1) On January 1, 2013, Riley Corp. acquired some of the outstanding bonds of one of its
subsidiaries. The bonds had a carrying value of $421,620, and Riley paid $401,937 for
them. How should you account for the difference between the carrying value and the
purchase price in the consolidated financial statements for 2013?
A) The difference is added to the carrying value of the debt.
B) The difference is deducted from the carrying value of the debt.
C) The difference is treated as a loss from the extinguishment of the debt.
D) The difference is treated as a gain from the extinguishment of the debt.
E) The difference does not influence the consolidated financial statements.
2) When a company applies the partial equity method in accounting for its investment
in a subsidiary and the subsidiary’s equipment has a fair value greater than its book
value, what consolidation worksheet entry is made in a year subsequent to the initial
acquisition of the subsidiary?
A) A above
B) B above
C) C above
D) D above
E) E above
3) On June 14, 2013, Fred City agreed to transfer cash of $52,000 from the General
Fund to provide permanent financing for a municipal swimming pool that will be
viewed as an Enterprise Fund. The cash was transferred on June 30.
Required:
(A) Prepare all the required journal entries and identify the fund in which each entry
was recorded for the Fund Financial Statements.
(B) Prepare all the required journal entries and identify the type of activity for the
Government-Wide Financial Statements.
4) Retro Corp. was engaged solely in manufacturing operations. The following data
pertain to the operating segments for 2013:
What is the minimum amount of revenue that each of these segments must earn to be
considered separately reportable?
A.$4,343,684
B.$4,826,316
C.$5,067,632
D.$4,585,000
E.$4,705,658
5) Jaynes Inc. acquired all of Aaron Co.’s common stock on January 1, 2012, by issuing
11,000 shares of $1 par value common stock. Jaynes’ shares had a $17 per share fair
value. On that date, Aaron reported a net book value of $120,000. However, its
equipment (with a five-year remaining life) was undervalued by $6,000 in the
company’s accounting records. Any excess of consideration transferred over fair value
of assets and liabilities is assigned to an unrecorded patent to be amortized over ten
years.
What was consolidated equipment as of December 31, 2013?
6) The financial balances for the Atwood Company and the Franz Company as of
December 31, 2013, are presented below. Also included are the fair values for Franz
Company’s net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 2013. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and
direct costs of $10 (in thousands) were paid.
Compute consolidated inventory at the date of the acquisition.
A) $1,650.
B) $1,810.
C) $1,230.
D) $ 580.
E) $1,830.
7) The following information pertains to inventory held by a company on December 31,
2013.
What amount of inventory should be reported under U.S. GAAP?
A.$16,000.
B.$27,000.
C.$30,000.
D.$21,600.
E.$20,000.
8) Tower Company owns 85% of Hill Company. The two companies engaged in several
intra-entity transactions. Each company’s operating and dividend income for the current
time period follow, as well as the effects of unrealized gains. No income tax accruals
have been recognized within these totals. The tax rate for each company is 30%.
Compute accrual-based consolidated net income.
A.$280,000.
B.$245,000.
C.$200,000.
D.$255,200.
E.$290,200.
9) Renfroe, Inc. acquires 10% of Stanley Corporation on January 1, 2012, for $90,000
when the book value of Stanley was $1,000,000. During 2012, Stanley reported net
income of $215,000 and paid dividends of $50,000. On January 1, 2013, Renfroe
purchased an additional 30% of Stanley for $325,000. Any excess of cost over book
value is attributable to goodwill with an indefinite life. During 2013, Renfroe reported
net income of $320,000 and paid dividends of $50,000.
How much is the adjustment to the Investment in Stanley Corporation for the change
from the fair-value method to the equity method on January 1, 2013?
A) A debit of $16,500.
B) A debit of $21,500.
C) A debit of $90,000.
D) A debit of $165,000.
E) There is no adjustment.
10) Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1,
2014. For 2014, Kailey reported revenues of $810,000 and expenses of $630,000, all
reflected evenly throughout the year. The annual amount of amortization related to this
acquisition was $15,000.
What is the amount of the non-controlling interest’s share of Kailey’s income for 2014?
A) $22,000.
B) $24,000.
C) $48,000.
D) $66,000.
E) $72,000.
11) Quincy Corp., about to be liquidated, has the following amounts for its assets and
liabilities:
The mortgage is secured by the land and building, and the note payable is secured by
the equipment. Quincy expects that the expenses of administering the liquidation will
total $40,000.
How much should the mortgage holder expect to collect from the liquidation?
A.$474,000
B.$510,000
C.$450,000
D.$480,000
E.$478,000
12) On January 4, 2013, Mason Co. purchased 40,000 shares (40%) of the common
stock of Hefly Corp., paying $560,000. At that time, the book value and fair value of
Hefly’s net assets was $1,400,000. The investment gave Mason the ability to exercise
significant influence over the operations of Hefly. During 2013, Hefly reported income
of $150,000 and paid dividends of $40,000. On January 2, 2014, Mason sold 10,000
shares for $150,000.
What is the balance in the investment account after the sale of the 10,000 shares?
A) $390,000.
B) $420,000.
C) $453,000.
D) $454,000.
E) $465,000.
13) Car Corp. (a U.S.-based company) sold parts to a Korean customer on December
16, 2013, with payment of 10 million Korean won to be received on January 15, 2014.
The following exchange rates applied:
Assuming a forward contract was entered into on December 16, what would be the net
impact on Car Corp.’s 2014 income statement related to this transaction?
A.$500 (gain).
B.$303 (gain).
C.$300 (gain).
D.$300 (loss).
E.$0.
14) A company incurs research and development costs of $200,000 in 2013 of which
$50,000 of these costs relate to development activities because certain criteria have
been met which suggest that an intangible asset has been created.
What amount should be recognized as research and development expense in 2013 using
IFRS?
A.$50,000.
B.$150,000.
C.$200,000.
D.$0.
E.$250,000.
15) The financial balances for the Atwood Company and the Franz Company as of
December 31, 2013, are presented below. Also included are the fair values for Franz
Company’s net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 2013. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and
direct costs of $10 (in thousands) were paid.
Compute consolidated buildings (net) at the date of the acquisition.
A) $2,450.
B) $2,340.
C) $1,800.
D) $ 650.
E) $1,690.
16) Dancey, Reese, Newman, and Jahn were partners who shared profits and losses on a
4:2:2:2 basis, respectively. They were beginning to liquidate their business. At the start
of the process, capital balances were as follows:
Which one of the following statements is true for a predistribution plan?
A.The first available $16,000 would go to Newman. The next $12,000 would go $8,000
to Dancey and $4,000 to Newman. The following $32,000 would be shared by Dancey,
Reese, and Newman. The total distribution would be $60,000 before all four partners
share any further payments equally.
B.The first available $16,000 would go to Newman. The next $12,000 would go $8,000
to Dancey and $4,000 to Newman. The following $32,000 would be shared by Dancey,
Reese, and Newman. The total distribution would be $60,000 before all four partners
share any further payments in their profit and loss sharing ratios.
C.The first $20,000 would go to Newman. The next $8,000 would go to Dancey. The
next $12,000 would be shared by Dancey, Reese, and Newman. The total distribution
would be $40,000 before all four partners share any further payments equally.
D.The first available $8,000 would go to Newman. The next $4,000 would be split
equally between Dancey and Newman. The following $12,000 would be shared by
Dancey, Reese, and Newman. The total distribution would be $24,000 before all four
partners share any further payments equally.
E.The first available $8,000 would go to Newman. The next $4,000 would be split
equally between Dancey and Newman. The following $12,000 would be shared by
Dancey, Reese, and Newman. The total distribution would be $24,000 before all four
partners share any further payments in their profit and loss sharing ratios.