69. Pursley, Inc. owns 70 percent of Harry, Inc. The consolidated income
statement for a year reports $50,000 Non-controlling Interest in Harry, Inc.
Income. Harry paid dividends in the amount of $80,000 for the year. What are the
effects of these transactions in the consolidated statement of cash flows for the
year?
70. Goehring, Inc. owns 70 percent of Harry, Inc. The consolidated income
statement for a year reports $40,000 Non-controlling Interest in Harry, Inc.
Income. Harry paid dividends in the amount of $100,000 for the year. What are
the effects of these transactions in the consolidated statement of cash flows for
the year?
71. Anderson, Inc. has owned 70% of its subsidiary, Arthur Corp., for several
years. The consolidated balance sheets of Anderson, Inc. and Arthur Corp. are
presented below:
Additional information for 2011:
Net cash flow from operating activities was:
72. Anderson, Inc. has owned 70% of its subsidiary, Arthur Corp., for several
years. The consolidated balance sheets of Anderson, Inc. and Arthur Corp. are
presented below:
Additional information for 2011:
Net cash flow from financing activities was:
73. The balance sheets of Butler, Inc. and its 70 percent-owned subsidiary,
Cassie Corp., are presented below:
Additional information for 2011:
Net cash flow from operating activities was:
74. The balance sheets of Butler, Inc. and its 70 percent-owned subsidiary,
Cassie Corp., are presented below:
Additional information for 2011:
Net cash flow from financing activities was:
75. How do subsidiary stock warrants outstanding affect consolidated
earnings per share?
76. A parent company owns a controlling interest in a subsidiary whose stock
has a book value of $27 per share. The last day of the year, the subsidiary issues
new shares entirely to outside parties at $33 per share. The parent still holds
control over the subsidiary. Which of the following statements is true?
77. A parent company owns a controlling interest in a subsidiary whose stock
has a book value of $27 per share. The last day of the year, the subsidiary issues
new shares entirely to outside parties at $25 per share. The parent still holds
control over the subsidiary. Which of the following statements is true?
78. A parent company owns a 70 percent interest in a subsidiary whose stock
has a book value of $27 per share. The last day of the year, the subsidiary issues
new shares for $27 per share, and the parent buys its 70 percent interest in the
new shares. Which of the following statements is true?
79. Carlson, Inc. owns 80 percent of Madrid, Inc. Carlson reports net income
for 2011 (without consideration of its investment in Madrid, Inc.) of $1,500,000.
For the same year, Madrid reports net income of $705,000. Carlson had bonds
payable outstanding on January 1, 2011 with a carrying value of $1,200,000.
Madrid acquired the bonds on the open market on January 3, 2011 for
$1,090,000. For the year 2011, Carlson reported interest expense on the bonds in
the amount of $96,000, while Madrid reported interest income of $94,000 for the
same bonds. What is Carlson’s share of consolidated net income?
80. Davidson, Inc. owns 70 percent of the outstanding voting stock of Ernest
Company. On January 2, 2009, Davidson sold 8 percent bonds payable with a
$5,000,000 face value maturing January 2, 2029 at a premium of $400,000. On
January 1, 2011, Ernest acquired 30 percent of these same bonds on the open
market at 97.6. Both companies use the straight-line method of amortization.
What adjustment should be made to Davidson’s 2012 beginning Retained
Earnings as a result of this bond acquisition?
81. Franklin Corporation owns 90 percent of the outstanding voting stock of
Georgia Company. On January 2, 2009, Georgia sold 7 percent bonds payable
with a $5,000,000 face value maturing January 2, 2029 at a premium of $500,000.
On January 1, 2011, Franklin acquired 20 percent of these same bonds on the
open market at 97.66. Both companies use the straight-line method of
amortization. What adjustment should be made to Franklin’s 2012 beginning
Retained Earnings as a result of this bond acquisition?
82. On January 1, 2011, Harrison Corporation spent $2,600,000 to acquire
control over Involved, Inc. This price was based on paying $750,000 for 30
percent of Involved’s preferred stock, and $1,850,000 for 80 percent of its
outstanding common stock. As of the date of the acquisition, Involved’s
stockholders’ equity accounts were as follows:
What is the total acquisition-date fair value of Involved?
83. On January 1, 2011, Harrison Corporation spent $2,600,000 to acquire
control over Involved, Inc. This price was based on paying $750,000 for 30
percent of Involved’s preferred stock, and $1,850,000 for 80 percent of its
outstanding common stock. As of the date of the acquisition, Involved’s
stockholders’ equity accounts were as follows:
Assuming Involved’s accounts are correctly valued within the company’s financial
statements, what amount of goodwill should be recognized for the Investment in
Involved?
84. Johnson, Inc. owns control over Kaspar, Inc. Johnson reports sales of
$400,000 during 2011 while Kaspar reports $250,000. Kaspar transferred
inventory during 2011 to Johnson at a price of $50,000. On December 31, 2011,
30 percent of the transferred goods are still in Johnson’s inventory. Consolidated
accounts receivable on January 1, 2011 was $120,000, and on December 31, 2011
is $130,000. Johnson uses the direct approach in preparing the statement of cash
flows. How much is
cash collected from customers
in the consolidated statement
of cash flows?
85. Parent Corporation loaned money to its subsidiary with a five-year note at
the market interest rate. How would the note be accounted for in the
consolidation process?
86. What documents or other sources of information would be used to prepare
a consolidated statement of cash flows?
87. Parent Corporation acquired some of its subsidiary’s bonds on the open
bond market. The remaining life of the bonds was eight years, and Parent
expected to hold the bonds for the full eight years. How would the acquisition of
the bonds affect the consolidation process?
88. Parent Corporation acquired some of its subsidiary’s bonds on the open
bond market, paying a price $40,000 higher than the bonds’ carrying value. How
should the difference between the purchase price and the carrying value be
accounted for?
89. How are intra-entity inventory transfers treated on the consolidation
worksheet and how are they reflected in a consolidated statement of cash
flows?
90. Danbers Co. owned seventy-five percent of the common stock of Renz
Corp. How does the issuance of a five percent stock dividend by Renz affect
Danbers and the consolidation process?