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1. Buckette Co. owned 60% of Shuvelle Corp. and 40% of Tayle Corp., and
Shuvelle owned 35% of Tayle.
When Buckette prepared
consolidated financial statements
, it should include
2. Buckette Co. owned 60% of Shuvelle Corp. and 40% of Tayle Corp., and
Shuvelle owned 35% of Tayle.
What is this pattern of ownership called?
3. Buckette Co. owned 60% of Shuvelle Corp. and 40% of Tayle Corp., and
Shuvelle owned 35% of Tayle.
What percentage of Tayle's income is attributed to Buckette's ownership
interest?
4. D Corp. had investments, direct and indirect, in several subsidiaries:
• E Co. is a domestic firm in which D Corp. owned a 90% interest
• F Co. is a domestic firm in which D Corp. owned 60% and E Co. owned 30%
• G Co. is a domestic firm wholly owned by E Co.
• H Co. is a foreign subsidiary in which D Corp. owned a 90% interest
• I Co. is a domestic firm in which D Corp. owned 50% and G Co. owned 25%
Which of these subsidiaries may be included in a
consolidated income tax
return
?
5. Evanston Co. owned 60% of Montgomery Corp. Montgomery owned 75% of
Noir Inc., and Noir owned 15% of Montgomery. This pattern of ownership would
be called
6. In a tax-free business combination,
7. West Corp. owned 70% of the voting common stock of East Co. East owned
60% of Compass Co. West and East both used the
initial value method
to account
for their investments. The following information was available from the financial
statements and records of the three companies:
Operating income included unrealized intra-entity gains (which are related to
inventory transfers) but did not include dividend income from investment in
subsidiary.
The
accrual-based income of East Co.
is calculated to be
8. West Corp. owned 70% of the voting common stock of East Co. East owned
60% of Compass Co. West and East both used the
initial value method
to account
for their investments. The following information was available from the financial
statements and records of the three companies:
Operating income included unrealized intra-entity gains (which are related to
inventory transfers) but did not include dividend income from investment in
subsidiary.
The
accrual-based income of West Corp.
is calculated to be
9. West Corp. owned 70% of the voting common stock of East Co. East owned
60% of Compass Co. West and East both used the
initial value method
to account
for their investments. The following information was available from the financial
statements and records of the three companies:
Operating income included unrealized intra-entity gains (which are related to
inventory transfers) but did not include dividend income from investment in
subsidiary.
What amount should have been reported for
consolidated net income
?
10. West Corp. owned 70% of the voting common stock of East Co. East owned
60% of Compass Co. West and East both used the
initial value method
to account
for their investments. The following information was available from the financial
statements and records of the three companies:
Operating income included unrealized intra-entity gains (which are related to
inventory transfers) but did not include dividend income from investment in
subsidiary.
For West Corp. and consolidated subsidiaries, what total amount would have
been reported for the
non-controlling interest's share of subsidiaries' net
income
?
11. West Corp. owned 70% of the voting common stock of East Co. East owned
60% of Compass Co. West and East both used the
initial value method
to account
for their investments. The following information was available from the financial
statements and records of the three companies:
Operating income included unrealized intra-entity gains (which are related to
inventory transfers) but did not include dividend income from investment in
subsidiary.
What amount of dividends did West Corp. receive from Compass Co.?
12. River Co. owned 80% of Boat Inc. The two companies filed a
consolidated
income tax return
and River used the
initial value method
to account for the
investment. The following information was available from the two companies'
financial statements:
Operating income included
net unrealized gains
, which are associated with
transfers of inventories between the two companies, but it did not include
dividends received from a subsidiary. The income tax rate was 30%.
What is the amount of
taxable income
reported on the
consolidated income tax
return
?
13. River Co. owned 80% of Boat Inc. The two companies filed a
consolidated
income tax return
and River used the
initial value method
to account for the
investment. The following information was available from the two companies'
financial statements:
Operating income included
net unrealized gains
, which are associated with
transfers of inventories between the two companies, but it did not include
dividends received from a subsidiary. The income tax rate was 30%.
What was the amount of
income tax expense
that should have been assigned to
Boat using the
percentage allocation method
?
14. River Co. owned 80% of Boat Inc. The two companies filed a
consolidated
income tax return
and River used the
initial value method
to account for the
investment. The following information was available from the two companies'
financial statements:
Operating income included
net unrealized gains
, which are associated with
transfers of inventories between the two companies, but it did not include
dividends received from a subsidiary. The income tax rate was 30%.
What was the amount of
income tax expense
that should have been assigned to
Boat using the
separate return method
?
15. River Co. owned 80% of Boat Inc. The two companies filed a
consolidated
income tax return
and River used the
initial value method
to account for the
investment. The following information was available from the two companies'
financial statements:
Operating income included
net unrealized gains
, which are associated with
transfers of inventories between the two companies, but it did not include
dividends received from a subsidiary. The income tax rate was 30%.
What was the
non-controlling interest in Boat Inc.'s net income
, assuming that
the
separate return method
was used?
16. Prescott Corp. owned 90% of Bell Inc., while Bell owned 10% of the
outstanding common shares of Prescott. No goodwill or other allocations were
recognized in connection with either of these acquisitions. Prescott reported
operating income of $266,000 for 2011 whereas Bell earned $98,000 during the
same period. No investment income was included within either of these income
totals. On a
consolidated income statement
, what is the
non-controlling interest
in Bell's net income
?
17. Prescott Corp. owned 90% of Bell Inc., while Bell owned 10% of the
outstanding common shares of Prescott. No goodwill or other allocations were
recognized in connection with either of these acquisitions. Prescott reported
operating income of $266,000 for 2011 whereas Bell earned $98,000 during the
same period. No investment income was included within either of these income
totals. How would the 10% investment in Prescott owned by Bell be presented in
the consolidated balance sheet?
18. On January 1, 2011, a subsidiary bought 10% of the outstanding shares of
its parent company. Although the total book value and fair value of the parent's
net assets were $5.5 million, the consideration transferred for these shares was
$590,000. During 2011, the parent reported operating income (no investment
income was included) of $714,000 while paying dividends of $196,000. How were
these shares reported at December 31, 2011?
19. Jastoon Co. acquired all of Wedner Co. for $588,000 cash in a tax-free
transaction. On that date, the subsidiary had net assets with a $560,000 fair value
but a $420,000 book value and income tax basis. The income tax rate was 30%.
What amount of
goodwill
should have been recognized on the date of the
acquisition?
20. Beagle Co. owned 80% of Maroon Corp. Maroon owned 90% of Eckston Inc.
Operating income totals for 2011 are shown below; these figures contained no
investment income. Amortization expense was not required by any of these
acquisitions. Included in Eckston's operating income was a $56,000 unrealized
gain on intra-entity transfers to Maroon.
The
accrual-based income of Eckston Inc.
is calculated to be
21. Beagle Co. owned 80% of Maroon Corp. Maroon owned 90% of Eckston Inc.
Operating income totals for 2011 are shown below; these figures contained no
investment income. Amortization expense was not required by any of these
acquisitions. Included in Eckston's operating income was a $56,000 unrealized
gain on intra-entity transfers to Maroon.
The
accrual-based income of Maroon Corp.
is calculated to be
22. Beagle Co. owned 80% of Maroon Corp. Maroon owned 90% of Eckston Inc.
Operating income totals for 2011 are shown below; these figures contained no
investment income. Amortization expense was not required by any of these
acquisitions. Included in Eckston's operating income was a $56,000 unrealized
gain on intra-entity transfers to Maroon.
The
accrual-based income of Beagle Co.
is calculated to be
