Janet Corporation holds 75 percent of Slider Corporation’s voting common stock,
acquired at book value. The fair value of the noncontrolling interest at the date of
acquisition was equal to 25 percent of the book value of Slider Corporation. On
December 31, 20X8, Slider Corporation acquired 25 percent of Janet Corporation’s
stock. Slider records dividends received from Janet as nonoperating income. In 20X9,
Janet reported operating income of $100,000 and paid dividends of $40,000. During the
same year, Slider reported operating income of $75,000 and paid $20,000 in dividends.
Based on the information provided, what amount will be reported as income assigned to
the controlling interest for 20X9 under the treasury stock method?
A. $18,750
B. $156,250
C. $175,000
D. $100,000
The personal financial statements of a partner include which of the following?
I. Statement of financial condition.
II. Statement of changes in net worth.
III. Statement of cash flows.
A. I and II
B. I and III
C. II and III
D. I, II, and III
Akron established an internal service fund for its data processing activities on July 1,
20X8. During the fiscal year ended June 30, 20X9, the following transactions and
events occurred:
1) On July 1, 20X8, the city council authorized the general fund to contribute
$1,000,000 to help establish the internal service fund on July 20, 20X8.
2) The internal service fund spent $900,000 of the contribution to acquire a mainframe
computer on July 25, 20X8.
3) During the year ended June 30, 20X9, the internal service billed other funds of the
city $300,000 for use of the computer. By year end, all of the billings were collected
except for $30,000.
4) The internal service fund incurred general operating expenses of $100,000, exclusive
of depreciation, during the year ended June 30, 20X9. All of the expenses were paid by
June 30, 20X9, except for $24,000.
5) Depreciation expense related to the computer was $180,000.
Required:
A) Prepare all journal entries that would be recorded by Akron’s internal service fund
for the year ended June 30, 20X9. Explanations for journal entries are not necessary.
B) Prepare a statement of revenues, expenses, and changes in fund net assets for the
internal service fund for the year ended June 30, 20X9.
C) Calculate the amount of unrestricted net assets at June 30, 20X9.
On January 1, 20X6, Interstate Corporation acquired 70 percent of Catapult Company’s
common stock for $210,000 cash. The fair value of the noncontrolling interest at that
date was determined to be $90,000. Data from the balance sheets of the two companies
included the following amounts as of the date of acquisition:
Interstate Catapult
Cash $50,000 $15,000
Accounts Receivable 70,000 25,000
Inventory 30,000 20,000
Land 150,000 80,000
Buildings and Equipment 250,000 200,000
Less: Accumulated Depreciation (70,000) (20,000)
Investment in Catapult Co. 210,000
Total Assets $690,000 $320,000
Accounts Payable $40,000 $10,000
Bonds Payable 150,000 40,000
Common Stock 300,000 90,000
Retained Earnings 200,000 180,000
Total Liabilities and Equity $690,000 $320,000
At the date of the business combination, the book values of Catapult’s assets and
liabilities approximated fair value except for inventory, which had a fair value of
$30,000, and land, which had a fair value of $95,000.
Based on the preceding information, what amount of goodwill will be reported in the
consolidated balance sheet prepared immediately after the business combination?
A. $0
B. $5,000
C. $25,000
D. $30,000
At June 30, 20X9, total assets for the various funds of a local municipality were as
follows:
Applying GASB 34 criteria, which of the above are major funds for reporting
purposes?
A. GF, CPF, EF
B. CPF, EF
C. CPF, ISF, EF
D. GF, CPF, ISF, EF
West, Inc. holds 100 percent of the common stock of Coast Company, an investment
acquired for $680,000. Immediately following the combination, West’s net assets have a
book value of $1,150,000 and a fair value of $1,390,000. The book value and the fair
value of Coast’s net assets on the date of combination are $400,000 and $550,000,
respectively. Immediately following the combination, a consolidated balance sheet is
prepared.
Based on the information given above, what will be the amount of net assets reported in
the consolidated balance sheet, prepared immediately following the combination?
A. $1,150,000
B. $1,550,000
C. $1,700,000
D. $1,830,000
The assets listed below of a foreign subsidiary have been converted to U.S. dollars at
both current and historical exchange rates. Assuming that the local currency of the
foreign subsidiary is the functional currency, what total amount should appear for these
assets on the U.S. company’s consolidated balance sheet?
A. $636,000
B. $648,000
C. $708,000
D. $960,000
Pace Corporation acquired 100 percent of Spin Company’s common stock on January 1,
20X9. Balance sheet data for the two companies immediately following the acquisition
follow:
At the date of the business combination, the book values of Spin’s net assets and
liabilities approximated fair value except for inventory, which had a fair value of
$60,000, and land, which had a fair value of $50,000. The fair value of land for Pace
Corporation was estimated at $80,000 immediately prior to the acquisition.
Based on the preceding information, what amount of goodwill will be reported in the
consolidated balance sheet prepared immediately after the business combination?
A. $0
B. $21,000
C. $6,000
D. $15,000
On January 1, 20X9, Company A acquired 80 percent of the common stock and 60
percent of the preferred stock of Company B, for $400,000 and $60,000, respectively.
At the time of acquisition, the fair value of the common shares of Company B held by
the noncontrolling interest was $100,000. Company B’s balance sheet contained the
following balances:
For the year ended December 31, 20X9, Company B reported net income of $100,000
and paid dividends of $40,000. The preferred stock is cumulative and pays an annual
dividend of 10 percent.
Based on the preceding information, what will be the equity method income reported by
Company A from its investment in Company B during 20X9?
A. $32,000
B. $30,000
C. $72,000
D. $48,000
On January 1, 20X6, Polka Co. (Polka) and Strauss Co. (Strauss) had condensed
balance sheets as follows:
On January 2, 20X6, Polka borrowed $90,000 and used the proceeds to acquire 90% of the
outstanding common shares of Strauss. This debt is payable in ten equal annual principal
and accrued interest payments beginning December 30, 20X6. On the acquisition date, the
fair value of Strauss was $100,000, and the excess cost of the investment over Strauss’s
carrying amount of acquired net assets should be allocated 60% to inventory and 40% to
goodwill.
Stockholders’ equity on the January 2, 20X6, consolidated balance sheet should be:
A. $85,000
B. $80,000
C. $90,000
D. $130,000
The Town of Baker reported the following items on the June 30, 20X9, balance sheet of
its general fund:
At June 30, 20X9, what amount should be reported for Fund Balance—Unassigned?
A. $46,000
B. $40,000
C. $30,000
D. $16,000
At its inception, Peacock Company purchased land for $50,000 and a building for
$220,000. After exactly 4 years, it transferred these assets and cash of $75,000 to a
newly created subsidiary, Selvick Company, in exchange for 25,000 shares of Selvick’s
$5 par value stock. Peacock uses straight-line depreciation. When purchased, the
building had a useful life of 20 years with no expected salvage value. An appraisal at
the time of the transfer revealed that the building has a fair value of $250,000.
Based on the information provided, what amount would be reported by Peacock
Company as investment in Selvick Company common stock?
A. $125,000
B. $250,000
C. $301,000
D. $345,000
A business combination in which the acquired company’s assets and liabilities are
combined with those of the acquiring company into a single entity is defined as:
A. Stock acquisition
B. Leveraged buyout
C. Statutory Merger
D. Reverse statutory rollup
Paccu Corporation acquired 100 percent of Sallee Company’s common stock on
January 1, 20X7. Balance sheet data for the two companies immediately following the
acquisition follow:
Paccu Sallee
Cash $50,000 $30,000
Accounts Receivable 60,000 35,000
Inventory 130,000 45,000
Land 75,000 60,000
Buildings and Equipment 310,000 170,000
Less: Accumulated Depreciation (130,000) (30,000)
Investment in Sallee Company Stock 250,000
Total Assets $745,000 $310,000
Accounts Payable $40,000 $35,000
Taxes Payable 30,000 12,000
Bonds Payable 250,000 50,000
Common Stock 75,000 75,000
Retained Earnings 350,000 138,000
Total Liabilities and Stockholders’ Equity $745,000 $310,000
At the date of the business combination, the book values of Sallee’s assets and liabilities
approximated fair value except for inventory, which had a fair value of $55,000, and
land, which had a fair value of $65,000. The fair value of land for Paccu Corporation
was estimated at $90,000 immediately prior to the acquisition.
Based on the preceding information, what amount of total stockholders’ equity will be
reported in the consolidated balance sheet prepared immediately after the business
combination?
A. $213,000
B. $350,000
C. $425,000
D. $638,000
Which of the following observations concerning interfund transfers is true?
A. They are expected to be repaid.
B. They are classified as fund revenues or expenditures.
C. The receiving fund recognizes these transfers as revenue.
D. These transfers are classified under “Other Financing Sources or Uses.”
According to ASC 958, Not-For-Profit entities should recognize
depreciation/amortization:
I. on all long-lived tangible assets.
II. on all long-lived intangible assets.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
What account should be debited in the debt service fund to recognize an installment
payment currently due on general obligation serial bonds?
I. Matured Bonds Payable.
II. Expenditures-Principal.
A. I
B. II
C. Either I or II
D. Neither I nor II
Hunter Company and Moss Company both produce and purchase fabric for resale each
period and frequently sell to each other. Since Hunter Company holds 80 percent
ownership of Moss Company, Hunter’s controller compiled the following information
with regard to intercompany transactions between the two companies in 20X7 and
20X8:
Required:
a. Give the consolidating entries required at December 31, 20X8, to eliminate the effects of
the inventory transfers in preparing a full set of consolidated financial statements.
b. Compute the amount of cost of goods sold to be reported in the consolidated income
statement for 20X8.
Neptune Corporation owns 70 percent of Pluto Company’s stock. On July 1, 20X4,
Neptune sold a piece of equipment to Pluto for $56,350. Neptune had purchased this
equipment on January 1, 20X1, for $63,000. The equipment’s original 15-year
estimated total economic life remains unchanged. Both companies use straight-line
depreciation. The equipment’s residual value is considered negligible.
Based on the information provided, in the preparation of the 20X4 consolidated
financial statements, equipment will be ______ in the consolidation entries.
A. debited for $6,650
B. debited for $56,350
C. debited for $63,000
D. credited for $63,000
Granite Company issued $200,000 of 10 percent first mortgage bonds on January 1,
20X4, at 105. The bonds mature in 10 years and pay interest semiannually on January 1
and July 1. Mortar Corporation purchased $140,000 of Granite’s bonds from the
original purchaser on January 1, 20X8, for $122,000. Mortar owns 75 percent of
Granite’s voting common stock. Granite’s partial bond amortization schedule is as
follows:
Based on the information given above, what amount of premium on bonds payable will be
eliminated in the preparation of the 20X8 year-end consolidated financial statements?
A. $4,276
B. $4,923
C. $6,108
D. $7,033
What account is debited in a debt service fund when it records matured interest
payable?
I. Interest Expense
II. Expenditures
A. I only
B. II only
C. Either I or II
D. Neither I nor II
The restricted funds of a not-for-profit hospital are often termed “______” funds
because they must hold the restricted assets and transfer expendable resources to the
general fund for expenditure.
A. specific
B. controlled
C. limited
D. holding
During the fiscal year ended June 30, 20X3, an enterprise fund of New Spring acquired
computer equipment costing $280,000 on account and issued $600,000 of long-term
bonds at par value. Revenues of the enterprise fund will be used to repay bond interest
and principal. What effect did these transactions have on New Spring’s enterprise fund
assets and long-term debt?
Assets Long-Term Debt
A. Increase of $880,000 Increase of $600,000
B. Increase of $280,000 Increase of $600,000
C. Increase of $880,000 No effect
D. Increase of $600,000 Increase of $600,000
Toledo Imports, a calendar-year corporation, had the following income before tax
expense and estimated effective annual income tax rates for the first three quarters in
20X8:
Toledo’s income tax expense in its interim income statement for the nine months ended
September 30 and for the third quarter, respectively, are:
A. $250,800 and $103,200.
B. $252,000 and $108,000.
C. $252,000 and $103,200.
D. $250,800 and $108,000.
For the year ended June 30, 20X9, a private college received contributions from alumni
which were restricted for faculty research stipends to be awarded during the next fiscal
year. For the year ended June 30, 20X9, these contributions should be disclosed on the
statement of activities of the private college as an increase in:
A. the fund balance of the restricted current fund.
B. temporarily restricted net assets.
C. deferred revenues.
D. temporarily restricted fund balance.
On July 25, 20X8, the city of Pullman, which reports on a calendar-year basis, ordered
five police cars at an estimated cost of $200,000. On August 26, 20X8, the police cars
were received, and the actual cost amounted to $197,000. Pullman encumbered the
appropriation for police cars in its general fund when the cars were ordered. When the
police cars were received, the general fund of Pullman should:
A. Credit Budgetary Fund Balance Assigned for Encumbrances for $197,000.
B. Debit Encumbrances for $200,000.
C. Debit Expenditures for $197,000.
D. Credit Budgetary Fund Balance Assigned for Expenditures for $200,000.
Blue Corporation holds 70 percent of Black Company’s voting common stock. On
January 1, 20X3, Black paid $500,000 to acquire a building with a 10-year expected
economic life. Black uses straight-line depreciation for all depreciable assets. On
December 31, 20X8, Blue purchased the building from Black for $180,000. Blue
reported income, excluding investment income from Black, of $140,000 and $162,000
for 20X8 and 20X9, respectively. Black reported net income of $30,000 and $45,000
for 20X8 and 20X9, respectively.
Based on the preceding information, the amount to be reported as consolidated net
income for 20X8 will be:
A. $190,000.
B. $170,000.
C. $175,000.
D. $150,000.
The transactions listed in the following questions occurred in a private, not-for-profit
hospital during 20X8. For each transaction, indicate its effect on the hospital’s statement
of operations for the year ended December 31, 20X8.
Transaction: Received cash contribution from donor who stipulated the contribution be
permanently invested.
Effect on Statement of Operations:
A. Increases operating income.
B. Decreases operating income.
C. The transaction is reported on the statement of operations, but there is no effect on
operating income.
D. The transaction is not reported on the statement of operations.
On December 31, 20X5, Paris Corporation acquired 60 percent of Sanlo Company’s
common stock for $180,000. At that date, the fair value of the noncontrolling interest
was $120,000. Of the $45,000 differential, $5,000 related to the increased value of
Sanlo’s inventory, $15,000 related to the increased value of its land, and $10,000 related
to the increased value of its equipment that had a remaining life of five years from the
date of combination. Sanlo sold all inventory it held at the end of 20X5 during 20X6.
The land to which the differential related was also sold during 20X6 for a large gain. In
20X6, Sanlo reported net income of $40,000 but paid no dividends. Paris accounts for
its investment in Sanlo using the equity method.
Based on the preceding information, what amount of differential would Paris amortize
during 20X6 in its equity method journal entries?
A. $13,200
B. $15,000
C. $22,000
D. $30,000
ABC Corporation purchased land on January 1, 20X6, for $50,000. On July 15, 20X8,
it sold the land to its subsidiary, XYZ Corporation, for $70,000. ABC owns 80 percent
of XYZ’s voting shares.
Based on the preceding information, what will be the worksheet consolidating entry to
remove the effects of the intercompany sale of land in preparing the consolidated
financial statements for 20X9?
A. Option A
B. Option B
C. Option C
D. Option D
