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Chapter 05 - Consolidation of Less-than-Wholly Owned Subsidiaries

Chapter 05
Consolidation of Less-than-Wholly Owned Subsidiaries

Multiple Choice Questions

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Chapter 05 - Consolidation of Less-than-Wholly Owned Subsidiaries

Bristle Corporation acquired 75 percent of Silver Corporation's common stock on December
31, 2008, for $300,000. The fair value of the noncontrolling interest at that date was
determined to be $100,000. Silver's balance sheet immediately before the combination
reflected the following balances:

A careful review of the fair value of Silver's assets and liabilities indicated that inventory,
land, and buildings and equipment (net) had fair values of $65,000, $100,000, and, $300,000
respectively. Goodwill is assigned proportionately to Bristle and the noncontrolling
shareholders.

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Chapter 05 - Consolidation of Less-than-Wholly Owned Subsidiaries

1. Based on the preceding information, what amount of inventory will be included in the
consolidated balance sheet immediately following the acquisition?
A. $0
B. $65,000
C. $70,000
D. $60,000

2. Based on the preceding information, what amount of land will be included in the
consolidated balance sheet immediately following the acquisition?
A. $0
B. $10,000
C. $90,000
D. $100,000

3. Based on the preceding information, what amount of buildings and equipment (net) will be
included in the consolidated balance sheet immediately following the acquisition?
A. $0
B. $50,000
C. $250,000
D. $300,000

4. Based on the preceding information, what amount of goodwill will be reported in the
consolidated balance sheet immediately following the acquisition?
A. $0
B. $120,000
C. $65,000
D. $20,000

5. Based on the preceding information, what amount will be reported as investment in Silver
Corporation stock in the consolidated balance sheet immediately following the acquisition?
A. $0
B. $210,000
C. $300,000
D. $400,000

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$83.000 C.000 5-4 .750 D.Consolidation of Less-than-Wholly Owned Subsidiaries 6. Based on the preceding information. $0 B. $100. what amount will be reported as noncontrolling interest in the consolidated balance sheet immediately following the acquisition? A.Chapter 05 . $70.

which had a fair value of $45.000. the book values of Sea-Gull's net assets and liabilities approximated fair value except for inventory.000 cash. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: At the date of the business combination. 2009. Gulliver Corporation acquired 80 percent of Sea-Gull Company's common stock for $160.000. which had a fair value of $60. 5-5 . The fair value of the noncontrolling interest at that date was determined to be $40. and land.Chapter 05 .000.Consolidation of Less-than-Wholly Owned Subsidiaries On January 1.

Based on the preceding information.000 10. $825. what amount of total liabilities will be reported in the consolidated balance sheet prepared immediately after the business combination? A. $15. $265. $280. $840. Based on the preceding information.000 9.000 8.000 D. Based on the preceding information.000 C. $20. $90. $720. $395. what amount of goodwill will be reported in the consolidated balance sheet prepared immediately after the business combination? A. $45. $195.Consolidation of Less-than-Wholly Owned Subsidiaries 7.000 5-6 .000 C. $0 B. $135.000 D.000 B.000 D.Chapter 05 . $130.000 B.000 D. $865. what amount of total assets will be reported in the consolidated balance sheet prepared immediately after the business combination? A. Based on the preceding information. what amount of total inventory will be reported in the consolidated balance sheet prepared immediately after the business combination? A. $40.000 B.000 C.000 C.

Based on the preceding information. $565.000.000 and paid dividends of $10.000 D.000 12.Chapter 05 . At the time of the combination. $550. Tester reported common stock outstanding of $200. $120. $205.000 more than their book value.000 On January 1. what amount will be reported as noncontrolling interest in the consolidated balance sheet prepared immediately after the business combination? A.000 13. Based on the preceding information.000 C. $205.000 B. $40.000 D. $15.000 C.000 during 2008. 5-7 . The patents had a remaining economic life of ten years at the date of the business combination. what amount of consolidated retained earnings will be reported? A.000. 2008. $46.000 D.Consolidation of Less-than-Wholly Owned Subsidiaries 11.000. Tester reported net income of $40.000 and retained earnings of $150. and the fair value of the noncontrolling interest was $100. Ramon Corporation acquired 75 percent of Tester Company's voting common stock for $300. The book value of Tester's net assets approximated market value except for patents that had a market value of $50. $445. Based on the preceding information. $325. $0 B. $310. what amount will be reported as total stockholders' equity in the consolidated balance sheet prepared immediately after the business combination? A.000 B.000 C.

Chapter 05 - Consolidation of Less-than-Wholly Owned Subsidiaries

14. Based on the preceding information, what balance will Ramon report as its investment in
Tester at December 31, 2008, assuming Ramon uses the equity method in accounting for its
investment?
A. $318,750
B. $317,500
C. $330,000
D. $326,250

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Chapter 05 - Consolidation of Less-than-Wholly Owned Subsidiaries

15. Based on the preceding information, all of the following are eliminating entries needed to
prepare a full set of consolidated financial statements at December 31, 2008, except:

A. Choice A
B. Choice B
C. Choice C
D. Choice D

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Chapter 05 - Consolidation of Less-than-Wholly Owned Subsidiaries

On January 1, 2008, Climber Corporation acquired 90 percent of Wisden Corporation for
$180,000 cash. Wisden reported net income of $30,000 and dividends of $10,000 for 2008,
2009, and 2010. On January 1, 2008, Wisden reported common stock outstanding of $100,000
and retained earnings of $60,000, and the fair value of the noncontrolling interest was
$20,000. It held land with a book value of $30,000 and a market value of $35,000 and
equipment with a book value of $50,000 and a market value of $60,000 at the date of
combination. The remainder of the differential at acquisition was attributable to an increase in
the value of patents, which had a remaining useful life of five years. All depreciable assets
held by Wisden at the date of acquisition had a remaining economic life of five years. Climber
uses the equity method in accounting for its investment in Wisden.

16. Based on the preceding information, the increase in the fair value of patents held by
Wisden is:
A. $20,000
B. $25,000
C. $15,000
D. $5,000

17. Based on the preceding information, what balance would Climber report as its investment
in Wisden at January 1, 2010?
A. $230,400
B. $180,000
C. $234,000
D. $203,400

18. Based on the preceding information, what balance would Climber report as its investment
in Wisden at January 1, 2011?
A. $251,100
B. $224,100
C. $215,100
D. $234,000

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000 C. Based on the preceding information.Consolidation of Less-than-Wholly Owned Subsidiaries On January 1. $1. The fair value of the noncontrolling interest was equal to 10 percent of the book value of Kaiser at that date. $742. 2008. On December 31.000 B.102. 2009? A. Wilhelm Corporation acquired 90 percent of Kaiser Company's voting stock. 2009. what amount would be reported as total assets in the consolidated balance sheet at December 31. $805. $712.Chapter 05 .000 5-11 . Wilhelm uses the equity method in accounting for its ownership of Kaiser. at underlying book value. the trial balances of the two companies are as follows: 19.000 D.

Consolidation of Less-than-Wholly Owned Subsidiaries 20.000 24. Based on the preceding information.000 C. 150.000 B. 424. what amount would be reported as retained earnings in the consolidated balance sheet prepared at December 31.000 C. 2009? A.000 23. what amount would be reported as total liabilities in the consolidated balance sheet at December 31. what amount would be reported as total stockholder's equity in the consolidated balance sheet at December 31. 2009? A.000 D. $27. 294. $348.000 21. $394.000 C. $542. 314.Chapter 05 .000 D.000 C. $318. Based on the preceding information.000 B. Based on the preceding information.000 D. $712. what amount would be reported as income to controlling interest in the consolidated financial statements for 2009? A.000 D. 2009? A. what amount would be reported as noncontrolling interest in the consolidated balance sheet at December 31. Based on the preceding information. $4. Based on the preceding information.000 D. $164. 2009? A.000 B. $18.000 22.000 5-12 .000 B. $150.000 C. $168. $412. $130. $15. $138. $330.000 B.

000 and retained earnings of $100. 2008. Bristol Company acquired 80 percent of Animation Company's common stock for $280. $118.000 cash.000 5-13 .750 C. $125. At that date.000 B. except for other intangible assets which had a fair value $50.750 D.Consolidation of Less-than-Wholly Owned Subsidiaries On January 1.000.000 and paid dividends of $30. Animation reported the following data for 2008 and 2009: Bristol reported net income of $100. 25. what is the amount of consolidated comprehensive income reported for 2008? A. Animation reported common stock outstanding of $200. $123. Based on the preceding information.000 for both the years.Chapter 05 . and the fair value of the noncontrolling interest was $70.000 greater than book value and an 8-year remaining life. $130.000. The book values and fair values of Animation's assets and liabilities were equal.

what is the amount of consolidated comprehensive income reported for 2009? A. Based on the preceding information.000 C.000 B. $138. $128.Chapter 05 . $145.750 5-14 .Consolidation of Less-than-Wholly Owned Subsidiaries 26. $135.750 D.

Chapter 05 . $118. $131. Based on the preceding information.Consolidation of Less-than-Wholly Owned Subsidiaries 27.750 D.000 D.000 28. what is the amount of comprehensive income attributable to the controlling interest for 2008? A.750 B. $119. $123.750 C. $128. Based on the preceding information.750 B. $135.000 C. $104. what is the amount of comprehensive income attributable to the controlling interest for 2009? A. $138.000 5-15 .

000.000.Consolidation of Less-than-Wholly Owned Subsidiaries On January 1.000 cash. $0. D. At that date. in the entry to eliminate the investment balance.000.000. noncontrolling interest will be debited for 30. the fair value of the noncontrolling interest was $30. 29. retained earnings will be credited for $20. D. $15.000. additional paid-in-capital will be credited for $20. Colorado Corporation acquired 75 percent of Denver Company's voting common stock for $90. Based on the preceding information. 2008. Based on the preceding information. C. the reported book values of Denver's assets and liabilities approximated fair value. 5-16 .000. Denvers's balance sheet at the date of acquisition contained the following balances: At the date of acquisition.000. B. $10. 30. the amount of goodwill reported is: A.000.Chapter 05 . B. Eliminating entries are being made to prepare a consolidated balance sheet immediately following the business combination. A. C. $20. differential will be credited for $10.

Sydney sold all inventory it held at the end of 2008 during 2009. what is the amount of write-off of differential associated with this acquisition recorded by Melkor during 2009? A.000 and common stock outstanding of $50. $0 B.500 C. but paid no dividends. Based on the preceding information.000. the fair value of the noncontrolling interest was $40. and $25.000 related to the increased value of Sydney's inventory. In 2009.000 32. Melkor accounts for its investment in Sydney using the equity method. $20.000 related to the increased value of its equipment that had a remaining life of 10 years from the date of combination. $32. 2008. $0 B. $32.000 D.000 differential. Sydney reported net income of $60. Melkor Corporation acquired 80 percent of Sydney Company's common stock for $160. $20. $26. Sydney reported retained earnings of $75.000 D. 31.000 related to the increased value of its land. The land to which the differential related was also sold during 2009 for a large gain.000. $26. Of the $75. the amount of goodwill reported in the consolidated financial statements prepared immediately after the combination is: A.000 5-17 . At the date of combination.Chapter 05 .000. $20. At that date.500 C.000.Consolidation of Less-than-Wholly Owned Subsidiaries On December 31. $10. Based on the preceding information.

Option C D. Option D 5-18 .Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries 33. Option B C. what is the elimination entry made to assign income to noncontrolling interest in the workpaper to prepare a full set of consolidated financial statements for the year 2009? A. Based on the preceding information. Option A B.

2004? A.000 on the date of acquisition. Based on the information provided. $85.000 D.Chapter 05 . 2004. On December 31. what amount of net income will be reported in the consolidated financial statements prepared on December 31.Consolidation of Less-than-Wholly Owned Subsidiaries On January 1. $125.000 C. the trial balance data for the two companies are as follows: 34.000 B. at underlying book value. Plimsol Company acquired 100 percent of Shipping Corporation's voting shares. Shipping's retained earnings was $75. Plimsol uses the cost method in accounting for its investment in Shipping. 2004. $110. $100.000 5-19 .

000 C.000 D. Based on the information provided. 2004? A.000 36.000 B. 2004? A. $190. Based on the information provided.000 C. 2004? A. $310. $425. $460.000 38. $190. $525. what amount of total assets will be reported in the consolidated balance sheet prepared on December 31. 2004? A.000 D. $235. $630.000 D. what amount of total liabilities will be reported in the consolidated balance sheet prepared on December 31. $115. $650. $225. what amount of total stockholder's equity will be reported in the consolidated balance sheet prepared on December 31. Based on the information provided.Chapter 05 . $125.000 C.000 37.000 B. $335. Based on the information provided. what amount of retained earnings will be reported in the consolidated balance sheet prepared on December 31.000 B.000 B.Consolidation of Less-than-Wholly Owned Subsidiaries 35.000 D. $210. $525.000 5-20 . $310.000 C.

A consolidated balance sheet was prepared immediately. X Company acquired controlling ownership of Y Company.Consolidation of Less-than-Wholly Owned Subsidiaries On December 31. X Company provided consulting services to Y Company and has not yet been paid for them. 2008. Partial balance sheet data for the two companies and the consolidated entity at that date follow: During 2008. 5-21 . There were no other receivables or payables between the companies at December 31.Chapter 05 . 2008.

000 5-22 . $0 B. $15. Based on the information given. 2008.000 C.Consolidation of Less-than-Wholly Owned Subsidiaries 39.Chapter 05 . on work done by X Company for Y Company? A.000 D. $5. $10. what is the amount of unpaid consulting services at December 31.

000 C.000 C.000 D. B.000 B. $48. 75 percent 44. 60 percent C. 80 percent D. X Company and Y Company reported wages payable of A. $115. what amount will be reported as total controlling interest in the consolidated balance sheet? A. $155. $110. what percentage of Y Company's shares were acquired by X Company? A. $60.Consolidation of Less-than-Wholly Owned Subsidiaries 40.000 respectively.000 and $35.000 and $60.000 D. $28.000 C. Based on the information given.000 41. C.000 respectively. $28.000 D. $40.000 and $32.000 5-23 . $285.000 43. $254.000 B. Based on the information given.000 respectively. $135. $38.000 and $28. $395. D.000 B. Based on the information given.Chapter 05 . what was the fair value of Y Company as a whole at the date of acquisition? A. 42. Based on the information given. $364.000 respectively. $40. $50. what balance in accounts receivable did Y Company report at December 31. 100 percent B. Based on the information given. 2008? A.

Zeta Company acquired 85 percent of Theta Company's common stock for $100. The fair value of the noncontrolling interest was determined to be 15 percent of the book value of Theta at that date. What portion of the retained earnings reported in the consolidated balance sheet prepared immediately after the business combination is assigned to the noncontrolling interest? A. Cannot be determined Essay Questions 5-24 .000 cash. 15 percent C. 100 percent D. On January 1.Chapter 05 . 2008.Consolidation of Less-than-Wholly Owned Subsidiaries 45. Nil B.

At December 31. and buildings and equipment. Defoe Corporation acquired 80 percent of Crusoe Company's common stock for $104. 2) Prepare a consolidated balance sheet workpaper. 2008. The fair value of the noncontrolling interest at that date was determined to be $26.000. Required: 1) Provide the eliminating entries needed to prepare a consolidated balance sheet immediately following the business combination.000. 2008. the book values of Crusoe's assets and liabilities approximated fair value except for inventory. which reported an equal amount in its accounts receivable.000 cash. which had a fair value of $45. which had a fair value of $100.000. Defoe reported accounts payable of $15. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: On that date. 5-25 .Chapter 05 .000 to Crusoe.Consolidation of Less-than-Wholly Owned Subsidiaries 46. On December 31.

Consolidation of Less-than-Wholly Owned Subsidiaries 3) Prepare a consolidated balance sheet in good form.Chapter 05 . 5-26 .

000. Required: 1) Provide the journal entries recorded by Magellan during 2008 on its books if it accounts for its investment in Dipper using the equity method.000 and retained earnings of $150.000. for $200. The fair value of the noncontrolling interest was $50. 2008.Consolidation of Less-than-Wholly Owned Subsidiaries 47.Chapter 05 . to prepare consolidated financial statements.000 and paid dividends of $20.000. 2008. The differential is assigned to equipment. 2) Give the eliminating entries needed at December 31. Canton reported net income of $40. 5-27 .000 in 2008. Dipper reported common stock outstanding of $75. which had a fair value $25. At that date.000 greater than book value and a remaining economic life of five years at the date of the business combination. Magellan Corporation acquired 80 percent ownership of Dipper Corporation on January 1.

Plimsol uses the cost method in accounting for its investment in Shipping. 2008.000 on the date of acquisition.Chapter 05 . 2008. Shipping's reported retained earnings of $75. 2007. Plimsol Company acquired 100 percent of Shipping Corporation's voting shares. The trial balances for Plimsol Company and Shipping Corporation as of December 31. at underlying book value. follow: Required: 1) Provide all eliminating entries required to prepare a full set of consolidated statements for 2008.Consolidation of Less-than-Wholly Owned Subsidiaries 48. 5-28 . On January 1. 2) Prepare a three-part consolidation workpaper in good form as of December 31.

2) Prepare a three-part consolidation workpaper. Gregory Corporation acquired 90 percent of Nova Company's voting stock. 5-29 .Consolidation of Less-than-Wholly Owned Subsidiaries 49.Chapter 05 . and retained earnings statement for 2008. income statement. 2008. Gregory uses the equity method in accounting for its ownership of Nova. at underlying book value. The fair value of the noncontrolling interest was equal to 10 percent of the book value of Nova at that date. 3) Prepare a consolidated balance sheet. to prepare consolidated financial statements. 2008. On December 31. On January 1. 2008. the trial balances of the two companies are as follows: Required: 1) Provide all eliminating entries required as of December 31.

Consolidation of Less-than-Wholly Owned Subsidiaries 5-30 .Chapter 05 .

The fair value of the noncontrolling interest was equal to 10 percent of the book value of Nova at that date. 2008.Chapter 05 . Gregory Corporation acquired 90 percent of Nova Company's voting stock. 2009. 2008. the trial balances of the two companies are as follows: Required: 1) Give all eliminating entries required on December 31. On January 1. Gregory uses the equity method in accounting for its ownership of Nova.Consolidation of Less-than-Wholly Owned Subsidiaries 50. to prepare consolidated financial statements. at underlying book value. On December 31. 2) Prepare a three-part consolidation workpaper as of December 31. 5-31 . 2008.

Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries 5-32 .

000 cash. On January 1. The book values and fair values of Scalar's assets and liabilities were equal.) No additional impairment occurred in 2009. Buildings and equipment are depreciated on a 10- year basis. the fair value of the noncontrolling interest was $30.000. that goodwill from its acquisition of Scalar shares had been impaired and the correct carrying amount was $5. Although goodwill is not amortized. 5-33 .Chapter 05 . the management of Vector concluded at December 31. The book value of Scalar's net assets at acquisition was $125.Consolidation of Less-than-Wholly Owned Subsidiaries 51. 2008. (Note that Vector Company does not adjust its Income from Subsidiary for goodwill impairment under the basic equity method.000. Goodwill and goodwill impairment were assigned proportionately to the controlling and noncontrolling shareholders. Vector Company acquired 80 percent of Scalar Company's ownership on for $120. 2008.000. At that date. except for buildings and equipment.000 more than book value. which were worth $15.

2009. are as follows: Required: 5-34 .Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries Trial balance data for Vector and Scalar on December 31.

2) Prepare a three-part consolidation workpaper for 2009 in good form.Consolidation of Less-than-Wholly Owned Subsidiaries 1) Provide all eliminating entries needed to prepare a three-part consolidation workpaper as of December 31. 2009.Chapter 05 . Chapter 05 Consolidation of Less-than-Wholly Owned Subsidiaries Answer Key Multiple Choice Questions 5-35 .

Chapter 05 . and.000. Goodwill is assigned proportionately to Bristle and the noncontrolling shareholders.000. Silver's balance sheet immediately before the combination reflected the following balances: A careful review of the fair value of Silver's assets and liabilities indicated that inventory. 2008. and buildings and equipment (net) had fair values of $65. The fair value of the noncontrolling interest at that date was determined to be $100.Consolidation of Less-than-Wholly Owned Subsidiaries Bristle Corporation acquired 75 percent of Silver Corporation's common stock on December 31.000 respectively.000. 5-36 . $300. for $300. $100.000. land.

000 C. $60. $70. $65.000 AACSB: Analytic AICPA: Measurement 5-37 .Consolidation of Less-than-Wholly Owned Subsidiaries 1. Based on the preceding information.000 D. what amount of inventory will be included in the consolidated balance sheet immediately following the acquisition? A.Chapter 05 . $0 B.

$65. Based on the preceding information.000 C.000 C. what amount of buildings and equipment (net) will be included in the consolidated balance sheet immediately following the acquisition? A. $120. Based on the preceding information.Consolidation of Less-than-Wholly Owned Subsidiaries 2.000 C. $90. $0 B.000 D. $250.000 AACSB: Analytic AICPA: Measurement 4. $300. $0 B. $10.000 AACSB: Analytic AICPA: Measurement 5-38 . $0 B. what amount of goodwill will be reported in the consolidated balance sheet immediately following the acquisition? A.Chapter 05 . $100. Based on the preceding information.000 AACSB: Analytic AICPA: Measurement 3. $20. $50.000 D.000 D. what amount of land will be included in the consolidated balance sheet immediately following the acquisition? A.

what amount will be reported as noncontrolling interest in the consolidated balance sheet immediately following the acquisition? A. Based on the preceding information. $400.750 D. Based on the preceding information. $0 B. $83. $70.Chapter 05 . $100. $0 B.000 C.000 AACSB: Analytic AICPA: Measurement 5-39 .000 D.000 AACSB: Analytic AICPA: Measurement 6. $210.Consolidation of Less-than-Wholly Owned Subsidiaries 5.000 C. $300. what amount will be reported as investment in Silver Corporation stock in the consolidated balance sheet immediately following the acquisition? A.

the book values of Sea-Gull's net assets and liabilities approximated fair value except for inventory. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: At the date of the business combination. Gulliver Corporation acquired 80 percent of Sea-Gull Company's common stock for $160.Consolidation of Less-than-Wholly Owned Subsidiaries On January 1. which had a fair value of $45.Chapter 05 . 2009.000.000 cash. which had a fair value of $60.000. The fair value of the noncontrolling interest at that date was determined to be $40.000. 5-40 . and land.

Chapter 05 - Consolidation of Less-than-Wholly Owned Subsidiaries

7. Based on the preceding information, what amount of total inventory will be reported in the
consolidated balance sheet prepared immediately after the business combination?
A. $130,000
B. $135,000
C. $90,000
D. $45,000

X

AACSB: Analytic
AICPA: Measurement

8. 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. $40,000
C. $20,000
D. $15,000

AACSB: Analytic
AICPA: Measurement

9. Based on the preceding information, what amount of total assets will be reported in the
consolidated balance sheet prepared immediately after the business combination?
A. $720,000
B. $840,000
C. $825,000
D. $865,000

AACSB: Analytic
AICPA: Measurement

5-41

Chapter 05 - Consolidation of Less-than-Wholly Owned Subsidiaries

10. Based on the preceding information, what amount of total liabilities will be reported in the
consolidated balance sheet prepared immediately after the business combination?
A. $395,000
B. $280,000
C. $265,000
D. $195,000

AACSB: Analytic
AICPA: Measurement

11. Based on the preceding information, what amount will be reported as noncontrolling
interest in the consolidated balance sheet prepared immediately after the business
combination?
A. $0
B. $15,000
C. $40,000
D. $46,000

AACSB: Analytic
AICPA: Measurement

12. Based on the preceding information, what amount of consolidated retained earnings will
be reported?
A. $205,000
B. $120,000
C. $325,000
D. $310,000

AACSB: Analytic
AICPA: Measurement

5-42

Chapter 05 - Consolidation of Less-than-Wholly Owned Subsidiaries

13. Based on the preceding information, what amount will be reported as total stockholders'
equity in the consolidated balance sheet prepared immediately after the business
combination?
A. $445,000
B. $205,000
C. $565,000
D. $550,000

AACSB: Analytic
AICPA: Measurement

On January 1, 2008, Ramon Corporation acquired 75 percent of Tester Company's voting
common stock for $300,000. At the time of the combination, Tester reported common stock
outstanding of $200,000 and retained earnings of $150,000, and the fair value of the
noncontrolling interest was $100,000. The book value of Tester's net assets approximated
market value except for patents that had a market value of $50,000 more than their book
value. The patents had a remaining economic life of ten years at the date of the business
combination. Tester reported net income of $40,000 and paid dividends of $10,000 during
2008.

14. Based on the preceding information, what balance will Ramon report as its investment in
Tester at December 31, 2008, assuming Ramon uses the equity method in accounting for its
investment?
A. $318,750
B. $317,500
C. $330,000
D. $326,250

AACSB: Analytic
AICPA: Measurement

5-43

except: A. Choice A B. 2008.Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries 15. Choice C D. all of the following are eliminating entries needed to prepare a full set of consolidated financial statements at December 31. Choice B C. Based on the preceding information. Choice D AACSB: Analytic AICPA: Measurement 5-44 .

2008.000 and retained earnings of $60.Consolidation of Less-than-Wholly Owned Subsidiaries On January 1.000 and equipment with a book value of $50. Climber Corporation acquired 90 percent of Wisden Corporation for $180.000 at the date of combination.000 cash. Wisden reported net income of $30. 2009. On January 1. 2008.000 for 2008. 5-45 .000 and a market value of $35. and the fair value of the noncontrolling interest was $20. and 2010.000 and a market value of $60.000 and dividends of $10. All depreciable assets held by Wisden at the date of acquisition had a remaining economic life of five years. Climber uses the equity method in accounting for its investment in Wisden. The remainder of the differential at acquisition was attributable to an increase in the value of patents. It held land with a book value of $30.000. Wisden reported common stock outstanding of $100.000.Chapter 05 . which had a remaining useful life of five years.

$25. 2011? A. $203. $224.100 D. $215.000 AACSB: Analytic AICPA: Measurement 5-46 . $234. the increase in the fair value of patents held by Wisden is: A.Chapter 05 .000 B. $20.Consolidation of Less-than-Wholly Owned Subsidiaries 16.100 B. 2010? A.400 B. $180.100 C. Based on the preceding information.400 AACSB: Analytic AICPA: Measurement 18.000 D. $5. Based on the preceding information. $15. what balance would Climber report as its investment in Wisden at January 1. what balance would Climber report as its investment in Wisden at January 1.000 C. Based on the preceding information. $230. $251.000 C.000 AACSB: Analytic AICPA: Measurement 17.000 D. $234.

Chapter 05 . 2008. The fair value of the noncontrolling interest was equal to 10 percent of the book value of Kaiser at that date. Wilhelm Corporation acquired 90 percent of Kaiser Company's voting stock. 2009. at underlying book value.Consolidation of Less-than-Wholly Owned Subsidiaries On January 1. the trial balances of the two companies are as follows: 5-47 . Wilhelm uses the equity method in accounting for its ownership of Kaiser. On December 31.

102. $1.Consolidation of Less-than-Wholly Owned Subsidiaries 19.000 B. $805. $712. what amount would be reported as total assets in the consolidated balance sheet at December 31. 2009? A.000 AACSB: Analytic AICPA: Measurement 5-48 .Chapter 05 .000 C. $742.000 D. Based on the preceding information.

what amount would be reported as total liabilities in the consolidated balance sheet at December 31.000 C. Based on the preceding information.000 AACSB: Analytic AICPA: Measurement 22.000 B.000 D. 424. Based on the preceding information. 294. 150.000 B. 2009? A.000 D. $130. 314. what amount would be reported as retained earnings in the consolidated balance sheet prepared at December 31. $18. what amount would be reported as noncontrolling interest in the consolidated balance sheet at December 31.000 C. 2009? A.000 AACSB: Analytic AICPA: Measurement 21. $318. Based on the preceding information. $4. $27. $15.000 AACSB: Analytic AICPA: Measurement 5-49 .Chapter 05 . 2009? A.000 C. $712.Consolidation of Less-than-Wholly Owned Subsidiaries 20. $330.000 D.000 B.

000 C. what amount would be reported as income to controlling interest in the consolidated financial statements for 2009? A. $394.000 AACSB: Analytic AICPA: Measurement 5-50 . $348.000 C. what amount would be reported as total stockholder's equity in the consolidated balance sheet at December 31. $150.Chapter 05 . $138.000 D.000 B. Based on the preceding information.Consolidation of Less-than-Wholly Owned Subsidiaries 23. $542. 2009? A.000 B. $164. $412. $168. Based on the preceding information.000 AACSB: Analytic AICPA: Measurement 24.000 D.

000 AACSB: Analytic AICPA: Measurement 5-51 . 25.000 and retained earnings of $100. and the fair value of the noncontrolling interest was $70.750 D. $118.000 B. 2008. The book values and fair values of Animation's assets and liabilities were equal. Bristol Company acquired 80 percent of Animation Company's common stock for $280. $130.Consolidation of Less-than-Wholly Owned Subsidiaries On January 1.000 for both the years.000 greater than book value and an 8-year remaining life. $123. what is the amount of consolidated comprehensive income reported for 2008? A. $125.Chapter 05 .000. except for other intangible assets which had a fair value $50. Animation reported the following data for 2008 and 2009: Bristol reported net income of $100.000.750 C.000 and paid dividends of $30. At that date.000 cash. Animation reported common stock outstanding of $200. Based on the preceding information.

what is the amount of comprehensive income attributable to the controlling interest for 2009? A. $131. $118.000 C.750 D.000 AACSB: Analytic AICPA: Measurement 5-52 .Consolidation of Less-than-Wholly Owned Subsidiaries 26.Chapter 05 .750 B.750 B.000 D. Based on the preceding information. $128. what is the amount of consolidated comprehensive income reported for 2009? A. $119. what is the amount of comprehensive income attributable to the controlling interest for 2008? A.000 AACSB: Analytic AICPA: Measurement 28. $128. $123. $138. $138. $135.750 C. Based on the preceding information. $104.000 C.000 B. Based on the preceding information.750 AACSB: Analytic AICPA: Measurement 27. $135.750 D. $145.

the reported book values of Denver's assets and liabilities approximated fair value.000 cash. Denvers's balance sheet at the date of acquisition contained the following balances: At the date of acquisition. D. Eliminating entries are being made to prepare a consolidated balance sheet immediately following the business combination. Colorado Corporation acquired 75 percent of Denver Company's voting common stock for $90. retained earnings will be credited for $20. B. in the entry to eliminate the investment balance. differential will be credited for $10.Consolidation of Less-than-Wholly Owned Subsidiaries On January 1. AACSB: Analytic AICPA: Measurement 5-53 . 2008. Based on the preceding information. At that date.000.000.000.Chapter 05 . A. the fair value of the noncontrolling interest was $30.000.000. additional paid-in-capital will be credited for $20. noncontrolling interest will be debited for 30. C. 29.

000 AACSB: Analytic AICPA: Measurement 5-54 .000 D.000 related to the increased value of Sydney's inventory. 31. $26. Sydney reported retained earnings of $75. Of the $75. Sydney sold all inventory it held at the end of 2008 during 2009. C. $15. $10. B.000.000 related to the increased value of its equipment that had a remaining life of 10 years from the date of combination. Melkor accounts for its investment in Sydney using the equity method. AACSB: Analytic AICPA: Measurement On December 31. $0 B. $32.000 and common stock outstanding of $50.000 related to the increased value of its land. 2008. $10. The land to which the differential related was also sold during 2009 for a large gain. $20.Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries 30. and $25. At the date of combination. the amount of goodwill reported in the consolidated financial statements prepared immediately after the combination is: A.000 differential. Melkor Corporation acquired 80 percent of Sydney Company's common stock for $160. At that date. Sydney reported net income of $60. the fair value of the noncontrolling interest was $40.500 C. In 2009.000.000. D.000.000. Based on the preceding information.000. Based on the preceding information. $0. $20. but paid no dividends. $20. the amount of goodwill reported is: A.000.

what is the amount of write-off of differential associated with this acquisition recorded by Melkor during 2009? A.Consolidation of Less-than-Wholly Owned Subsidiaries 32. $0 B. $26.Chapter 05 .000 AACSB: Analytic AICPA: Measurement 5-55 .000 D. $32.500 C. $20. Based on the preceding information.

Option B C. Option D AACSB: Analytic AICPA: Measurement 5-56 .Chapter 05 . Based on the preceding information.Consolidation of Less-than-Wholly Owned Subsidiaries 33. Option C D. what is the elimination entry made to assign income to noncontrolling interest in the workpaper to prepare a full set of consolidated financial statements for the year 2009? A. Option A B.

Chapter 05 . the trial balance data for the two companies are as follows: 5-57 .000 on the date of acquisition. 2004. 2004. at underlying book value. Plimsol uses the cost method in accounting for its investment in Shipping. Plimsol Company acquired 100 percent of Shipping Corporation's voting shares. On December 31.Consolidation of Less-than-Wholly Owned Subsidiaries On January 1. Shipping's retained earnings was $75.

Based on the information provided. $110.000 B. 2004? A. $100.Consolidation of Less-than-Wholly Owned Subsidiaries 34.000 D.000 C.Chapter 05 . $85. $125.000 AACSB: Analytic AICPA: Measurement 5-58 . what amount of net income will be reported in the consolidated financial statements prepared on December 31.

$125. $210. Based on the information provided.000 C.000 D. what amount of retained earnings will be reported in the consolidated balance sheet prepared on December 31.000 AACSB: Analytic AICPA: Measurement 36.000 B.000 B. $310. what amount of total assets will be reported in the consolidated balance sheet prepared on December 31. $115. 2004? A. $190.Consolidation of Less-than-Wholly Owned Subsidiaries 35. Based on the information provided. Based on the information provided.Chapter 05 . $650.000 C. $630. what amount of total liabilities will be reported in the consolidated balance sheet prepared on December 31. $525.000 D. 2004? A. $525.000 B. $425. 2004? A.000 AACSB: Analytic AICPA: Measurement 37.000 C.000 AACSB: Analytic AICPA: Measurement 5-59 .000 D. $235. $225.

000 B. Based on the information provided.Chapter 05 . what amount of total stockholder's equity will be reported in the consolidated balance sheet prepared on December 31. $335. $190. $460.Consolidation of Less-than-Wholly Owned Subsidiaries 38.000 AACSB: Analytic AICPA: Measurement 5-60 .000 D. 2004? A.000 C. $310.

2008.Chapter 05 . X Company acquired controlling ownership of Y Company.Consolidation of Less-than-Wholly Owned Subsidiaries On December 31. 5-61 . There were no other receivables or payables between the companies at December 31. A consolidated balance sheet was prepared immediately. 2008. X Company provided consulting services to Y Company and has not yet been paid for them. Partial balance sheet data for the two companies and the consolidated entity at that date follow: During 2008.

000 and $28. B. on work done by X Company for Y Company? A. 2008.Consolidation of Less-than-Wholly Owned Subsidiaries 39. $28.Chapter 05 .000 respectively.000 respectively.000 C.000 D. C. AACSB: Analytic AICPA: Measurement 5-62 . X Company and Y Company reported wages payable of A.000 respectively. $5.000 AACSB: Analytic AICPA: Measurement 41.000 B.000 and $32. $15. $28. Based on the information given. $38. $48. $40. $10. what is the amount of unpaid consulting services at December 31. $50.000 and $60. Based on the information given.000 and $35. $40. $0 B.000 C.000 AACSB: Analytic AICPA: Measurement 40. 2008? A.000 D. $60. D. what balance in accounts receivable did Y Company report at December 31.000 respectively. Based on the information given.

000 AACSB: Analytic AICPA: Measurement 43.000 C. $155. Based on the information given. $285. 60 percent C. what percentage of Y Company's shares were acquired by X Company? A.000 D. $364. what was the fair value of Y Company as a whole at the date of acquisition? A. what amount will be reported as total controlling interest in the consolidated balance sheet? A. $395.000 C.000 AACSB: Analytic AICPA: Measurement 5-63 . $115. $254.000 B.000 D. Based on the information given. $135. $110. 100 percent B. 75 percent AACSB: Analytic AICPA: Measurement 44.Chapter 05 . 80 percent D.000 B. Based on the information given.Consolidation of Less-than-Wholly Owned Subsidiaries 42.

What portion of the retained earnings reported in the consolidated balance sheet prepared immediately after the business combination is assigned to the noncontrolling interest? A. Nil B.Chapter 05 .000 cash. 2008. The fair value of the noncontrolling interest was determined to be 15 percent of the book value of Theta at that date. On January 1. 100 percent D. 15 percent C. Cannot be determined AACSB: Reflective Thinking AICPA: Reporting Essay Questions 5-64 .Consolidation of Less-than-Wholly Owned Subsidiaries 45. Zeta Company acquired 85 percent of Theta Company's common stock for $100.

000.000 to Crusoe. which had a fair value of $45. The fair value of the noncontrolling interest at that date was determined to be $26. Required: 1) Provide the eliminating entries needed to prepare a consolidated balance sheet immediately following the business combination. On December 31. Defoe reported accounts payable of $15. which reported an equal amount in its accounts receivable.Chapter 05 . and buildings and equipment. which had a fair value of $100. 2) Prepare a consolidated balance sheet workpaper.000 cash. the book values of Crusoe's assets and liabilities approximated fair value except for inventory. At December 31. 2008.Consolidation of Less-than-Wholly Owned Subsidiaries 46. 5-65 .000. 2008. Defoe Corporation acquired 80 percent of Crusoe Company's common stock for $104.000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: On that date.

5-66 .Consolidation of Less-than-Wholly Owned Subsidiaries 3) Prepare a consolidated balance sheet in good form.Chapter 05 .

Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries 1) 2) 5-67 .

Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries 3) AACSB: Analytic AICPA: Measurement 5-68 .

to prepare consolidated financial statements.000 in 2008. At that date. The differential is assigned to equipment.Chapter 05 . The fair value of the noncontrolling interest was $50. 2) Give the eliminating entries needed at December 31. which had a fair value $25.000 greater than book value and a remaining economic life of five years at the date of the business combination.000. Magellan Corporation acquired 80 percent ownership of Dipper Corporation on January 1. 2008. for $200.000 and paid dividends of $20. Canton reported net income of $40.Consolidation of Less-than-Wholly Owned Subsidiaries 47.000. 2008.000 and retained earnings of $150.000. Dipper reported common stock outstanding of $75. Required: 1) Provide the journal entries recorded by Magellan during 2008 on its books if it accounts for its investment in Dipper using the equity method. 5-69 .

Consolidation of Less-than-Wholly Owned Subsidiaries 1) 2) 5-70 .Chapter 05 .

Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries 5-71 .

Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries AACSB: Analytic AICPA: Measurement 5-72 .

2) Prepare a three-part consolidation workpaper in good form as of December 31. 2008. 5-73 . The trial balances for Plimsol Company and Shipping Corporation as of December 31. follow: Required: 1) Provide all eliminating entries required to prepare a full set of consolidated statements for 2008. at underlying book value. 2007.Consolidation of Less-than-Wholly Owned Subsidiaries 48. Plimsol Company acquired 100 percent of Shipping Corporation's voting shares. On January 1. 2008.000 on the date of acquisition. Plimsol uses the cost method in accounting for its investment in Shipping. Shipping's reported retained earnings of $75.Chapter 05 .

Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries 1) 2) 5-74 .

Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries 5-75 .

Consolidation of Less-than-Wholly Owned Subsidiaries AACSB: Analytic AICPA: Measurement 5-76 .Chapter 05 .

Gregory uses the equity method in accounting for its ownership of Nova. to prepare consolidated financial statements. income statement. The fair value of the noncontrolling interest was equal to 10 percent of the book value of Nova at that date. 2008. 5-77 . 2) Prepare a three-part consolidation workpaper. Gregory Corporation acquired 90 percent of Nova Company's voting stock.Consolidation of Less-than-Wholly Owned Subsidiaries 49. and retained earnings statement for 2008. On December 31. at underlying book value. 3) Prepare a consolidated balance sheet. 2008. 2008.Chapter 05 . the trial balances of the two companies are as follows: Required: 1) Provide all eliminating entries required as of December 31. On January 1.

Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries 1) 2) 5-78 .

Consolidation of Less-than-Wholly Owned Subsidiaries 5-79 .Chapter 05 .

Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries 3) 5-80 .

Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries 5-81 .

Consolidation of Less-than-Wholly Owned Subsidiaries AACSB: Analytic AICPA: Measurement 5-82 .Chapter 05 .

2008.Chapter 05 . to prepare consolidated financial statements. at underlying book value. On January 1.Consolidation of Less-than-Wholly Owned Subsidiaries 50. On December 31. The fair value of the noncontrolling interest was equal to 10 percent of the book value of Nova at that date. 2008. 5-83 . Gregory uses the equity method in accounting for its ownership of Nova. the trial balances of the two companies are as follows: Required: 1) Give all eliminating entries required on December 31. Gregory Corporation acquired 90 percent of Nova Company's voting stock. 2) Prepare a three-part consolidation workpaper as of December 31. 2008. 2009.

Consolidation of Less-than-Wholly Owned Subsidiaries 1) 2) 5-84 .Chapter 05 .

Consolidation of Less-than-Wholly Owned Subsidiaries 5-85 .Chapter 05 .

Consolidation of Less-than-Wholly Owned Subsidiaries 5-86 .Chapter 05 .

Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries AACSB: Analytic AICPA: Measurement 5-87 .

2008. the management of Vector concluded at December 31. The book values and fair values of Scalar's assets and liabilities were equal. that goodwill from its acquisition of Scalar shares had been impaired and the correct carrying amount was $5.) No additional impairment occurred in 2009. On January 1.000. the fair value of the noncontrolling interest was $30. At that date. 5-88 . 2008.Consolidation of Less-than-Wholly Owned Subsidiaries 51. Although goodwill is not amortized. The book value of Scalar's net assets at acquisition was $125. (Note that Vector Company does not adjust its Income from Subsidiary for goodwill impairment under the basic equity method.000. Buildings and equipment are depreciated on a 10- year basis. Goodwill and goodwill impairment were assigned proportionately to the controlling and noncontrolling shareholders.Chapter 05 .000 more than book value. except for buildings and equipment.000. which were worth $15. Vector Company acquired 80 percent of Scalar Company's ownership on for $120.000 cash.

are as follows: Required: 5-89 .Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries Trial balance data for Vector and Scalar on December 31. 2009.

Consolidation of Less-than-Wholly Owned Subsidiaries 1) Provide all eliminating entries needed to prepare a three-part consolidation workpaper as of December 31. 2009. 2) Prepare a three-part consolidation workpaper for 2009 in good form. 5-90 .Chapter 05 .

Consolidation of Less-than-Wholly Owned Subsidiaries 1) Eliminating entries 2) 5-91 .Chapter 05 .

Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries 5-92 .

) AACSB: Analytic AICPA: Measurement 5-93 .Chapter 05 .Consolidation of Less-than-Wholly Owned Subsidiaries (contd.