1) On January 1, 2013, Riney Co. owned 80% of the common stock of Garvin Co. On
that date, Garvin’s stockholders’ equity accounts had the following balances:
The balance in Riney’s Investment in
Garvin Co. account was $552,000, and the non-controlling interest was $138,000. On
January 1, 2013, Garvin Co. sold 10,000 shares of previously unissued common stock
for $15 per share. Riney did not acquire any of these shares.
What is the balance in Investment in Garvin Co. after the sale of the 10,000 shares of
common stock?
A) $552,000.
B) $560,000.
C) $460,000.
D) $404,000.
E) $672,000.
2) Certain balance sheet accounts of a foreign subsidiary of the Tulip Co. had been
stated in U.S. dollars as follows:
If the U.S. dollar is the functional currency of this subsidiary, what total amount should
be included in Tulip’s balance sheet in U.S. dollars?
A.$609,000
B.$658,000
C.$602,000
D.$630,000
E.$616,000
3) Presented below are the financial balances for the Atwood Company and the Franz
Company as of December 31, 2012, immediately before Atwood acquired Franz. Also
included are the fair values for Franz Company’s net assets at that date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2012. 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 to effect this acquisition transaction. To settle a difference
of opinion regarding Franz’s fair value, Atwood promises to pay an additional $5.2 (in
thousands) to the former owners if Franz’s earnings exceed a certain sum during the
next year. Given the probability of the required contingency payment and utilizing a 4%
discount rate, the expected present value of the contingency is $5 (in thousands).
Compute the investment to be recorded at date of acquisition.
A) $1,750.
B) $1,755.
C) $1,725.
D) $1,760.
E) $1,765.
4) On January 1, 2013, Pride, Inc. acquired 80% of the outstanding voting common
stock of Strong Corp. for $364,000. There is no active market for Strong’s stock. Of this
payment, $28,000 was allocated to equipment (with a five-year life) that had been
undervalued on Strong’s books by $35,000. Any remaining excess was attributable to
goodwill which has not been impaired.
As of December 31, 2013, before preparing the consolidated worksheet, the financial
statements appeared as follows:
During 2013, Pride bought inventory for $112,000 and sold it to Strong for $140,000.
Only half of this purchase had been paid for by Strong by the end of the year. 60% of
these goods were still in the company’s possession on December 31, 2013. What is the
consolidated total of non-controlling interest appearing in the balance sheet?
A) $100,800.
B) $ 97,440.
C) $ 93,800.
D) $120,400.
E) $117,040.
5) Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with
investments of $100,000, $150,000, and $200,000, respectively. For division of income,
they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual
compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss
in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was
$150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use
every month during 2012 and 2013.
What was Nolan’s capital balance at the end of 2012?
A.$200,000.
B.$224,000.
C.$238,000.
D.$246,000.
E.$254,000.
6) 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, 2015.
A) $126,000.
B) $106,000.
C) $109,200.
D) $149,600.
E) $148,200.
7) 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 not entered into, what would be the net impact on Car
Corp.’s 2013 income statement related to this transaction?
A.$500 (gain).
B.$500 (loss).
C.$200 (gain).
D.$200 (loss).
E.$- 0 –
8) The following information pertains to inventory held by a company at December 31,
2013.
What is the amount of inventory loss shown on the income statement under IFRS?
A.$1,000.
B.$2,000.
C.$4,000.
D.$5,000.
E.$6,000.
9) Alpha Corporation owns 100 percent of Beta Company, and Beta owns 80 percent of
Gamma, Inc. all of which are domestic corporations. Information for the three
companies for the year ending December 31, 2013 follows:
Which of the following statements is true?
A.Alpha and Beta must file a consolidated income tax return, but must exclude Gamma
from the consolidated return.
B.Alpha, Beta, and Gamma must file a consolidated income tax return.
C.Alpha, Beta, and Gamma must file separate income tax returns because the
ownership of Beta is less than 100%.
D.Alpha, Beta, and Gamma will probably not file a consolidated income tax return.
E.Alpha, Beta, and Gamma may file separate income tax returns or a consolidated
income tax return.
10) 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 land at the date of the acquisition.
A) $2,060.
B) $1,800.
C) $ 260.
D) $2,050.
E) $2,070.
11) Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory
to Posito at a 25% profit on selling price. The following data are available pertaining to
intra-entity purchases. Gargiulo was acquired on January 1, 2012.
Assume the equity method is used. The following data are available pertaining to
Gargiulo’s income and dividends.
For consolidation purposes, what amount would be debited to cost of goods sold for the
2014 consolidation worksheet with regard to the unrealized gross profit of the 2014
intra-entity transfer of merchandise?
A) $ 600.
B) $ 750.
C) $3,760.
D) $3,000.
E) $ 675.
12) Which of the following types of health care organizations recognize depreciation
expense?
A.Option A
B.Option B
C.Option C
D.Option D
E.Option E
13) Hanson Co. acquired all of the common stock of Roberts Inc. on January 1, 2012,
transferring consideration in an amount slightly more than the fair value of Roberts’ net
assets. At that time, Roberts had buildings with a twenty-year useful life, a book value
of $600,000, and a fair value of $696,000. On December 31, 2013, Roberts had
buildings with a book value of $570,000 and a fair value of $648,000. On that date,
Hanson had buildings with a book value of $1,878,000 and a fair value of $2,160,000.
Required:
What amount should be shown for buildings on the consolidated balance sheet dated
December 31, 2013?
14) The executor of Danny Mack’s estate has listed the following properties at fair
value: Cash $200,000, Life Insurance Receivable $500,000, Investment in Stocks and
Bonds $50,000, Rental Property $100,000, and Personal Property $80,000.
Additionally, the executor found $100,000 of various debts incurred before the
decedent’s death. The cost of Danny Mack’s funeral was $20,000.
Prepare the journal entry to record ordinary repairs to the rental property of $5,000.