling interest―Upstream gross profit
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback: Parent’s Part of Net Income for 2019 ($94,000 X .10 = $9,400) – Earnings Adjustment for
Unrecognized Gross profit of Subsidiary for 2019 ($3,000 X .25 X .10 = $75) + Recognized Gross profit
of Subsidiary for 2018 ($100) = $9,425
[QUESTION]
REFER TO: 05-07
53. For consolidation purposes, what amount would be debited to cost of goods sold for the 2017
consolidation worksheet with regard to unrecognized intra-entity gross profit remaining in ending
inventory with respect to the transfer of merchandise?
A) $ 300.
B) $ 240.
C) $2,000.
D) $1,600.
E) $ 270.
54. For consolidation purposes, what amount would be debited to cost of goods sold for the 2018
consolidation worksheet with regard to the unrecognized intra-entity gross profit remaining in ending
inventory with respect to the 2018 transfer of merchandise?
A) $1,000.
B) $ 800.
C) $3,000.
D) $2,400.
E) $ 900.
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Education.
Page 5-25
AACSB: Analytical Thinking
AACSB: Knowledge Application
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback: Earnings Adjustment for Unrecognized Gross profit of Subsidiary for 2018 ($4,000 X .25 =
$1,000)
[QUESTION]
REFER TO: 05-07
55. For consolidation purposes, what amount would be debited to cost of goods sold for the 2019
consolidation worksheet with regard to the unrecognized intra-entity gross profit remaining in ending
inventory with respect to the 2019 intra-entity transfer of merchandise?
A) $ 600.
B) $ 750.
C) $3,760.
D) $3,000.
E) $ 675.
56. For consolidation purposes, what amount would be debited to January 1 retained earnings for the
2017 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in
ending inventory with respect to the 2017 intra-entity transfer of merchandise?
A) $ 0.
B) $1,600.
C) $ 300.
D) $ 240.
E) $ 270.
57. For consolidation purposes, what amount would be debited to January 1 retained earnings for the
2018 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in
ending inventory with respect to the 2017 intra-entity transfer of merchandise?
A) $ 240.
B) $ 300.
C) $2,000.
D) $1,600.
E) $ 270.
58. For consolidation purposes, what amount would be debited to January 1 retained earnings for the
2019 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in
ending inventory with respect to the 2018 intra-entity transfer of merchandise?
A) $3,000.
B) $2,400.
C) $1,000.
D) $ 800.
E) $ 900.
59. Compute consolidated sales.
A) $10,000,000.
B) $10,126,000.
C) $10,140,000.
D) $10,200,000.
E) $10,260,000.
60. Compute consolidated cost of goods sold.
A) $7,500,000.
B) $7,600,000.
C) $7,615,000.
D) $7,604,500.
E) $7,660,000.
61. Assume the same information, except Shannon sold inventory to Patti. Compute consolidated sales.
A) $10,000,000.
B) $10,126,000.
C) $10,140,000.
D) $10,200,000.
E) $10,260,000.
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Education.
Page 5-28
Learning Objective: 05-02
Topic: Eliminate intra-entity sales and purchases
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback: Consolidated Sales = Parent’s Sales $10,000,000 + Subsidiary’s sales $200,000 = $10,200,000
– Intra-Entity Transfers $60,000 = $10,140,000
REFERENCE: 05-09
Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an
original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2017. On January 1,
2017, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten
remaining years.
On April 1, 2017 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment
from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date.
The following data are available pertaining to Simon’s income and dividends declared:
2017
2018
2019
Net income
$100,000
$120,000
$130,000
Dividends declared
40,000
50,000
60,000
[QUESTION]
REFER TO: 05-09
62. What amount should be recorded on Wilson’s books as gain on the transfer of equipment, prior to
preparing consolidating entries?
A) $19,500.
B) $18,250.
C) $11,750.
D) $38,250.
E) $37,500.
63. Compute the amortization of gain through a depreciation adjustment for 2017 for consolidation
purposes.
A) $1,950.
B) $1,825.
C) $1,500.
D) $2,000.
E) $5,250.
64. Compute the amortization of gain through a depreciation adjustment for 2018 for consolidation
purposes.
A) $1,950.
B) $1,825.
C) $2,000.
D) $1,500.
E) $7,000.
65. Compute the amortization of gain through a depreciation adjustment for 2019 for consolidation
purposes.
A) $1,925.
B) $1,825.
C) $2,000.
D) $1,500.
E) $7,000.
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Page 5-30
Feedback: Amortization of Gain on Transfer of Equipment = $19,500 Gain / 9yrs 9 mos. Remaining
Useful Life = $2,000 per year X 12 mos. of 2019 = $2,000 Depreciation Adjustment for 2019
[QUESTION]
REFER TO: 05-09
66. Assuming there are no excess amortizations associated with the consolidation, and no other intra-
entity asset transfers, compute Wilson’s share of income from Simon for consolidation for 2017.
A) $72,000.
B) $90,000.
C) $73,575.
D) $73,800.
E) $72,500.
67. Assuming there are no excess amortizations associated with the consolidation, and no other intra-
entity asset transfers, compute Wilson’s share of income from Simon for consolidation for 2018.
A) $108,000
B) $110,000.
C) $106,000.
D) $109,825.
E) $109,800.
68. Assuming there are no excess amortizations associated with the consolidation, and no other intra-
entity asset transfers, compute Wilson’s share of income from Simon for consolidation for 2019.
A) $118,825.
B) $115,000.
C) $117,000.
D) $119,000.
E) $118,800.
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Education.
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Learning Objective: 05-07
Topic: Intra-entity transfer of depreciable asset
Difficulty: 1 Easy
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback: Parent’s Share of Subsidiary Net Income 2019 ($130,000 X .90) = $117,000
REFERENCE: 05-10
On January 1, 2017, Smeder Company, an 80% owned subsidiary of Collins, Inc., transferred equipment
with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash.
At the date of transfer, Smeder’s records carried the equipment at a cost of $120,000 less accumulated
depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and
$32,000 for 2017 and 2018, respectively. All net income effects of the intra-entity transfer are attributed
to the seller for consolidation purposes.
[QUESTION]
REFER TO: 05-10
69. What amount of gain should be reported by Smeder Company relating to the equipment for 2017
prior to making consolidating entries?
A) $36,000.
B) $34,000.
C) $12,000.
D) $10,000.
E) $ 0.
70. Assuming there are no excess amortizations associated with the consolidation, and no other intra-
entity asset transfers, what amount of this gain should be recognized for consolidation purposes for 2017?
A) $12,000.
B) $9,600.
C) $8,400.
D) $2,000.
E) $1,200.
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Education.
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AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback: Deferred Gain on Transfer $12,000 divided by 6 years remaining equals $2,000 Amortization
of Gain per year.
[QUESTION]
REFER TO: 05-10
71. For consolidation purposes, what net debit or credit will be made for the year 2017 relating to the
accumulated depreciation for the equipment transfer?
A) Debit accumulated depreciation, $46,000.
B) Debit accumulated depreciation, $48,000.
C) Credit accumulated depreciation, $48,000.
D) Credit accumulated depreciation, $46,000.
E) Debit accumulated depreciation, $2,000.
72. What is the net effect on net income as a result of consolidating adjustments made in 2017 with
respect to the equipment transfer?
A) Increase net income by $2,000.
B) Decrease net income by $12,000.
C) Decrease net income by $10,000.
D) Decrease net income by $14,000.
E) Increase net income by $10,000.
73. Compute the gain or loss on the intra-entity transfer of land that should be reported on the books of
Stiller prior to consolidation.
A) $15,000 loss.
B) $15,000 gain.
C) $50,000 loss.
D) $50,000 gain.
E) $65,000 gain.
74. On a consolidation worksheet, what adjustment would be made for 2017 regarding the land transfer?
A) Debit gain for $50,000.
B) Credit gain for $50,000.
C) Debit land for $15,000.
D) Credit land for $15,000.
E) Credit gain for $15,000.
75. On a consolidation worksheet, having used the equity method, what adjustment would be made for
2018 regarding the land transfer?
A) Debit retained earnings for $15,000.
B) Credit retained earnings for $15,000.
C) Debit retained earnings for $50,000.
D) Credit retained earnings for $50,000.
E) Debit investment in Stiller for $15,000.
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Education.
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Topic: Intra-entity transfer of land
Difficulty: 1 Easy
Blooms: Analyze
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback: Debit the Investment account for the Gain of $15,000, with any recognition of intra-entity gain
on the transfer deferred until the parcel is sold outside the entity in the future.
[QUESTION]
REFER TO: 05-11
76. Assuming there are no excess amortizations or other intra-entity transactions, compute income from
Stiller on Leo’s books for 2017.
A) $110,000
B) $100,000.
C) $125,000.
D) $ 85,000.
E) $ 88,000.
77. Assuming there are no excess amortizations or other intra-entity transactions, compute income from
Stiller on Leo’s books for 2018.
A) $140,000.
B) $ 97,000.
C) $125,000.
D) $100,000.
E) $112,000.
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Page 5-35
$92,000 in 2019. Both companies use the equity method of accounting.
[QUESTION]
REFER TO: 05-12
78. Compute the gain or loss reported on Stark’s books prior to consolidation from the intra-entity
transfer of land in 2017.
A) $80,000 gain.
B) $80,000 loss.
C) $ 5,000 gain.
D) $ 5,000 loss.
E) $85,000 loss.
79. Which of the following will be included in a consolidation entry for 2017?
A) Debit loss for $5,000.
B) Credit loss for $5,000.
C) Credit land for $5,000.
D) Debit gain for $5,000.
E) Credit gain for $5,000.
80. Which of the following will be included in a consolidation entry for 2018?
A) Debit retained earnings for $5,000.
B) Credit retained earnings for $5,000.
C) Debit investment in subsidiary for $5,000.
D) Credit investment in subsidiary for $5,000.
E) Credit land for $5,000.
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Blooms: Analyze
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
[QUESTION]
REFER TO: 05-12
81. Assuming there are no excess amortizations or other intra-entity transactions, compute income from
Stark reported on Parker’s books for 2017.
A) $205,000.
B) $200,000.
C) $180,000.
D) $175,500.
E) $184,500.
82. Assuming there are no excess amortizations or other intra-entity transactions, compute income from
Stark reported on Parker’s books for 2018.
A) $185,000.
B) $157,500.
C) $166,500.
D) $162,000.
E) $180,000.
83. Compute Parker’s reported gain or loss on its internal accounting records prior to consolidation
relating to the land for 2019.
A) $12,000 gain.
B) $ 5,000 loss.
C) $12,000 loss.
D) $ 7,000 gain.
E) $ 7,000 loss.
84. Compute Stark’s reported gain or loss relating to the land for 2019.
A) $5,000 loss.
B) $5,000 gain.
C) $7,000 loss.
D) $7,000 gain.
E) $ 0.
85. Compute the gain or loss relating to the land that will be reported in consolidated net income for
2019.
A) $ 5,000 loss.
B) $ 7,000 gain.
C) $12,000 gain.
D) $ 7,000 loss.
E) $12,000 loss.
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[QUESTION]
REFER TO: 05-12
86. Assuming there are no excess amortizations or other intra-entity transactions, compute income from
Stark reported on Parker’s books for 2019.
A) $204,300.
B) $202,500.
C) $193,500.
D) $191,700.
E) $198,000.
87. What is the gain or loss on equipment recognized by Devin on its internal accounting records for
2017?
A) $54,000 gain.
B) $21,000 loss.
C) $21,000 gain.
D) $ 9,000 loss.
E) $ 9,000 gain.
88. What is the consolidated gain or loss on equipment for 2017?