1.

Great Corporation acquired a 90% interest in SOS Corporation at its $810,000 book
value on December 31, 2013. A summary of the stockholders' equity for SOS at the
end of 2013 and 2014 is as follows:

                                                                                12/31/13                      12/31/14
Capital stock, $10 par                                      $600,000                     $600,000
Additional paid-in capital                                 30,000                          30,000
Retained Earnings                                              270,000                        420,000
Total stockholders' equity                                $900,000                   $1,050,000

On January 1, 2015, SOS sold 10,000 new shares of its $10 par value common stock for
$45 per share. If SOS sold the additional shares to the general public,
Great's Investment in SOS account after the sale would be ________. 
Jawaban :
SOS stock holders equity prior to the stock issuance $ 1,050,000
Plus: Capital received from new stock issued 450,000
New stockholders equity $ 1,500,000
Greats ownership [54,000/(60,000 + 10,000)] 77.14%
Greats adjusted investment in SOS $ 1,157,100

2. Pied Imperial Corporation acquired a 90% interest in Somest Corporation in 2012

when Somest's book values were equivalent to fair values. Somest sold equipment
with a book value of $80,000 to Pied for $130,000 on January 1, 2014. Pied is fully
depreciating the equipment over a 4-year period by using the straight-line method.
Somest reported net income for 2014 was $320,000. Pied's 2014 income from
Somest was …………………………..
Jawaban:
IFS = 90% x (320,000 – 50,000 + 12,500)
= 90% x 282,500
= 254,250

3. Pahm Corporation owns 80% of the outstanding voting common stock of Abussi
Corporation, which was purchased for $60,000 over Abussi's book value. The
excess purchase price was attributable to goodwill. Abussi Corporation owns 60% of
the outstanding common stock of Badock Corporation, which was purchased at
book value. The separate net incomes of Pahm, Abussi, and Badock (excluding
investment income) for the year are $200,000, $240,000, and $260,000,
respectively. There were no fair value/book value differences in the assets and
liabilities of Pahm, Abussi and Badock.
The amount of income for the current year assigned to the noncontrolling
shareholders of Badock Corporation is ……………………………
Jawaban:
40% x 260,000 = 104,000
 4. Pasfield Corporation acquired a 90% interest in Santini Corporation for $90,000
cash on January 1, 2014. The following information is available for Santini at that
time.

                                                          Book Value            Fair Value            Difference

Current assets                                 $40,000                  $50,000                $10,000
Plant assets                                        60,000                     75,000                 15,000
Liabilities                                           (50,000)                  (50,000)                         0
Net assets                                           $50,000                  $75,000

Under the entity theory, a consolidated balance sheet prepared immediately after
the business combination will show goodwill of.........................................

Jawaban:
Goodwill = Implied Fair Value – Fair Value of Net Assets
= ($ 90,000/90%) - $ 75,000
= $ 25,000

5. Bird Corporation purchased an 80% interest in Brush Corporation on July 1, 2013 at

its book value, and on January 1, 2014 its Investment in Brush account was
$300,000, equal to its book value. Brush's net income for 2014 was $99,000 (earned
uniformly); no dividends were declared. On March 1, 2014, Bird reduced its interest
in Brush by selling a 20% interest, one-fourth of its investment, for $84,000.
If Bird uses a "beginning-of-the-year" sale assumption, its gain on sale and income
from Brush for 2014 will be…………………….
Jawaban:
Selling price $ 84,000
Book value of interest sold (300,000 x 20%/80%) (75,000)
Gain on sale $ 9,000
Income from Brush 99,000 x (80% - 20%) $ 59,400
6. Petrolia Company acquired a 90% interest in Seadigo Corporation on January 1,
2013. On January 1, 2014, Seadigo sold a building with a book value of $120,000 to
Petrolia for $150,000. The building had a remaining useful life of ten years and no
salvage value. Straight-line depreciation is used. The separate balance sheets of
Petrolia and Seadigo on December 31, 2014 included the following balances:

                                                                                 Petrolia                 Seadigo
Buildings                                                                $500,000               $230,000
Accumulated Depr. - Buildings                            180,000                    79,000

The consolidated amounts for Buildings and Accumulated Depreciation - Buildings that
appeared, respectively, on the balance sheet at December 31, 2014,
were……………………….
Jawaban:

Gain = 30,000

Adjustment on depreciation expense = 30,000/10 = 3,000

Adjustment entry :

Gain on sale 30,0000

Buildings 30,000
Accumulated Depreciation-Buildings 3,000
Depreciation Expense 3,000

PETROLIA COMPANY

BALANCE SHEET

DECEMBER 31, 2014

Buildings (500,000 + 230,000 – 30,000) $ 700,000

Accumulated Depreciation-Buildings (180,000 + 79,000 – 3,000) $ 256,000

7. Parnaby has 25,000 common stock shares outstanding and its 100%-owned
subsidiary Sandal has 5,000 common stock shares outstanding. Parnaby and
Sandal do not have any potentially dilutive securities outstanding. The separate net
incomes for Parnaby and Sandal are $150,000 and $75,000, respectively. Diluted
EPS for the consolidated company is ……………….
Jawaban:

(150,000 + 75,000)/25,000 = 9,000

 8. On January 1, 2012, Saruta Corporation purchased a delivery truck with an
expected useful life of five years, and a salvage value of $8,000. On January 1,
2014, Saruta sold the truck to Piaca Corporation. Piaca assumed the same salvage
value and remaining life of three years used by Saruta. Straight-line depreciation is
used by both companies. On January 1, 2014, Saruta recorded the following journal
entry:
 
                                                                                     Debit                    Credit
Cash                                                                         50,000
Accumulated depreciation                                  18,000
                Truck                                                                                       53,000
                Gain on Sale of Truck                                                            15,000
 
Piaca holds 60% of Saruta. Saruta reported net income of $55,000 in 2014 and Piaca
separate net income (excludes interest in Saruta) for 2014 was $98,000.
In preparing the consolidated financial statements for 2014, the elimination entry for
depreciation expense was a ……………….
Jawaban:

$ 15,000 gain/3years

Credit for $ 5,000

9. Pfadt Inc. had $600,000 par of 8% bonds payable outstanding on January 1, 2013
due January 1, 2017 with an unamortized discount of $12,000. Senat is a 90%-
owned subsidiary of Pfadt. On January 2, 2013, Senat Corporation purchased
$150,000 par value of Pfadt's outstanding bonds for $152,000. The bonds have
interest payment dates of January 1 and July 1. Straight-line amortization is used.
With respect to the bond purchase, the consolidated income statement of Pfadt
Corporation and Subsidiary for 2013 showed a gain or loss of…………………….
Jawaban:

Purchase price 152,000 (FV)

Nominal 150,000 (BV)

BV on Bonds Purchased 150,000 – (25% x 12,000)

= 150,000 – 3,000

= $ 147,000

BV Purchased – Purchase Price

= 147,000 – 152,000
= (5,000) constructive loss on bond retirement

10. Pabari Corporation owns an 80% interest in Alders Corporation and Alders owns a
60% interest in Babao Corporation. Both interests were acquired at a cost equal to
book value equal to fair value. During 2013, Alders sells land to Babao at a profit of
$12,000. Babao still holds the land at December 31, 2013. Net income (loss) of the
three companies (excluding investment income) for 2013 are:
 
Pabari Corporation                  $180,000
Alders Corporation                      72,000
Babao Corporation                     (30,000)
 
Controlling interest share of consolidated net income and noncontrolling interest share,
respectively, for 2013 are ……………………………….
Jawaban:

Controlling interest share and Non-controlling interest share

Pabari Alders Babao

180,000 72,000 (30,000)
Unrealized Profit 0 (12,000) 0
Income after adjustment 180,000 60,000 (30,000)
Allocated Income:
Babao to Alders (18,000) 18,000
180,000 42,000 (12,000)
Allocated Income:
Alders to Pabari 33,600 (33,600) 0
Income 213,600 8,400 (12,000)

Net income consolidation = 213,600

NCI Share in A = 8,400

NCI Share in B = (12,000)

Net Income Loss = 8,400 – 12,000 = 3,600

11. Paris Corporation purchased 80% of the outstanding voting common stock of
Sanders Corporation on January 1, 2014, at a cost of $400,000. The stockholders'
equity of Sanders Corporation on this date consisted of $200,000 of Capital Stock
and $100,000 of Retained Earnings. Book values were equal to fair values except
for land and inventory. The book value of Sanders' land was $10,000, and fair value
was $22,000. The book value of Sanders' inventory was $30,000, and fair value was
$25,000.
Under the parent company theory, what amount of goodwill was reported on the
consolidated balance sheet at December 31, 2014?
Purchase price 400,000
Less: BV acquired (80% x 300,000) (240,000)
Excess 160,000
Less: excess to land (12,000 x 80%) (9,600)
Add: excess to inventory (5,000 x 80%) 4000
Remainder allocated to goodwill 154,400

12. Prussia Corporation owns 80% of the voting stock of Stad Corporation. On January
1, 2013, Prussia paid $391,000 cash for $400,000 par of Stad's 10% $1,000,000 par
value outstanding bonds, due on April 1, 2018. Stad's bonds had a book value of
$1,045,000 on January 1, 2013. Straight-line amortization is used. The gain or loss
on the constructive retirement of $400,000 of Stad bonds on January 1, 2013 was
reported in the 2013 consolidated income statement in the amount of…………….
Jawaban:
27,000