1) What is the justification for preparing consolidated financial statements when, in
fact, it is apparent that the consolidated group is not a legal entity?
2) What journal entry, if any, would the parentcompany make to record the receipt of a
stockdividend?
3) Walleye Industries operates in four different industries. Information concerning the
operations of these industries for the year 2014 is:
Revenue
IndustryOperatingSegment
SegmentTotalIntersegmentProfit (Loss)Assets
A$ 24,000$4,200$ 2,700$ 22,400
B18,0002,200(2,000)25,200
C90,00014,0003,60070,000
D 168,000-0- 23,700 162,400
$300,000$28,000$280,000
Required:
Complete the following schedule to determine which of the above segments must be
treated as reportable segments.
10% Test For
SegmentRevenueOp. Profit (Loss)Segment AssetsReportable?
A
B
C
D
4) In what period and in what manner should profitsrelating to the intercompany sale of
depreciableproperty and equipment be recognized in theconsolidated financial
statements?
5) Push down accounting is an accounting method required for the subsidiary in some
instances such as the banking industry. Briefly explain the concept of push down
accounting.
6) In what circumstances might a consolidatedgain be recognized on the sale of assets
to anonaffiliate when the selling affiliate recognizesa loss?
7) On a consolidated work paper for a parent and its partially owned subsidiary, the
noncontrolling interest column accumulates the non controlling interests share of
several account balances. What are these accounts?
8) Under the current rate method, describe how the various balance sheet accounts are
translated (including the equity accounts) and how this translation affects the
computation of various ratios (such as debt to equity or the current ratio). In particular,
discuss whether or not the ratios will change when computed in local currencies and
compared to their calculations (after translation) using the parents currency.
9) At the date of an 80% acquisition, a subsidiary had common stock of $100,000 and
retained earnings of $16,250. Seven years later, at December 31, 2013, the subsidiarys
retained earnings had increased to $461,430. What adjustment will be made on the
consolidated work paper at December 31, 2014, to recognize the parents share of the
cumulative undistributed profits (losses)of its subsidiary? Under which method(s) is
this adjustment needed? Why?
10) When a parent company has obtained control of a subsidiary through several
purchases and subsequently sells a portion of its shares in the subsidiary, how is the
carrying value of the shares sold determined?