Quiz Master

Question 1
5 out of 5 points
Donald, Anne, and Todd have the following capital balances; $40,000, $50,000 and $30,000
respectively. The partners share profits and losses 20%, 40%, and 40% respectively.
What is the total partnership capital after Anne retires receiving $80,000 and using the bonus
method?
Selected Answer:
$40,000.
Correct Answer:
$40,000.
Response correct
Feedback:
AACSB: Analytic
AICPA FN: Measurement
Blooms: Application
Difficulty: Medium
Hoyle - Chapter 14 #62
Learning Objective: 14-10 Prepare journal entries to record the
withdrawal of a current partner.
Question 2
5 out of 5 points
Which of the following could be used as a basis to allocate profits among partners who are
active in the management of the partnership?
1) Allocation of salaries.
2) The number of years with the partnership.
3) The amount of time each partner works.
4) The average capital invested.
Selected Answer:
1, 2, 3, and 4.
Correct Answer:
1, 2, 3, and 4.
Response correct
Feedback:
AACSB: Reflective thinking
Blooms: Knowledge
Difficulty: Easy
Learning Objective: 14-05 Understand the impact that the allocation of
partnership income has on the partners individual capital balances.
Question 3
5 out of 5 points
Cleary, Wasser, and Nolan formed a partnership on January 1, 2010, with investments of
$100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1)
interest of 10% of the beginning capital balance each year, (2) annual compensation of
$10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for
Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2010 and
$180,000 in 2011. Each partner withdrew $1,000 for personal use every month during 2010
and 2011.
What was Wasser's capital balance at the end of 2011?

Selected Answer:
$264,540.
Correct Answer:
$264,540.
Response correct
Feedback:
AACSB: Analytic
Blooms: Application
Difficulty: Medium
Question 4
5 out of 5 points
Jerry, a partner in the JSK partnership, begins the year on January 1, 2011 with a capital
balance of $20,000. The JSK partnership agreement states that Jerry receives 6% interest on
this weighted average capital balance.
On March 1, 2011, when the partnership tax return for 2010 was completed, Jerry's capital
account was credited for his share of 2010 profit of $120,000.
Jerry withdrew this amount quarterly, beginning April 1.
On September 1, Jerry's capital account was credited with a special bonus of $60,000 for
business he brought to the partnership.
What amount of interest will be attributed to Jerry for year 2011 that will go toward his
profit distribution for the year? (Use a 360-day year for calculations.)
Selected Answer:
$6,000
Correct Answer:
$6,000
Response correct
Feedback:
AACSB: Analytic
Blooms: Application
Difficulty: Hard
Learning Objective: 14-06 Allocate income to partners when interest
and/or salary factors are included.
Question 5
5 out of 5 points
Which of the following is not a characteristic of a partnership?

Selected Answer:
A partnership requires written Articles of Partnership.
Correct Answer:
A partnership requires written Articles of Partnership.
Response correct
Feedback:
AICPA BB: Legal
Blooms: Knowledge
Difficulty: Easy
Learning Objective: 14-01 Discuss the advantages and disadvantages of the
partnership versus the corporate form of business.
Question 6
5 out of 5 points
Partnerships have alternative legal forms including all of the following except:
Selected Answer:
Subchapter S Partnership.
Correct Answer:
Subchapter S Partnership.
Response correct
Feedback:
AICPA BB: Legal
Blooms: Knowledge
Difficulty: Easy
Question 7
5 out of 5 points
The partnership of Clapton, Seidel, and Thomas was insolvent and will be unable to pay
$30,000 in liabilities currently due. What recourse was available to the partnership's
creditors?
Selected Answer:
they may seek remuneration from any partner they choose.
Correct Answer:
they may seek remuneration from any partner they choose.
Response correct
Feedback:
Blooms: Comprehension
Difficulty: Easy
Question 8
5 out of 5 points
The dissolution of a partnership occurs

Selected Answer:
when there is any change in the individuals who make up the partnership.
Correct Answer:
when there is any change in the individuals who make up the partnership.
Response correct
Feedback:
AICPA BB: Legal
Blooms: Knowledge
Difficulty: Easy
Learning Objective: 14-07 Discuss the meaning of partnership dissolution
and understand that a dissolution will often have little or no effect on the
operations of the partnership business.
Question 9
10 out of 10 points
Cherryhill and Hace had been partners for several years, and they decided to admit Quincy
to the partnership. The accountant for the partnership believed that the dissolved partnership
and the newly formed partnership were two separate entities. What method would the
accountant have used for recording the admission of Quincy to the partnership?
Selected Answer:
The goodwill method.
Correct Answer:
The goodwill method.
Response correct
Feedback:
Difficulty: Easy
Learning Objective: 14-08 Prepare journal entries to record the acquisition
by a new partner of either all or a portion of a current partners interest.
Question 10
5 out of 5 points
and 2011.
What was Wasser's total share of net income for 2011?

Selected Answer:
$75,000.
Correct Answer:
$75,000.
Response correct
Feedback:
AACSB: Analytic
Blooms: Application
Difficulty: Medium
Question 11
5 out of 5 points
and 2011.
What was Wasser's total share of net income for 2010?

Selected Answer:
$63,000.
Correct Answer:
$63,000.
Response correct
Feedback:
AACSB: Analytic
Blooms: Application
Difficulty: Easy
Question 12
5 out of 5 points
Which of the following type of organization is classified as a partnership, or similar to a
partnership, for tax purposes?
(I.) Limited Liability Company
(II.) Limited Liability Partnership
(III.) Subchapter S Corporation
Selected Answer:
I, II, and III.
Correct Answer:
I, II, and III.
Response correct
Feedback:
AICPA BB: Legal
Blooms: Knowledge
Difficulty: Medium
Question 13
5 out of 5 points
A partnership began its first year of operations with the following capital balances:
Young, Capital: $143,000
Eaton, Capital: $104,000
Thurman, Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following
manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to
Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the
first day of the year.
The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman,
respectively.
Each partner withdrew $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of
$52,000 in the second year.
What was Eaton's total share of net loss for the first year?
Selected Answer:
$10,400 loss.
Correct Answer:
$10,400 loss.
Response correct
Feedback:
AACSB: Analytic
Blooms: Application
Difficulty: Medium
Question 14
5 out of 5 points
The disadvantages of the partnership form of business organization, compared to

corporations, include
Selected Answer:
unlimited liability for the partners.
Correct Answer:
unlimited liability for the partners.
Response correct
Feedback:
Difficulty: Easy
Question 15
5 out of 5 points
Peter, Roberts, and Dana have the following capital balances; $80,000, $100,000 and
$60,000, respectively. The partners share profits and losses 20%, 40%, and 40%
respectively.
Roberts retires and is paid $160,000 based on an independent appraisal of the business. If
the goodwill method is used, what is the capital balance of Dana?
Selected Answer:
$120,000.
Correct Answer:
$120,000.
Response Roberts receives an additional $60,000 above her capital balance. Since she is
Feedback:
assigned 40 percent of all profits and losses, this extra allocation indicates
total goodwill of $150,000, which must be split among all partners.
40% of Goodwill = $60,000
.40 G = $60,000
G = $150,000 and Dana receives 40% = $60,000.
Dana's balance = $60,000 + $60,000 = $120,000.
AACSB: Analytic
Blooms: Application
Difficulty: Medium
Learning Objective: 14-10 Prepare journal entries to record the withdrawal of
a current partner.
Question 16
5 out of 5 points
and 2011.
What was Nolan's capital balance at the end of 2010?

Selected Answer:
$246,000.
Correct Answer:
$246,000.
Response correct
Feedback:
AACSB: Analytic
Blooms: Application
Difficulty: Medium
Question 17
5 out of 5 points
Donald, Anne, and Todd have the following capital balances; $40,000, $50,000 and $30,000
respectively. The partners share profits and losses 20%, 40%, and 40% respectively.
Anne retires and is paid $80,000 based on an independent appraisal of the business. If the
goodwill method is used, what is the capital of the remaining partners?
Selected Answer:
Donald, $55,000; Todd, $60,000
Correct Answer:
Donald, $55,000; Todd, $60,000
Response Anne receives an additional $30,000 above her capital balance. Since she is
Feedback:
assigned 40 percent of all profits and losses, this extra allocation indicates
total goodwill of $75,000, which must be split among all partners.
40% of Goodwill = $30,000
.40 G = $30,000
G = $75,000
Donald = 20% Goodwill = $15,000. $40,000 + $15,000 = $55,000.
Todd = 40% Goodwill = $30,000. $30,000 + $30,000 = $60,000.
AACSB: Analytic
Blooms: Application
Difficulty: Medium
Learning Objective: 14-10 Prepare journal entries to record the withdrawal of
a current partner.
Question 18
5 out of 5 points
The partners of Apple, Bere, and Carroll LLP share net income and losses in a 5:3:2 ratio,
respectively. The capital account balances on January 1, 2011, were as follows:
The carrying amounts of the assets and liabilities of the partnership are the same as their
current fair values. Dorr will be admitted to the partnership with a 20% capital interest and a
20% share of net income and losses in exchange for a cash investment. The amount of cash
that Dorr should invest in the partnership is:
Selected Answer:
$37,500.
Correct Answer:
$37,500.
Response ($150,000/.8 = $187,500. $187,500 - $150,000 = $37,500 to invest)
Feedback:
AACSB: Analytic
Blooms: Application
Difficulty: Medium
Learning Objective: 14-09 Prepare journal entries to record a new partners
admission by a contribution made directly to the partnership.
Question 19
5 out of 5 points
The advantages of the partnership form of business organization, compared to corporations,

include
Selected Answer:
single taxation.
Correct Answer:
single taxation.
Response correct
Feedback:
Difficulty: Easy
Question 1
10 out of 10 points
The Abrams, Bartle, and Creighton partnership began the process of liquidation with the
following balance sheet:
Abrams, Bartle, and Creighton share profits and losses in a ratio of 3:2:5. Liquidation
expenses are expected to be $12,000.
The noncash assets were sold for $134,000. Which partner(s) would have had to contribute
assets to the partnership to cover a deficit in his or her capital account?
Selected Answer:
Abrams and Creighton.
Correct Answer:
Abrams and Creighton.
Response Feedback: correct
Question 2
10 out of 10 points
A local partnership has assets of cash of $5,000 and a building recorded at $80,000. All
liabilities have been paid. The partners capital accounts are as follows Harry $40,000,
Landers $30,000 and Waters 15,000. The partners share profits and losses 4:4:2.
If the building is sold for $50,000, how much cash will Harry receive in the final settlement?
Selected Answer:
$28,000.
Correct Answer:
$28,000.
Question 3
10 out of 10 points
Which item is not shown on the schedule of partnership liquidation?

Selected Answer:
Personal assets of the partners.
Correct Answer:
Personal assets of the partners.
Question 4
10 out of 10 points
Which one of the following statements is correct?

Selected
Answer:
If a partner of a liquidating partnership is unable to pay a capital account
deficit, the deficit is absorbed by the other partners in the profit and loss ratio
of those partners.
Correct
Answer:
If a partner of a liquidating partnership is unable to pay a capital account
deficit, the deficit is absorbed by the other partners in the profit and loss ratio
of those partners.
Question 5
10 out of 10 points
Which of the following statements is true concerning the distribution of safe payments?
Selected
Answer:
The distribution of safe payments assumes that any capital deficit balances
will prove to be a total loss to the partnership.
Correct
Answer:
The distribution of safe payments assumes that any capital deficit balances
will prove to be a total loss to the partnership.
Question 6
10 out of 10 points
A local partnership was considering the possibility of liquidation since one of the partners
(Ding) was personally insolvent. Capital balances at that time were as follows. Profits and
losses were divided on a 4:2:2:2 basis, respectively.
Creditors of partner Ding filed a $25,000 claim against the partnership's assets. At that time,
the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There
was no cash on hand at the time.
If the assets could be sold for $228,000, what is the minimum amount that Ezzard's creditors
would have received?
Selected Answer:
$0.
Correct Answer:
$0.
Question 7
10 out of 10 points
The Keaton, Lewis, and Meador partnership had the following balance sheet just before
entering liquidation:
Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. Noncash assets were
sold for $180,000. Liquidation expenses were $10,000.
Assume that Lewis was personally insolvent and could not contribute any assets to the
partnership, while Keaton and Meador were both solvent. What amount of cash would
Keaton have received from the distribution of partnership assets?
Selected Answer:
$30,000.
Correct Answer:
$30,000.
Question 8
10 out of 10 points
Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. The partnership feels
confident it will be able to eventually sell the noncash assets and wants to distribute some
cash before paying liabilities. How much would each partner receive of a total $60,000
distribution of cash?
Selected Answer:
Option A
Correct Answer:
Option A
Question 9
0 out of 10 points
What accounting transactions are not recorded by an accountant during partnership

liquidation?
Selected Answer:
[None Given]
Correct Answer:
The initiation of legal action by creditors of the partnership.
Response Feedback: incorrect
Question 10
10 out of 10 points
What is the preferred method of resolving a partner's deficit balance, according to

the Uniform Partnership Act?
Selected
Answer:
The partner with a deficit balance must contribute personal assets to cover
the deficit balance.
Correct
Answer:
The partner with a deficit balance must contribute personal assets to cover
the deficit balance.
Question 11
10 out of 10 points
When a partnership is insolvent and a partner has a deficit capital balance, that partner is
legally required to:
Selected Answer:
contribute cash to the partnership.
Correct Answer:
contribute cash to the partnership.
Question 12
10 out of 10 points
Which of the following statements is false concerning the partnership Schedule of

Liquidation?
Selected Answer:
Frequent reporting by the accountant is rarely necessary.
Correct Answer:
Frequent reporting by the accountant is rarely necessary.
Question 1
5 out of 5 points
Which of the following is not normally viewed as an adjustment to the principal of an

estate?

Question 2
5 out of 5 points
In an executor's accounting for an estate, debts and other obligations are recorded

Question 3
5 out of 5 points
What is the amount of the personal exemption on an estate income tax return?

Question 4
5 out of 5 points
What are the goals of probate laws?

(1) Gather and preserve all of the decedent's property;
(2) Carry out an orderly and fair settlement of all debts;
(3) Discover and follow the decedent's intent for the remaining property

Question 5
5 out of 5 points
Which of the following is usually not accounted for as an adjustment to a trust's income?

Question 6
5 out of 5 points
Which of the following is not subtracted to arrive at the taxable value of an estate?
Question 7
5 out of 5 points
What guidelines must be followed to classify a transaction as associated with the principal of
an estate or as an income transaction?

Question 8
5 out of 5 points
When an estate does not have sufficient assets to satisfy all claims against it, what claim has
the highest priority?

Question 9
5 out of 5 points
The terms of a will currently undergoing probate are: "A gift to my brother David of
$25,000 cash; to my son James, $50,000 from my savings account; and to my Daughter Lila,
all of my remaining property." At the time of death, the balance in the savings account was
$40,000, and there was additional cash (after payment of funeral expenses and all claims
against the estate) of $70,000.
How much would James have received from the estate?

Question 10
5 out of 5 points
Which of the following is usually accounted for as an adjustment to a trust's principal?

Question 11
5 out of 5 points
After expenses of administering an estate, which claims would be next in a typical order of
priority to establish which creditors will get paid?
(1) Funeral expenses.
(2) Medical expenses of the last illness.
(3) Debts and taxes given preference under laws.
(4) All other claims.

Question 12
5 out of 5 points
An executor will normally carry out all the following tasks except:

Question 13
5 out of 5 points
Which of the following is not a trust used for estate planning?

Question 14
5 out of 5 points
When a person dies without leaving a valid will, how is the distribution of his or her
property determined?

Question 15
5 out of 5 points
What is the process of abatement?

Question 16
5 out of 5 points
Jim Bowie died on April 1, 2011. The estate has the following gross asset valuation
information:
The estate tax will be calculated using:

Question 17
5 out of 5 points
The provisions of a will currently undergoing probate are: "Two thousand shares of Dorn
stock to my son; $30,000 in cash from my savings account to my brother; $50,000 in cash to
my daughter; and any remaining property divided equally between my son and daughter."
Assume that, at the time of death, the estate included 1,200 shares of Dorn stock, $60,000
cash in the savings account, and $70,000 in cash from other sources. What would the son
have received from the settlement of the estate?

Question 18
5 out of 5 points
Executor's fees and court costs for settling an estate usually

Question 19
5 out of 5 points
In a will, a devise is a

Question 20
5 out of 5 points
A gift that is specified in a will as "I leave $5,000 in cash from my checking account to my
daughter" is a

Question 21
5 out of 5 points
A testamentary trust is a trust

Question 22
5 out of 5 points
Under what circumstance does an estate have an executor?

Question 23
5 out of 5 points
The terms of a will currently undergoing probate are: "A gift to my brother David of
$25,000 cash; to my son James, $50,000 from my savings account; and to my Daughter Lila,
all of my remaining property." At the time of death, the balance in the savings account was
$40,000, and there was additional cash (after payment of funeral expenses and all claims
against the estate) of $70,000.
The gift to David is a

Question 24
5 out of 5 points
The estate of Bobbi Jones has the following provisions: total value of estate assets
$2,000,000, amount specified to convey to a spouse $1,000,000, amount specified to convey
to children $200,000, total debts 400,000, administrative expenses $50,000, and funeral
expenses of $30,000. What is the value of the taxable estate?

Question 25
5 out of 5 points
The provisions of a will currently undergoing probate are: "One thousand shares of Wal-
mart stock to my son; $10,000 in cash from my savings account to my brother; $5,000 in
cash to my daughter; and any remaining property divided equally between my son and
daughter." At the time of death, the estate included 1,400 shares of Wal-mart stock and
$25,000 cash in the savings account.
What would the son have received from the settlement of the estate?
Question 1
5 out of 5 points
A company that was to be liquidated had the following liabilities:
Total assets, available to pay liabilities with priority and unsecured creditors, are calculated
to be what amount?
Response Feedback: (200,000+95,000)

Question 2
5 out of 5 points
Which of the following is not a responsibility of the bankruptcy trustee?

Question 3
5 out of 5 points
Lawyer's fees incurred during a reorganization are accounted for as:

Question 4
5 out of 5 points
How should the fresh start reorganization value normally be determined?

Question 5
5 out of 5 points
On a statement of financial affairs, a specific liability may be classified as

Question 6
5 out of 5 points
On a statement of financial affairs, a company's liabilities should be valued at

Question 7
5 out of 5 points
Which one of the following is a requirement that must be met before an involuntary bankruptcy petition can be
filed when there are at least 12 unsecured creditors?
Question 8
5 out of 5 points
In a statement of financial affairs, assets are classified

Question 9
5 out of 5 points
Which of the following is not one of the more common reorganization plan elements?

Question 10
5 out of 5 points
During a reorganization, cash reserves tend to grow. How should interest earned on these
reserves be reported on the financial statements?

Question 11
5 out of 5 points
Mandich Co. had the following amounts for its assets, liabilities, and stockholders' equity
accounts just before filing a bankruptcy petition and requesting liquidation:
Of the salaries payable, $30,000 was owed to an officer of the company. The remaining
amount was owed to salaried employees who had not been paid within the previous 80 days:
John Webb was owed $10,600, Samantha Jones was owed $15,000, Sandra Johnson was
owed $11,900, and Dennis Roberts was owed $2,500. The maximum owed for any one
employee's claims for contributions to benefit plans was $800. Estimated expense for
administering the liquidation amounted to $40,000.
What was the total amount of unsecured liabilities with priority?
Response Pension $10,000 + Salaries $35,000 (= $10,600 + $10,950 + $10,950 +

Feedback:
$2,500) + Taxes $80,000 + Liq. expenses $40,000 = $165,000.
Question 12
5 out of 5 points
What are free assets?

Question 13
5 out of 5 points
The statement of financial affairs should be prepared

Question 14
5 out of 5 points
A Chapter 7 bankruptcy is a(n)

Question 15
5 out of 5 points
Where should a company undergoing reorganization report the gains and losses resulting
from the reorganization?
Question 16
5 out of 5 points
A company that was to be liquidated had the following liabilities:
Total unsecured nonpriority liabilities are calculated to be what amount?
Response Excess of salaries $1,050 + notes pay in excess of security $25,000+

Feedback:
accounts pay $50,000
Question 17
5 out of 5 points
During a reorganization, how should interest expense be reported on the financial

statements?

Question 18
5 out of 5 points
Gongman Corp. owned the following assets when it came out of a Chapter 11 bankruptcy:
Gongman Corp. had a fresh start reorganization value of $1,000,000. What amount of
goodwill should have been recognized in recording the reorganization?

Question 19
5 out of 5 points
Sparkman Co. filed a bankruptcy petition and liquidated its noncash assets. Sparkman was
paying forty cents on the dollar for unsecured claims. Bailey Co. held a mortgage of
$150,000 on land that was sold for $110,000. The total amount of payment that Bailey
should have received is calculated to be
Response Feedback: Sale of land $110,000 + 40% of remaining $40,000 owed = $126,000
Question 20
5 out of 5 points
How should liabilities (except for deferred income taxes) be reported by a company
using fresh start accounting?

Question 21
5 out of 5 points
Which one of the following unsecured liabilities has the highest priority when an insolvent
company is about to be liquidated?

Question 22
5 out of 5 points
Which statement is false regarding the acceptance and confirmation of a reorganization

plan?

Question 23
5 out of 5 points
On a statement of financial affairs, a company's assets should be valued at

Question 24
5 out of 5 points
What is normally required before a reorganization plan can be implemented?

Question 25
5 out of 5 points
Which statement is false regarding a plan for reorganization?

Question 26
5 out of 5 points
What information is conveyed by the Statement of Realization and Liquidation?

Question 27
5 out of 5 points
On its balance sheet, a company undergoing reorganization should

Question 28
5 out of 5 points
Mandich Co. had the following amounts for its assets, liabilities, and stockholders' equity
accounts just before filing a bankruptcy petition and requesting liquidation:
Of the salaries payable, $30,000 was owed to an officer of the company. The remaining
amount was owed to salaried employees who had not been paid within the previous 80 days:
John Webb was owed $10,600, Samantha Jones was owed $15,000, Sandra Johnson was
owed $11,900, and Dennis Roberts was owed $2,500. The maximum owed for any one
employee's claims for contributions to benefit plans was $800. Estimated expense for
administering the liquidation amounted to $40,000.
On a statement of financial affairs, what amount would have been shown as assets available
to pay liabilities with priority and unsecured creditors?
Response Net realizable value of: Cash + A/R + Inventory net of note payable +
Feedback:
Land + Building
uestion 1
10 out of 10 points
Gaw Company owns 15% of the common stock of Teal Corporation and used the fair-value method to account
for this investment. Teal reported net income of $110,000 for 2015 and paid dividends of $60,000 on October
1, 2015. How much income should Gaw recognize on this investment in 2015?
Response Feedback: correct : FASB1115, FMV method : pickup only div. as income (60k*15%)
Question 2
0 out of 10 points
Yult Company owns 25% of the common stock of Dent Co. and uses the equity method to account for the
investment. During 2015, Dent reported income of $220,000 and paid dividends of $80,000. There is no
amortization associated with the investment. During 2015, how much income should Yult recognize related to
this investment?
Response Feedback: incorrect (Income not EIE, $220*25%)
Question 3
10 out of 10 points
On January 1, 2014, Pacer Company paid $1,920,000 for 60,000 shares of Lennon Co.'s voting common stock
which represents a 45% investment. No allocation to goodwill or other specific account was made. Significant
influence over Lennon was achieved by this acquisition. Lennon distributed a dividend of $2.50 per share
during 2014 and reported net income of $670,000. What was the balance in the Investment in Lennon
Co. account found in the financial records of Pacer as of December 31, 2014?
Response correct (EM : Inc pickup $670k * 45% = $301.5k - Div 2.5 * 60k = 150 ) = 151.5k
Feedback: +1,920 = 2,071.5k)
Question 4
10 out of 10 points
A company should always use the equity method to account for an investment if
Response correct, only when Significant Influence is present via percentage or in

Feedback:
other ways such as BOD, key processes of a company etc.
Question 5
10 out of 10 points
On January 1, 2013, Dermot Company purchased 12% of the voting common stock of Horne Corp. On January
1, 2014, Dermot purchased 18% of Horne's voting common stock. If Dermot achieves significant influence
with this new investment, how must Dermot account for the change to the equity method?
Response correct, It must restate the financial statements for 2010 and 2011 as if the equity method had
Feedback: been used for those two years (keep in mind that the percentage for the back year/s will be
the % owned for that particular year. Example, if 2010=12% and 2011=12+18 or 30%)
Question 6
10 out of 10 points
During January 2013, Webb, Inc. acquired 30% of the outstanding common stock of Wilson Co. for
$1,200,000. This investment gave Webb the ability to exercise significant influence over Wilson. Wilson's
assets on that date were recorded at $6,400,000 with liabilities of $3,000,000. Any excess of cost over book
value of Webb's investment was attributed to unrecorded patents having a remaining useful life of ten years.
In 2013, Wilson reported net income of $600,000. For 2014, Wilson reported net income of $750,000.
Dividends of $200,000 were paid in each of these two years. What was the reported balance of
Webb's Investment in Wilson Co. at December 31, 2014?
Response correct, APB 18, Equity method. Accounting for investment on Parent Balance Sheet.
Feedback:
Investment = $1.2m + 249k =(Income = Inc 0.3(600+750)- 0.3 Div (200+200)
- Depreciation (1.2m - (6.4-3m=3.4m*.3=1.02m)=Excess paid for assets=180k/10yrs * 2yrs
(2013 & 14) = 36k)
Question 7
10 out of 10 points
On January 1, 2013, Bangle Company purchased 30% of the voting common stock of Sleat Corp. for
$1,000,000. Any excess of cost over book value was assigned to goodwill. During 2013, Sleat paid dividends
of $24,000 and reported a net loss of $140,000. What is the balance in the investment account on December 31,
2013?
Response Feedback: First Year Investment Balance - correct, $1m - 30%(140 loss + $24 Div)
Question 8
10 out of 10 points
On January 1, 2013, Jordan Inc. acquired 30% of Nico Corp. Jordan used the equity method to account for the
investment. On January 1, 2014, Jordan sold 2/3 of its investment in Nico. It no longer had the ability to
exercise significant influence over the operations of Nico. How should Jordan have accounted for this change?
Question 9
10 out of 10 points
Bowler Inc. owns 30% of Yarby Co. and applies the equity method. During the current year, Bowler bought
inventory costing $66,000 and then sold it to Yarby for $120,000. At year-end, only $24,000 of merchandise
was still being held by Yarby. What amount of unrealized gain must be deferred by Bowler?
Response correct, as always % matters. For intercompany sales, if significant influence exist, defer
Feedback: gains up or down sales on ending inventory. If control exist, eliminate unrealized gains, up
or down on ending inventory.
Also, what do you need profit on sale OR profits on cost. POS
Question 10
10 out of 10 points
On January 4, 2013, Watts Co. purchased 40,000 shares (40%) of the common stock of Adams Corp., paying
$800,000. There was no goodwill or other cost allocation associated with the investment. Watts has significant
influence over Adams. During 2013, Adams reported income of $200,000 and paid dividends of $80,000. On
December 31, 2013, Watts sold 5,000 shares for $125,000. What was the balance in the investment
account after the shares had been sold?
Response correct
Feedback:
Purchased @ $800k - 40,000, Inc 200k - 80k = 120 * 40% = 48k = $848/40k = 21.20 *
5000 = 106,000. 848-106=742.
Question 11
10 out of 10 points
On January 3, 2014, Austin Corp. purchased 25% of the voting common stock of Gainsville Co., paying
$2,000,000. Austin decided to use the equity method to account for this investment. At the time of the
investment, Gainsville's total stockholders' equity was $6,000,000. Austin gathered the following information
about Gainsville's assets and liabilities:
For all other assets and liabilities, book value and fair market value were equal. Any excess of cost over fair
value was attributed to goodwill, which has not been impaired.
What is the amount of goodwill associated with the investment?

Response Feedback: correct, Investment $2m - 0.25(BV 6m + FMV 100+300+400)=GW 300K
Question 12
10 out of 10 points
On January 3, 2014, Austin Corp. purchased 25% of the voting common stock of Gainsville Co., paying
$2,000,000. Austin decided to use the equity method to account for this investment. At the time of the
investment, Gainsville's total stockholders' equity was $6,000,000. Austin gathered the following information
about Gainsville's assets and liabilities:
For all other assets and liabilities, book value and fair market value were equal. Any excess of cost over fair
value was attributed to goodwill, which has not been impaired.
For 2014, what is the total amount of excess amortization for Austin's 25% investment in Gainsville?
Response correct, Bv = $6m + (FmV - Bv of Assets = Excess = $2.2 - 1.4 = $800k) --- Paid $2 -
Feedback: .25(6+.8) = Excess GW 300k
Gw is not AMORTIZED.
Question 13
10 out of 10 points
Club Co. appropriately uses the equity method to account for its investment in Chip Corp. As of the end of
2014, Chip's common stock had suffered a significant decline in market value,which is expected to be
recovered over the next several months. How should Club account for the decline in value?
Question 14
10 out of 10 points
An upstream sale of inventory is a sale

Question 15
10 out of 10 points
Surrell Inc. owns 30% of the outstanding voting common stock of Vicker Co. and has the ability to
significantly influence the investee's operations and decision making. On January 1, 2014, the balance in
the Investment in Vicker Co. account was $402,000. Amortization associated with this acquisition is $10,800
per year. During 2014, Vicker earned an income of $108,000 and paid cash dividends of $36,000. Previously in
2013, Vicker had sold inventory costing $28,800 to Surrell for $48,000. All but 25% of this merchandise was
consumed by Surrell during 2013. The remainder was used during the first few weeks of 2014. Additional sales
were made to Surrell in 2014; inventory costing $33,600 was transferred at a price of $60,000. Of this total,
40% was not consumed until 2015.
What amount of equity income would Surrell have recognized in 2014 from its ownership interest in Vicker?
Response Q request equity income in 2014.

Feedback:
No dividend included. 2014 Inc 32.4k (108*.3), adj income for depreciation 10.8k,
+adj for deferral of unrealized gains and realized gains on inter company US sales (Realized
beg 2014, (48k * 0.25 * 0.4 profit margin= 4.8 * .3 = 1.44 gains realized on beginning inv.)
- ending inventory gains deferral (60-33.6=26.4*0.4)=10.56*0.3=3.168k
2014 Total net adjustment 32.4 Inc-10.8 Depreciation -3.168 Ending Def Gains + 1.44 Beg
def gains = $19.872k
Question 16
10 out of 10 points
Surrell Inc. owns 30% of the outstanding voting common stock of Vicker Co. and has the ability to
significantly influence the investee's operations and decision making. On January 1, 2014, the balance in
the Investment in Vicker Co. account was $402,000. Amortization associated with this acquisition is $10,800
per year. During 2014, Vicker earned an income of $108,000 and paid cash dividends of $36,000. Previously in
2013, Vicker had sold inventory costing $28,800 to Surrell for $48,000. All but 25% of this merchandise was
consumed by Surrell during 2013. The remainder was used during the first few weeks of 2014. Additional sales
were made to Surrell in 2014; inventory costing $33,600 was transferred at a price of $60,000. Of this total,
40% was not consumed until 2014.
What was the balance in the Investment in Vicker Co. account at the end of 2014?
Response correct, from previous questions Investment $402k + 2014 adj $19.872 less div (36k*.3=
Feedback: 10.8) = $411,072
Question 17
10 out of 10 points
On January 1, 2013, Deuce Inc. acquired 15% of Wiz Co.'s outstanding common stock for $62,400 and
categorized the investment as an available-for-sale security. Wiz earned net income of $96,000 in 2013 and
paid dividends of $36,000. On January 1, 2014, Deuce bought an additional 10% of Wiz for $54,000. This
second purchase gave Deuce the ability to significantly influence the decision making of Wiz. During 2014,
Wiz earned $120,000 and paid $48,000 in dividends. As of December 31, 2014, Wiz reported a net book
value of $468,000. For both purchases, Deuce concluded that Wiz Co.'s book values approximated fair values
and attributed any excess cost to goodwill.
On Deuce's December 31, 2014 balance sheet, what balance was reported for the Investment in Wiz
Co. account?
Response Feedback: Investments 62.4 + 54 add + (96-36*.15) or 9 + (120-48*.25) or 18 =143.4
Question 18
0 out of 10 points
On January 1, 2013, Deuce Inc. acquired 15% of Wiz Co.'s outstanding common stock for $62,400 and
categorized the investment as an available-for-sale security. Wiz earned net income of $96,000 in 2013 and
paid dividends of $36,000. On January 1, 2014, Deuce bought an additional 10% of Wiz for $54,000. This
second purchase gave Deuce the ability to significantly influence the decision making of Wiz. During 2014,
Wiz earned $120,000 and paid $48,000 in dividends. As of December 31, 2014, Wiz reported a net book
value of $468,000. For both purchases, Deuce concluded that Wiz Co.'s book values approximated fair values
and attributed any excess cost to goodwill.
What amount of equity income should Deuce have reported for 2014?
Response Feedback: incorrect, easy (15+10=25%) *120 =30k
Question 19
10 out of 10 points
In a situation where the investor exercises significant influence over the investee, which of
the following entries is not actually posted to the books of the investor?
Response Feedback: correct, done under the costs method

Question 20
10 out of 10 points
All of the following would require use of the equity method for investments except

Question 21
10 out of 10 points
All of the following statements regarding the investment account using the equity method
are true except
Question 22
10 out of 10 points
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?

Question 23
10 out of 10 points
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?
Response correct;however, if the company buy shares instead of selling the

Feedback:
treatment is retroactive.
Question 24
10 out of 10 points
An investee company incurs an extraordinary loss during the period. The investor
appropriately applies the equity method. Which of the following statements is true?

Question 25
10 out of 10 points
How should a permanent loss in value of an investment using the equity method be treated?

Question 26
10 out of 10 points
Under the equity method, when the company's share of cumulative losses equals its
investment and the company has no obligation or intention to fund such additional losses,
which of the following statements is true?
Response correct : Use Prof. Balkaran's accounting Method to track reversal of
Feedback:
losses
Question 27
10 out of 10 points
When an investor sells shares of its investee company, which of the following statements is
true?
Response Feedback: correct, carrying value here is the investment account balance
Question 28
10 out of 10 points
When applying the equity method, how is the excess of cost over book value accounted for?
Response correct, as discussed, all part of 142 purchase method or acquisition method
Feedback:
allocation of purchase price ( BV, FMV, GW and possible write down of
non current asset)
Question 29
10 out of 10 points
After allocating cost in excess of book value, which asset or liability would not be amortized
over its useful life?
Response Feedback: correct, According to FASB 141 and 142, impair don't amortized.
Question 30
10 out of 10 points
Which statement is true concerning unrealized gains in inventory transfers using the equity
method?
Response correct The investor must defer upstream beginning inventory profits (no,
Feedback:
Beginning gets realized). The investor must defer downstream beginning
inventory profits (no, Beginning gets realized). The investor must defer
downstream ending inventory profits. The investee must defer upstream
beginning inventory profits. (no,Realized) The investee must defer upstream
ending inventory profits. (Eliminate)
Question 1
10 out of 10 points
Participation point is a "game changer". Ways to gain such points are:
Correct
Answer:
Making all "in class" sessions, completing all online quizzes, assigned
homework, asking all your questions in class, participate on blackboard
questions, particpate during in class session and be open with the professor by
making suggestions to improve your online learning process.
Question 2
2 out of 2 points
Test Format: The format of test
Correct
Answer:
is a blend of in class discussion (10%), Problem & Exercise (10%), Quiz
(55%), Project (15%) and questions from slides (10%).
Question 3
24 out of 24 points
Quiz Close Date: Each Quiz will have a scheduled close date. That means
Correct Answer:
I must complete my Quiz before the stated close date.
Question 4
2 out of 2 points
Quiz: If I do not receive a grade immediately after submitting a quiz or test, it means
Correct
Answer:
I went over the TIME LIMIT so it will be graded manually by the Professor (
an immediate grade means I submitted my test within the time limit).
Question 5
0 out of 2 points
ONLINE LEARNING: Distance learning is essentially the computer and network enabled transfer of skills
and knowledge. E-Learning applications and processes include Web-based learning, computer-based learning,
virtual classrooms and digital collaboration. Content is delivered via the Internet, intranet/extranet, audio or
video tape, satellite TV, and CD-ROM. It can be self paced or instructor led and includes media in the form of
text, image, animation, streaming video and audio.
Fill in the missing terms?
Correct Answer:
Neither is correct.
Question 6
2 out of 2 points
Inappropriate behavior: Includes (but is not limited to) using cell phones in class, eating in
classrooms, talking during class, arriving late, and cheating. Students are expected to bear individual
responsibility for their work and to uphold the ideal of academic integrity. Cheating, forgery, plagiarism, or
other dishonest acts undermine the colleges educational mission and the students personal and intellectual
growth. Any student who attempts to compromise or devalue the academic process will be sanctioned.
Correct Answer:
Rules Rules Rules....hey but I agree!
Question 7
2 out of 2 points
The Professor Promises To be Flexible To be Reasonable Treat You as a professional if you demonstrate
maturity Help you with the CPA, Industry and Queens College Requirements. Try to answer all your
questions Try to get you involved and enjoy the class
PROMISE I keep!
P - I will PARTICIPATE
R - I will keep a REVIEW BINDER
O - I will stay ON PLAN
M - I will not MOVE around from seat to seat for all class meetings
I - I will follow the professors INSTRUCTIONS and question when necessary
S - I will STUDY sufficiently (based on my own needs)
E - I will use EXCEL for any homework submission
S - I will SIGN in each class
T - I will bring my TEXT book and be on Time
0 - I OFFER to discuss my issues upfront.
Correct Answers:
I PROMISE
Question 8
2 out of 2 points
Only 20% of the class will receive an A, that means I have to:
1. Stick with the professors advice both on line and in person
2. Listen to the slides or read the chapters but not both
3. Read the text aided by slides
4. Complete all quizzes and ensure I clear all questions during the in class session
5. Attend all in-class sessions
6. Get all questions cleared via the discussion board, study group, or in class sessions
7. Team up with a group
8. Stay on top of the Black Board Posting by checking in every day
9. Do well not only on the tests but participate fully
10. Dont depend on curve
11. Dont wait for last minute to study
12. Complete the Project with full contribution
13. Study Study Study!
Correct Answer:
True
Question 9
0 out of 2 points
Quiz Grading: To do well on each quiz, I must achieve:

Correct Answer:
70% or better on each Quiz within 3 tries!
Question 10
2 out of 2 points
Absent from a class: Should I miss a class,
Correct
Answer:
Put the Professor on notice well before, call a group member after the class
and/or post a note/questions on discussion board. If all fail, request the
Professor's help.
Question 11
2 out of 2 points
Success: All depends on ME! The Professor can only point me in the right direction and make the material
available in a comprehensive way. He/she can only help if I make my questions clear & known early.
Correct Answer:
True
Question 12
2 out of 2 points
Disaster Plan-Blackout Period: Online courses are guaranteed by unknown forces therefore a
backup plan is never needed.
Correct
Answer:
I must take the personal steps to ensure my alternative emails have been
submitted to the Professor along with my phone number. My group contact is
alive and well! I should also ensure that I made the effort to find out one way or
the other as to whether the Professor called an on site "in house" meeting during
this blackout period.
Question 13
0 out of 2 points
FaceBook: All students are encouraged to sign up for facebook but it is not required.
Correct
Answer:
Advised to because you can sync all your BlackBoard courses to facebook
and share with friends who are taking the same course.
Question 14
2 out of 2 points
Should my email overflow as a result of inactivities or failure to delete

Professor's Updates:
unwanted emails, the student is responsible to call
Correct
Answer: Technical Support below and request a clean up or delete of all emails.
Self-service at https://helpdesk.qc.cuny.edu
Phone at 718-997-4444
In person by visiting us in the Dining Hall, Room 151
Email to help@qc.cuny.edu
All service requests are managed by our call management system (CA service desk). Customers will
be given a call number, followed by an email with the call details once the request for service is
entered in our system.
Visit us at
https://helpdesk.qc.cuny.edu to view FAQs or to log into our self-service portal
where you can search for technology-related answers or open a service request.
Question 15
2 out of 2 points
BlackBoard: Should I have a problem with my Password, Email or accessing the BlackBoard,
I should call
Correct
Answer: Call Technical Support,
Self-service at https://helpdesk.qc.cuny.edu
Phone at 718-997-4444
In person by visiting us in the Dining Hall, Room 151
Email to help@qc.cuny.edu
All service requests are managed by our call management system (CA service desk). Customers will
be given a call number, followed by an email with the call details once the request for service is
entered in our system.
Visit us at
https://helpdesk.qc.cuny.edu to view FAQs or to log into our self-service portal
where you can search for technology-related answers or open a service request.
Question 16
2 out of 2 points
Registration:Each student is responsible to ensure they met the minimium grade requirement
for the class. Given this fact,
Correct Answer:
Both One and Two
Question 17
2 out of 2 points
Online Test Rule: Once an exam (NOT QUIZ) is completed, students must consult with the Professor before
accessing the exam again. Unlike Quizzes, students are free to go in and out without consequences providing
the Quiz is not completed. Once a quiz is completed, the quiz score will be removed if the quiz was started
again. Should a student go back into an EXAM, he or she will automatically remove the score and replace it
with zero. Given this fact,
Correct
Answer:
I am free to go back into my Quiz without the professor's consultation
providing the Quiz is not completed. Once completed the previous quiz score
will be affected. Exam are not accessible but Quiz are.
Response Feedback: Man, I am good!
Question 18
2 out of 2 points
Quiz: The Professor will be really happy

Correct
Answer:
Do each Quiz 3 times at most within the deadline with all my questions ready
for in class discussion or discussion board.
Question 19
2 out of 2 points
Professionalism: The best way to demonstrate this to the Professor is to:
Correct
Answer:
Utilize time shared with the Professor efficienly by asking direct questions.
Show the Professor that I do not want to fall back in the class. Express an
interest and follow the Professors guide "5P" Proper Planning Prevents Poor
Performance!
Question 20
2 out of 2 points
Study Approach: The best study approach:
Correct
Answer:
Follow the Professor's lead, study the slides or the text but not both (if slides is
the main focus then the text book should be used limitedly to clarify your
understanding). Ensure all my questions were cleared via the various sources,
complete all recquired quizzes and HOME WORK (a must) as detailed via the
Syllabus including any update from the Professor.
Question 21
2 out of 2 points
Textbook: The most efficient way to obtain a textbook is
Correct Answer:
All of the above.
Question 22
2 out of 2 points
Online Student (OS): OS are different than the traditional student in that they are
Correct Answer:
All of the above and more
Question 23
2 out of 2 points
Exam Taking; During an exam,
Correct
Answer:
Be prepared to be turned over to the dean's office plus receiving an F if
caught cheating.
Question 24
2 out of 2 points
Binder: A 4" Binder is:

Correct
Answer:
A wise decision to store materials for the course. Each chapter slides can be
printed 3 to a page with discussion notes added to each page on the right plus
any other notes and comments.
Question 25
2 out of 2 points
Questions: Should I have a question

Correct Answer:
Any or all of the above
Question 26
2 out of 2 points
Discussion Board: If I post an anonymous comment to a students Question,

Correct Answer:
No credit will be given to me for a good student to student response.
Question 27
2 out of 2 points
Discussion Board: I should use this method of communicating
Correct
Answer:
Ask my Questions, respond to questions, score participation points for a good
student to student response or meet other classmates and/or group members.
Question 28
2 out of 2 points
First Meeting: I must bring all my Questions with me to my first in class meeting:
Correct Answer:
Ask the Professor my questions
Question 29
2 out of 2 points
Blackout: Should the Blackboard have a blackout, Professionals must

Correct
Answer:
Resort to their syllabus and text books and pay attention to their alternative
emails other that cuny (Extra time will be given to complete Quizzes once the
blackboard is back).
Question 30
2 out of 2 points
Password Quiz & Exams: When in doubt, always use uppercase TERRY
Correct Answer:
To access Quizzes and Exams
Question 31
2 out of 2 points
Emails: All students must have an alternative email other their cuny email an ensure submitted
to the Professor:
Correct
Answer:
To aid in communication in periods of blackboard "blackout/Non-
operational periods"
Question 32
2 out of 2 points
MidTerm & Final: Exams are

Correct Answer:
All Exams are on Campus in a Computer Lab
Question 33
2 out of 2 points
Taking a Test: All students taking a test must:

Correct Answer:
Both statements are correct.
Question 34
2 out of 2 points
Communication Mode: All students must ensure they have access to the blackboardsince
Correct Answer:
Is the Main Communication medium.
Response Feedback: Hey! I am good.
Question 35
1 out of 1 points
Was this Quiz Helpful?
Correct Answer:
Yes, absolutely!
Question 1
2 out of 2 points
Edgar Co. acquired 60% of Stendall Co. on January 1, 2011. During 2011, Edgar made
several sales of inventory to Stendall. The cost and selling price of the goods were $140,000
and $200,000, respectively. Stendall still owned one-fourth of the goods at the end of 2011.
Consolidated cost of goods sold for 2011 was $2,140,000 because of a consolidating
adjustment for intra-entity sales less the entire profit remaining in Stendall's ending
inventory.
How would consolidated cost of goods sold have differed if the inventory transfers had been
for the same amount and cost, but from Stendall to Edgar?
Correct Answer:
Consolidated cost of goods sold would have remained $2,140,000.
Response correct Remains the same since the COGS is already adjusted for intra sales
Feedback:
and unrealized. Regardless, of the sale or URGL...the COGS sold will stay at
its before intercompany sales level.
Question 2
2 out of 2 points
On January 1, 2011, Race Corp. acquired 80% of the voting common stock of Gallow Inc.
During the year, Race sold to Gallow for $450,000 goods which cost $330,000. Gallow still
owned 15% of the goods at year-end. Gallow's reported net income was $204,000, and
Race's net income was $806,000. Race decided to use the equity method to account for this
investment. What was the noncontrolling interest's share of consolidated net income?
Correct Answer:
$40,800.
Response correct The is a downstream sale so no adjustment is required on sub's
Feedback:
NI. Sub's Income = $204,000 * .2 = $40,800 Noncontrolling Interest
Question 3
2 out of 2 points
X-Beams Inc. owned 70% of the voting common stock of Kent Corp. During 2011, Kent made several sales of
inventory to X-Beams. The total selling price was $180,000 and the cost was $100,000. At the end of the year,
20% of the goods were still in X-Beams' inventory. Kent's reported net income was $300,000. What was
the noncontrolling interest in Kent's netincome?
Correct Answer:
$85,200.
Response correct Upstream sales, must adjust net income Markup 80/180 =
Feedback:
44.444% Left in inventory = $180*.20=36 URG = 36*.44444=16 Income
Unadjusted 300 - 16 * .30 = $85,200
Question 4
2 out of 2 points
Norek Corp. owned 70% of the voting common stock of Thelma Co. On January 2, 2010,
Thelma sold a parcel of land to Norek. The land had a book value of $32,000 and was sold
to Norek for $45,000. Thelma's reported net income for 2010 was $119,000. What is
the noncontrolling interest's share of Thelma's net income?
Correct Answer:
$31,800.
Response correct Upstream sale of land, URGains = 45-32=13 Noncontrolling
Feedback:
Interest = $119-13=106*.30=$31,800
Question 5
2 out of 2 points
Bauerly Co. owned 70% of the voting common stock of Devin Co. During 2010, Devin
made frequent sales of inventory to Bauerly. There were unrealized gains of $40,000 in the
beginning inventory, and $25,000 at the end of the year. Devin reported net income of
$137,000 for 2010. Bauerly decided to use the equity method to account for the investment.
What is the noncontrolling interest's share of Devin's net income for 2010?
Correct Answer:
$45,600.
Response correct Again, Upsteam Sales, Gains sits with Sub, + prior Yr - Curr Yr
Feedback:
137+40-25=152*.3=$45,600
Question 6
2 out of 2 points
Gibson Corp. owned a 90% interest in Sparis Co. Sparis frequently made sales of inventory
to Gibson. The sales, which include a markup over cost of 25%, were $420,000 in 2010 and
$500,000 in 2011. At the end of each year, Gibson still owned 30% of the goods. Net
income for Sparis was $912,000 during 2011. What was
the noncontrolling interest's share ofSparis' net income for 2011?
Correct Answer:
$90,720.
Response Again, Upsteam Sales, Gains sit with Sub , + prior YrBeg - Curr YrEnd
Feedback: In Beg Inv - Sales 420, profits = 420 - less cost 420/1.25=336=84*.3=realized gains =
25.2
In End Inv - Sales 500, profits = 500 - less cost 500/1.25=400=100*.3=UNrealized

gains = 30
Net Income 912 + 25.2 -30 = $907.2k*.1=$90,720
Question 7
2 out of 2 points
Pot Co. holds 90% of the common stock of Skillet Co. During 2011, Pot reported sales of
$1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of
$420,000 and cost of goods sold of $252,000. Included in the amounts for Skillet's sales
were Skillet's sales of merchandise to Pot for $140,000. There were no sales from Pot to
Skillet. Intra-entity sales had the same markup as sales to outsiders. Pot still had 40% of the
intra-entity sales as inventory at the end of 2011. What
are consolidated sales and cost ofgoods sold for 2011?
Correct Answer:
$1,400,000 and $974,400.
Response Consol Sales = P1,120,000 S=420,000-Eliminate Intra Sales of 140,000=$1,400,000
Feedback:
Consol CGS =P 840,000 + S134,400 = S 252 - (140 - elim of URG 22.4** ( in ending
inventory @ cost 140 * .4 * .4))
Note: Cost = 252/420=60% then profit margin must be 40%

** Ending Inventory is a negative component of cost of goods sold, Elim the URG will
increase CGS
Question 8
2 out of 2 points
Clemente Co. owned all of the voting common stock of Snider Co. On January 2, 2010,
Clemente sold equipment to Snider for $125,000. The equipment had cost Clemente
$140,000. At the time of the sale, the balance in accumulated depreciation was $40,000. The
equipment had a remaining useful life of five years and a $0 salvage value. Straight-line
depreciation is used by both Clemente and Snider.
At what amount should the equipment (net of depreciation) be included in the consolidated
balance sheet dated December 31, 2010?
Correct Answer:
$80,000.
Response correct Reported Original Values Sale Price is 125 but cost =140 - Acc
Feedback:
Depr 40 = BV 100/5=20 100-20=80k
Question 9
2 out of 2 points
On January 1, 2011, Payton Co. sold equipment to its subsidiary, Starker Corp., for
$115,000. The equipment had cost $125,000, and the balance in accumulated depreciation
was $45,000. The equipment had an estimated remaining useful life of eight years and $0
salvage value. Both companies use straight-line depreciation. On their separate 2011 income
statements, Payton and Starker reported depreciation expense of $84,000 and $60,000,
respectively. The amount of depreciation expense on the consolidated income statement for
2011 would have been
Correct Answer:
$139,625.
Response Intra sales must be restore to historical cost: depreciation is adjusted to historical cost base.
Feedback:
P 84K + adj S55,625 (Unadjusted S Depre 60K - Gains PurPrice115-BV 80 (125-45) =
35gains /8years = $4,375, increase in depreciation as a result of the increase in the asset
base) ---- $139,625 Consolidated
Question 10
0 out of 2 points
Dalton Corp. owned 70% of the outstanding common stock of Shrugs Inc. On January 1,
2009, Dalton acquired a building with a ten-year life for $420,000. No salvage value was
anticipated and the building was to be depreciated on the straight-line basis. On January 1,
2011, Dalton sold this building to Shrugs for $392,000. At that time, the building had a
remaining life of eight years but still no expected salvage value. In preparing financial
statements for 2011, how does this transfer affect the calculation of Dalton's share of
consolidated net income?
Correct Answer:
Consolidated net income must be reduced by $49,000.
Response incorrect : The gains on the sale is 56k which equals the overstatement of the
Feedback:
assets (56 = 392 - 420 - dep 42*2). The correct depreciation should be 420/10
= 42k per year. The new base is 392 and dep on S's books equal 392/8=49k
per year. The overstatement in depre is 49-42=7 or 56/8=7. The question is
asking for the total adjustment Reduce gains by $56, decrease dep/inc income
by 7 for a net adjustment to income of $49k.
Question 11
2 out of 2 points
An intra-entity sale took place whereby the transfer price exceeded the book value of a
depreciable asset. Which statement is true for the year following the sale?
Correct
Answer:
A worksheet entry is made with a debit to investment in subsidiary for a
downstream transfer when the parent uses the equity method.
Response If the transfer is downstream and the parent uses the equity method, then
Feedback:
their Retained Earnings balance has already been reduced for the gain, and
we adjust the Investment account instead
Question 12
2 out of 2 points
An intra-entity sale took place whereby the transfer price was less than the book value of a
depreciable asset. Which statement is true for the year following the sale?
Correct
Answer:
A worksheet entry is made with a credit to investment in subsidiary for a
downstream transfer when the parent uses the equity method.
Question 13
2 out of 2 points
Wilson owned equipment with an estimated life of 10 years when it was acquired for an
original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2010. On
January 1, 2010, Wilson realized that the useful life of the equipment was longer than
originally anticipated, at ten remaining years. On April 1, 2010 Simon Company, a 90%
owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and
for depreciation purposes used the estimated remaining life as of that date. The following
data are available pertaining to Simon's income and dividends:
Compute the gain on transfer of equipment reported by Wilson for 2010.

Correct Answer:
$19,500.
Response Bought @ 80k , Bv is $50k = AccDepre $30k 10yrs Asset or 120 months,
Feedback:
30/80*120 = 45months depreciated. New @ 1/1/2010 is 10 yrs, Depre for 3
months to 4/1/2010 = 50k/10*3=1250 BV 50K - 1,250=48,750 Gains on sale
= $68,250-48,750=$19,500
Question 14
2 out of 2 points
Wilson owned equipment with an estimated life of 10 years when it was acquired for an
original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2010. On
January 1, 2010, Wilson realized that the useful life of the equipment was longer than
originally anticipated, at ten remaining years.
On April 1, 2010 Simon Company, a 90% owned subsidiary of Wilson Company, bought
the equipment from Wilson for $68,250 and for depreciation purposes used the estimated
remaining life as of that date. The following data are available pertaining to Simon's income
and dividends:
Compute the amortization of gain through a depreciation adjustment for 2010 for
consolidation purposes.
Correct Answer:
$1,500.
Response Feedback: Cost
OC 80000 Asset
01/2010 50000 48750 68250
Acc Dep 30000 5000 7000 2000
04/01/2010 5000 Change 10 1500
3mth 1250
Acc Dep 31250 Point of Sale
BV 48750
Sale Price 68250
Profits 19500
Question 15
2 out of 2 points
On January 1, 2010, Smeder Company, an 80% owned subsidiary of Collins, Inc.,
transferred equipment with a 10-year life (six of which remain with no salvage value) to
Collins in exchange for $84,000 cash. At the date of transfer, Smeder's records carried the
equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line
depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2010 and
2011, respectively. All net income effects of the intra-entity transfer are attributed to the
seller for consolidation purposes.
Compute the gain recognized by Smeder Company relating to the equipment for 2010.
Correct Answer:
$12,000.
Response Feedback: correct 84 - (120-48) = 12
Saturday, December 5, 2015 9:55:24 PM EST
Question 1
10 out of 10 points
The following account balances were available for the Perry, Quincy, and Renquist partnership
just before it entered liquidation:
Perry, Quincy, and Renquist had shared profits and losses in a ratio of 2:4:4. Liquidation
expenses were expected to be $8,000.
Assume that Quincy was insolvent and could not contribute assets to cover any deficit in her
capital account. For what amount must the noncash assets have been sold, so that Renquist
would have received some cash from the liquidation?
Selected Answer:
any amount in excess of $108,000.
Correct Answer:
Question 2
10 out of 10 points
The following account balances were available for the Perry, Quincy, and Renquist partnership
just before it entered liquidation:
Perry, Quincy, and Renquist had shared profits and losses in a ratio of 2:4:4. Liquidation
expenses were expected to be $8,000.
All partners were solvent. What would be the minimum amount for which the noncash assets
must have been sold for, in order for Quincy to receive some cash from the liquidation?
Selected Answer:
Correct Answer:
Response correct
Feedback
: Partnership Allocation
P&L Alloc 20% 40% 40% 100%
Name P Q R Total
Cap Bal 70 50 100 220
Loss-NC Assets -23.4 -46.8 -46.8 -117?? Plug
Balance 46.6 3.2 53.2 103 Solvency
Liquidation Exp 1.6 3.2 3.2 8
Balance 45 0 50 95
Alloc Deficit 0 0
Balance 45 0 50 95 Total
Cash Availability NC Assts (Loss)/Gain

Cash 90 300Cost
Sale of NC Assets 183 183Sold
Less: Liq Exp -12 -117Loss Allocated Above
Less: Liabilities -170
Cash for Partners 91
Question 3
0 out of 10 points
Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. Noncash assets were
sold for $180,000. Liquidation expenses were $12,000.
Assume that Lewis was personally insolvent and could not contribute any assets to the
partnership, while Keaton and Meador were both solvent. What amount of cash would Keaton
have received from the distribution of partnership assets?
Selected Answer:
$31,040.
Correct Answer:
$29,333.
Question 4
0 out of 10 points
The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following
account balances:
Estimated expenses of liquidation were $10,000. Henry, Isaac, and Jacobs shared profits and
losses in a ratio of 2:4:4.
Before liquidating any assets, the partners determined the amount of safe cash and distributed it.
The noncash assets were then sold for $120,000, and the liquidation expenses of $10,000 were
paid. How much of the $120,000 would be distributed to Henry?
Selected Answer:
$24,000.
Correct Answer:
$28,667.
Question 5
10 out of 10 points
The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following
account balances:
Estimated expenses of liquidation were $10,000. Henry, Isaac, and Jacobs shared profits and
losses in a ratio of 2:4:4.
Before liquidating any assets, the partners determined the amount of safe cash. To whom should
the safe cash be distributed?
Selected Answer:
$13,333 to Henry and $6,667 to Jacobs.
Correct Answer:
$13,333 to Henry and $6,667 to Jacobs.
Question 6
10 out of 10 points
The Abrams, Bartle, and Creighton partnership began the process of liquidation with the
following balance sheet:
Abrams, Bartle, and Creighton share profits and losses in a ratio of 3:2:5. Liquidation expenses
are expected to be $12,000.
After the liquidation expenses of $12,000 had been paid and the noncash assets sold, Creighton
had a deficit of $8,000. For what amount were the noncash assets sold?
Selected Answer:
$170,000.
Correct Answer:
$170,000.
Respons correct
e
Feedbac Partnership Allocation
k:
P&L Alloc 30% 20% 50% 100%
Name A B C Total
Cap Bal 80 90 130 300
Loss-NC Assets -79.2 -52.8 -132 -264 ?? Plug
Balance 0.8 37.2 -2 36

Liquidation Exp -3.6 -2.4 -6 -12
Balance -2.8 34.8 -8 24 Given

Alloc Deficit 2.8 -10.8 8 0
Balance 0 24 0 24
Cash Availability NC Assts (Loss)/Gain

Cash 16 434Cost
Sale of NC Assets 170 170Sold
Less: Liq Exp -12 -264Loss Allocated Above
Less: Liabilities -150
Cash for Partners 24
Wednesday, September 16, 2015 11:26:58 AM EDT
Question 1
10 out of 10 points
The financial balances for the Atwood Company and the Franz Company as of December
31, 2000, are presented below. Also included are the fair market values for Franz Company's
net assets.
Note: Parenthesis indicate a credit balance

In the following situations, determine the value that would be shown in the consolidated
financial statements for Atwood Company at date of acquisition.
Assume a purchase took place at December 31, 2000. Atwood issued 50 shares of its
common stock with a fair market value of $35 for all of the outstanding common shares of
Franz. Stock issuance costs of $15 and direct costs of $10 were paid. Atwood is applying
the acquisition method in accounting for Franz. To settle a difference of opinion regarding
Franz's fair value, Atwood promises to pay an additional $41,600 to the former owners if
Franz's earnings exceed a certain sum during the next year. Given the probability of the
required contingency payment and utilizing a 4% discount rate, the expected present value
of the contingency is $5.
Compute consolidated inventory at date of acquisition.
Response correct, for consolidation the consolidated assets and liabilities are always
Feedback:
booked at 100% regardless of the % owned since the minority/non owned
piece is shown between LT liability and Equity as Minority Interest. (P =
100%BV + S = 100% FMV ) = 1,230 + 580
Question 2
10 out of 10 points
net assets.

Compute consolidated land at date of acquisition.
Response correct. Again, regardless of % ownership, Assets are always reported at a

Feedback:
100%. BV of P + FMV for S, thus 1800 + 250 = 2050
Question 3
10 out of 10 points
net assets.

Compute consolidated buildings at date of acquisition.
Response correct. Again, regardless of % ownership, Assets are always reported at a

Feedback:
100%. BV of P + FMV for S, thus = 2450
Question 4
10 out of 10 points
net assets.

Compute consolidated goodwill at date of acquisition.
Response correct, under the Acquisition Method you are only allow to pickup the Net Income from date
Feedback: of acquisition i.e., 12/31/2000. (direct & indirect costs are expensed, stock issuance costs is
charged against APIC, both cash or stock contigency costs increase acquisition costs:
however, in event of payment the liability associated with the cash contingency is paid via
cash, the stock contingency is debited to APIC and the stock is issued @ MV, pv + apic) see
page 110 : FYI - MI is based on fair value. Asset & Liab therefore is pickup on the balance
sheet @ (P = 100%BV + S = 100% FMV )
The cost paid is $1.750k (50*35) (Exclude 10 direct costs since it is expensed) + $5
contingency costs. = 1755 -1300 fmv = 455
Question 5
10 out of 10 points
net assets.

Compute consolidated equipment at date of acquisition.
Response Feedback: correct, 100% BV of P and 100 FMV of S

Question 6
10 out of 10 points
net assets.
of the contingency is $5,000.
Compute consolidated retained earnings at date of acquisition.
Response correct, Same as Parent since sub will be eliminated against the
Feedback:
investment
Question 7
10 out of 10 points
net assets.

Compute consolidated revenues at date of acquisition.

Response correct, under the Purchase or Acquisition Method you are only allow to
Feedback:
pickup the Net Income from date of acquisition i.e., 12/31/2000
Question 8
10 out of 10 points
net assets.

of the contingency is $5,000.
Compute consolidated expenses at date of acquisition.
Response correct, under the Acquisition Method you are only allow to pickup the Net
Feedback:
Income from date of acquisition i.e., 12/31/2000. (direct & indirect costs are
expensed, stock issuance costs is charged against APIC, both cash or stock
contigency costs increase acquisition costs: however, in event of payment the
liability associated with the cash contingency is paid via cash, the stock
contingency is debited to APIC and the stock is issued @ MV, pv + apic) see
page 110 : FYI - MI is based on fair value. Asset & Liab therefore is pickup
on the balance sheet @ (P = 100%BV + S = 100% FMV )
Question 9
10 out of 10 points
net assets.
Compute the investment cost at date of acquisition.
Response correct correct, Acquisition Method vs Purchase Method (AM vs PM)different

Feedback:
in several ways. One diff. is AM includes the earnings contingency costs as
acquisition costs while PM treats as goodwill costs. The cost paid is $1.750k
(50*35) (Exclude 10 direct costs since it is expensed) + $5 contingency costs.
= 1755 -1300 fmv = 455
Question 10
10 out of 10 points
Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January
1, 2003. To obtain these shares, Flynn pays $400,000 and issues 10,000 shares of $20 par
value common stock on this date. Flynn's stock had a fair market value of $36 per share on
that date. Flynn also pays $15,000 to a local investment firm for arranging the acquisition.
An additional $10,000 was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 2003 follow. The fair market
value of each of Flynn and Macek accounts is also included. In addition, Macek holds a fully
amortized trademark that still retains a $40,000 value. The figures below are in thousands.
Assume that this combination is accounted for using the purchase method.
What amount will be reported for goodwill?

Response correct. Under the purchased method, direct costs is included with acquisition
Feedback:
costs and stock issuance costs reduced the APIC. Total Investment
(400+(10k*36=360)=760+ 15 direct costs - % net FMV (665 + 40) = 70
Question 11
10 out of 10 points
What amount will be reported for consolidated receivables?
Response Feedback: correct, 100% Ps BV and 100% Ss % FMV

Question 12
10 out of 10 points
What amount will be reported for consolidated inventory?

Question 13
10 out of 10 points
What amount will be reported for consolidated buildings (net)?

Question 14
10 out of 10 points
What amount will be reported for consolidated equipment (net)?

Question 15
10 out of 10 points
What amount will be reported for consolidated long-term liabilities?
Response correct, liabilities no different than assets, 100% BV for P + 100% FMV
Feedback:
for S
Question 16
10 out of 10 points
What amount will be reported for consolidated common stock?
Response correct, Same as discussed as P, 1200 + 200 issued for the puchase =
Feedback:
1400
Question 17
10 out of 10 points
What amount will be reported for consolidated retained earnings?

Question 18
10 out of 10 points
What amount will be reported for consolidated additional paid-in capital?
Response Feedback: correct, 10k * (36-20) = 160k - stock issuance costs 10k = $150k
Question 19
10 out of 10 points
What amount will be reported for consolidated cash after the purchase transaction?
Response correct, same 100% asset rule (980)-400 part of purchase costs - 15 for
Feedback:
direct costs and 10 for stock issuance costs
Question 20
10 out of 10 points
Direct combination costs and stock issuance costs are often incurred in the process of
making a controlling investment in another company. How should those costs be accounted
for in a Purchase transaction?
Question 21
10 out of 10 points
What is the primary accounting difference between purchase accounting when the
subsidiary is dissolved and when the subsidiary retains its incorporation?

Question 22
10 out of 10 points
In a pooling of interests,

Question 23
10 out of 10 points
How are stock issuance costs and direct consolidation costs treated in a business
combination which is accounted for as a purchase, when the subsidiary will retain its
incorporation?

Question 24
10 out of 10 points
Which of the following is a reason for a business combination to take place?
Question 1
10 out of 10 points
Which one of the following accounts would not appear on the consolidated financial
statements at the end of the first fiscal period of the combination?
Response correct, as noted before, Investment in sub will be eliminated against sub
Feedback:
equity to avoid double counting also from common sense point of view, we
pick up the all of the net assets and report MI
Question 2
10 out of 10 points
Which of the following internal record-keeping methods can a parent choose to account for a
subsidiary acquired in a purchase transaction or acquisition Method?
Response correct, again, three methods if the parent has control. If Significant
Feedback:
Influence then APB 18, equity method only.
Question 3
10 out of 10 points
Which one of the following varies between the equity, cost, and partial equity methods of
accounting for an investment?
Response correct, the investment is not affect for cost unless in a liquidating dividend
Feedback:
situation. The investment fully updated for all changes in subs equity under the
Equity method. Partial will depend on what the company policy for the
investment account calls for. Under all three method, however, the account
must be up to date for consolidation.
Question 4
10 out of 10 points
Under the partial equity method, the parent recognizes income when
Response correct, it is safe to assume under the partial method that income/loss are
Feedback:
picked up in the investment account: however, all others must be detailed by
the questions/company policy.
Question 5
10 out of 10 points
Push-down accounting is concerned with the
Response correct,Push down accounting simply suggests to restate the actual subsidiary
Feedback:
books to FMV after acquisition. So, Goodwill will be on Subs books instead
of parent and SUBS net assets will be all written up or down to FMV.
Question 6
10 out of 10 points
Jansen Inc. bought all of the outstanding common stock of Merriam Co. on January 1, 2007,
for $257,000. Annual amortization of $19,000 resulted from this purchase. Jansen reported
net income of $70,000 in 2007 and $50,000 in 2008 and paid $22,000 in dividends each
year. Merriam reported net income of $40,000 in 2007 and $47,000 in 2008 and paid
$10,000 in dividends each year. What is the Investment in Merriam Co. balance on Jansen's
books as of December 31, 2008, if the equity method has been applied?
Response correct, EM = 257K Investment, Increased by 29=(40+47-10-10-19-19)=

Feedback:
286k
Question 7
10 out of 10 points
Velway Corp. purchased Joker Inc. on January 1, 2008. The parent paid more than the fair
market value of the subsidiary's net assets. On that date, Velway had equipment with a book
value of $500,000 and a fair market value of $640,000. Joker had equipment with a book
value of $400,000 and a fair market value of $470,000. Joker decided to use push-down
accounting. Immediately after the acquisition, what Equipment amount would appear
on Joker's separate balance sheet and on the consolidated balance sheet?
Response correct, again, consolidated assets = 100% Parent BV + % FMV of Sub =

Feedback:
(500+470) = 970k, pushed down accounting will force the sub to changed its
basis of assets and liability to FMV and established purchased Goodwill on its
books
Question 8
10 out of 10 points
On January 1, 2008, Cale Corp. paid $1,020,000 to purchase Kaltop Co. Kaltop maintained
separate incorporation. Cale used the equity method to account for the investment. The
following information is available for Kaltop's assets, liabilities, and stockholders' equity
accounts:
Kaltop earned net income for 2008 of $126,000 and paid dividends of $48,000 during the
year.
If Cale Corp. had net income of $444,000, exclusive of the investment, what is the amount
of consolidated net income?
Response Feedback: correct, P-444 + S126+1= -1.4=(268-240/20)+2.4=(516-540/10))
Question 9
10 out of 10 points
Jans Inc. purchased all of the outstanding common stock of Tysk Corp. on January 1, 2006,
for $372,000. Equipment with a ten-year life was undervalued on Tysk's financial records by
$46,000. Tysk also owned an unrecorded customer list with an assessed fair value of
$67,000 and an estimated remaining life of five years.
Tysk earned reported net income of $180,000 in 2006 and $216,000 in 2007. Dividends of
$70,000 were paid in each of these two years. Selected account balances as of December 31,
2008, for the two companies follow.
If the equity method had been applied, what would be the Investment in Tysk Corp. account
balance within the records of Jans at the end of 2008?
Response correct, Investment 372 + Inc (180+216+240) - Div (70+70+70) -

Feedback:
(18+18+18), 18= 67/5 + 46/10
Question 10
10 out of 10 points
Under the partial equity method,
Response Feedback: correct, only the income/loss is addressed

Question 11
10 out of 10 points
Which of the following statements is false regarding push-down accounting?
Response correct, Push down accounting calls for the subs assets and liability to be
Feedback:
written up/down based on FMV and to book goodwill instead of doing this on
the Work Papers. The JE - Debit/Credit to Asset/Liability on one side and +/-
Equity/Revaluation on the other side of the Push Down entry. The effects are
all true as listed. If the subs assets/liability are written up/down then there is no
need to make the FMV ADJ as part of consolidation entries. It is not used
under the outdated POOLING OF INTEREST
Question 12
10 out of 10 points
Kaye Company acquired 100% of Fiore Company on January 1, 2008. Kaye paid $1,000
excess cost over book value which is being amortized at $20 per year. Fiore reported net
income of $400 in 2008 and paid dividends of $100.
Assume the equity method is applied. How much will Kaye's income increase or decrease as
a result of Fiore's operations?
Response correct, income pickup is after the adjustment. The FMV changes causes
Feedback:
income to be reduced by the increased depreciation/amortization as a result of
the asset basis increase.
Question 13
10 out of 10 points
Kaye Company acquired 100% of Fiore Company on January 1, 2003. Kaye paid $1,000
excess cost over book value which is being amortized at $20 per year. Fiore reported net
income of $400 in 2003 and paid dividends of $100.
Assume the partial equity method is used. In subsequent years, what additional worksheet
entry must be made for consolidation purposes versus the equity method?

Question 14
10 out of 10 points
Following are selected accounts for Green Corporation and Vega Company as of December
31, 2003. Several of Green's accounts have been omitted.
Green purchased 100% of Vega on January 1, 1999, by issuing 10,500 shares of its $10 par
value common stock with a fair market value of $95. On January 1, 1999, Vega's land was
undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was
undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year
life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life.
Compute the book value of Vega at January 1, 1999.
Response correct,WORK BACKWORDS Purchase Price represents FMV +

Feedback:
GOODWILL. If there is no GW as in this case then PP = FMV of assets and
liabilities. Undo the write up/down to get back to BV.
PP=10,500*95=$997,500 - 40K + 30K -80K -50K =857.5K
Question 15
10 out of 10 points
Following are selected accounts for Green Corporation and Vega Company as of December
31, 2003. Several of Green's accounts have been omitted.
Green purchased 100% of Vega on January 1, 1999, by issuing 10,500 shares of its $10 par
value common stock with a fair market value of $95. On January 1, 1999, Vega's land was
undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was
undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year
life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life.
Compute the December 31, 2003, consolidated common stock.
Response correct, as discussed, after consolidation certain accounts are predictable.

Feedback:
Equity sections must be the same as parent since the Sub's equity is 100%
eliminated via (Minority Interest and Majority Interest). Investment account
must be -0- and GW must be established if present and pushed down was not
used.
Question 16
10 out of 10 points
One company acquires another company in a combination accounted for as a purchase. The
acquiring company decides to apply the cost method in accounting for the combination.
What is one reason the acquiring company might have made this decision?
Response correct, less qualified accountant can handle since it is simply, less time is
Feedback:
spend in accounting as a result cost of accounting is less and/or investment
activities could be minimum so year end adjustments to the investment may
be deem sufficient.
Question 17
10 out of 10 points
How is the cost of an intangible asset allocated to expense, when the asset has no legal,
regulatory, contractual, competitive, economic, or other factors that limit its life?

Question 18
10 out of 10 points
Harrison, Inc. acquires 100% of the voting stock of Rhine Company on January 1, 2007 for
$400,000 cash. A contingent payment of $16,500 will be paid on April 15, 2008 if Rhine
generates cash flows from operations of $27,000 or more in the next year. Harrison
estimates that there is a 20% probability that Rhine will generate at least $27,000 next year,
and uses an interest rate of 5% to incorporate the time value of money. The fair value of
$16,500 at 5%, using a probability weighted approach, is $3,142.
Under SFAS 141, what will Harrison record as the acquisition price on January 1, 2007?
Response correct, under the purchase method, $400k is the acquisition price. If the
Feedback:
income bet is lost, then the GW is adjusted at such time.
Question 19
10 out of 10 points
Assuming Rhine generates cash flow from operations of $27,200 in 2007, how will Harrison
record the $16,500 payment of cash on April 15, 2008 according to SFAS 141?
Response correct, shareholders of Rhine bets Parent that their company will generate
Feedback:
better cash flow as a result they need compensation if they surrender their
shares to allow the deal. They did and won the bet. The Parent must now
honor the payout. Under the purchase method this will be increase to
Goodwill. Under the Acquisition Method, the PV at the time of the bet will be
included in acquisition Costs.
Question 20
10 out of 10 points
Under the FASB Exposure Draft, Business Combinations, what will Harrison record as the
acquisition price on January 1, 2007?
Response correct, shareholders of Rhine bets Parent that their company will generate
Feedback:
better cash flow as a result they need compensation if they surrender their
shares to allow the deal. They did and won the bet. The Parent must now
honor the payout. Under the purchase method this will be increase to
Goodwill. Under the Acquisition Method, the PV at the time of the bet will be
included in acquisition Costs.
Question 21
10 out of 10 points
Prince Company purchases Duchess, Inc. on January 1, 2007. The purchase price exceeds
the fair value of Duchess' net assets. On that date, Prince has a building with a book value of
$1,200,000 and a fair value of $1,500,000. Duchess has a building with a book value of
$400,000 and fair value of $500,000.
If push-down accounting is not used, what amounts in the Building account appear on
Duchess' separate balance sheet and on the consolidated balance sheet immediately after
acquisition?
Response correct, again, consolidated assets = 100% Parent BV + % FMV of Sub =

Feedback:
(500k+1.2m) = 1.7m, pushed down accounting will force the sub to changed
its basis of assets and liability to FMV and established purchased Goodwill on
its books
Question 22
10 out of 10 points
Watkins, Inc. obtains all of the outstanding stock of Glen Corporation on January 1, 2005.
At that date, Glen owns only three assets and has no liabilities:
If Watkins pays $450,000 in cash for Glen, what allocation should be assigned to the
subsidiary's Equipment account in a December 31, 2007, consolidation, assuming there are
no acquisitions or disposals in buildings and equipment?
Response correct, the equipment was overstated by 5k so the depreciation per a year
Feedback:
will be $500 * 3 = $1,500 to be added back since it was overstated, 75k
+1.5k = 76.5k
Question 23
10 out of 10 points
Watkins, Inc. obtains all of the outstanding stock of Glen Corporation on January 1, 2005.
At that date, Glen owns only three assets and has no liabilities:
If Watkins issued common stock valued at $410,000 for Glen, rather than paying cash, in a
pooling of interests on June 15, 1999, what allocation should be assigned to the subsidiary's
Equipment account in a December 31, 2007, consolidation, assuming no acquisitions or
disposals in buildings or equipment?
Response Feedback: correct, BV=80k
Question 1
2 out of 2 points
Which of the following are not authoritative pronouncements of International Financial

Reporting Standards (IFRSs)?
1) International Financial Reporting Standards issued by the IASB
2) International Accounting Standards issued by the IASC and adopted by the IASB
3) Intrepretations originated by the International Financial Reporting Interpretations
Committee (IFRIC)
4) U.S. Generally Accepted Accounting Principles
Correct Answer:
4 only.
Response correct
Feedback:
AACSB: Diversity
AICPA BB: Global
AICPA FN: Research
Blooms: Knowledge
Difficulty: Medium
Learning Objective: 11-03 List the authoritative pronouncements that
constitute International Financial Reporting Standards (IFRS).
Question 2
2 out of 2 points
What international organization currently promulgates IFRS?

Correct Answer:
IASB.
Response correct
Feedback:
AACSB: Diversity
AICPA BB: Global
AICPA FN: Reporting
AICPA FN: Research
Blooms: Knowledge
Difficulty: Medium
Question 3
2 out of 2 points
Which of the following is not true about IFRS?

Correct Answer:
IFRS includes only pronouncements issued by the IASB.
Response correct
Feedback:
AACSB: Diversity
AICPA BB: Global
AICPA FN: Reporting
Blooms: Knowledge
Difficulty: Medium
Question 4
2 out of 2 points
In countries where there is less pressure for public accountability and information
disclosure:
Correct
Answer:
information needs can be satisfied by requesting information from internal
company sources.
Response correct
Feedback:
AACSB: Diversity
AICPA BB: Global
AICPA FN: Reporting
Blooms: Knowledge
Difficulty: Medium
Learning Objective: 11-01 Explain the major factors influencing the
international development of accounting systems.
Question 5
2 out of 2 points
In countries of Latin America:

Correct Answer:
accounting standards emphasize accounting for high inflation situations.
Response correct
Feedback:
AACSB: Diversity
AICPA BB: Global
AICPA FN: Reporting
Blooms: Knowledge
Difficulty: Easy
Question 6
2 out of 2 points
Which of the following statements is false regarding a country's legal system?

Correct Answer:
Common law originated in the Roman jus civile.
Response correct
Feedback:
AACSB: Diversity
AICPA BB: Global
AICPA BB: Legal
Blooms: Knowledge
Difficulty: Medium
Question 7
2 out of 2 points
Which of the following statements is false regarding providers of financing?

Correct
Answer:
Disclosures are less extensive in those countries financed primarily by
stock.
Response correct
Feedback:
AACSB: Diversity
AICPA BB: Global
AICPA FN: Reporting
Difficulty: Medium
Question 8
2 out of 2 points
The following information pertains to inventory held by a company at December 31, 2011.
As a result of inventory loss, what is the difference in income between reporting using U.S.
GAAP and IFRS?
Correct Answer:
IFRS income is $1,000 higher.
Response U.S. GAAP loss is $5,000 and IFRS loss is $4,000 which results in IFRS
Feedback:
income being $1,000 higher.
AACSB: Analytic
AACSB: Diversity
AICPA BB: Global
Blooms: Application
Difficulty: Hard
Learning Objective: 11-07 Determine the impact that specific differences
between IFRS and U.S. GAAP have on the measurement of income and
stockholders equity.
Question 9
2 out of 2 points
A company acquired a new piece of equipment on January 1, 2009 at a cost of $200,000.

The equipment is expected to have a useful life of 10 years, a residual value of $20,000 and
is depreciated on a straight-line basis. On January 1, 2011, the equipment was appraised and
determined to have a fair value of $190,000 and a residual value of $25,000 and a remaining
useful life of 10 years.
At what amount should the equipment be reported on the December 31, 2011 balance sheet
under the IFRS revaluation model?
Correct Answer:
$173,500
Response Under the IFRS IAS 16 revaluation model, on January 1, 2011 the equipment
Feedback:
would be revalued to $190,000 fair value. The new depreciation would be
(190,000-25,000)/10 years or $16,500 per year. The equipment would be
reported at $190,000-$16,500 = $173,500.
AACSB: Analytic
AACSB: Diversity
AICPA BB: Global
Blooms: Application
Difficulty: Hard
Learning Objective: 11-06 Recognize acceptable accounting treatments under
IFRS and identify key differences between IFRS and U.S. GAAP.
Question 1
10 out of 10 points
Gunther Co. established a subsidiary in Mexico on January 1, 2007. The subsidiary engaged
in the following transactions during 2007:
What amount of foreign exchange gain or loss would have been recognized on
Gunther's consolidated income statement for 2007?
Correct Answer:
$250,000 loss.
Response Feedback: Income TM
Sales 12,000,000
(8,000,000)
2,000,000
COGS (6,000,000)
NI 6,000,000 0.18 1080000
BS
Cash 5,000,000
Sales 12,000,000
Purch (8,000,000)
Equip (1,000,000)
Ending Cash 8,000,000
Cash 8,000,000 0.16 1280000

Equip 1,000,000 0.19 190000
Ending 2,000,000 0.18 360000
Total 11,000,000 1 1,830,000
CS 5,000,000 0.2 1000000
Ni 6,000,000 0.18 1080000
Equity 11,000,000 2080000
Loss 250,000
Question 2
10 out of 10 points
Which of the following translation methods was originally mandated by SFAS No. 8?
Correct Answer:
Temporal Method.
Question 3
10 out of 10 points
Westmore, Ltd. is a British subsidiary of a U.S. company. Westmore's functional currency is

the pound sterling. The following exchange rates were in effect during 2007:
On December 31, Westmore had accounts receivable of 280,000. What amount would have
been included for this subsidiary in calculating consolidated accounts receivable?
Correct Answer:
$451,613.
Response Functional currency is pound sterling: You must translate from FC to US via Translation,
Feedback: current rate method. Current rate = $1 = .620 pd sterling. or 1/.620 = 1.6129032 * 280,000
= $451,613
Question 4
10 out of 10 points
A U.S. company's foreign subsidiary had the following amounts in stickles () in 2007:
The average exchange rate during 2007 was $.96 = 1. The beginning inventory was acquired when the
exchange rate was $1.20 = 1. The ending inventory was acquired when the exchange rate was $.90 = 1. The
exchange rate at December 31, 2007 was $.84 = 1. Assuming that the foreign country had a highly
inflationary economy, at what amount should the foreign subsidiary's cost of goods sold have been reflected in
the U.S. dollar income statement?
Correct Answer:
$11,613,600.
Response Feedback: In a highly inflationary economy, you must use the Temporal method
Beginning Inventory 240 * rate at that date 1.20 = 288,000
Purchase 12,360, 000 * 0.96 average for the year = 11,865,600

Available for sale 12,600,000 = 12,153,600
Ending 600,000 * BalanceSheet HR .90 = 540,000
COGS = 11,613,600
Question 5
10 out of 10 points
A net asset balance sheet exposure exists and the foreign currency depreciates. Which of the
following statements is true?
Correct Answer:
There is a negative translation adjustment.
Question 6
10 out of 10 points
Which method of translating a foreign subsidiary's financial statements is correct?

Correct Answer:
Current rate method.
Question 7
10 out of 10 points
The following inventory balances for 2007 in local currency units (LCU) are given:
Compute the December 31, 2007, inventory balance using the lower of cost or market
method under the temporal method.
Correct Answer:
$429,000.
Response Temporal method uses the current rate for current assets. We will apply then the CR to
Feedback: inventory, 12/31; however, when the LCM is applied, the last quarter average rate is use.
This is a except under the TM. So, 1.43 * lower of cost or market is 300k = 429,000
Question 1
10 out of 10 points
Norton Co., a U.S. corporation, sold inventory on December 1, 2007, with payment of
10,000 British pounds to be received in sixty days. The pertinent exchange rates were as
follows:
For what amount should Sales be credited on December 1?
17,241
Response Feedback: correct (1.7241*10,000)
Question 2
10 out of 10 points
follows:
What amount of foreign exchange gain or loss should be recorded on December 31?
Response correct - This is a receivable, decreasing rate leads to a loss. It means you
Feedback:
will collect less than sale price. Price sold @ $18,182-$17,241 = $941 Gain,
rate increased.
Question 3
10 out of 10 points
follows:
What amount of foreign exchange gain or loss should be recorded on January 30?
Response correct - This is a receivable, decreasing rate leads to a loss. It means you
Feedback:
will collect less than sale price. Price sold @ $18,182-$16,667 = $1,515
Gain, rate increased.
THIS IS INCORRECT
Question 4
10 out of 10 points
Brisco Bricks purchases raw material from its foreign supplier, Bolivian Clay, on May 8.
Payment of 2,000,000 foreign currency units (FC) is due in 30 days. May 31 is Brisco's
fiscal year-end. The pertinent exchange rates were as follows:
For what amount should Brisco's Accounts Payable be credited on May 8?
2,500,000
Question 5
10 out of 10 points
Brisco Bricks purchases raw material from its foreign supplier, Bolivian Clay, on May 8.
Payment of 2,000,000 foreign currency units (FC) is due in 30 days. May 31 is Brisco's
fiscal year-end. The pertinent exchange rates were as follows:
How much Foreign Exchange Gain or Loss should Brisco record on May 31?
20,000 Loss
Question 6
10 out of 10 points
A U.S. company buys merchandise from a foreign company denominated in U.S. dollars.
Which of the following statements is true?
No forging exchange gain or loss will result

Question 7
10 out of 10 points
SFAS 133 provides guidance for hedges of all the following sources of foreign exchange
risk except
Deferred foreign currency gains and losses

Question 8
10 out of 10 points
A company has a discount on a forward contract for an asset. How is the discount
recognized over the life of the contract?

Question 9
10 out of 10 points
Which of the following statements is true concerning hedge accounting?
Response Hedges of foreign currency firm commitments are used for future
Feedback:
sales or purchases.
Question 10
0 out of 10 points
On December 1, 2007, Keenan Company, a U.S. firm, sold merchandise to Velez Company
of Spain for 150,000 euro. Payment is due on February 1, 2008. Keenan entered into a
forward exchange contract on December 1, 2007, to deliver 150,000 euro on February 1,
2008 for $.97. Keenan chose to use a foreign currency option to hedge this foreign currency
asset designated as a cash flow hedge. Relevant exchange rates follow:
Compute the value of the foreign currency option at December 31, 2007.
Response Feedback: incorrect ($0.04*150,000=$6,000)

Question 11
10 out of 10 points
Angela, Inc., a U.S. company, had a euro receivable from exports to Spain and a British
pound payable resulting from imports from England. Angela recorded foreign exchange gain
related to both its euro receivable and pound payable. Did the foreign currencies increase or
decrease in dollar value from the date of the transaction to the settlement date?

Question 12
0 out of 10 points
On October 1, 2007, Eagle Company forecasts the purchase of inventory from a British
supplier on February 1, 2008, at a price of 100,000 British pounds. On October 1, 2007,
Eagle pays $1,800 for a three-month call option on 100,000 pounds with a strike price of
$2.00 per pound. The option is considered to be a cash flow hedge of a forecasted foreign
currency transaction. On December 31, 2007, the option has a fair value of $1,600. The
following spot exchange rates apply:
What journal entry should Eagle prepare on October 1, 2007?

Question 13
0 out of 10 points
On October 1, 2007, Eagle Company forecasts the purchase of inventory from a British
supplier on February 1, 2008, at a price of 100,000 British pounds. On October 1, 2007,
Eagle pays $1,800 for a three-month call option on 100,000 pounds with a strike price of
$2.00 per pound. The option is considered to be a cash flow hedge of a forecasted foreign
currency transaction. On December 31, 2007, the option has a fair value of $1,600. The
following spot exchange rates apply:
What journal entry should Eagle prepare on December 31, 2007?

Question 14
Needs Grading
What is meant by the term hedging?

is an invement that protects your asstes from taking a downfall in its price. Like taking an insurance policy on
your home
Response Feedback: [None Given]

Question 15
Needs Grading
How is the fair value of a Forward Contract determined under SFAS 133?
The fair value of a Forward Contract is determined by comparing the difference between thecontracted
forward rate and the currently available forward rate for contracts expiring on the same date.On the
initial date of the contract, this would result in a fair value of $0. As time passes, the currentlyavailable
forward rate will likely fluctuate relative to the fixed contracted forward rate, creating adifference
that must be accounted for as a gain or loss on the forward contract. A contract with a net gainover its
life is recorded on the balance sheet as a Forward Contract Asset. A contract with a net loss overits life
is recorded on the balance sheet as a Forward Contract Liability

Question 16
Needs Grading
How does a foreign currency forward contract differ from a foreign currency option?
Foreign currency option: An option which gives the owner the right to buy or sell the
indicated amount of foreign currency at a specified price before a specific date.
Foreign currency forward: In currency forward contract, the contract holders are obligated
to buy or sell the currency at a specified price, at a specified quantity and on a specified
future date. These contracts cannot be transferred

Question 17
Needs Grading
Old Colonial Corp. (a U.S. company) made a sale to a foreign customer on September 15,
2006, for 100,000 stickles. Payment was received on October 15, 2006. The following
exchange rates applied:
Required:
Prepare all journal entries for Old Colonial Corp. in connection with this sale assuming that
the company closes its books on September 30 to prepare interim financial statements.
Question 1
10 out of 10 points
Select True (T) or False (F) for each of the following statements:
False - A parent will recognize a gain or loss if it sells a portion of its investment in a subsidiary and maintains
control after the sale.
False - A parent sells a portion of its investment in a subsidiary and no longer maintains control. This sale of
shares represents a remeasurement event for the investee.
True - International financial reporting standards (IFRS) allow an option to value the noncontrolling interest
with goodwill or to value the noncontrolling interest without goodwill.
False - Consolidated net income represents the combined net income of the parent and subsidiary after
subtracting the noncontrolling interest in the net income of the subsidiary.
True - The total acquisition-date fair value of an acquired firm is the sum of the fair value of the controlling
interest and the fair value of the noncontrolling interest.
True - When control of a subsidiary is acquired on a date other than the first day of a fiscal year, excess
amortization expenses are pro-rated to include only the post-acquisition period.
False - For a mid-year acquisition following an equity method investment of the same company, the
consolidated income statement will report consolidated revenues and expenses for the entire year.
True - In a step acquisition where the parent previously held a noncontrolling interest in the acquired firm, the
parent remeasures the prior interest to fair value.
False - When a parent has control over a subsidiary with less than 100 percent ownership, and thereafter
increases its ownership, the parent remeasures the prior interest to fair value.
Correct Answer:
Agree!
Question 2
10 out of 10 points
McLaughlin, Inc. acquires 70 percent of Ellis Corporation on September 1, 2010, and an additional 10 percent
on November 1, 2011. Annual amortization of $8,400 attributed to the controlling interest relates to the first
acquisition. Ellis reports the following figures for 2011:
Without regard for this investment, McLaughlin earns $480,000 in net income ($840,000 revenues less
$360,000 expenses; incurred evenly through the year) during 2011.
Required: Prepare a schedule of consolidated net income and apportionment to noncontrolling and controlling
interests for 2011.
Correct Answer:
$39,100
Response
Feedback:
* Amortization of $12,000 = original $8,400 for 70% grossed up to the 100% amount of
$12,000.
Question 3
10 out of 10 points
On January 1, 2010, Jannison Inc. acquired 90% of Techron Co. by paying $477,000 cash.
There is no active trading market for Techron stock. Techron Co. reported a Common Stock
account balance of $140,000 and Retained Earnings of $280,000 at that date. The fair value
of Techron Co. was appraised at $530,000. The total annual amortization was $11,000 as a
result of this transaction. The subsidiary earned $98,000 in 2010 and $126,000 in 2011 with
dividend payments of $42,000 each year. Without regard for this investment, Jannison had
income of $308,000 in 2010 and $364,000 in 2011. Use the economic unit concept to
account for this acquisition.
What is the noncontrolling interest balance as of December 31, 2011?

Correct Answer:
$64,800
Response Feedback:
Question 4
2 out of 2 points
When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a
book value of $70,000 and a fair value of $100,000. What is the amount of excess land
allocation attributed to the noncontrolling interest at the acquisition date?
Correct Answer:
$7,500.
Response correct - Acquisition - FMV method - (100k fmv-70k bv) = 30k * .25 =
Feedback:
$7,500
Question 5
2 out of 2 points
Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2010 when Park's book
value was $560,000. The Royce stock was not actively traded. On the date of acquisition,
Park had equipment (with a ten-year life) that was undervalued in the financial records by
$140,000. One year later, the following selected figures were reported by the two
companies. Additionally, no dividends have been paid.
What is the noncontrolling interest's share of the subsidiary's net income for the year ended
December 31, 2011 and what is the ending balance of the noncontrolling interest in the
subsidiary at December 31, 2011?
Correct Answer:
$50,400 and $330,400.
Response Income - 560-420=140 - (140/10=14) =126*.4=$50,400 Investment Bal -
Feedback:
420/.6=700*.4=280k + 50.4k = $330,400
Question 6
2 out of 2 points
Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. Demers
reported common stock of $300,000 and retained earnings of $210,000 on that date.
Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each
having a 10-year remaining life. Any excess consideration transferred over fair value was
attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not
been impaired.
Demers earns income and pays dividends as follows:
Assume the equity method is applied.
Compute the noncontrolling interest in Demers at December 31, 2010.

Correct Answer:
$135,600.
Response correct - FMV @ 100% = 500/.80=625*0.2=125 + 12(Equity (100-40)*.2) -
Feedback:
1.4k ADJ Depreciatin (70/10=7*.2=1.4k) = $135,600
Question 7
2 out of 2 points
Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. Demers
reported common stock of $300,000 and retained earnings of $210,000 on that date.
Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each
having a 10-year remaining life. Any excess consideration transferred over fair value was
attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not
been impaired.
Demers earns income and pays dividends as follows:
Assume the equity method is applied.
Compute Pell's investment in Demers at December 31, 2010.

Correct Answer:
$542,400.
Response correct - 500 + 48(Equity (100-40)*.8) - 5.6k ADJ Depreciatin
Feedback:
(70/10=7*.8=5.6k) = $542,400
Question 8
2 out of 2 points
Parsons Company acquired 90% of Roxy Company several years ago and recorded goodwill
of $200,000 at that date. During 2013 an analysis of the fair value of Roxy's assets
determined an impairment of goodwill in the amount of $50,000. At what amount would
consolidated goodwill be reported for 2013?
Correct Answer:
$150,000.
Question 9
2 out of 2 points
Parsons Company acquired 90% of Roxy Company several years ago and recorded goodwill
of $200,000 at that date. During 2013 an analysis of the fair value of Roxy's assets
determined an impairment of goodwill in the amount of $50,000.
What journal entry would be made by Parsons regarding the impairment of goodwill?
Correct Answer:
Journal entry C.
Response correct A two step process that requires to test if goodwill decreased. If there
Feedback:
is a decrease, move to the second step by calculating it. Dr. Impairment loss
and Cr. the Investment/Asset for the decrease. You can write down an
investment but once written down you cannot write up later if the asset
regains value.
Question 10
Needs Grading
McLaughlin, Inc. acquires 70 percent of Ellis Corporation on September 1, 2010, and an

additional 10 percent on November 1, 2011. Annual amortization of $8,400 attributed to the
controlling interest relates to the first acquisition. Ellis reports the following figures for
2011:
Without regard for this investment, McLaughlin earns $480,000 in net income ($840,000
revenues less $360,000 expenses; incurred evenly through the year) during 2011.
Required: Prepare a schedule of consolidated net income and apportionment to
noncontrolling and controlling interests for 2011.
Correct Answer:
* Amortization of $12,000 = original $8,400 for 70% grossed up to the

100% amount of $12,000.
Response [None Given]
Feedback:
Question 11
2 out of 2 points
McGuire company acquired 90 percent of Hogan Company on January 1, 2010, for
$234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders'
equity consisted of common stock of $160,000 and retained earnings of $80,000. An
analysis of Hogan's net assets revealed the following:
Any excess consideration transferred over fair value is attributable to an unamortized patent
with a useful life of 5 years.
The acquisition value attributable to the noncontrolling interest at January 1, 2010 is:
Correct Answer:
$26,000.
Response correct 90% 1/1/2010 =234,000
Feedback:
100%=234,000/.9=260,000*.10=$26,000
Question 12
2 out of 2 points
In measuring noncontrolling interest at the date of acquisition, which of the following

would not be indicative of the value attributed to the noncontrolling interest?
Correct Answer:
Book value of subsidiary net assets.
Response Feedback: correct This was the used under the Purchase Method previously
Question 13
2 out of 2 points
For business combinations involving less than 100 percent ownership, the acquirer
recognizes and measures all of the following at the acquisition date except:
Correct Answer:
liabilities assumed, at book value.
Response Feedback: correct Acquisition
Question 14
10 out of 10 points
A noncontrolling interest is most likely to be shown as part of equity under the

Correct Answer:
economic unit concept
Response Currently under the Acquisition Method the FMV under FASB 160 is used;
Feedback:
however, under the purchase method MI was measured using three
method...PARENT using sub's BV reported after liabilities but before equity.
The ECONOMIC UNIT CONCEPT was later recommended similar to the
current FMV assessment. The PROPORTIONATE CONSOLIDATION
CONCEPT focus on the the cost of buying the sub.
Question 15
10 out of 10 points
Bell Company purchases 80% of Demers Company for $500,000 on January 1, 2010 Demers reported common
stock of $300,000 and retained earnings of $200,000 on that date. Equipment was undervalued by $30,000 and
buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess cost over fair value
was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been
impaired.Demers earns income and pays dividends as follows:
Assume the cost method is applied. Compute Bell's investment in Demers at December 31, 2010.
Correct Answer:
$500,000
Response correct, COST METHOD: Only liquidating dividends affects the
Feedback:
investment account. In this case, there was non.
1. In reporting consolidated earnings per share when there is a wholly owned

subsidiary, which of the following statements is true?

Parent company earnings per share equals consolidated earnings
per share when the equity method is used.

2. How would consolidated earnings per share be calculated if the subsidiary has
no convertible securities or warrants?

Consolidated net income divided by parent's number of shares
outstanding.

3. How do subsidiary stock warrants outstanding affect consolidated earnings
per share?

They will only be included in diluted earnings per share if they are
dilutive.

4. Knight Co. owned 80% of the common stock of Stoop Co. Stoop had 50,000
shares of $5 par value common stock and 2,000 shares of preferred stock
outstanding. Each preferred share received an annual per share dividend of $10
and is convertible into four shares of common stock. Knight did not own any of
Stoop's preferred stock. Stoop also had 600 bonds outstanding, each of which is
convertible into ten shares of common stock. Stoop's annual after-tax interest
expense for the bonds was $22,000. Knight did not own any of Stoop's bonds.
Stoop reported income of $300,000 for 2011.
What was the amount of Stoop's earnings that should be included in calculating
consolidated diluted earnings per share?
$201,250.
5. Knight Co. owned 80% of the common stock of Stoop Co. Stoop had 50,000
shares of $5 par value common stock and 2,000 shares of preferred stock
outstanding. Each preferred share received an annual per share dividend of $10
and is convertible into four shares of common stock. Knight did not own any of
Stoop's preferred stock. Stoop also had 600 bonds outstanding, each of which is
convertible into ten shares of common stock. Stoop's annual after-tax interest
expense for the bonds was $22,000. Knight did not own any of Stoop's bonds.
Stoop reported income of $300,000 for 2011.
Stoop's diluted earnings per share (rounded) is calculated to be
5.03
6. A variable interest entity can take all of the following forms except a
Estate
7. All of the following are examples of variable interests except
Stock Options
8. Which of the following is not a potential loss or return of a variable interest

entity?
Entitles holder to receive shares of common stock.
9. Which of the following characteristics is not indicative of an enterprise

qualifying as a primary beneficiary with a controlling financial interest in a
variable interest entity?
No ability to make decisions about the entity's activities.
10. Which of the following statements is false concerning variable interest

entities (VIEs)?
A VIE cannot take the legal form of a partnership or corporation.
11. Which of the following statements is true concerning variable interest

entities (VIEs)?
1) The role of the VIE equity investors can be fairly minor.
2) A VIE may be created specifically to benefit its sponsoring firm with low-cost
financing.
3) VIE governing agreements often limit activities and decision making.
4) VIEs usually have a well-defined and limited business activity.
1,2,3, and 4
12. Which of the following is not an indicator that requires a sponsoring firm to
consolidate a variable interest entity (VIE) with its own financial statements?
The sponsoring firm receives risks and rewards of the VIE in

proportion to equity ownership.
13. On January 1, 2011, Riley Corp. acquired some of the outstanding bonds of
one of its subsidiaries. The bonds had a carrying value of $421,620, and Riley
paid $401,937 for them. How should you account for the difference between the
carrying value and the purchase price in the consolidated financial statements
for 2011?
The difference is treated as a gain from the extinguishment of the

debt.
14. Campbell Inc. owned all of Gordon Corp. For 2011, Campbell reported net
income (without consideration of its investment in Gordon) of $280,000 while
the subsidiary reported $112,000. The subsidiary had bonds payable outstanding
on January 1, 2011, with a book value of $297,000. The parent acquired the
bonds on that date for $281,000. During 2011, Campbell reported interest
income of $31,000 while Gordon reported interest expense of $29,000. What is
consolidated net income for 2011?
406,000
15. If newly issued debt is issued from a parent to its subsidiary, which of the
following statements is false?
A net gain or loss on the bond transaction will be reported.
16. Which of the following statements is true concerning the acquisition of

existing debt of a consolidated affiliate in the year of the debt acquisition?
Any gain or loss is recognized on a consolidated income statement.
17. Stevens Company has had bonds payable of $10,000 outstanding for several
years. On January 1, 2011, when there was an unamortized discount of $2,000
and a remaining life of 5 years, its 80% owned subsidiary, Matthews Company,
purchased the bonds in the open market for $11,000. The bonds pay 6% interest
annually on December 31. The companies use the straight-line method to
amortize interest revenue and expense. Compute the consolidated gain or loss
on a consolidated income statement for 2011.
3,000 loss
18. Franklin Corporation owns 90 percent of the outstanding voting stock of

Georgia Company. On January 2, 2009, Georgia sold 7 percent bonds payable
with a $5,000,000 face value maturing January 2, 2029 at a premium of
$500,000. On January 1, 2011, Franklin acquired 20 percent of these same bonds
on the open market at 97.66. Both companies use the straight-line method of
amortization. What adjustment should be made to Franklin's 2012 beginning
Retained Earnings as a result of this bond acquisition?
107,100
19. ?
20. Where do dividends paid to the noncontrolling interest of a subsidiary appear

on a consolidated statement of cash flows?

Cash flows from financing activities.
21. Where do dividends paid by a subsidiary to the parent company appear in a

consolidated statement of cash flows?
They do not appear in the consolidated statement of cash flows.
22. Where do intra-entity sales of inventory appear in a consolidated statement

of cash flows?
They do not appear in the consolidated statement of cash flows.
23. Cadion Co. owned a controlling interest in Knieval Inc. Cadion reported sales
of $420,000 during 2011 while Knieval reported $280,000. Inventory costing
$28,000 was transferred from Knieval to Cadion (upstream) during the year for
$56,000. Of this amount, twenty-five percent was still in ending inventory at
year's end. Total receivables on the consolidated balance sheet were $112,000 at
the first of the year and $154,000 at year-end. No intra-entity debt existed at the
beginning or ending of the year. Using the direct approach, what is the
consolidated amount of cash collected by the business combination from its
customers?
602,000
24. What would differ between a statement of cash flows for a consolidated
company and an unconsolidated company using the indirect method?
Non-controlling interest in net income of subsidiary would be

added to net income.
25. The following information has been taken from the consolidation worksheet
of Graham Company and its 80% owned subsidiary, Stage Company.
(1.) Graham reports a loss on sale of land of $5,000. The land cost Graham
$20,000.
(2.) Noncontrolling interest in Stage's net income was $30,000.
(3.) Graham paid dividends of $15,000.
(4.) Stage paid dividends of $10,000.
(5.) Excess acquisition-date fair value over book value was expensed by $6,000.
(6.) Consolidated accounts receivable decreased by $8,000.
(7.) Consolidated accounts payable decreased by $7,000.
How is the loss on sale of land reported on the consolidated statement of cash
flows?
5,000 added to net income as an operating activity
$20,000.
Where does the noncontrolling interest in Stage's net income appear on a

consolidated statement of cash flows?
Noncontrolling interest in Stage's net income does not appear on a

consolidated statement of cash flows.
$20,000.
How will dividends be reported in consolidated statement of cash flows?
$17,000 decrease as a financing activity.
$20,000.
How is the amount of excess acquisition-date fair value over book value
recognized in a consolidated statement of cash flows assuming the indirect
method is used?
$6,000 added to net income
$20,000.
Using the indirect method, where does the decrease in accounts receivable
appear in a consolidated statement of cash flows?
$8,000 increase to net income as an operating activity.
$20,000.

Using the indirect method, where does the decrease in accounts payable appear
in a consolidated statement of cash flows?

$7,000 decrease to net income as an operating activity.
31. Wolff Corporation owns 70 percent of the outstanding stock of Donald, Inc.
During the current year, Donald made $75,000 in sales to Wolff. How does this
transfer affect the consolidated statement of cash flows?

Not reported in the consolidated statement of cash flows.

32. Pursley, Inc. owns 70 percent of Harry, Inc. The consolidated income
statement for a year reports $50,000 Noncontrolling Interest in Harry, Inc.
Income. Harry paid dividends in the amount of $80,000 for the year. What are
the effects of these transactions in the consolidated statement of cash flows for
the year?

D above

33. Goehring, Inc. owns 70 percent of Harry, Inc. The consolidated income
statement for a year reports $40,000 Noncontrolling Interest in Harry, Inc.
Income. Harry paid dividends in the amount of $100,000 for the year. What are
the effects of these transactions in the consolidated statement of cash flows for
the year?

Decrease in the financing section of $30,000.

34. The balance sheets of Butler, Inc. and its 70 percent-owned subsidiary, Cassie
Corp., are presented below:

63,000

35. The balance sheets of Butler, Inc. and its 70 percent-owned subsidiary, Cassie
Corp., are presented below:

(129,000)

Question 1
2 out of 2 points
Buckette Co. owned 60% of Shuvelle Corp. and 40% of Tayle Corp., and Shuvelle owned
35% of Tayle.
What is this pattern of ownership called?

Correct Answer:
A connecting affiliation.
Response Feedback: Connecting Affiliation - Mutual Ownership - Father son grandson
Question 2
2 out of 2 points
Which of the following statements is true concerning connecting affiliations and mutual
ownerships?
Correct Answer:
In a mutual ownership, the subsidiary owns a portion of the parent's stock.
Question 3
2 out of 2 points
35% of Tayle.
When Buckette prepared consolidated financial statements, it should include

Correct Answer:
Shuvelle and Tayle.
Response 60% of Shuvelle Corp. and 40% direct of Tayle Corp., and 21% indirect
Feedback:
(60% Shuvelle owned x 35% of Tayle)
Question 4
2 out of 2 points
35% of Tayle.
What percentage of Tayle's income is attributed to Buckette's ownership interest?

Correct Answer:
61%.
Question 5
2 out of 2 points
Chase Company owns 80% of Lawrence Company and 40% of Ross Company. Lawrence Company also owns
30% of Ross Company. Separate operating incomes for 2011 of Chase, Lawrence, and Ross are $450,000,
$300,000, and $250,000, respectively. Each company also retains a $20,000 unrealized gain in their current
income figures. Annual amortization expense of $15,000 is assigned to Chase's investment in Lawrence and
another $15,000 is assigned to Lawrence's investment in Ross.
Compute the noncontrolling interest in Ross' net income for 2011.
Correct Answer:
$64,500.
Response 250-20k-15k=215k*.3=64.5k Chase owns 40% of Ross + Lawrence owns
Feedback: 30%=70% 100-70=30%
Question 6
2 out of 2 points
Chase Company owns 80% of Lawrence Company and 40% of Ross Company. Lawrence Company also owns
30% of Ross Company. Separate operating incomes for 2011 of Chase, Lawrence, and Ross are $450,000,
$300,000, and $250,000, respectively. Each company also retains a $20,000 unrealized gain in their current
income figures. Annual amortization expense of $15,000 is assigned to Chase's investment in Lawrence and
another $15,000 is assigned to Lawrence's investment in Ross.
Compute Chase's attributed ownership in Ross.
Correct Answer:
64%.
Response Feedback: Chase Direct 40 + Chase (.80*.30=24%) = 64%
Question 7
2 out of 2 points
Chase Company owns 80% of Lawrence Company and 40% of Ross Company. Lawrence
Company also owns 30% of Ross Company. Separate operating incomes for 2011 of Chase,
Lawrence, and Ross are $450,000, $300,000, and $250,000, respectively. Each company
also retains a $20,000 unrealized gain in their current income figures. Annual amortization
expense of $15,000 is assigned to Chase's investment in Lawrence and another $15,000 is
assigned to Lawrence's investment in Ross.
Compute Lawrence's accrual-based income for 2011.

Correct Answer:
$329,500.
Response Lawrence's inc 300 -20 -15 = 265 + (215*.3=64.5) = 329.5 Ross's Income
Feedback:
250-20-15 = 215
Question 1
2 out of 2 points
Generally accepted accounting principles require a U.S. corporation to disclose the

following disaggregated information for each operating segment, except:
Cost of goods sold.

Question 2
2 out of 2 points
Which one of the following items must be disclosed for all reportable operating segments in
the notes to financial statements?
(I.) Revenue from external customers.
(II.) Total Segment Assets
(III.) Revenues from foreign customers, identified by country.
I and II only
Question 3
2 out of 2 points
Which one of the following items is not required to be disclosed for each operating
segment?
Factors used to allocate company-wide expenses.

Question 4
2 out of 2 points
The following items are required to be disclosed for each operating segment except:
Factors used to allocate company-wide pension expense.

Response Feedback: Factors used to allocate company-wide pension expense.
Question 5
2 out of 2 points
Which of the following statements is not true according to U.S. GAAP regarding segment or
enterprise-wide disclosure?
Segment information does not have to be in accordance with generally accepted accounting principles
Question 6
2 out of 2 points
Which of the following operating segment disclosures is not required by U.S. GAAP?
Liabilities
Question 7
2 out of 2 points
Vapor Corporation has a fan products operating segment. Which of the following items does
Vapor not have to report for this segment?
Research and development expense

Question 8
2 out of 2 points
Coulanger Corp. identified four operating segments: A, B, C, and D. Segment A met

the revenue test for identifying reportable segments while Segment C met
the revenue test, profit orloss test, and asset test. Segment B and Segment D did not meet
any of these tests. Which of these segments must be disclosed separately?
Option C

Question 9
2 out of 2 points
Retro Corp. was engaged solely in manufacturing operations. The following data pertain to
the operating segments for 2011:
What is the minimum amount of revenue that each of these segments must earn to be
considered separately reportable?
$4,585,000.

Question 10
2 out of 2 points
What is the minimum amount of profit or loss that each of these segments must earn to be
$812,000.

Question 11
2 out of 2 points
What is the minimum amount of assets that each of these segments must own to be
$9,450,000.
Response Feedback: $94.5m * .10 = 9.450m
Question 12
0 out of 2 points
Which of the following statements is false concerning the number of operating segments that
should be disclosed?
Even though an operating segment has been reportable in the past and is of continuing
significance, it must meet at least one of the three reporting tests to report separately in
the current year.
THIS IS NOT CORRECT
Response Feedback: The practical limit to the number of operating segments is 10.
Question 13
2 out of 2 points
Elektronix, Inc. has three operating segments with the following information:
What is the operating profit or loss for the VCRs segment?
$124,000 loss
Response Feedback: 624-500
Question 14
2 out of 2 points
Betsy Kirkland, Inc. incurred a flood loss during the first quarter of 2011 that is deemed both
unusual and infrequent. The loss is considered immaterial to the twelve-month period, but is
material in amount relative to the first quarter. The proper accounting treatment in the first
quarter interim statement is to:
Response Record the loss in the first quarter, but not as an extraordinary loss, and
Feedback:
disclose the loss in a separate note or in the income statement as a
separate line item.
Question 15
2 out of 2 points
How should a change from one generally accepted accounting principle to another accepted
principle be handled in a third-quarter income statement?
Adjust financial statements for each prior period presented to reflect the effects of the
new principle in those reported periods.

Question 16
0 out of 2 points
Betsy Kirkland, Inc. incurred a flood loss during the first quarter of 2011 that is deemed both
unusual and infrequent. The loss is considered immaterial to the twelve-month period, but is
material in amount relative to the first quarter. The proper accounting treatment in the first
quarter interim statement is to:
1.
Record the loss in the first quarter, but not as an extraordinary loss, and disclose the
loss in a separate note or in the income statement as a separate line item.

Question 17
2 out of 2 points
Which of the following is not a required disclosure in an interim financial report?
Gains on sales of major equipment.

Question 18
2 out of 2 points
Which of the following items of information are required to be included in interim reports
for each operating segment?
(I.) Revenues from external customers
(II.) Segment profit or loss
(III.) Reconciliation of segment profit or loss to the enterprise's total income before taxes
(IV.) Intersegment revenues
Response Feedback: I, II, III, and IV.

Question 19
2 out of 2 points
How are extraordinary gains reported in a third quarter interim financial report?
Recognized in the third quarter.

Question 20
2 out of 2 points
Which of the following is reported for interim financial reports using the integral approach?
Bonus expense.

Question 21
2 out of 2 points
How should seasonal revenues be reported in an interim financial statement?
The seasonal nature should be disclosed, and a supplemental report for the 12-month
period ended at the interim date should supplement the interim report.

Question 22
2 out of 2 points
What is the appropriate treatment in an interim financial report for inventory that has market
value below cost?
The loss should be recorded in the interim period in which market value drops below
cost if the loss is considered permanent.

Question 23
2 out of 2 points
Which of the following costs require similar treatment to Property Tax Expense in an
interim financial report?
1) Annual major repairs.
2) Advertising expense.
3) Bonus expense, if estimable.
4) Quantity discounts based on annual sales.
Response Feedback: 1, 2, 3, and 4

Question 24
2 out of 2 points
Provo, Inc. has an estimated annual tax rate of 35 percent in the first quarter of 2011. Pretax
income for the first quarter was $300,000. At the end of the second quarter of 2011, Provo
expects the annual tax rate to be 32 percent because of anticipated tax credits. Pretax income
for the second quarter was $350,000. Assume no items in either quarter requiring the net-of-
tax presentation.
How much income tax expense is recognized in the second quarter of 2011?
Response Feedback: Pretax income for first Quarter 2010 $300 * .35 =$105
Pretax income for 1st Quarter 2010 300
Pretax income for 1st Quarter 2010 350
Total = $650 * .32 = 208 - 105 = $103 to be paid for second Quarter
Question 25
2 out of 2 points
Which of the following is false with regard to accounting standards for segment reporting
according to International Financial Reporting Standards (IFRS) and U.S. GAAP?
IFRS and U.S. GAAP both require disclosure of intangible assets attributable to
geographic segments.

Question 26
2 out of 2 points
Baker Corporation changed from the LIFO method to the FIFO method for inventory
valuation during 2011. Baker has an effective income tax rate of 30 percent and 100,000
shares of common stock issued and outstanding. The following additional information is
available:
Assuming Baker makes the change in the first quarter of 2011, how much is reported as net
income for the first quarter of 2011?
Response Net Income will increase as a result of LOWER COGS (REV - COGS =
Feedback:
Gross Inc) COGS is lower under FIFO as compared to LIFO since inventory
sold is based on lower value. $500k +5,200 = 505,200k

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Question 1

What was Wasser's capital balance at the end of 2011?

Which of the following is not a characteristic of a partnership?

The dissolution of a partnership occurs

What was Wasser's total share of net income for 2011?

What was Wasser's total share of net income for 2010?

The disadvantages of the partnership form of business organization, compared to

What was Nolan's capital balance at the end of 2010?

The advantages of the partnership form of business organization, compared to corporations,

Which item is not shown on the schedule of partnership liquidation?

Which one of the following statements is correct?

What accounting transactions are not recorded by an accountant during partnership

What is the preferred method of resolving a partner's deficit balance, according to

Which of the following statements is false concerning the partnership Schedule of

Which of the following is not normally viewed as an adjustment to the principal of an

Response Feedback: correct

Response Feedback: correct

Response Feedback: correct

What are the goals of probate laws?

Response Feedback: correct

Response Feedback: correct

Response Feedback: correct

Response Feedback: correct

How much would James have received from the estate?

Response Feedback: correct

Which of the following is usually accounted for as an adjustment to a trust's principal?

Response Feedback: correct

Response Feedback: correct

Response Feedback: correct

Which of the following is not a trust used for estate planning?

Response Feedback: correct

Response Feedback: correct

What is the process of abatement?

Response Feedback: correct

Response Feedback: correct

Response Feedback: correct

Executor's fees and court costs for settling an estate usually

Response Feedback: correct

Response Feedback: correct

Response Feedback: correct

Response Feedback: correct

Under what circumstance does an estate have an executor?

Response Feedback: correct

The gift to David is a

Response Feedback: correct

Response Feedback: correct

Response Feedback: correct

A company that was to be liquidated had the following liabilities:

Response Feedback: (200,000+95,000)

Which of the following is not a responsibility of the bankruptcy trustee?

Response Feedback: correct

Lawyer's fees incurred during a reorganization are accounted for as:

Response Feedback: correct

How should the fresh start reorganization value normally be determined?

Response Feedback: correct

On a statement of financial affairs, a specific liability may be classified as

On a statement of financial affairs, a company's liabilities should be valued at

Response Feedback: correct

Response Feedback: correct

In a statement of financial affairs, assets are classified

Response Feedback: correct

Response Feedback: correct

- ending inventory gains deferral (60-33.6=26.40.4)=10.560.3=3.168k

Response Feedback: Investments 62.4 + 54 add + (96-36.15) or 9 + (120-48.25) or 18 =143.4