1) The Fratilo Co. had three operating segments with the following information:
In addition, revenues generated at corporate headquarters are $1,400
What is the minimum amount of revenue that each of these segments must earn to be
considered separately reportable?
A.$2,730
B.$2,660
C.$2,800
D.$2,940
E.$2,520
2) 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 fair value of the net assets acquired at the date of the acquisition.
A) $1,300.
B) $1,340.
C) $1,500.
D) $1,750.
E) $2,480.
3) On January 3, 2013, Austin Corp. purchased 25% of the voting common stock of
Gainsville Co., paying $2,500,000. Austin decided to use the equity method to account
for this investment. At the time of the investment, Gainsville’s total stockholders’ equity
was $8,000,000. Austin gathered the following information about Gainsville’s assets
and liabilities:
For all other assets and liabilities, book value and fair value were equal. Any excess of
cost over fair value was attributed to goodwill, which has not been impaired.
What is the amount of goodwill associated with the investment?
A) $500,000.
B) $200,000.
C) $0.
D) $300,000.
E) $400,000.
4) On January 1, 2012, Dawson, Incorporated, paid $100,000 for a 30% interest in
Sacco Corporation. This investee had assets with a book value of $550,000 and
liabilities of $300,000. A patent held by Sacco having a book value of $10,000 was
actually worth $40,000 with a six year remaining life. Any goodwill associated with this
acquisition is considered to have an indefinite life. During 2012, Sacco reported income
of $50,000 and paid dividends of $20,000 while in 2013 it reported income of $75,000
and dividends of $30,000. Assume Dawson has the ability to significantly influence the
operations of Sacco.
The balance in the Investment in Sacco account at December 31, 2012, is
A) $100,000.
B) $112,000.
C) $106,000.
D) $107,500.
E) $140,000.
5) Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1,
20 During 2014, Harbor had revenues of $2,500,000 and expenses of $2,000,000. The
amortization of excess cost allocations totaled $60,000 in 20 What is the effect of
including Harbor in consolidated net income for 2014?
A) $350,000.
B) $308,000.
C) $500,000.
D) $440,000.
E) $290,000.
6) Atlarge Inc. owns 30% of the outstanding voting common stock of Ticker Co. and
has the ability to significantly influence the investee’s operations and decision making.
On January 1, 2013, the balance in the Investment in Ticker Co. account was $402,000.
Amortization associated with the purchase of this investment is $8,000 per year. During
2013, Ticker earned income of $108,000 and paid cash dividends of $36,000.
Previously in 2012, Ticker had sold inventory costing $28,800 to Atlarge for $48,000.
All but 25% of this merchandise was consumed by Atlarge during 2012. The remainder
was used during the first few weeks of 2013. Additional sales were made to Atlarge in
2013; inventory costing $33,600 was transferred at a price of $60,000. Of this total,
40% was not consumed until 2014.
What was the balance in the Investment in Ticker Co. account at the end of 2013?
A) $401,136.
B) $413,872.
C) $418,840.
D) $412,432.
E) $410,148.
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
A.$385,700.
B.$581,000.
C.$557,000.
D.$551,000.
E.$707,000.
8) Kaye Company acquired 100% of Fiore Company on January 1, 2013. Kaye paid
$1,000 excess consideration over book value which is being amortized at $20 per year.
Fiore reported net income of $400 in 2013 and paid dividends of $100.
Assume the partial equity method is used. In the years following acquisition, what
additional worksheet entry must be made for consolidation purposes that is not required
for the equity method?
A) Entry A.
B) Entry B.
C) Entry C.
D) Entry D.
E) Entry E.
9) Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2014 when
Park’s book value was $560,000. The Royce stock was not actively traded. On the date
of acquisition, Park had equipment (with a ten-year life) that was undervalued in the
financial records by $140,000. One year later, the following selected figures were
reported by the two companies. Additionally, no dividends have been paid.
What is consolidated net income for 2015 attributable to Royce’s controlling interest?
A) $686,000.
B) $560,000.
C) $644,000.
D) $635,600.
E) $691,600.
11) Retro Corp. was engaged solely in manufacturing operations. The following data
pertain to the operating segments for 2013:
What is the minimum amount of assets that each of these segments must own to be
considered separately reportable?
A.$9,450,000
B.$8,624,272
C.$10,643,000
D.$12,936,408
E.$10,413,000
12) On January 1, 2013, Jackie Corp. purchased 30% of the voting common stock of
Rob Co., paying $2,000,000. Jackie properly accounts for this investment using the
equity method. At the time of the investment, Rob’s total stockholders’ equity was
$3,000,000. Jackie gathered the following information about Rob’s assets and liabilities
whose book values and fair values differed:
Any excess of cost over fair value was attributed to goodwill, which has not been
impaired. Rob Co. reported net income of $300,000 for 2013, and paid dividends of
$100,000 during that year.
What is the amount of the excess of purchase price over book value?
A) $(1,000,000.)
B) $ 400,000.
C) $ 800,000.
D) $ 1,000,000.
E) $ 1,100,000.
13) Norek Corp. owned 70% of the voting common stock of Thelma Co. On January 2,
2012, Thelma sold a parcel of land to Norek. The land had a book value of $32,000 and
was sold to Norek for $45,000. Thelma’s reported net income for 2012 was $119,000.
What is the non-controlling interest’s share of Thelma’s net income?
A) $35,700.
B) $31,800.
C) $39,600.
D) $22,200.
E) $26,100.
14) Justings Co. owned 80% of Evana Corp. During 2013, Justings sold to Evana land
with a book value of $48,000. The selling price was $70,000. In its accounting records,
Justings should
A) not recognize a gain on the sale of the land since it was made to a related party.
B) recognize a gain of $17,600.
C) defer recognition of the gain until Evana sells the land to a third party.
D) recognize a gain of $8,000.
E) recognize a gain of $22,000.
16) Jim Bowie died on April 1, 2013. The estate has the following gross asset valuation
information:
The estate tax will be calculated using:
A.$73,000.
B.$75,000.
C.$76,000.
D.$80,000.
E.$89,000.