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1. Which one of the following accounts would not appear in the consolidated
financial statements at the end of the first fiscal period of the combination?
2. Which of the following internal record-keeping methods can a parent
choose to account for a subsidiary acquired in a business combination?
3. Which one of the following varies between the equity, initial value, and
partial equity methods of accounting for an investment?
4. Under the partial equity method, the parent recognizes income when
5. Push-down accounting is concerned with the
6. Racer Corp. acquired all of the common stock of Tangiers Co. in 2009.
Tangiers maintained its incorporation. Which of Racer's account balances would
vary between the equity method and the initial value method?
7. How does the partial equity method differ from the equity method?
8. Jansen Inc. acquired all of the outstanding common stock of Merriam Co.
on January 1, 2010, for $257,000. Annual amortization of $19,000 resulted from
this acquisition. Jansen reported net income of $70,000 in 2010 and $50,000 in
2011 and paid $22,000 in dividends each year. Merriam reported net income of
$40,000 in 2010 and $47,000 in 2011 and paid $10,000 in dividends each year.
What is the
Investment in Merriam Co.
balance on Jansen's books as of
December 31, 2011, if the equity method has been applied?
9. Velway Corp. acquired Joker Inc. on January 1, 2010. The parent paid more
than the fair value of the subsidiary's net assets. On that date, Velway had
equipment with a book value of $500,000 and a fair value of $640,000. Joker had
equipment with a book value of $400,000 and a fair value of $470,000. Joker
decided to use push-down accounting. Immediately after the acquisition, what
Equipment amount would appear on Joker's separate balance sheet and on
Velway's consolidated balance sheet, respectively?
10. Parrett Corp. acquired one hundred percent of Jones Inc. on January 1,
2009, at a price in excess of the subsidiary's fair value. On that date, Parrett's
equipment (ten-year life) had a book value of $360,000 but a fair value of
$480,000. Jones had equipment (ten-year life) with a book value of $240,000 and
a fair value of $350,000. Parrett used the partial equity method to record its
investment in Jones. On December 31, 2011, Parrett had equipment with a book
value of $250,000 and a fair value of $400,000. Jones had equipment with a book
value of $170,000 and a fair value of $320,000. What is the consolidated balance
for the Equipment account as of December 31, 2011?
11. On January 1, 2010, Cale Corp. paid $1,020,000 to acquire Kaltop Co.
Kaltop maintained separate incorporation. Cale used the equity method to
account for the investment. The following information is available for Kaltop's
assets, liabilities, and stockholders' equity accounts:
Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000
during the year.
The 2010 total amortization of allocations is calculated to be
12. On January 1, 2010, Cale Corp. paid $1,020,000 to acquire Kaltop Co.
Kaltop maintained separate incorporation. Cale used the equity method to
account for the investment. The following information is available for Kaltop's
assets, liabilities, and stockholders' equity accounts:
Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000
during the year.
In Cale's accounting records, what amount would appear on December 31, 2010
for
equity in subsidiary earnings
?
13. On January 1, 2010, Cale Corp. paid $1,020,000 to acquire Kaltop Co.
Kaltop maintained separate incorporation. Cale used the equity method to
account for the investment. The following information is available for Kaltop's
assets, liabilities, and stockholders' equity accounts:
Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000
during the year.
What is the balance in Cale's
investment in subsidiary
account at the end of
2010?
14. On January 1, 2010, Cale Corp. paid $1,020,000 to acquire Kaltop Co.
Kaltop maintained separate incorporation. Cale used the equity method to
account for the investment. The following information is available for Kaltop's
assets, liabilities, and stockholders' equity accounts:
Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000
during the year.
At the end of 2010, the consolidation entry to eliminate Cale's accrual of Kaltop's
earnings would include a credit to Investment in Kaltop Co. for
15. On January 1, 2010, Cale Corp. paid $1,020,000 to acquire Kaltop Co.
Kaltop maintained separate incorporation. Cale used the equity method to
account for the investment. The following information is available for Kaltop's
assets, liabilities, and stockholders' equity accounts:
Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000
during the year.
If Cale Corp. had net income of $444,000 in 2010, exclusive of the investment,
what is the amount of
consolidated net income
?
16. On January 1, 2010, Franel Co. acquired all of the common stock of Hurlem
Corp. For 2010, Hurlem earned net income of $360,000 and paid dividends of
$190,000. Amortization of the patent allocation that was included in the
acquisition was $6,000.
How much difference would there have been in Franel's income with regard to
the effect of the investment, between using the
equity method
or using the
initial
value method
of internal recordkeeping?
17. On January 1, 2010, Franel Co. acquired all of the common stock of Hurlem
Corp. For 2010, Hurlem earned net income of $360,000 and paid dividends of
$190,000. Amortization of the patent allocation that was included in the
acquisition was $6,000.
How much difference would there have been in Franel's income with regard to
the effect of the investment, between using the
equity method
or using the
partial
equity method
of internal recordkeeping?
18. Cashen Co. paid $2,400,000 to acquire all of the common stock of Janex
Corp. on January 1, 2010. Janex's reported earnings for 2010 totaled $432,000,
and it paid $120,000 in dividends during the year. The amortization of allocations
related to the investment was $24,000. Cashen's net income, not including the
investment, was $3,180,000, and it paid dividends of $900,000.
On the consolidated financial statements for 2010, what amount should have
been shown for
Equity in Subsidiary Earnings
?
19. Cashen Co. paid $2,400,000 to acquire all of the common stock of Janex
Corp. on January 1, 2010. Janex's reported earnings for 2010 totaled $432,000,
and it paid $120,000 in dividends during the year. The amortization of allocations
related to the investment was $24,000. Cashen's net income, not including the
investment, was $3,180,000, and it paid dividends of $900,000.
On the consolidated financial statements for 2010, what amount should have
been shown for
consolidated dividends
?
20. Jans Inc. acquired all of the outstanding common stock of Tysk Corp. on
January 1, 2009, for $372,000. Equipment with a ten-year life was undervalued on
Tysk's financial records by $46,000. Tysk also owned an unrecorded customer list
with an assessed fair value of $67,000 and an estimated remaining life of five
years.
Tysk earned reported net income of $180,000 in 2009 and $216,000 in 2010.
Dividends of $70,000 were paid in each of these two years. Selected account
balances as of December 31, 2011, for the two companies follow.
If the partial equity method had been applied, what was 2011
consolidated net
income
?
21. Jans Inc. acquired all of the outstanding common stock of Tysk Corp. on
January 1, 2009, for $372,000. Equipment with a ten-year life was undervalued on
Tysk's financial records by $46,000. Tysk also owned an unrecorded customer list
with an assessed fair value of $67,000 and an estimated remaining life of five
years.
Tysk earned reported net income of $180,000 in 2009 and $216,000 in 2010.
Dividends of $70,000 were paid in each of these two years. Selected account
balances as of December 31, 2011, for the two companies follow.
If the equity method had been applied, what would be the
Investment in Tysk
Corp.
account balance within the records of Jans at the end of 2011?
