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Package Title: Test Bank Questions
Course Title: Advanced Accounting, 6e

Chapter Number: 3
Question Type: Multiple Choice
1) A majority-owned subsidiary that is in legal reorganization should normally be accounted for using:
a) consolidated financial statements.

b) the equity method.
c) the market value method.
d) the cost method.
Answer: d
Question Title: Test Bank (Multiple Choice) Question 01

Difficulty: Medium
Learning Objective: 5 List the requirements for inclusion of a subsidiary in consolidated financial
statements.
Section Reference: 3.2
2) Under the acquisition method, indirect costs relating to acquisitions should be:
a) included in the investment cost.

b) expensed as incurred.
c) deducted from other contributed capital.
d) none of these.
Answer: b

Difficulty: Easy
Learning Objective: 7 Record the investment in the subsidiary on the parent’s books at the date of
acquisition.
3) Eliminating entries are made to cancel the effects of intercompany transactions and are made on the:
a) books of the parent company.

b) books of the subsidiary company.
c) workpaper only.
d) books of both the parent company and the subsidiary.
Answer: c

Difficulty: Easy
Learning Objective: 8 Prepare the consolidated workpapers and eliminating entries at the date of acquisition.
4) One reason a parent company may pay an amount less than the book value of the subsidiary's stock
acquired is:
a) an undervaluation of the subsidiary's assets.

b) the existence of unrecorded goodwill.
c) an overvaluation of the subsidiary's liabilities.
d) the existence of unrecorded contingent liabilities.
Answer: d

Difficulty: Easy
Learning Objective: 3 Describe the reasons why a company acquires a subsidiary rather than its net assets.
5) In a business combination accounted for as an acquisition, registration costs related to common stock
issued by the parent company are:
a) expensed as incurred.
b) deducted from other contributed capital.
c) included in the investment cost.
d) deducted from the investment cost.
Answer: b

Difficulty: Easy
Learning Objective: 7 Record the investment in the subsidiary on the parent’s books at the date of
acquisition., 8 Prepare the consolidated workpapers and eliminating entries at the date of acquisition.
6) On the consolidated balance sheet, consolidated stockholders' equity is:
a) equal to the sum of the parent and subsidiary stockholders' equity.

b) greater than the parent's stockholders' equity.
c) less than the parent's stockholders' equity.
d) equal to the parent's stockholders' equity.
Answer: d

Difficulty: Easy
7) Majority-owned subsidiaries should be excluded from the consolidated statements when:
a) control does not rest with the majority owner.

b) the subsidiary operates under governmentally imposed uncertainty.
c) a foreign subsidiary is domiciled in a country with foreign exchange restrictions or controls.
d) any of these circumstances exist.
Answer: d

Difficulty: Medium
statements.
8) Under the economic entity concept, consolidated financial statements are intended primarily for the
benefit of the:
a) stockholders of the parent company.

b) creditors of the parent company.
c) minority stockholders.
d) all of these.
Answer: d

Difficulty: Easy
Learning Objective: 4 Describe the valuation and classification of accounts in consolidated financial
statements.
9) Reasons a parent company may pay more than book value for the subsidiary company's stock include all
of the following EXCEPT:
a) the fair value of one of the subsidiary's assets may exceed its recorded value because of appreciation.
b) the existence of unrecorded goodwill.
c) liabilities may be overvalued.
d) stockholders' equity may be undervalued.
Answer: d

Difficulty: Medium
Learning Objective: 4 Describe the valuation and classification of accounts in consolidated financial
statements., 9 Compute and allocate the difference between implied value and book value of the acquired
firm’s equity.
10) What is the method of presentation required by SFAS 160 of “non-controlling interest” on a
consolidated balance sheet?
a) As a deduction from goodwill from consolidation.

b) As a separate item within the long-term liabilities section.
c) As a part of stockholders' equity.
d) As a separate item between liabilities and stockholders' equity.
Answer: c

Difficulty: Easy
Learning Objective: 2 Explain the role of a noncontrolling interest in business combinations.
11) Which of the following is a limitation of consolidated financial statements?
a) Consolidated statements provide no benefit for the stockholders and creditors of the parent company.
b) Consolidated statements of highly diversified companies cannot be compared with industry standards.
c) Consolidated statements are beneficial only when the consolidated companies operate within the same
industry.
d) Consolidated statements are beneficial only when the consolidated companies operate in different
industries.
Answer: b

Difficulty: Easy
Learning Objective: 6 Discuss the limitations of consolidated financial statements.
12) Pina Corp. owns 60% of Simon Corp.'s outstanding common stock. On May 1, 2016, Pina advanced
Simon $90,000 in cash, which was still outstanding at December 31, 2016. What portion of this advance
should be eliminated in the preparation of the December 31, 2016 consolidated balance sheet?
a) $90,000.
b) $54,000.
c) $36,000.
d) $-0-.
Answer: a

Difficulty: Easy
Section Reference: 3.6, 3.7
13) On January 1, 2016, Pell Company and Sand Company had condensed balance sheets as follows:
Pell Sand
Current assets $ 280,000 $80,000
Noncurrent assets 360,000 160,000
Total assets $640,000 $240,000
Current liabilities $ 120,000 $40,000

Long-term debt 200,000 -0-
Stockholders' equity 320,000 200,000
Total liabilities & stockholders' equity $640,000 $240,000
On January 2, 2016 Pell borrowed $240,000 and used the proceeds to purchase 90% of the outstanding
common stock of Sand. This debt is payable in 10 equal annual principal payments, plus interest, starting
December 30, 2016. Any difference between book value and the value implied by the purchase price relates
to land.
On Pell's January 2, 2016 consolidated balance sheet, noncurrent assets should be:
a) $520,000.
b) $536,000.
c) $544,000.
d) $586,667.
Answer: d

Difficulty: Medium
Learning Objective: 9 Compute and allocate the difference between implied value and book value of the
acquired firm’s equity.
Pell Sand
Total assets $640,000 $240,000

to land.
On Pell's January 2, 2016 consolidated balance sheet, current liabilities should be:
a) $200,000.
b) $184,000.
c) $160,000.
d) $120,000.
Answer: b

Difficulty: Medium
Pell Sand
Total assets $640,000 $240,000

to land.
On Pell's January 2, 2016 consolidated balance sheet, noncurrent liabilities should be:
a) $440,000.
b) $416,000.
c) $240,000.
d) $216,000.
Answer: b

Difficulty: Medium
16) A newly acquired subsidiary has pre-existing goodwill on its books. The parent company’s consolidated
balance sheet will:
a) treat the goodwill the same as other intangible assets of the acquired company.
b) will always show the pre-existing goodwill of the subsidiary at its book value.
c) not show any value for the subsidiary’s pre-existing goodwill.
d) do an impairment test to see if any of it has been impaired.
Answer: c

Difficulty: Easy
17) The Difference between Implied and Book Value account is:
a) an asset or liability account reflected on the consolidated balance sheet.

b) used in allocating the amounts paid for recorded balance sheet accounts that are different than their fair
values.
c) the excess implied value assigned to goodwill.
d) the unamortized excess that cannot be assigned to any related balance sheet accounts
Answer: b

Difficulty: Easy
18) The main evidence of control for purposes of consolidated financial statements involves:
a) possessing majority ownership

b) having decision-making ability that is not shared with others.
c) being the sole shareholder
d) having the parent company and the subsidiary participating in the same industry.
Answer: b

Difficulty: Easy
Learning Objective: 1 Understand the concept of control as used in reference to consolidations.
19) In which of the following cases would consolidation be inappropriate?
a) The subsidiary is in bankruptcy.

b) Subsidiary's operations are dissimilar from those of the parent.
c) The parent owns 90 percent of the subsidiary's common stock, but all of the subsidiary's nonvoting
preferred stock is held by a single investor.
d) Subsidiary is foreign.
Answer: a

Difficulty: Easy
statements.
20) Price Company acquired 75 percent of the common stock of Shandie Corporation on December 31,
2016. On the date of acquisition, Price held land with a book value of $150,000 and a fair value of
$300,000; Shandie held land with a book value of $100,000 and fair value of $500,000. What amount would
land be reported in the consolidated balance sheet prepared immediately after the combination?
a) $650,000
b) $500,000
c) $550,000
d) $375,000
Answer: a

Difficulty: Easy
21) On January 1, 2016, Pent Company and Shelter Company had condensed balance sheets as follows:
Pent Shelter
Current assets $210,00 $60,000
Total assets $480,000 $180,000
Current liabilities $90,000 $30,000

Stock holders' equity 240,000 150,000
On January 2, 2016 Pent borrowed $180,000 and used the proceeds to purchase 90% of the outstanding
common stock of Shelter. This debt is payable in 10 equal annual principal payments, plus interest, starting
to land.
On Pent's January 2, 2016 consolidated balance sheet, noncurrent assets should be:
a) $390,000.
b) $402,000.
c) $408,000.
d) $440,000.
Answer: d

Difficulty: Medium
Pent Shelter
Total assets $480,000 $180,000

to land.
On Pent's January 2, 2016 consolidated balance sheet, current liabilities should be:
a) $150,000.
b) $138,000.
c) $120,000.
d) $90,000.
Answer: b

Difficulty: Easy
Pent Shelter
Total assets $480,000 $180,000

to land.
On Pent's January 2, 2016 consolidated balance sheet, noncurrent liabilities should be:
a) $330,000.
b) $312,000.
c) $180,000.
d) $162,000.
Answer: b

Difficulty: Easy
24) On January 1, 2016, Prima Corporation acquired 80 percent of Sunder Corporation's voting common
stock. Sunders's buildings and equipment had a book value of $300,000 and a fair value of $350,000 at the
time of acquisition. At what amount will Sunder’s buildings and equipment will be reported in the
consolidated statements?
a) $350,000
b) $340,000
c) $280,000
d) $300,000
Answer: a

Difficulty: Easy
25) The primary beneficiary of a variable interest entity (VIE) must consolidate the VIE into its financial
statements whenever:
a) substantially all of the entity’s activities are conducted on behalf of an investor who has disproportionally
few voting rights.
b) the voting rights are not proportional to the obligations to absorb the expected losses or receive expected
residual returns.
c) the total equity at risk is not sufficient to permit the entity to finance its activities without additional
subordinated financial support from other parties.
d) the holders of the equity investment at risk have the right to receive the residual returns of the legal entity
Answer: c

Difficulty: Medium
26) If an entity is not considered a VIE, the determination of consolidation is based on whether:
a) the voting rights are proportional to the obligations to absorb expected losses or receive expected residual
returns.
b) the total equity at risk is sufficient to permit the entity to finance its activities without additional
subordinated financial support from other parties.
c) the equity investments or investments in subordinated debt are at risk.
d) one of the entities in the consolidated group directly or indirectly has a controlling financial interest
(usually ownership of a majority voting interest) in the other entities.
Answer: d

Difficulty: Easy
27) IFRS defines control as:
a) the direct or indirect ability to determine the direction of management and policies through ownership,
contract, or otherwise.
b) the power to govern the entity’s financial and operating policies as to obtain benefits from its activities.
c) the power to direct the activities that impact economic performance, the obligation to absorb expected
losses, and the right to receive expected residual returns.
d) having a majority of the ownership interests entitled to elect management.
Answer: b

Difficulty: Medium
Learning Objective: 1 Understand the concept of control as used in reference to consolidations., 10 Discuss
some of the similarities and differences between U.S. GAAP and IFRS with respect to the preparation of
consolidated financial statements at the date of acquisition.
Section Reference: 3.1, 3.8
Question Type: Essay
28) There are several reasons why a company would acquire a subsidiary’s voting common stock rather than
its net assets. Identify at least two advantages to acquiring a controlling interest in the voting stock of
another company rather than its assets.
Answer: Reasons why a company would acquire a subsidiary rather than its net assets include the following:
 Stock acquisition is relatively simple and avoids the often lengthy and difficult negotiations that are
required in a complete takeover.
 Control of the subsidiary's operations can be accomplished with a much smaller investment.
 The separate legal existence of the individual affiliates provides an element of protection of the
parent's assets from attachment by subsidiary creditors.
Question Title: Test Bank (Essay) Question 28

Difficulty: Medium
Learning Objective: 3 Describe the reasons why a company acquires a subsidiary rather than its net assets.
29) A useful first step in the consolidating process is to prepare a Computation and Allocation of Difference
(CAD) Schedule. Identify the steps involved in preparing the CAD schedule.
Answer: Preparation of the Computation and Allocation of Difference Schedule involves the following
process:
 Determine the percentage of stock acquired in the subsidiary.
 Compute the implied value of the subsidiary by dividing the purchase price by the percentage
acquired.
 Allocate any difference between the implied value and the book value of the subsidiary's equity to
adjust the underlying assets and/or liabilities of the acquired company.
Question Title: Test Bank (Essay) Question 29

Difficulty: Medium
30) On December 31, 2016, Pinta Company purchased 80% of the outstanding common stock of Snead
Company for cash. At the time of acquisition, Snead Company's balance sheet was as follows:
Current assets $ 1,680,000

Plant and equipment 1,580,000
Land 280,000
Total assets $3,540,000
Liabilities $ 1,320,000
Common stock, $10 par value 1,440,000
Other contributed capital 700,000
Retained earnings 240,000
Total $3,700,000
Treasury stock at cost, 5,000 shares <160,000>
Total equities $3,540,000
Required:
Prepare the elimination entry(s) required for the preparation of a consolidated balance sheet workpaper on
December 31, 2016, assuming the purchase price of the stock was $1,670,000. Any difference between the
value implied by the purchase price of the investment and the book value of net assets acquired relates to
subsidiary land.
Answer:
Common Stock – Snead 1,440,000

Other Contributed Capital – Snead 700,000
Retained Earnings – Snead 240,000
Investment in Snead Company 1,670,000
Treasury Stock - Snead 160,000
Difference Between Implied and Book Value 106,000
Noncontrolling Interest 444,000

Land 106,000
Question Title: Test Bank (Problem) Question 3-1

Difficulty: Medium
Learning Objective: 8 Prepare the consolidated workpapers and eliminating entries at the date of
acquisition., 9 Compute and allocate the difference between implied value and book value of the acquired
firm’s equity.
31) P Company purchased 80% of the outstanding common stock of S Company on January 2, 2016, for
$380,000. Balance sheets for P Company and S Company immediately after the stock acquisition were as
follows:
P Company S Company
Current assets $ 166,000 $ 96,000
Investment in S Company 380,000 -0-
Plant and equipment (net) 560,000 224,000
Land 40,000 120,000
$1,146,000 $440,000
Current liabilities $ 120,000 $ 44,000

Long-term notes payable -0- 36,000
Common stock 480,000 160,000
Other contributed capital 244,000 64,000
Retained earnings 302,000 136,000
$1,146,000 $440,000
S Company owed P Company $16,000 on open account on the date of acquisition.
Required:
Prepare a consolidated balance sheet for P and S Companies on the date of acquisition. Any difference
between the value implied by the purchase price of the investment and the book value of net assets acquired
relates to subsidiary land. The book values of S Company's other assets and liabilities are equal to their fair
values.
Answer:
P COMPANY AND SUBSIDIARY
Consolidated Balance Sheet
January 2, 2016
Current assets $246,000
Plant and equipment (net) 784,000
Land ($160,000 + $115,000 excess cost) 275,000
Total $1,305,000
Current liabilities $ 148,000

Long-term notes payable 36,000
Common stock 480,000
Noncontrolling interest 95,000
Total $1,305,000

Difficulty: Medium
firm’s equity.
32) P Company acquired 54,000 shares of the common stock of S Company on January 1, 2016, for
$950,000 cash. The stockholders' equity section of S Company's balance sheet on that date was as follows:
Common stock, $10 par value $600,000

Total $1,000,000
On the date of acquisition, S Company owed P Company $10,000 on open account.
Required:
Present, in general journal form, the elimination entries for the preparation of a consolidated balance sheet
workpaper on January 1, 2016. The difference between the value implied by the purchase price of the
investment and the book value of the net assets acquired relates to subsidiary land.
Answer:
Accounts Payable (to P) 10,000

Accounts Receivable (from S) 10,000
Common Stock - S 600,000

Other Contributed Capital - S 80,000
Retained Earnings - S 320,000
Investment in S Company 950,000
Noncontrolling Interest 100,000
Land 50,000

Difficulty: Medium
firm’s equity.
33) On January 2, 2016, Pope Company acquired 90% of the outstanding common stock of Smithwick
Company for $480,000 cash. Just before the acquisition, the balance sheets of the two companies were as
follows:
Pope Smithwick
Cash $ 650,000 $ 160,000
Accounts Receivable (net) 360,000 60,000
Inventory 290,000 140,000
Plant and Equipment (net) 970,000 240,000
Land 150,000 80,000
Total Assets $2,420,000 $680,000
Accounts Payable $ 260,000 $ 120,000

Mortgage Payable 180,000 100,000
Common Stock, $2 par value 1,000,000 170,000
Other Contributed Capital 520,000 50,000
Retained Earnings 460,000 240,000
Total Equities $2,420,000 $680,000
The fair values of Smithwick's assets and liabilities are equal to their book values with the exception of land.
Required:
A. Prepare the journal entry necessary to record the purchase of Smithwick's common stock.
B. Prepare a consolidated balance sheet at the date of acquisition.

Answer:
A.
Investment in Smithwick Company 480,000
Cash 480,000
B.
POPE COMPANY AND SUBSIDIARY
Consolidated Balance Sheet
January 2, 2016
Assets
Cash (650,000 + 160,000 - $480,000) $330,000
Accounts Receivable 420,000
Inventory 430,000
Plant and Equipment (net) 1,210,000
Land ($150,000 + $80,000 + $73,333*) 303,333
Total Assets $2,693,333
Liabilities and Stockholders’ Equity

Accounts Payable $380,000
Mortgage Payable 280,000
Total liabilities $660,000
Noncontrolling Interest
($170,000 + $50,000 + $240,000 + 73,333) × .10 $ 53,333
Common Stock $1,000,000
Other Contributed Capital 520,000
Retained Earnings 460,000
Total Stockholders’ Equity 1,980,000
Total Liabilities and Stockholders’ Equity $2,693,333
* $480,000/.9 - ($170,000 + $50,000 + $240,000)

Difficulty: Hard
firm’s equity.
34) P Corporation paid $420,000 for 70% of S Corporation’s $10 par common stock on December 31, 2016,
when S Corporation’s stockholders’ equity was made up of $300,000 of Common Stock, $90,000 of Other
Contributed Capital and $60,000 of Retained Earnings. S’s identifiable assets and liabilities reflected their
fair values on December 31, 2016, except for S’s inventory which was undervalued by $60,000 and their
land which was undervalued by $25,000. Balance sheets for P and S immediately after the business
combination are presented in the partially completed work-paper below.
- Eliminations
P S Debit Credit Noncontrolling Consolidated
Interest Balances
ASSETS
Cash $40,000 $30,000
Accounts
receivable-net 30,000 45,000
Inventories 185,000 165,000
Land 45,000 120,000
Plant assets-
net 480,000 240,000
Investment in
S Corp. 420,000
Difference
between implied
and book value
Goodwill
Total Assets $1,200,000 $600,000
EQUITIES
Current
liabilities $170,000 $150,000
Capital stock 600,000 300,000
Additional paid-
in capital 150,000 90,000
Retained
earnings 280,000 60,000
Noncontrolling
interest
Total Equities $1,200,000 $600,000
Required:
Complete the consolidated balance sheet workpaper for P Corporation and Subsidiary.
Answer:
Eliminations
P S Debit Credit Noncontrolling Consolidated
Interest Balances
ASSETS
Cash $40,000 $30,000 $70,000
Accounts
receivable-net 30,000 45,000 75,000
Inventories 185,000 165,000 (b) 60,000 410,000
Land 45,000 120,000 (b) 25,000 190,000
Plant assets-
net 480,000 240,000 720,000
Investment in
S Corp. 420,000 (a) 420,000
Difference (a) 150,000 (b) 150,000
between
implied and
book value
Goodwill (b) 65,000 65,000
Total Assets $1,200,000 $600,000 $1,530,000
EQUITIES
Current
liabilities $170,000 $150,000 $320,000
Capital stock 600,000 300,000 (a) 300,000 600,000
Additional
paid-in capital 150,000 90,000 (a) 90,000 150,000
Retained
earnings 280,000 60,000 (a) 60,000 280,000
Noncontrolling
interest (a) 180,000 180,000 180,000
Total Equities $1,200,000 $600,000 $750,000 $750,000 $1,530,000

Difficulty: Hard
firm’s equity.
35) Prepare in general journal form the workpaper entries to eliminate Porter Company's investment in
Sewell Company in the preparation of a consolidated balance sheet at the date of acquisition for each of the
following independent cases:
Sewell Company Equity Balances

Cash Percent of Investment Common Other Contributed Retained
Stock Owned Cost Stock Capital Earnings
a. 90 $675,000 $450,000 $180,000 $75,000
b. 80 318,000 620,000 140,000 20,000
Any difference between book value of net assets acquired and the value implied by the purchase price
relates to subsidiary property, plant, and equipment except for case (b). In case (b) assume that all book
values and fair values are the same.
Answer:
A.
Common Stock – Sewell 450,000
Other Contributed Capital – Sewell 180,000
Difference between Implied and Book Values 45,000
Retained Earnings – Sewell 75,000
Investment in Sewell 675,000
Noncontrolling Interest in Equity 75,000
B.
Common Stock – Sewell 620,000
Other Contributed Capital – Sewell 140,000
Retained Earnings – Sewell 20,000
Investment in Sewell 318,000
Gain on Purchase of Business - Porter 306,000

Difficulty: Hard
firm’s equity.
36) On December 31, 2016, Priestly Company purchased a controlling interest in Shelter Company for
$1,060,000. The consolidated balance sheet on December 31, 2016 reported noncontrolling interest in
Shelter Company of $265,000.
On the date of acquisition, the stockholders' equity section of Shelter Company's balance sheet was as
follows:
Common stock $520,000

Total 1,180,000
Required:
A.Compute the noncontrolling interest percentage on December 31, 2016.
B. Prepare the investment elimination entry made to prepare a consolidated balance sheet workpaper. Any
difference between book value and the value implied by the purchase price relates to subsidiary land.
Answer:
A. 265,000/(1,060,000 +265,000) = 20% Noncontrolling interest
B.
Common Stock – Shelter 520,000
Other Contributed Capital – Shelter 380,000
Retained Earnings – Shelter 280,000
Difference between Implied and Book Values 145,000
Investment in Shelter Company 1,060,000

Difficulty: Medium
firm’s equity.
37) On January 1, 2016, Prima Company issued 1,500 of its $20 par value common shares with a fair value
of $50 per share in exchange for 2,000 outstanding common shares of Swatch Company in a purchase
transaction. Registration costs amounted to $1,700 paid in cash. Just prior to the acquisition, the balance
sheets of the two companies were as follows:
Prima Swatch
Cash $ 73,000 $13,000

Accounts Receivable (net) 95,000 19,000
Inventory 58,000 25,000
Plant and Equipment (net) 95,000 43,000
Land 26,000 20,000
Total Assets $ 347,000 $ 120,000
Accounts Payable $ 66,000 16,000

Notes Payable 82,000 21,000
Common Stock, $20 par value 100,000 40,000
Other Contributed Capital 60,000 24,000
Retained Earnings 39,000 19,000
Total Liabilities and Equities $ 347,000 $ 120,000
Any differences between the book value of equity and the value implied by the purchase price relates to
Land.
Required:
A. Prepare the journal entry on Prima’s books to record the exchange of stock.
B. Prepare a Computation and Allocation Schedule for the Difference between book value and value
implied by the purchase price.
C. Calculate the consolidated balance for each of the following accounts as of December 31, 2016:
1. Cash
2. Land
3. Common Stock
4. Other Contributed Capital
Answer:
A. Investment in Swatch Company ($50  1,500) 75,000
Common Stock ($20  1,500) 30,000
Other Contributed Capital ($30  1,500) 45,000
Other Contributed Capital 1,700

Cash 1,700
B. Computation and Allocation of Difference

Non-
Parent Controlling Entire
Share Share Value
Purchase price and implied value $75,000 0 75,000
Less: Book value of equity acquired 83,000* 0 83,000
Difference between implied and book value 7,000 0 7,000
Land (7,000) (0) (7,000)
Balance -0- -0- -0-
* $40,000 + $24,000 + $19,000 = $83,000
C.
Cash balance: 73,000 + 13,000 –1,700 = $84,300
Land balance: 26,000 + 20,000 + 7,000= $ 53,000
Common Stock balance: 100,000 + 30,000 = $130,000
Other Contributed Capital: 60,000 + 45,000 – 1,700 = $ 103,300

Difficulty: Hard
firm’s equity.

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Package Title: Test Bank Questions

Course Title: Advanced Accounting, 6e

Question Type: Multiple Choice

a) consolidated financial statements.

Question Title: Test Bank (Multiple Choice) Question 01

a) included in the investment cost.

Question Title: Test Bank (Multiple Choice) Question 02

a) books of the parent company.

Question Title: Test Bank (Multiple Choice) Question 03

a) an undervaluation of the subsidiary's assets.

Question Title: Test Bank (Multiple Choice) Question 04

Question Title: Test Bank (Multiple Choice) Question 05

6) On the consolidated balance sheet, consolidated stockholders' equity is:

a) equal to the sum of the parent and subsidiary stockholders' equity.

Question Title: Test Bank (Multiple Choice) Question 06

a) control does not rest with the majority owner.

Question Title: Test Bank (Multiple Choice) Question 07

a) stockholders of the parent company.

Question Title: Test Bank (Multiple Choice) Question 08

Question Title: Test Bank (Multiple Choice) Question 09

a) As a deduction from goodwill from consolidation.

Question Title: Test Bank (Multiple Choice) Question 10

11) Which of the following is a limitation of consolidated financial statements?

Question Title: Test Bank (Multiple Choice) Question 11

Question Title: Test Bank (Multiple Choice) Question 12

Current liabilities $ 120,000 $40,000

Question Title: Test Bank (Multiple Choice) Question 13

Current liabilities $ 120,000 $40,000

Question Title: Test Bank (Multiple Choice) Question 14

Current liabilities $ 120,000 $40,000

Question Title: Test Bank (Multiple Choice) Question 15

Question Title: Test Bank (Multiple Choice) Question 16

a) an asset or liability account reflected on the consolidated balance sheet.

Question Title: Test Bank (Multiple Choice) Question 17

a) possessing majority ownership

Question Title: Test Bank (Multiple Choice) Question 18

19) In which of the following cases would consolidation be inappropriate?

a) The subsidiary is in bankruptcy.

Question Title: Test Bank (Multiple Choice) Question 19

Question Title: Test Bank (Multiple Choice) Question 20

Current liabilities $90,000 $30,000

Question Title: Test Bank (Multiple Choice) Question 21

Current liabilities $90,000 $30,000

Question Title: Test Bank (Multiple Choice) Question 22

Current liabilities $90,000 $30,000

Question Title: Test Bank (Multiple Choice) Question 23

Question Title: Test Bank (Multiple Choice) Question 24

Question Title: Test Bank (Multiple Choice) Question 25

Question Title: Test Bank (Multiple Choice) Question 26

27) IFRS defines control as:

Question Title: Test Bank (Multiple Choice) Question 27

Question Title: Test Bank (Essay) Question 28

Question Title: Test Bank (Essay) Question 29

Current assets $ 1,680,000

Common Stock – Snead 1,440,000

Difference Between Implied and Book Value 106,000

Question Title: Test Bank (Problem) Question 3-1

Current liabilities $ 120,000 $ 44,000

S Company owed P Company $16,000 on open account on the date of acquisition.