Midterm Examination in ACCTG2215

Read each question carefully. Select the option that corresponds to your answer.

* Required

For 2017, compute the following items of consolidated FS: Net income *

3 points

None of the choices

12,988,800
13,528,800
14,968,800
11,986,800

Philippines Incorporation owns 80% of the South Africa Company. During 2018, Philippines sold

goods with a 40% gross profit to South Africa. South Africa sold all these goods in 2018. For

consolidated financial statements how the summation of Philippines and South Africa income

statement items should be adjusted? *

1 point
Sales and Cost of Goods sold should be reduced by the intercompany sales
Sales and Cost of Goods sold should be reduced by 80% of the intercompany sales
Net income should be reduced by 80% of the gross profit on the intercompany sales
No adjustment is necessary
Which of the following statements is true, concerning an intercompany transfer of a depreciable

asset? *

1 point
Non-controlling interest in subsidiary's net income is increased by an upstream gain in the year
of transfer
Non-controlling interest in subsidiary's net income is affected only when the transfer is upstream
Non-controlling interest in subsidiary's net income is affected by a downstream gain only
Non-controlling interest in subsidiary's net income is never affected by a gain on the transfer
Non-controlling interest in subsidiary's net income is always affected by a gain on the transfer

The consolidation procedures for intercompany sales are similar for upstream and downstream

sales *

1 point
When the subsidiary is 100% owned
Under a periodic inventory system but not under perpetual inventory system
If the merchandise is transferred at cost
If the merchandise is immediately sold to outside parties

Compute the following for/as of December 31, 2017: Consolidated Gross profit *

2 points

None of the choices

5,148,750
11,651,250
11,948,750
3,351,250
A subsidiary was acquired for cash in a business combination on December 31, 20X1. The

purchase price exceeded the fair value of identifiable net assets. The acquired company owned

equipment with a fair value in excess of the book value as of the date of the combination. A

consolidated balance sheet prepared on December 31, 20X1, would *

1 point
reduce retained earnings for the excess of the fair value of the equipment over its book value.
report the excess of the fair value over the book value of the equipment as part of the plant and
equipment account.
report the excess of the fair value over the book value of the equipment as part of goodwill.
make no adjustment for the excess of the fair value of the equipment over book value. Instead, it
is an adjustment to expense over the life of the equipment.

Compute the following for/as of December 31, 2017: Consolidated operating expense *

2 points

None of the choices

4,340,000
4,300,000
4,380,000
4,140,000
What is the primary accounting difference between accounting for when the subsidiary is dissolved

and when the subsidiary retains its incorporation? *

1 point
If the subsidiary is dissolved, it will not be operated as a separate division.
If the subsidiary retains its incorporation, the consolidation is not formally recorded in the
accounting records of the acquiring company
If the subsidiary retains its incorporation, there will be no goodwill associated with the
acquisition.
If the subsidiary is dissolved, assets and liabilities are consolidated at their book values.

On November 8, 2014, Power Corp sold Land to Wood Co., its wholly owned subsidiary. The land

cost P61,500 and was sold to Wood for P89,000. From the perspective of the combination, when is

the gain on the sale of the land realized? *

1 point
Proportionately over designated period of years
As Wood uses the land
When Wood Co. sells the land to a third party
No gain can be recognized
When Wood Co. begins using the land productively

Reasons a parent company may pay more than book value for the subsidiary company’s stock

include all of the following except *

1 point
Liabilities may be overvalued.
The fair value of one of the subsidiary’s assets may exceed its recorded value because of
appreciation.
The existence of unrecorded goodwill.
Stockholder’s equity may be undervalued.

Eliminating entries are made to cancel the effects of intercompany transactions and are made on

the *

1 point
Books of the both parent and subsidiary.
Books of the subsidiary.
Work paper only.
Books of the parent.
Which of the following describes the impact on the consolidated financial statements of upstream

and downstream transfers? *

1 point
Downstream transfers affect the computation of the non-controlling interest’s share of the
subsidiary’s income but upstream transfers do not.
Downstream transfers can be ignored because the parent company makes them.
Upstream transfers affect the computation of the non-controlling interest’s share of the
subsidiary’s income but downstream transfers do not.
No difference exists in consolidated financial statements between upstream and downstream
transfers.

Which one of the following accounts would not appear in the consolidated financial statements at

the end of the first fiscal period of the combination? *

1 point
Equipment.
Investment in Subsidiary.
Goodwill.
Common Stock.

How much is the non-controlling interest in net assets on 12/31/2016? *

2 points

745,455
None of the choices
763,455
871,005
731, 505
For 2017, compute the following items of consolidated FS: Operating Expenses *

3 points

5,487,000
5,433,000
5,460,000
5,469,000
None of the choices

Compute the following for/as of December 31, 2017: Consolidated Net income attributable to

parent *

2 points
9,720,750
10,018,750
11,118,750
11,768,750
None of the choices

For 2017, compute the following items of consolidated FS: Non-controlling Interest in Net Income  *

3 points

None of the choices

1,536,750
1,542,000
1,582,500
1,546,500

How much is the consolidated shareholders’ equity? *

2 points

None of the choices

9,853,575
8,773,575
9,867,525
9,122,070
For 2017, compute the following items of consolidated FS: Non-controlling interest in Net assets *

3 points

3,707,250
None of the choices
3,716,250
3,626,250
3,712,500

For 2017, compute the following items of consolidated FS: Gross Profit *

3 points

None of the choices

17,100,000
17,164,200
17,035,800
20,275,800