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Wednesday, 18 November 2020, 9:56 AM

State Finished

Completed on Wednesday, 18 November 2020, 10:07 AM

Time taken 10 mins 23 secs

Grade 10.00 out of 10.00 (100%)

Question 1
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Question text
When a parent/investor sells an ownership interest, a gain or loss is recorded where the
interest sold leads to deconsolidation of a former subsidiary.

Select one:
True 

False
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The correct answer is 'True'.

Question 2
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Question text
Which of the following is correct? The direct sale of additional shares of stock at book
value per share to only the parent company from a subsidiary

Select one:
a. decreases the parent's interest and increases the noncontrolling shareholders'
interest.
b. decreases the parent's interest and decreases the noncontrolling shareholders'
interest.
c. increases the parent's interest and increases the noncontrolling shareholders' interest.

d. increases the parent's interest and decreases the noncontrolling shareholders'

interest. 
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Your answer is correct.
The correct answer is: increases the parent's interest and decreases the noncontrolling
shareholders' interest.

Question 3
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Question text
If an acquisition by a parent of a subsidiary occurs during the accounting period,
adjustments must be made for the income earned by a subsidiary prior to the acquisition
date.

Select one:
True 

False
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The correct answer is 'True'.

Question 4
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Question text
Jersey Company acquired 90% of York Company on April 1, 2014. Both Jersey
Company and York Company have December 31 fiscal year ends. Under current GAAP,
which of the following statements is false?

Select one:
a. York's earnings prior to April 1, 2014 should appear as a deduction on the
consolidated income statement in 2014. 
b. The consolidated income statement in 2014 should include York's revenues and
expenses after April 1, 2014.
c. When preparing consolidating work papers in 2014, York's revenues prior to April 1,
2014 are eliminated.

d. The consolidated income statement in 2014 should not include York's revenues and
expenses prior to April 1, 2014.
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Your answer is correct.
The correct answer is: York's earnings prior to April 1, 2014 should appear as a
deduction on the consolidated income statement in 2014.

Question 5
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Question text
Piecemeal acquisitions require the previously held investment to be measured at book
value at the date control of the subsidiary is obtained.

Select one:
True

False 
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The correct answer is 'False'.

Question 6
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Question text
Utah Company holds 80% of the stock of a subsidiary company. The subsidiary issues
100 additional shares of stock to Utah Company at a price above book value per share.
The subsidiary does not issue any additional shares at the same time. How will Utah
Company record the purchase?

Select one:
a. Utah Company increases additional paid-in capital.
b. Utah Company records a gain on sale of stock.
c. Utah Company decreases additional paid-in capital.

d. Utah Company assigns any excess cost over book value acquired to increase
undervalued identifiable assets or goodwill as appropriate. 
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Your answer is correct.
The correct answer is: Utah Company assigns any excess cost over book value
acquired to increase undervalued identifiable assets or goodwill as appropriate.

Question 7
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Question text
When a parent/investor sells an ownership interest, a gain or loss is recorded where the
interest sold does not impact control by the parent company.

Select one:
True

False 
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The correct answer is 'False'.

Question 8
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Question text
Whenever a parent ceases to have a controlling interest, the subsidiary should be
deconsolidated and recorded as either an equity method or cost method investment.

Select one:
True 

False
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The correct answer is 'True'.

Question 9
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Question text
Consider a sale of stock by a subsidiary to parties outside the consolidated entity. This
transaction requires an adjustment of the parent's investment and additional paid-in
capital accounts except when

Select one:
a. the shares are sold at market value.
b. the shares are sold above book value per share.
c. the shares are sold below book value per share

d. the shares are sold at book value per share. 

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Your answer is correct.
The correct answer is: the shares are sold at book value per share.

Question 10
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Question text
If a parent company and outside investors purchase shares of a subsidiary in relation to
existing stock ownership (ratably), then

Select one:
a. there will be an adjustment to additional paid-in capital if the stock is sold above book
value.
b. there will be no adjustment to additional paid-in capital regardless whether the stock is
sold above or below book value. 
c. there will be the elimination of a gain.

d. there will be an adjustment to additional paid-in capital if the stock is sold below book
value.
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Your answer is correct.
The correct answer is: there will be no adjustment to additional paid-in capital regardless
whether the stock is sold above or below book value.

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