Multiple Choice Questions

1. Blue Company owns 70 percent of Black Company's outstanding common stock. On December 31, 2008, Black sold equipment to Blue at a price in excess of Black's carrying amount, but less than its original cost. On a consolidated balance sheet at December 31, 2008, the carrying amount of the equipment should be reported at: A. Blue's original cost. B. Black's original cost. C. Blue's original cost less Black's recorded gain. D. Blue's original cost less 70 percent of Black's recorded gain. 2. A parent and its 80 percent owned subsidiary have made several intercompany sales of noncurrent assets during the past two years. The amount of income assigned to the noncontrolling interest for the second year should include the noncontrolling interest's shareof gains: A. unrealized in the second year from upstream sales made in the second year. B. realized in the second year from downstream sales made in both years. C. realized in the second year from upstream sales made in both years. D. both realized and unrealized from upstream sales made in the second year. 3. A wholly owned subsidiary sold land to its parent during the year at a gain. The parent continues to hold the land at the end of the year. The amount to be reported as consolidated net income for the year should equal: A. the parent's separate operating income, plus the subsidiary's net income. B. the parent's separate operating income, plus the subsidiary's net income, minus the intercompany gain. C. the parent's separate operating income, plus the subsidiary's net income, plus the intercompany gain. D. the parent's net income, plus the subsidiary's net income, minus the intercompany gain. Sky Corporation owns 75 percent of Earth Company's stock. On July 1, 2008, Sky sold a building to Earth for $33,000. Sky had purchased this building on January 1, 2006, for $36,000. The building's original eight-year estimated total economic life remains unchanged. Both companies use straight-line depreciation. The equipment's residual value is considered negligible. 4. Based on the information provided, in the preparation of the 2008 consolidated financial statements, building will be _____ in the eliminating entries. A. debited for $33,000 B. debited for $36,000 C. credited for $36,000 D. debited for $3,000

5. Based on the information provided, the gain on sale of the building eliminated in the consolidated financial statements for 2008 is:

2009. debited for $750 in the eliminating entries. 7. credited for $1500 in the eliminating entries. 2009. in the preparation of the 2009 consolidated income statement. Based on the information provided.500 in the eliminating entries. depreciation expense will be: A. $6.750 in the eliminating entries. B. C. 9.750 in the eliminating entries. C. Deimos Company purchased land from Phobos Company during 2009. 2009.000. D.A. Phobos Company holds 80 percent of Deimos Company's voting shares. Based on the information provided. Phobos Company purchased land from Deimos Company before January 1. D. debited for $6. B. debited for $7. Option D . for $70. debited for $750 in the eliminating entries. D. On July 15. 6.250. ABC Corporation purchased land on January 1. Option C D. credited for $7. C. the following eliminating entry was made: Which of the following statements is correct? A. while preparing the 2008 consolidated income statement. credited for $6.250. it sold the land to its subsidiary. debited for $1500 in the eliminating entries. $10. $8. Phobos Company purchased land from Deimos Company during 2009. C. credited for $750 in the eliminating entries. in the preparation of a consolidated balance sheet at January 1. credited for $1500 in the eliminating entries. credited for $750 the eliminating entries. Option A B. for $50. B. 8. B. $11. C.500.000. D. Based on the information provided. B. ABC owns 80 percent of XYZ's voting shares. D. During the preparation of consolidated financial statements for 2009. XYZ Corporation. Based on the preceding information. what will be the workpaper eliminating entry to Remove the effects of the intercompany sale of land in preparing the consolidated financial statements for 2008? A. Option B C. Deimos Company purchased land from Phobos Company before January 1. 10.500 in the eliminating entries. 2006. debited for $1500 in the eliminating entries. 2008. retained earnings will be: A.000. depreciation expense will be: A.

D. 14. $150.000.000. B. debited for $1.000. 2009. $110. $65.000 D.000 15. C. Based on the preceding information.000. Option B C.000 B. Option D Mortar Corporation acquired 80 percent of Granite Corporation's voting common stock onJanuary 1. Based on the preceding information. in the preparation of the 2009 consolidated financial statements. credited for $15. equipment will be: A. On December 31. credited for $15. C.000 C. equipment will be: A. debited for $1. The equipment is expected to have a 10-year useful life and no salvage value. B.000. 2008. in the preparation of the 2009 consolidated income statement. Option C D.000 and then sold it to ABC on July 15. debited for $25. the gain on sale of the equipment recorded by Mortar for 2008 is: A. debited for $25. Both companies depreciate equipments on a straight-line basis. 16. in the preparation of the 2008 consolidated financial statements.000 from Granite for a equipment Mortar had purchased on January 1.000 in the eliminating entries. Which workpaper eliminating entry will be made on December 31.000.000 in the eliminating entries. Based on the preceding information. what will be the workpaper eliminating entry to remove the effects of the intercompany sale of land in preparing the consolidated financial statements for 2009? A. Option A B.000. D. credited for $15. debited for $25. for $70. debited for $10. $40. Option B C. 2007. 2005.000.000.11. debited for $10. . Mortar received $390. Option A B. depreciation expense will be: A. Based on the preceding information. Based on the preceding information. if XYZ Corporation had initially purchased the land for $50. Option D 12. 2008. Option C D.000? A. 13. B. for $400.

debited for $160. credited for $160. D. debited for $50. 19. C.000 in the eliminating entries. Both companies depreciate equipments on a straightline basis. Based on the preceding information. Debited for $10. accumulated depreciation will be: A.000. in the preparation of the 2009 consolidated income statement.C. Debited for $40. C.000 in the eliminating entries. 18.000 in the eliminating entries. credited for $135.000. 2005. debited for $25. 21. credited for $25. 2007. D. accumulated depreciation will be: A. 17. C. in the preparation of the 2009 consolidated balance sheet. B. D. debited for $110. On January 1. the gain on sale of equipment recorded by Mortar for 2008 is: A.000 in the eliminating entries. B. credited for $110. $65. Based on the preceding information.000 in the eliminating entries. debited for $135. 2008. for $400.000. . B. B. accumulated depreciation will be: A.000 in the eliminating entries. debited for $160.000. credited for $120. Mortar Corporation acquired 80 percent of Granite Corporation's voting common stock on January 1. depreciation expense will be: A. in the preparation of the 2008 consolidated balance sheet. Credited for $10.000 in the eliminating entries. $50.000. debited for $40.000.000.000 in the eliminating entries. $70. equipment will be: A. D.000 in the eliminating entries. Based on the preceding information. debited for $15.000 in the eliminating entries. Credited for $40. in the preparation of the 2008 consolidated financial statements.000 in the eliminating entries. Mortar received $350. C.000 from Granite for a equipment Mortar had purchased on January 1. D.000.000 in the eliminating entries. Based on the preceding information.000. in the preparation of the 2009 consolidated balance sheet. Based on the preceding information. $40. B.000 in the eliminating entries. 22.000 in the eliminating entries. C. B.000 in the eliminating entries. D. Based on the preceding information. 20. credited for $70. credited for $110. debited for $50.000 in the eliminating entries. The equipment is expected to have a 10-year useful life and no salvage value.

Servant Company purchased a machine with an expected economic life of five years.000.000 in the eliminating entries. and Master reported income from its own operations of $100.000. D. 2009. this tractor should be included in fixed-asset cost and accumulated depreciation as: A. D. $150.000 in the eliminating entries. 2009. Credited for $15.000. 24. which had accumulated depreciation of $170. Debited for $15. Based on the preceding information.000 salvage value and depreciated the tractor using the straight-line method over 10 years. D. Light had paid $900. credited for $45. Based on the preceding information. Option D . C. On January 1.000. On January 1. C. C. consolidated balance sheet. debited for $1.000 to Star Corporation. Credited for $1. Debited for $1. 27. a policy that Star continued. In Light's December 31.000 for this equipment. 25.000. Servant reported net income of $50. There is no change in the estimated economic life of the equipment as a result of the intercorporate transfer.000 in the eliminating entries. D. consolidated net income for 2009 will be: A. $12.000 for 2009.000. machine will be: A.000. B. its wholly owned subsidiary.000 in the eliminating entries. Light Corporation sold equipment for $400. debited for $15. Option C D. 23. Servant sold the machine to Master Corporation and recorded the following entry: Master Corporation holds 75 percent of Servant's voting shares. B.500. credited for $100. in the preparation of the 2009 consolidated balance sheet.000 in the eliminating entries. debited for $25. $14. Option B C.000. B. Light estimated a $50. debited for $100. B. in the preparation of the 2009 consolidated income statement. 2007.000. $12. On January 1. depreciation expense will be: A.000. Option A B. 2009. income assigned to the noncontrolling interest in the 2009 consolidated income statement will be: A.000. $148. $130.000. Based on the preceding information. Based on the preceding information. D.C. C. $100. $48. 26.000.000 in the eliminating entries.

Based on the preceding information. the amount of income assigned to the controlling shareholders in the consolidated income statement for 2008 will be: A. C. C. $202. Based on the preceding information.000 and $45. $190. Interest and dividends III.000.000 for 2008 and 2009. C. $202. $190. III C. B.000. the amount to be reported as consolidated net income for 2008 will be: A. $150. Blue reported income. 2008. 29. II.000. Based on the preceding information.000.000.000 to acquire a building with a 10-year expected economic life. $150. Which of the following are examples of intercompany balances and transactions that must be eliminated in preparing consolidated financial statements? I. B.000. II B. Based on the preceding information. $207. the amount of income assigned to the controlling shareholders in the consolidated income statement for 2009 will be: A.000. 31. B. Security holdings II. 2003.000 and $162. D. 32. $175. III D.000. Black paid $500. D. $190. $212. $190. Black uses straight-line depreciation for all depreciable assets.000. $175.000. 28. $207. $170.000. On January 1.000. 30. Black reported net income of $30. D. On December 31. I.000. of $140.000. Sales and purchases A.000. excluding investment income from Black. $170. II . B. I. Blue purchased the building from Black for $180.000.Blue Corporation holds 70 percent of Black Company's voting common stock. respectively.000 for 2008 and 2009. C.000. $212. D. the amount to be reported as consolidated net income for 2009 will be: A. I. respectively.

050.122. Small billed Big $140.000 for such services and collected all but $7.000 34.000.000 on November 27. $220. 2008? A. $60. what amount of consolidated net income should be reported in 2008? A.000 37. 36.000 C. what amount of income should be assigned to the noncontrolling shareholders in the consolidated income statement for 2008? A. $4. This purchase followed a series of transactions between P-controlled subsidiaries. Based on the preceding information. Big paid Small $125. what amount of gain or loss on sale of land should be reported in the consolidated income statement for 2008? A. $3. Big reported $2.262. 2008. Small's labor cost and other associated costs for the employees providing services to Bigtotaled $86. $3. Parent has control of the following companies: Parent reported income from its separate operations of $200.400 B.000 C. Small Inc.432 for its services. On February 15.900 by year-end.700 .000 in 2008.000 D. $465. $0 C. S3 Corporation purchased the land from a nonaffiliate for $160.567. For the year2008. During 2007.Parent Corporation purchased land from S1 Corporation for $220.000 on October 19.000 in 2007 and $121.000. $75. Based on the preceding information. and S2 sold the land to S1 for $197.000 B. $369. $23. Based on the preceding information.000 35. at what amount should the land be reported in the consolidated balance sheet as of December 31.000 of income from its own separate operations for 2008. $47. Based on the preceding information.000 B.000 Big Corporation receives management consulting services from its 92 percent owned subsidiary.000 C.000 B.000 D. 2008. $405.000 on December 26. $145. 2008.000 for 2008. what should be the amount of income assigned to the controlling shareholders in the consolidated income statement for 2008? A. 33.100 D. It sold the land to S2 Company for $145.254. $160. and Small reported net income of $695. Based on the preceding information. $3.000 D. $197. $60. 2008.

I B. Based on the preceding information. Any intercompany gain or loss on a downstream sale of land should be recognized in consolidated net income: I. the parent's separate operating income. B. $140.600 D.560 D.400 C. $125. A. $55. in the year of the downstream sale. plus the intercompany loss. A parent sold land to its partially owned subsidiary during the year at a loss. $60. $5. $7. in the year the subsidiary sells the land to an unrelated party.B.900 C. $44. minus the intercompany loss. The subsidiary continues to hold the land at the end of the year. C. plus the subsidiary's net income.000 38.432 B. III D. the parent's separate operating income. I or II . over the period of time the subsidiary uses the land. III. plus the intercompany loss. the parent's separate operating income. II. II C.000 39. plus the subsidiary's net income. 40. The amount to be reported as consolidated net income for the year should equal: A. what amount of receivable/payable should be eliminated in the 2008 consolidated financial statements? A. minus the intercompany loss. the parent's separate operating income. D.