Acct 559 Quiz 1 Solution

Quiz I (Chapters 1and 2) Date Name ID Answer the side by side(p) Questions1. Tower Inc. owns 30% of Yale Co. and applies the faithfulness method. During the contemporary course of instruction, Tower bought inventory be $66,000 and then change it to Yale for $120,000. At year-end, save $24,000 of merchandise was still creation held by Yale. What amount of inter- alliance inventory profit essential be deferred by Tower? A. $6,480 B. $3,240 C. $10,800 D. $16,200 E. $6,6102. All of the following statements regarding the investment circular employ the equity method are true except A. The investment is preserve at comprise B.Dividends received are reported as tax C. force out income of investee increases the investment account D. Dividends received reduce the investment account E. amortisation of fair prize all over cost reduces the investment account3. After allocating cost in intemperance of daybook observe, which asset or li qualification would non be amortized o ver a useful life? A. Cost of goods sold B. Property, plant, & equipment C. Patents D. good will E. Bonds payable4. A gild should always use the equity method to account for an investment if A. it has the ability to exercise crucial influence over the operating policies of the investee.B. it owns 30% of a nonher companys transmission line. C. it has a controlling interest (more than 50%) of another companys stock. D. the investment was made primarily to earn a feed on excess cash. E. it does not have the ability to exercise significant influence over the operating policies of the investee.5. An upstream sale of inventory is a sale A. between subsidiaries owned by a popular parent. B. with the convey of goods scheduled by contract to come about on a qualify next date. C. in which the goods are physically transported by boat from a subsidiary to its parent. D. ade by the investor to the investee. E. made by the investee to the investor.6. In a situation where the investor ex ercises significant influence over the investee, which of the following entries is not real posted to the books of the investor?1) account to the Investment account and a Credit to the fair play in Investee Income account.2) Debit to Cash (for dividends received from the investee) and a Credit to Dividend Revenue.3) Debit to Cash (for dividends received from the investee) and a Credit to the Investment account. A. Entries 1 and 2 B. Entries 2 and 3 C. Entry 1 only D.Entry 2 only E. Entry 3 only7. All of the following statements regarding the investment account victimization the equity method are true except A. The investment is recorded at cost B. Dividends received are reported as revenue C. Net income of investee increases the investment account D. Dividends received reduce the investment account E. Amortization of fair lever over cost reduces the investment account8. A company has been using the fair-value method to account for its investment. The company now has the ability to significantly control the investee and the equity method has been deemed appropriate.Which of the following statements is true? A. A additive effect change in history teaching must(prenominal) occur B. A prospective change in accounting convention must occur C. A retrospective change in accounting principle must occur D. The investor will not receive future dividends from the investee E. next dividends will continue to be recorded as revenue9. A company has been using the equity method to account for its investment. The company sells shares and does not continue to have significant control. Which of the following statements is true? A. A cumulative effect change in accounting principle must occur B. A prospective change in accounting principle must occur C. A retrospective change in accounting principle must occur D. The investor will not receive future dividends from the investee E. Future dividends will continue to reduce the investment account10. After allocating cost in excess of book value, which asset or liability would not be amortized over a useful life? A. Cost of goods sold B. Property, plant, & equipment C. Patents D. Goodwill E. Bonds payable11. How are stock issuance be and direct cabal be treated in a business combination which is accounted for as an learning when the subsidiary will retain its incorporation? A. Stock issuance be are a severalise of the acquisition costs and the direct combination costs are expensed B. Direct combination costs are a part of the acquisition costs and the stock issuance costs are a diminution to additional paid-in capital C. Direct combination costs are expensed and stock issuance costs are a reduction to additional paid-in capital D. Both are treated as part of the acquisition price E. Both are treated as a reduction to additional paid-in capital12. Lisa Co. paid cash for all of the voting customary stock of Victoria Corp. Victoria will continue to exist as a cleave corporation. Entries for the desegregation of Lisa and Victoria would be recorded in A. A worksheet B. Lisas general journal C. Victorias general journal D. Victorias secret desegregation journal E. The general journals of both companies13. At the date of an acquisition which is not a bargain purchase, the acquisition method A. Consolidates the subsidiarys assets at fair value and the liabilities at book value B.Consolidates all subsidiary assets and liabilities at book value C. Consolidates all subsidiary assets and liabilities at fair value D. Consolidates current assets and liabilities at book value, long-term assets and liabilities at fair value E. Consolidates the subsidiarys assets at book value and the liabilities at fair value14. Which of the following statements is true regarding a statutory consolidation? A. The original companies dissolve while remaining as separate divisions of a newly created company B. Both companies remain in existence as legal corporations with one corporation now a subsidiary of the acquiring company C.The acquired company dissolves as a separate corporation and becomes a division of the acquiring company D. The acquiring company acquires the stock of the acquired company as an investment E. A statutory consolidation is no longer a legal option15. In a movement accounted for using the purchase method where cost is less than fair value which statement is true? A. Negative goodwill is recorded B. A deferred book of facts is recorded C. Long-term assets of the acquired company are reduced in balance to their fair values. some(prenominal) excess is recorded as a deferred character reference D.Long-term assets of the acquired company are reduced in proportion to their fair values. Any excess is recorded as an extraordinary gain E. Long-term assets and liabilities of the acquired company are reduced in proportion to their fair values. Any excess is recorded as an extraordinary gain16. In a purchase or acquisition where control is achieved, how would the l and accounts of the parent and the land accounts of the subsidiary be combined? A. Entry A B. Entry B C. Entry C D. Entry D E. Entry E17. In a pooling of interests, A.Revenues and expenses are fused for the entire fiscal year, even if the combination occurred late in the year B. Goodwill may be recognized C. Consolidation is accomplished using the fair values of both companies D. The transactions may involve the supervene upon of preferred stock or debt securities as well as common stock E. The transaction is properly regarded as an acquisition of one company by another Prior to being united in a business combination, Botkins Inc. and Volkerson Corp. had the following stockholders equity figures Botkins issued 56,000 new shares of its common stock set at $3. 5 per share for all of the outstanding stock of Volkerson.18. aim that Botkins acquired Volkerson as a purchase combination. Immediately afterwards, what are consolidated supernumerary Paid-In Capital and Retained Earnings, respectively? A. $133,000 and $360,000 B. $236,000 and $360,000 C. $130,000 and $360,000 D. $236,000 and $490,000 E. $133,000 and $490,00019. Assume that Botkins and Volkerson were being joined in a pooling of interests and this occurred on January 1, 2000, using the same values given. Immediately afterwards, what is consolidated Additional Paid-In Capital? A. 138,000 B. $266,000 C. $130,000 D. $236,000 E. $135,00020. Chapel Hill Company had common stock of $350,000 and carry earnings of $490,000. Blue Town Inc. had common stock of $700,000 and retained earnings of $980,000. On January 1, 2009, Blue Town issued 34,000 shares of common stock with a $12 par value and a $35 fair value for all of Chapel Hill Companys outstanding common stock. This combination was accounted for as an acquisition. Immediately after the combination, what was the consolidated net assets? A. $2,520,000 B. $1,190,000 C. $1,680,000 D. $2,870,000 E. $2,030,000