Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
1) Pot Co. holds 90% of the common stock of Skillet Co. During 2013, Pot reported
sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet
had sales of $420,000 and cost of goods sold of $252,000.
Included in the amounts for Pot's sales were Pot's sales for merchandise to Skillet for
$140,000. There were no sales from Skillet to Pot. Intra-entity sales had the same
markup as sales to outsiders. Skillet had resold all of the intra-entity purchases from Pot
to outside parties during 2013. What are consolidated sales and cost of goods sold for
2013?
A) $1,400,000 and $952,000.
B) $1,400,000 and $ 1,092,000.
C) $1,540,000 and $952,000.
D) $1,400,000 and $1,232,000.
E) $1,540,000 and $1,092,000.
2) The capital account balances for Donald & Hanes LLP on January 1, 2013, were as
follows:
Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The
partners agreed to admit May to the partnership with a 35% interest in partnership
capital and net income. May invested $100,000 cash, and no goodwill was recognized.
What is the balance of May's capital account after the new partnership is created?
A.$84,000.
B.$100,000.
C.$140,000.
D.$176,000.
E.$200,000.
3) Gongman Corp. owned the following assets when it came out of a Chapter 11
bankruptcy:
Gongman Corp. had a fresh start reorganization value of $1,000,000. What amount of
goodwill should have been recognized in recording the reorganization?
A.$20,000.
B.$100,000.
C.$60,000.
D.$210,000.
E.$98,000.
4) On January 1, 2012, Jones Company bought 15% of Whitton Company. Jones paid
$150,000 for these shares, an amount that exactly equaled the proportionate book value
of Whitton. On January 1, 2013, Whitton acquired 80% ownership of Jones. The
following data are available concerning Whitton's acquisition of Jones:
Excess fair value over book value (assigned to trademarks) is amortized over 20 years.
The initial value method is used by both companies.
The following information is available regarding Jones and Whitton:
Compute Whitton's accrual-based consolidated net income for 2013.
A.$199,000.
B.$190,000.
C.$185,000.
D.$184,000.
E.$176,000.
5) Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during
2012. One-third of the inventory is sold by Walsh uses the equity method to account for
its investment in Fisher.
In the consolidation worksheet for 2012, which of the following choices would be a
credit entry to eliminate the intra-entity transfer of inventory?
A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Fisher Company.
E) Sales.
6) On October 1, 2013, Eagle Company forecasts the purchase of inventory from a
British supplier on February 1, 2014, at a price of 100,000 British pounds. On October
1, 2013, Eagle pays $1,800 for a three-month call option on 100,000 pounds with a
strike price of $2.00 per pound. The option is considered to be a cash flow hedge of a
forecasted foreign currency transaction. On December 31, 2013, the option has a fair
value of $1,600. The following spot exchange rates apply:
What journal entry should Eagle prepare on October 1, 2013?
A.Option A
B.Option B
C.Option C
D.Option D
E.Option E
7) The school system had some booklets printed by a local print shop on September 22,
2013. The school system was charged $1,560 for the printing, but the bill is not due
until October.
Required:
(A) Prepare the required journal entry in the General Fund for the Fund Financial
Statements.
(B) Prepare the required journal entry for the Government-Wide Financial Statements.
8) On January 1, 2013, Nichols Company acquired 80% of Smith Company's common
stock and 40% of its non-voting, cumulative preferred stock. The consideration
transferred by Nichols was $1,200,000 for the common and $124,000 for the preferred.
Any excess acquisition-date fair value over book value is considered goodwill. The
capital structure of Smith immediately prior to the acquisition is:
Compute the goodwill recognized in consolidation.
A) $ 800,000.
B) $ 310,000.
C) $ 124,000.
D) $ 0.
E) $(196,000.)
9) Faru Co. identified five industry segments: (1) plastics, (2) metals, (3) lumber, (4)
paper, and (5) finance. Each of these segments had been consolidated appropriately by
the company in producing its annual financial statements. Information describing each
segment is presented below (in thousands).
Prepare the asset testand determine which of these segments was separately reportable.
10) Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014.
Demers reported common stock of $300,000 and retained earnings of $210,000 on that
date. Equipment was undervalued by $30,000 and buildings were undervalued by
$40,000, each having a 10-year remaining life. Any excess consideration transferred
over fair value was attributed to goodwill with an indefinite life. Based on an annual
review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the INITIAL VALUE is applied.
Compute the non-controlling interest in Demers at December 31, 2014.
A) $135,600.
B) $ 80,000.
C) $117,000.
D) $100,000.
E) $110,600.
11) Assume that Bob Smith dies on May 25, 2013. Mr. Smith's assets include the
following: ABC Stock costing $30,000 but valued at $40,000; a house costing $280,000
but valued at $620,000; life insurance in the amount of $600,000; and cash from
various sources totaling $50,700. Three credit cards in Mr. Smith's name had balances
totaling $8,530 on the date of death. The estate paid funeral and final medical expenses
in the amount of $50,492. There were no charitable gifts designated by the will, and Mr.
Smith was single at the time of his death. What is the amount of the taxable estate?
A.$901,678.
B.$1,251,678.
C.$1,268,738.
D.$1,310,700.
E.$651,678.
12) Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014.
Demers reported common stock of $300,000 and retained earnings of $210,000 on that
date. Equipment was undervalued by $30,000 and buildings were undervalued by
$40,000, each having a 10-year remaining life. Any excess consideration transferred
over fair value was attributed to goodwill with an indefinite life. Based on an annual
review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the EQUITY METHOD is applied.
Compute the non-controlling interest in the net income of Demers at December 31,
2015.
A) $18,400.
B) $14,400.
C) $22,600.
D) $24,000.
E) $12,600.
13) Blanton Corporation is comprised of five operating segments. Information about
each of these segments is as follows (in thousands):
Required:
(a.) Which operating segments are reportable under the revenue test?
(b.) What is the total amount of revenues in applying the revenues test?
(c.) Which operating segments are reportable under the profit or loss test?
(d.) In applying the profit or loss test, what is the minimum amount an operating
segment must have in order to meet the profit or loss test for a reportable segment?
(e.) Which operating segments are reportable under the asset test?
(f.) In applying the asset test, what is the minimum amount an operating segment must
have in order to meet the asset test for a reportable segment?
(g.) Which operating segments are reportable?
(h.) According to the test results for reportable segments, is there a sufficient number of
reported segments or should any additional segments also be disclosed? Explain the
reason for your conclusion.
