Chapt

er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

Chapt
er05
Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies
 

Mul
ti
pleChoi
ceQuest
ions
 

 
Brist
leCorpor
ati
onacqui r
ed75percentofSil
verCorpor
ati
on'scommonst ockon
December31,2008, f
or$300,
000.Thefairval
ueofthenoncontrol
l
inginter
estatthat
dat
ewasdet erminedtobe$100,000.Si
lver
'sbal
ancesheetimmedi at
elybeforet
he
combinat
ionrefl
ectedthefol
l
owingbalances:

   

Acarefulrevi
ewoft hefairval
ueofSil
ver
'sasset
sandliabil
it
iesindi
catedthat
i
nventory,
land,andbuil
dingsandequipment(net
)hadfairval
uesof$65, 000,$100,
000,
and,$300,
000r especti
vel
y .Goodwi
l
lisassi
gnedproporti
onatelytoBri
stleandt he
noncontr
olli
ngshareholders.

5-
1
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

1. 
Basedont heprecedingi
nformat
ion,
whatamountofinv
entor
ywi l
lbeincl
udedi
n
theconsol
idatedbalancesheetimmedi
atel
yfol
l
owingtheacqui
sit
ion? 
A. 
$0
B. 
$65,
000
C. 
$70,000
D. 
$60,000

2. 
Basedont hepr
ecedi
nginf
ormat
ion,whatamountofl
andwillbeincl
udedi
nthe
consol
idatedbal
ancesheeti
mmediat
elyfol
lowi
ngtheacqui
sit
ion?
 
A. 
$0
B. 
$10,
000
C. 
$90,000
D. 
$100,000

3. 
Basedont hepr
ecedi
nginf
ormati
on,
whatamountofbuil
dingsandequi
pment(
net
)
wil
lbeincludedi
ntheconsol
i
datedbal
ancesheeti
mmediat
elyfol
lowi
ngthe
acqui
sit
ion? 
A. 
$0
B. 
$50,
000
C. 
$250,000
D. 
$300,000

4. 
Basedont hepr
ecedi
nginf
ormat
ion,whatamountofgoodwil
lwi
llber
epor
tedi
nthe
consol
idatedbal
ancesheeti
mmediatel
yfol
lowi
ngtheacquisi
ti
on?
 
A. 
$0
B. 
$120,000
C. 
$65,000
D. 
$20,000

5-
2
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

5. 
Basedont heprecedi
nginf
ormati
on,whatamountwillberepor
tedasinv
est
mentin
Sil
verCorporat
ionstocki
ntheconsol
idat
edbalancesheetimmediatel
yfol
l
owingt
he
acquisi
ti
on? 
A. 
$0
B. 
$210,000
C. 
$300,000
D. 
$400,000

5-
3
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

6.
 Basedont hepr
ecedi
nginf
ormation,
whatamountwil
lbereport
edasnoncont r
oll
i
ng
i
nterestint
heconsoli
dat
edbalancesheeti
mmediatel
yfol
lowingtheacqui
sit
ion? 
A.
 $0
B.
 $70,000
C.
 $83,750
D.
 $100,000

 
OnJanuary1,2009, Gul
l
iverCorpor
ati
onacquir
ed80per centofSea-Gul lCompany'
s
commonstockf or$160,
000cash.Thef ai
rval
ueoft henoncontr
oll
ingi nt
erestatt
hat
dat
ewasdet er
mi nedtobe$40,000.Dat
af r
om thebalancesheetsoft hetwo
compani
esincl
udedt hefoll
owingamountsasoft hedateofacquisit
ion:

   

Atthedat eofthebusi
nesscombi
nati
on,thebookv al
uesofSea-
Gul
l'
snetasset
sand
l
iabi
lit
iesapproxi
matedfai
rval
ueexceptfori
nventory
,whichhadaf
airv
alueof
$45,000,andland,whi
chhadafai
rvalueof$60,000.

5-
4
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

7. 
Basedont hepr
ecedingi
nfor
mat i
on,whatamountoftot
alinvent
orywill
ber
epor
ted
i
nt heconsoli
dat
edbalancesheetprepar
edimmediat
elyaft
erthebusiness
combination?
 
A. 
$130,000
B. 
$135,000
C. 
$90,000
D. 
$45,000

8. 
Basedonthepr
ecedi
nginformati
on,
whatamountofgoodwi
ll
will
bereport
edinthe
consol
idat
edbal
ancesheetprepar
edimmediat
elyaf
tert
hebusi
nesscombinati
on?
 
A. 
$0
B. 
$40,
000
C. 
$20,000
D. 
$15,000

9. 
Basedont heprecedingi
nfor
mation,whatamountoft
otal
asset
swill
ber
epor
tedi
n
theconsolidatedbalancesheetpr
eparedimmediat
elyaf
tert
hebusi
ness
combination? 
A. 
$720,000
B. 
$840,000
C. 
$825,000
D. 
$865,000

10. Basedont hepr
ecedinginf
ormati
on,whatamountoft
otal
liabi
li
ti
eswil
lbe
reportedintheconsol
idatedbal
ancesheetpr
epar
edimmediatelyaf
tert
hebusi
ness
combi nati
on? 
A. $395,000
B. 
$280,000
C. $265,000
D. $195,000

5-
5
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

11. 
Basedont heprecedinginf
ormat
ion,whatamountwillbereport
edas
noncontrol
li
ngint
erestintheconsol
i
datedbalancesheetpreparedi
mmediat
elyaf
ter
thebusinesscombinati
on?  
A. 
$0
B. 
$15,
000
C. 
$40,000
D. 
$46,000

12. 
Basedont heprecedi
nginf
ormat
ion,
whatamountofconsol
i
dat
edr
etai
ned
earni
ngswillbereport
ed? 
A. 
$205,000
B. 
$120,
000
C. 
$325,000
D. 
$310,000

13. Basedont heprecedingi
nformati
on,
whatamountwillberepor
tedast
otal
stockholders'
equit
yint heconsol
idat
edbal
ancesheetpr
eparedimmediat
elyaf
tert
he
businesscombi nat
ion? 
A. $445,000
B. 
$205,000
C. $565,000
D. $550,000

 
OnJanuar y1, 2008, RamonCor por ati
onacquir
ed75per centofTesterCompany '
s
voti
ngcommonst ockf or$300,000.Att het
imeoft hecombi nation,
Testerreported
commonst ockout standingof$200, 000andretai
nedear ningsof$150,000, andthe
fai
rv al
ueofthenoncont roll
i
ngint erestwas$100,000.Thebookv al
ueofTest er'
snet
assetsapproximatedmar ketvalueexceptf orpatentsthathadamar ketvalueof
$50,000mor ethant heirbookv alue.Thepat ent
shadar emai ni
ngeconomi clifeoften
yearsatthedat eofthebusi nesscombi nati
on.Testerr
epor tednetincomeof$40, 000
andpai ddi
videndsof$10, 000dur ing2008.

5-
6
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

14. 
Basedontheprecedi
nginfor
mati
on,whatbal
ancewil
lRamonrepor
tasit
s
i
nvestmentinTest
eratDecember31,2008,
assumingRamonusestheequi
tymet
hod
i
naccount i
ngfori
tsi
nvestment?
 
A. 
$318,750
B. 
$317,
500
C. 
$330,000
D. 
$326,250

15. 
Basedont hepr
ecedi
nginformati
on,al
lofthefol
lowingar
eeli
minati
ngentr
ies
neededtoprepareaful
lsetofconsol
idat
edfinanci
alstat
ementsatDecember31,
2008,except
:

   
 
A.
 Choi
ceA
B.
 Choi
ceB
C.
 Choi
ceC
D.
 Choi
ceD

5-
7
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

 
OnJanuar y1, 2008, Cli
mberCor porat i
onacqui r
ed90per centofWi sdenCor por
ati
on
for$180,000cash.Wi sdenr epor t
edneti ncomeof$30, 000anddi vi
dendsof$10, 000
for2008, 2009, and2010.OnJanuar y1, 2008, Wisdenr epor t
edcommonst ock
outstandingof$100, 000andr et
ainedear ningsof$60, 000, andt hefairval
ueoft he
noncont r
olli
ngi nterestwas$20, 000.I thel dlandwi t
habookv al
ueof$30, 000anda
mar ketvalueof$35, 000andequi pmentwi t
habookv alueof$50, 000andamar ket
valueof$60, 000att hedateofcombi nation.Ther emainderoft hedi f
fer
enti
al at
acquisit
ionwasat t
ribut
ablet oani ncreasei nt hevalueofpat ents,whichhada
remainingusef ullifeoffi
v ey ears.All depr eciableasset sheldbyWi sdenatt hedateof
acquisit
ionhadar emainingeconomi cl i
feoff iveyears.Climberusest heequi t
y
met hodinaccount ingforitsi nvestmenti nWi sden.

16. 
Basedont hepr
ecedi
ngi
nfor
mat
ion,
thei
ncr
easei
nthef
airv
alueofpat
ent
shel
d
byWi sdeni
s: 
A. 
$20,000
B. 
$25,000
C. 
$15,000
D. 
$5,000

17. 
Basedontheprecedi
nginformati
on,whatbal
ancewoul
dCl
i
mberr
epor
tasi
ts
i
nvestmentinWisdenatJanuary1,2010? 
A. 
$230,400
B. 
$180,
000
C. 
$234,000
D. 
$203,400

18. 
Basedontheprecedi
nginformati
on,whatbal
ancewoul
dCl
i
mberr
epor
tasi
ts
i
nvestmentinWisdenatJanuary1,2011? 
A. 
$251,100
B. 
$224,
100
C. 
$215,100
D. 
$234,000

5-
8
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

 
OnJanuar y1,2008,Wilhel
m Corporat
ionacqui red90per centofKaiserCompany's
voti
ngstock,
atunderly
ingbookv al
ue.Thefairv alueofthenoncontroll
ingi
nter
estwas
equalt
o10per centofthebookv al
ueofKai seratt hatdate.Wil
helm usestheequi
ty
methodinaccountingforit
sowner shi
pofKai ser.OnDecember31, 2009,thetr
ial
bal
ancesofthet wocompani esareasfoll
ows:

   

19. 
Basedont heprecedingi
nfor
mati
on,whatamountwouldberepor
tedast
otal
assetsintheconsoli
datedbal
ancesheetatDecember31,
2009?
 
A. 
$805,000
B. 
$712,000
C. 
$742,000
D. 
$1,102,
000

5-
9
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

20. 
Basedontheprecedinginf
ormation,whatamountwouldbereport
edast
otal
l
iabi
li
ti
esintheconsol
idatedbalancesheetatDecember31,2009? 
A. 
$330,000
B. 
$712,
000
C. 
$318,000
D. 
$130,000

21. 
Basedontheprecedinginf
ormati
on,whatamountwouldberepor
tedasret
ained
earni
ngsintheconsol
idatedbal
ancesheetprepar
edatDecember31,2009?
 
A. 
314,000
B. 
294,000
C. 
150,000
D. 
424,000

22. 
Basedont heprecedingi
nformat
ion,whatamountwouldber epor
tedas
noncontrol
l
ingint
erestintheconsol
i
datedbalancesheetatDecember31,2009?
 
A. 
$27,000
B. 
$4,000
C. 
$15,000
D. 
$18,000

23. Basedont heprecedingi
nformati
on,
whatamountwouldbereport
edast ot
al
stockholder'
sequit
yint heconsol
idat
edbal
ancesheetatDecember31,2009? 
A. $412,000
B. 
$394,000
C. $542,000
D. $348,000

24. 
Basedontheprecedingi
nfor
mation,
whatamountwouldberepor
tedasi
ncomet
o
contr
oll
ingi
nter
estintheconsol
idat
edfi
nanci
alst
atement
sfor2009? 
A. 
$168,000
B. 
$138,
000
C. 
$164,000
D. 
$150,000

5-
10
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

5-
11
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

 
OnJanuar y1, 2008,Bristol
Companyacqui red80per centofAni mati
onCompany '
s
commonst ockf or$280,000cash.Att hatdate,Animationreportedcommonst ock
outstandingof$200, 000andr etainedearningsof$100, 000,andt hef
airv
alueofthe
noncont r
ol l
ingi nter
estwas$70, 000.Thebookv aluesandf airv
aluesofAnimati
on's
assetsandl iabili
ti
eswer eequal,exceptforotherintangibl
easset swhi
chhadaf air
value$50, 000gr eat
erthanbookv al
ueandan8- yearremainingli
fe.Animati
on
reportedthef oll
owingdat afor2008and2009:

   

Bri
stol
repor
tedneti
ncomeof$100,
000andpai
ddi
vi
dendsof$30,
000f
orbot
hthe
year
s.

25. 
Basedont hepr
ecedi
nginfor
mati
on,whati
stheamountofconsol
i
dat
ed
comprehensiv
eincomereport
edfor2008?
 
A. 
$125,000
B. 
$123,
750
C. 
$118,750
D. 
$130,000

26. 
Basedont hepr
ecedi
nginfor
mati
on,whati
stheamountofconsol
i
dat
ed
comprehensiv
eincomereport
edfor2009?
 
A. 
$145,000
B. 
$135,
000
C. 
$138,750
D. 
$128,750

5-
12
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

27. 
Basedontheprecedinginf
ormati
on,whatist
heamountofcompr
ehensi
vei
ncome
att
ri
butablet
othecontroll
i
nginter
estfor2008? 
A. 
$123,750
B. 
$118,750
C. 
$119,000
D. 
$104,000

28. 
Basedontheprecedinginf
ormati
on,whatist
heamountofcompr
ehensi
vei
ncome
att
ri
butablet
othecontroll
i
nginter
estfor2009? 
A. 
$138,750
B. 
$131,000
C. 
$128,750
D. 
$135,000

5-
13
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

 
OnJanuar y1,2008,Color
adoCor por
ati
onacquired75per centofDenverCompany
's
voti
ngcommonst ockfor$90,000cash.Atthatdate,thefairval
ueofthe
noncontrol
l
ingint
erestwas$30, 000.Denver
s'sbalancesheetatthedateof
acquisi
ti
oncontai
nedt hefol
lowingbalances:

Atthedateofacqui
sit
ion,
thereport
edbookvaluesofDenver'
sasset
sandl
iabi
l
iti
es
approxi
matedfai
rval
ue.Eli
minati
ngentri
esarebei
ngmadet oprepar
eaconsol
idat
ed
bal
ancesheetimmediatel
yfol
lowingthebusi
nesscombinati
on.

29. 
Basedont hepr ecedinginformati
on, i
ntheentrytoel
imi
nat
ethei
nvest
ment
bal
ance, 
A. 
ret
ainedearningswi l
lbecr edit
edfor$20,000.
B. 
addit
ionalpai
d-in-capi
talwillbecredit
edfor$20,000.
C. 
dif
ferent
ialwi
llbecr edit
edf or$10,000.
D. 
noncontrol
li
ngint er
estwillbedebitedfor30,000.

30. 
Basedonthepr
ecedi
ngi
nfor
mat
ion,
theamountofgoodwi
l
lrepor
tedi
s: 
A. 
$0.
B. 
$10,
000.
C. 
$15,
000.
D. 
$20,000.

5-
14
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

5-
15
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

 
OnDecember31, 2008, Mel korCor porationacqui red80per centofSy dneyCompany '
s
commonst ockf or$160, 000.Att hatdat e,thefairv alueoft henoncont roll
i
nginterest
was$40, 000.Oft he$75, 000di fferential,$10,000r elat edtot hei ncreasedv al
ueof
Sy dney'
sinv entory,$20,000r elatedt ot heincreasedv alueofi tsland, and$25,000
relatedt
ot hei ncreasedv al
ueofi tsequi pmentt hathadar emai ninglifeof10y ears
from thedat eofcombi nat i
on.Sy dneysol dal li
nvent or yitheldatt heendof2008
dur i
ng2009.Thel andt owhi cht hedi f
ferent i
alrel
at edwasal sosol ddur ing2009f ora
l
ar gegain.Att hedat eofcombi nation,Sy dneyr epor t
edr etainedear ningsof$75, 000
andcommonst ockout standi ngof$50, 000.I n2009, Sy dneyr epor t
edneti ncomeof
$60,000,butpai dnodi vidends. Mel koraccount sf oritsi nvest mentinSy dneyusingthe
equitymet hod.

31. 
Basedont
hepr ecedi
nginfor
mati
on,t
heamountofgoodwil
lrepor
tedi
nthe
consol
idat
edf
inancialst
atementspr
epar
edi
mmediatel
yaftert
hecombinat
ioni
s: 
A. 
$0
B. 
$32,
500
C. 
$26,
000
D. 
$20,000

32. 
Basedont
heprecedi
nginfor
mat i
on,
whati
st heamountofwri
te-
offofdi
ff
erent
ial
associ
atedwi
tht
hisacqui
sit
ionrecor
dedbyMelkordur
ing2009?
 
A. 
$0
B. 
$32,
500
C. 
$26,
000
D. 
$20,000

5-
16
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

33. 
Basedontheprecedi
nginformati
on,whatistheel
i
mi nat
ionent
rymadet oassi
gn
i
ncomet ononcont
roll
i
ngint
erestintheworkpapert
oprepareaful
lsetofconsol
i
dated
fi
nanci
alst
atementsfort
hey ear2009?

   
 
A.
 Opt
ionA
B.
 Opt
ionB
C.
 Opt
ionC
D.
 Opt
ionD

5-
17
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

 
OnJanuar y1, 2004,Pl
i
msol Companyacqui r
ed100per centofShi
ppi
ngCorporat
ion'
s
voti
ngshar es,atunder
lyi
ngbookv al
ue.Pli
msol usesthecostmethodinaccount
ing
forit
sinvestmentinShippi
ng.Shippi
ng'
sretainedearni
ngswas$75,000onthedateof
acquisi
ti
on. OnDecember31, 2004,t
hetr
ialbalancedatafort
hetwocompaniesareas
fol
lows:

   

34. 
Basedonthei
nformati
onprov
ided,whatamountofneti
ncomewill
berepor
tedi
n
theconsoli
dat
edf
inanci
alstat
ementsprepar
edonDecember31,2004? 
A. 
$100,000
B. 
$85,
000
C. 
$110,000
D. 
$125,000

5-
18
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

35. 
Basedonthei
nfor
mationprov
ided,whatamountoft
otal
asset
swi
l
lber
epor
tedi
n
theconsoli
dat
edbal
ancesheetpr
eparedonDecember31,2004? 
A. 
$425,000
B. 
$525,000
C. 
$650,000
D. 
$630,000

36. Basedont hei
nfor
mationpr
ovi
ded,whatamountofr
etai
nedear
ningswil
lbe
reportedintheconsol
idat
edbal
ancesheetpr
epar
edonDecember31, 2004?
 
A. $235,000
B. 
$210,000
C. $310,000
D. $225,000

37. 
Basedont heinf
ormati
onprovi
ded,whatamountoft
otal
li
abil
it
ieswi
l
lber
epor
ted
i
ntheconsolidatedbal
ancesheetprepar
edonDecember31,2004? 
A. 
$525,000
B. 
$115,
000
C. 
$125,000
D. 
$190,000

38. 
Basedont heinf
ormati
onprovi
ded,whatamountoftot
alst
ockhol
der
'sequi
tywi
l
l
bereportedi
nt heconsol
i
datedbal
ancesheetpr
eparedonDecember31,2004?
 
A. 
$190,000
B. 
$335,
000
C. 
$460,000
D. 
$310,000

5-
19
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

 
OnDecember31, 2008,
XCompanyacqui r
edcontroll
ingownershi
pofYCompany .A
consol
idat
edbal
ancesheetwaspreparedi
mmedi atel
y.Part
ialbal
ancesheetdat
af or
thetwocompani
esandt heconsol
i
datedenti
tyatthatdatefol
l
ow:

   

Duri
ng2008,XCompanyprovi
dedconsul
ti
ngserv
icest
oYCompanyandhasnoty
et
beenpai
dforthem.Ther
ewerenootherr
ecei
vabl
esorpay
abl
esbet
weenthe
compani
esatDecember31,2008.

39. 
Basedontheinf
ormati
ongiv
en,
whati
stheamountofunpai
dconsul
ti
ngser
vices
atDecember31,2008,onwor
kdonebyXCompanyforYCompany? 
A. 
$0
B. 
$10,000
C. 
$5,000
D. 
$15,000

5-
20
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

40. 
Basedont heinf
ormati
ongiven,whatbal
ancei
naccount
srecei
vabl
edi
dY
Companyr eportatDecember31,2008? 
A. 
$28,
000
B. 
$48,
000
C. 
$40,
000
D. 
$38,000

41. 
Basedontheinf
ormati
ongiven,XCompanyandYCompanyr
epor
tedwages
payabl
eof  
A. 
$50,
000and$28,000respect
ivel
y.
B. 
$60,
000and$32,000respect
ivel
y.
C. 
$40,
000and$35,000respect
ivel
y.
D. 
$28,000and$60,
000respect
ivel
y.

42. 
Basedontheinf
ormationgi
ven,
whatwast
hef
airv
alueofYCompanyasawhol
e
atthedateofacqui
sit
ion?
 
A. 
$155,000
B. 
$110,
000
C. 
$115,000
D. 
$135,000

43. 
Basedonthei
nfor
mat i
ongi
ven,
whatper
cent
ageofYCompany
'sshar
eswer
e
acquir
edbyXCompany ?
 
A. 
100percent
B. 
60percent
C. 
80percent
D. 
75percent

44. 
Basedontheinfor
mationgi
ven,whatamountwi
l
lber
epor
tedast
otal
cont
rol
l
ing
i
nterestint
heconsoli
dat
edbalancesheet
? 
A. 
$254,000
B. 
$285,000
C. 
$364,000
D. 
$395,000

5-
21
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

5-
22
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

45. 
OnJanuar y1,2008,ZetaCompanyacqui r
ed85per centofThetaCompany '
s
commonst ockfor$100,000cash.Thefai
rvalueofthenoncontrol
li
nginterestwas
determinedt obe15per centofthebookvalueofThetaatthatdate.Whatpor ti
onof
theretainedear ningsreport
edintheconsoli
datedbalancesheetprepar
ed
i
mmedi at elyaft
erthebusinesscombinati
onisassignedtothenoncontroll
i
ng
i
nterest? 
A. 
Nil
B. 
15per cent
C. 
100per cent
D. 
Cannotbedet ermined

 
 

EssayQuest
ions
 

5-
23
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

46. 
OnDecember31, 2008,
DefoeCorporat
ionacqui
red80percentofCrusoe
Company '
scommonst ockfor$104,
000cash.Thefairv
alueofthenoncontr
oll
ing
i
nterestatt
hatdat
ewasdet ermi
nedtobe$26,000.Datafrom t
hebalancesheetsof
thetwocompaniesincl
udedthefol
lowi
ngamount sasofthedateofacquisi
ti
on:

   

Ont hatdate,t
hebookvaluesofCrusoe'sasset
sandl
iabi
li
ti
esapproxi
mat edf
airval
ue
exceptf ori
nvent
ory
,whichhadaf airval
ueof$45,
000,andbui
ldi
ngsandequi pment,
whichhadaf ai
rval
ueof$100,000.AtDecember31,2008,Def
oereportedaccounts
payabl eof$15,
000toCrusoe,whichreport
edanequalamountini
tsaccounts
receivable.

Requir
ed:
1)Provi
detheeli
minati
ngent
ri
esneededtoprepareaconsol
i
dat
edbal
ancesheet
i
mmedi atel
yfol
l
owingthebusi
nesscombinati
on.
2)Prepar
eaconsolidat
edbal
ancesheetworkpaper.
3)Prepar
eaconsolidat
edbal
ancesheeti
ngoodf orm. 

 
 

5-
24
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

5-
25
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

47. 
Magel lanCor porati
onacquired80per centowner shi pofDipperCorporat
ionon
January1, 2008,f or$200,
000.Att hatdate,Dipperrepor tedcommonst ock
outstandingof$75, 000andr etai
nedear ni
ngsof$150, 000.Thef ai
rval
ueoft he
noncontrolli
nginterestwas$50, 000.Thedifferenti
alisassi gnedtoequipment,which
hadaf airvalue$25, 000greaterthanbookv alueandar emai ni
ngeconomiclifeoffiv
e
yearsatthedat eoft hebusinesscombi nati
on. Cantonr eportedneti
ncomeof$40, 000
andpai ddividendsof$20,000i n2008.

Requir
ed:
1)Providethejournalentr
iesrecordedbyMagell
andur
ing2008onit
sbooksifi
t
accountsforit
si nvestmentinDipperusi
ngtheequi
tymethod.
2)Givetheeli
mi natingentr
iesneededatDecember31,2008,t
opr
epareconsol
i
dat
ed
fi
nancialst
atement s. 

 
 

5-
26
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

48. 
OnJanuar y1,2007,Pli
msol Companyacqui r
ed100per centofShippi
ng
Corpor at
ion'
svoti
ngshares,atunderl
yi
ngbookv alue.Pli
msolusesthecostmethodi
n
account i
ngfori
tsinvest
menti nShippi
ng.Shippi
ng'sreport
edretai
nedearni
ngsof
$75,000ont hedateofacquisit
ion.Thetr
ialbal
ancesf orPl
imsolCompanyand
ShippingCorporat
ionasofDecember31, 2008,f
ollow:
 

Requir
ed:
1)Provi
deal
lel
i
minati
ngentri
esrequi
redtoprepar
eaful
lsetofconsol
i
dat
ed
stat
ementsf
or2008.
2)Prepar
eathr
ee-par
tconsol
idat
ionworkpaperi
ngoodf
orm asofDecember31,
2008. 

 
 

5-
27
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

49. 
OnJanuary1,2008, Gr
egor
yCor porat
ionacquir
ed90per centofNovaCompany 's
voti
ngstock,
atunderly
ingbookval
ue. Thefai
rvalueofthenoncontrol
li
ngint
erestwas
equalt
o10per centofthebookval
ueofNov aatthatdate.Gregor
yusestheequity
methodinaccountingfori
tsownershipofNova.OnDecember31, 2008,t
hetrial
bal
ancesofthetwocompani esareasf ol
lows:

   

Requir
ed:
1)Provi
deal lel
iminati
ngent r
iesr equi
redasofDecember31,2008,
toprepar
e
consoli
datedf i
nancialstat
ement s.
2)Prepareathr ee-
partconsolidationworkpaper
.
3)Prepareaconsol i
dat edbal
ancesheet ,incomest
atement
,andret
ainedear
nings
stat
ementf or2008. 

 
 

5-
28
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

50. 
OnJanuary1,2008, Gr
egor
yCor porat
ionacquir
ed90per centofNovaCompany 's
voti
ngstock,
atunderly
ingbookval
ue. Thefai
rvalueofthenoncontrol
li
ngint
erestwas
equalt
o10per centofthebookval
ueofNov aatthatdate.Gregor
yusestheequity
methodinaccountingfori
tsownershipofNova.OnDecember31, 2009,t
hetrial
bal
ancesofthetwocompani esareasf ol
lows:

   

Requir
ed:
1)Givealleli
minat
ingentr
iesr
equi
redonDecember31,2008,
toprepareconsol
i
dat
ed
fi
nancial
st at
ements.
2)Prepareat hr
ee-
partconsol
i
dati
onworkpaperasofDecember31,2008.
 

 
 

5-
29
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

51. 
OnJanuar y1, 2008, VectorCompanyacqui red80per centofScal arCompany '
s
owner shiponf or$120, 000cash.Att hatdate,thef airv
alueofthenoncont r
oll
ing
i
nterestwas$30, 000.Thebookv alueofScal ar'
snetasset satacqui siti
onwas
$125,000. Thebookv aluesandf airvaluesofScal ar '
sassetsandliabili
ti
eswer eequal,
exceptf orbuil
dingsandequi pment ,
whi chwer ewor th$15,000mor ethanbookv al
ue.
Buil
dingsandequi pmentar edepreci at
edona10- yearbasis.Al
thoughgoodwi l
li
snot
amor t
ized, t
hemanagementofVect orconcludedatDecember31, 2008,thatgoodwill
fr
om itsacqui sit
ionofScal arshar eshadbeeni mpai redandt hecor r
ectcarryi
ng
amountwas$5, 000. Goodwi l
landgoodwi lli
mpai rmentwer eassignedpr oport
ionatel
y
tothecont rol
lingandnoncont rol
lingshar eholders.(NotethatVectorCompanydoes
notadj ustit
sIncomef rom Subsidi ar
yf orgoodwi ll
impai r
mentundert hebasicequity
method. )Noaddi tionalimpairmentoccur redin2009.

Tr
ial
bal
ancedat
aforVect
orandScal
aronDecember31,
2009,
areasf
oll
ows:

   

Requi
red:

5-
30
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

5-
31
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

1)Provi
deallel
i
minati
ngentri
esneededt
oprepareathr
ee-par
tconsol
i
dati
on
workpaperasofDecember31, 2009.
2)Prepareathr
ee-
partconsol
idati
onwor
kpaperf
or2009ingoodform. 

 
 

Chapt
er05Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies
AnswerKey
 

Mul
ti
pleChoi
ceQuest
ions
 

5-
32
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

 
Brist
leCorpor
ati
onacqui r
ed75percentofSil
verCorpor
ati
on'scommonst ockon
December31,2008, f
or$300,
000.Thefairval
ueofthenoncontrol
l
inginter
estatthat
dat
ewasdet erminedtobe$100,000.Si
lver
'sbal
ancesheetimmedi at
elybeforet
he
combinat
ionrefl
ectedthefol
l
owingbalances:

   

Acarefulrevi
ewoft hefairval
ueofSil
ver
'sasset
sandliabil
it
iesindi
catedthat
i
nventory,
land,andbuil
dingsandequipment(net
)hadfairval
uesof$65, 000,$100,
000,
and,$300,
000r especti
vel
y .Goodwi
l
lisassi
gnedproporti
onatelytoBri
stleandt he
noncontr
olli
ngshareholders.

1. 
Basedont heprecedingi
nformat
ion,
whatamountofinv
entor
ywi l
lbeincl
udedi
n
theconsol
idatedbalancesheetimmedi
atel
yfol
l
owingtheacqui
sit
ion? 
A. 
$0
B. 
$65,
000
C. 
$70,000
D. 
$60,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
33
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

2. 
Basedont hepr
ecedi
nginf
ormat
ion,whatamountofl
andwillbeincl
udedi
nthe
consol
idatedbal
ancesheeti
mmediat
elyfol
lowi
ngtheacqui
sit
ion?
 
A. 
$0
B. 
$10,
000
C. 
$90,000
D. 
$100,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

3. 
Basedont hepr
ecedi
nginf
ormati
on,
whatamountofbuil
dingsandequi
pment(
net
)
wil
lbeincludedi
ntheconsol
i
datedbal
ancesheeti
mmediat
elyfol
lowi
ngthe
acqui
sit
ion? 
A. 
$0
B. 
$50,
000
C. 
$250,000
D. 
$300,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

4. 
Basedont hepr
ecedi
nginf
ormat
ion,whatamountofgoodwil
lwi
llber
epor
tedi
nthe
consol
idatedbal
ancesheeti
mmediatel
yfol
lowi
ngtheacquisi
ti
on?
 
A. 
$0
B. 
$120,000
C. 
$65,000
D. 
$20,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
34
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

5. 
Basedont heprecedi
nginf
ormati
on,whatamountwillberepor
tedasinv
est
mentin
Sil
verCorporat
ionstocki
ntheconsol
idat
edbalancesheetimmediatel
yfol
l
owingt
he
acquisi
ti
on? 
A. 
$0
B. 
$210,000
C. 
$300,000
D. 
$400,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

6.
 Basedont hepr
ecedi
nginf
ormation,
whatamountwil
lbereport
edasnoncont r
oll
i
ng
i
nterestint
heconsoli
dat
edbalancesheeti
mmediatel
yfol
lowingtheacqui
sit
ion? 
A.
 $0
B.
 $70,000
C.
 $83,750
D.
 $100,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
35
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

 
OnJanuary1,2009, Gul
l
iverCorpor
ati
onacquir
ed80per centofSea-Gul lCompany'
s
commonstockf or$160,
000cash.Thef ai
rval
ueoft henoncontr
oll
ingi nt
erestatt
hat
dat
ewasdet er
mi nedtobe$40,000.Dat
af r
om thebalancesheetsoft hetwo
compani
esincl
udedt hefoll
owingamountsasoft hedateofacquisit
ion:

   

Atthedat eofthebusi
nesscombi
nati
on,thebookv al
uesofSea-
Gul
l'
snetasset
sand
l
iabi
lit
iesapproxi
matedfai
rval
ueexceptfori
nventory
,whichhadaf
airv
alueof
$45,000,andland,whi
chhadafai
rvalueof$60,000.

5-
36
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

7. 
Basedont hepr
ecedingi
nfor
mat i
on,whatamountoftot
alinvent
orywill
ber
epor
ted
i
nt heconsoli
dat
edbalancesheetprepar
edimmediat
elyaft
erthebusiness
combination?
 
A. 
$130,000
B. 
$135,000
C. 
$90,000
D. 
$45,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

8. 
Basedonthepr
ecedi
nginformati
on,
whatamountofgoodwi
ll
will
bereport
edinthe
consol
idat
edbal
ancesheetprepar
edimmediat
elyaf
tert
hebusi
nesscombinati
on?
 
A. 
$0
B. 
$40,
000
C. 
$20,000
D. 
$15,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

9. 
Basedont heprecedingi
nfor
mation,whatamountoft
otal
asset
swill
ber
epor
tedi
n
theconsolidatedbalancesheetpr
eparedimmediat
elyaf
tert
hebusi
ness
combination? 
A. 
$720,000
B. 
$840,000
C. 
$825,000
D. 
$865,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
37
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

10. Basedont hepr
ecedinginf
ormati
on,whatamountoft
otal
liabi
li
ti
eswil
lbe
reportedintheconsol
idatedbal
ancesheetpr
epar
edimmediatelyaf
tert
hebusi
ness
combi nati
on? 
A. $395,000
B. 
$280,000
C. $265,000
D. $195,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

11. 
Basedont heprecedinginf
ormat
ion,whatamountwillbereport
edas
noncontrol
li
ngint
erestintheconsol
i
datedbalancesheetpreparedi
mmediat
elyaf
ter
thebusinesscombinati
on?  
A. 
$0
B. 
$15,
000
C. 
$40,000
D. 
$46,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

12. 
Basedont heprecedi
nginf
ormat
ion,
whatamountofconsol
i
dat
edr
etai
ned
earni
ngswillbereport
ed? 
A. 
$205,000
B. 
$120,
000
C. 
$325,000
D. 
$310,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
38
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

13. Basedont heprecedingi
nformati
on,
whatamountwillberepor
tedast
otal
stockholders'
equit
yint heconsol
idat
edbal
ancesheetpr
eparedimmediat
elyaf
tert
he
businesscombi nat
ion? 
A. $445,000
B. 
$205,000
C. $565,000
D. $550,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

 
OnJanuar y1, 2008, RamonCor por ati
onacquir
ed75per centofTesterCompany '
s
voti
ngcommonst ockf or$300,000.Att het
imeoft hecombi nation,
Testerreported
commonst ockout standingof$200, 000andretai
nedear ningsof$150,000, andthe
fai
rv al
ueofthenoncont roll
i
ngint erestwas$100,000.Thebookv al
ueofTest er'
snet
assetsapproximatedmar ketvalueexceptf orpatentsthathadamar ketvalueof
$50,000mor ethant heirbookv alue.Thepat ent
shadar emai ni
ngeconomi clifeoften
yearsatthedat eofthebusi nesscombi nati
on.Testerr
epor tednetincomeof$40, 000
andpai ddi
videndsof$10, 000dur ing2008.

14. 
Basedontheprecedi
nginfor
mati
on,whatbal
ancewil
lRamonrepor
tasit
s
i
nvestmentinTest
eratDecember31,2008,
assumingRamonusestheequi
tymet
hod
i
naccount i
ngfori
tsi
nvestment?
 
A. 
$318,750
B. 
$317,
500
C. 
$330,000
D. 
$326,250

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
39
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

15. 
Basedont hepr
ecedi
nginformati
on,al
lofthefol
lowingar
eeli
minati
ngentr
ies
neededtoprepareaful
lsetofconsol
idat
edfinanci
alstat
ementsatDecember31,
2008,except
:

   
 
A.
 Choi
ceA
B.
 Choi
ceB
C.
 Choi
ceC
D.
 Choi
ceD

AACSB:Anal
yti
c
AI
CPA:Measurement
 

 
OnJanuar y1, 2008, Cli
mberCor porat i
onacqui r
ed90per centofWi sdenCor por
ati
on
for$180,000cash.Wi sdenr epor t
edneti ncomeof$30, 000anddi vi
dendsof$10, 000
for2008, 2009, and2010.OnJanuar y1, 2008, Wisdenr epor t
edcommonst ock
outstandingof$100, 000andr et
ainedear ningsof$60, 000, andt hefairval
ueoft he
noncont r
olli
ngi nterestwas$20, 000.I thel dlandwi t
habookv al
ueof$30, 000anda
mar ketvalueof$35, 000andequi pmentwi t
habookv alueof$50, 000andamar ket
valueof$60, 000att hedateofcombi nation.Ther emainderoft hedi f
fer
enti
al at
acquisit
ionwasat t
ribut
ablet oani ncreasei nt hevalueofpat ents,whichhada
remainingusef ullifeoffi
v ey ears.All depr eciableasset sheldbyWi sdenatt hedateof
acquisit
ionhadar emainingeconomi cl i
feoff iveyears.Climberusest heequi t
y
met hodinaccount ingforitsi nvestmenti nWi sden.

5-
40
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

16.
 Basedonthepr
ecedi
ngi
nfor
mat
ion,
thei
ncr
easei
nthef
airv
alueofpat
ent
shel
d
byWisdenis:
 
A. 
$20,
000
B. 
$25,
000
C. 
$15,
000
D. 
$5,
000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

17. 
Basedontheprecedi
nginformati
on,whatbal
ancewoul
dCl
i
mberr
epor
tasi
ts
i
nvestmentinWisdenatJanuary1,2010? 
A. 
$230,400
B. 
$180,
000
C. 
$234,000
D. 
$203,400

AACSB:Anal
yti
c
AI
CPA:Measurement
 

18. 
Basedontheprecedi
nginformati
on,whatbal
ancewoul
dCl
i
mberr
epor
tasi
ts
i
nvestmentinWisdenatJanuary1,2011? 
A. 
$251,100
B. 
$224,
100
C. 
$215,100
D. 
$234,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
41
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

 
OnJanuar y1,2008,Wilhel
m Corporat
ionacqui red90per centofKaiserCompany's
voti
ngstock,
atunderly
ingbookv al
ue.Thefairv alueofthenoncontroll
ingi
nter
estwas
equalt
o10per centofthebookv al
ueofKai seratt hatdate.Wil
helm usestheequi
ty
methodinaccountingforit
sowner shi
pofKai ser.OnDecember31, 2009,thetr
ial
bal
ancesofthet wocompani esareasfoll
ows:

   

19. 
Basedont heprecedingi
nfor
mati
on,whatamountwouldberepor
tedast
otal
assetsintheconsoli
datedbal
ancesheetatDecember31,
2009?
 
A. 
$805,000
B. 
$712,000
C. 
$742,000
D. 
$1,102,
000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
42
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

20. 
Basedontheprecedinginf
ormation,whatamountwouldbereport
edast
otal
l
iabi
li
ti
esintheconsol
idatedbalancesheetatDecember31,2009? 
A. 
$330,000
B. 
$712,
000
C. 
$318,000
D. 
$130,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

21.
 Basedontheprecedinginf
ormati
on,whatamountwouldberepor
tedasret
ained
earni
ngsintheconsol
idatedbal
ancesheetprepar
edatDecember31,2009?
 
A. 
314,000
B. 
294,000
C. 
150,000
D. 
424,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

22. 
Basedont heprecedingi
nformat
ion,whatamountwouldber epor
tedas
noncontrol
l
ingint
erestintheconsol
i
datedbalancesheetatDecember31,2009?
 
A. 
$27,000
B. 
$4,000
C. 
$15,000
D. 
$18,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
43
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

23. Basedont heprecedingi
nformati
on,
whatamountwouldbereport
edast ot
al
stockholder'
sequit
yint heconsol
idat
edbal
ancesheetatDecember31,2009? 
A. $412,000
B. 
$394,000
C. $542,000
D. $348,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

24. 
Basedontheprecedingi
nfor
mation,
whatamountwouldberepor
tedasi
ncomet
o
contr
oll
ingi
nter
estintheconsol
idat
edfi
nanci
alst
atement
sfor2009? 
A. 
$168,000
B. 
$138,
000
C. 
$164,000
D. 
$150,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
44
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

 
OnJanuar y1, 2008,Bristol
Companyacqui red80per centofAni mati
onCompany '
s
commonst ockf or$280,000cash.Att hatdate,Animationreportedcommonst ock
outstandingof$200, 000andr etainedearningsof$100, 000,andt hef
airv
alueofthe
noncont r
ol l
ingi nter
estwas$70, 000.Thebookv aluesandf airv
aluesofAnimati
on's
assetsandl iabili
ti
eswer eequal,exceptforotherintangibl
easset swhi
chhadaf air
value$50, 000gr eat
erthanbookv al
ueandan8- yearremainingli
fe.Animati
on
reportedthef oll
owingdat afor2008and2009:

   

Bri
stol
repor
tedneti
ncomeof$100,
000andpai
ddi
vi
dendsof$30,
000f
orbot
hthe
year
s.

25.
 Basedont hepr
ecedi
nginfor
mati
on,whati
stheamountofconsol
i
dat
ed
comprehensiv
eincomereport
edfor2008?
 
A. 
$125,000
B. 
$123,
750
C. 
$118,750
D. 
$130,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
45
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

26. 
Basedont hepr
ecedi
nginfor
mati
on,whati
stheamountofconsol
i
dat
ed
comprehensiv
eincomereport
edfor2009?
 
A. 
$145,000
B. 
$135,
000
C. 
$138,750
D. 
$128,750

AACSB:Anal
yti
c
AI
CPA:Measurement
 

27. 
Basedontheprecedinginf
ormati
on,whatist
heamountofcompr
ehensi
vei
ncome
att
ri
butablet
othecontroll
i
nginter
estfor2008? 
A. 
$123,750
B. 
$118,750
C. 
$119,000
D. 
$104,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

28. 
Basedontheprecedinginf
ormati
on,whatist
heamountofcompr
ehensi
vei
ncome
att
ri
butablet
othecontroll
i
nginter
estfor2009? 
A. 
$138,750
B. 
$131,000
C. 
$128,750
D. 
$135,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
46
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

 
OnJanuar y1,2008,Color
adoCor por
ati
onacquired75per centofDenverCompany
's
voti
ngcommonst ockfor$90,000cash.Atthatdate,thefairval
ueofthe
noncontrol
l
ingint
erestwas$30, 000.Denver
s'sbalancesheetatthedateof
acquisi
ti
oncontai
nedt hefol
lowingbalances:

Atthedateofacqui
sit
ion,
thereport
edbookvaluesofDenver'
sasset
sandl
iabi
l
iti
es
approxi
matedfai
rval
ue.Eli
minati
ngentri
esarebei
ngmadet oprepar
eaconsol
idat
ed
bal
ancesheetimmediatel
yfol
lowingthebusi
nesscombinati
on.

29. 
Basedont hepr ecedinginformati
on, i
ntheentrytoel
imi
nat
ethei
nvest
ment
bal
ance, 
A. 
ret
ainedearningswi ll
becr edit
edfor$20,000.
B. 
addit
ionalpai
d-in-capit
alwillbecredit
edfor$20,000.
C. 
dif
ferent
ialwi
llbecr edit
edf or$10,000.
D. 
noncontrol
li
ngint er
estwillbedebitedfor30,000.

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
47
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

30. 
Basedonthepr
ecedi
ngi
nfor
mat
ion,
theamountofgoodwi
l
lrepor
tedi
s: 
A. 
$0.
B. 
$10,
000.
C. 
$15,
000.
D. 
$20,000.

AACSB:Anal
yti
c
AI
CPA:Measurement
 

 
OnDecember31, 2008, Mel korCor porationacqui red80per centofSy dneyCompany '
s
commonst ockf or$160, 000.Att hatdat e,thefairv alueoft henoncont roll
i
nginterest
was$40, 000.Oft he$75, 000di fferential,$10,000r elat edtot hei ncreasedv al
ueof
Sy dney'
sinv entory,$20,000r elatedt ot heincreasedv alueofi tsland, and$25,000
relatedt
ot hei ncreasedv al
ueofi tsequi pmentt hathadar emai ninglifeof10y ears
from thedat eofcombi nat i
on.Sy dneysol dal li
nvent or yitheldatt heendof2008
dur i
ng2009.Thel andt owhi cht hedi f
ferent i
alrel
at edwasal sosol ddur ing2009f ora
l
ar gegain.Att hedat eofcombi nation,Sy dneyr epor t
edr etainedear ningsof$75, 000
andcommonst ockout standi ngof$50, 000.I n2009, Sy dneyr epor t
edneti ncomeof
$60,000,butpai dnodi vidends. Mel koraccount sf oritsi nvest mentinSy dneyusingthe
equitymet hod.

31. 
Basedont
hepr ecedi
nginfor
mati
on,t
heamountofgoodwil
lrepor
tedi
nthe
consol
idat
edf
inancialst
atementspr
epar
edi
mmediatel
yaftert
hecombinat
ioni
s: 
A. 
$0
B. 
$32,
500
C. 
$26,
000
D. 
$20,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
48
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

32. 
Basedont
heprecedi
nginfor
mat i
on,
whati
st heamountofwri
te-
offofdi
ff
erent
ial
associ
atedwi
tht
hisacqui
sit
ionrecor
dedbyMelkordur
ing2009?
 
A. 
$0
B. 
$32,
500
C. 
$26,
000
D. 
$20,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

33. 
Basedontheprecedi
nginformati
on,whatistheel
i
mi nat
ionent
rymadet oassi
gn
i
ncomet ononcont
roll
i
ngint
erestintheworkpapert
oprepareaful
lsetofconsol
i
dated
fi
nanci
alst
atementsfort
hey ear2009?

   
 
A.
 Opt
ionA
B.
 Opt
ionB
C.
 Opt
ionC
D.
 Opt
ionD

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
49
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

 
OnJanuar y1, 2004,Pl
i
msol Companyacqui r
ed100per centofShi
ppi
ngCorporat
ion'
s
voti
ngshar es,atunder
lyi
ngbookv al
ue.Pli
msol usesthecostmethodinaccount
ing
forit
sinvestmentinShippi
ng.Shippi
ng'
sretainedearni
ngswas$75,000onthedateof
acquisi
ti
on. OnDecember31, 2004,t
hetr
ialbalancedatafort
hetwocompaniesareas
fol
lows:

   

34. 
Basedonthei
nformati
onprov
ided,whatamountofneti
ncomewill
berepor
tedi
n
theconsoli
dat
edf
inanci
alstat
ementsprepar
edonDecember31,2004? 
A. 
$100,000
B. 
$85,
000
C. 
$110,000
D. 
$125,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
50
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

35. 
Basedonthei
nfor
mationprov
ided,whatamountoft
otal
asset
swi
l
lber
epor
tedi
n
theconsoli
dat
edbal
ancesheetpr
eparedonDecember31,2004? 
A. 
$425,000
B. 
$525,000
C. 
$650,000
D. 
$630,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

36. Basedont hei
nfor
mationpr
ovi
ded,whatamountofr
etai
nedear
ningswil
lbe
reportedintheconsol
idat
edbal
ancesheetpr
epar
edonDecember31, 2004?
 
A. $235,000
B. 
$210,000
C. $310,000
D. $225,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

37. 
Basedont heinf
ormati
onprovi
ded,whatamountoft
otal
li
abil
it
ieswi
l
lber
epor
ted
i
ntheconsolidatedbal
ancesheetprepar
edonDecember31,2004? 
A. 
$525,000
B. 
$115,
000
C. 
$125,000
D. 
$190,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
51
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

38.
 Basedont heinf
ormati
onprovi
ded,whatamountoftot
alst
ockhol
der
'sequi
tywi
l
l
bereportedi
nt heconsol
i
datedbal
ancesheetpr
eparedonDecember31,2004?
 
A. 
$190,000
B. 
$335,
000
C. 
$460,000
D. 
$310,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

 
OnDecember31, 2008,
XCompanyacqui r
edcontroll
ingownershi
pofYCompany .A
consol
idat
edbal
ancesheetwaspreparedi
mmedi atel
y.Part
ialbal
ancesheetdat
af or
thetwocompani
esandt heconsol
i
datedenti
tyatthatdatefol
l
ow:

   

Duri
ng2008,XCompanyprovi
dedconsul
ti
ngserv
icest
oYCompanyandhasnoty
et
beenpai
dforthem.Ther
ewerenootherr
ecei
vabl
esorpay
abl
esbet
weenthe
compani
esatDecember31,2008.

5-
52
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

5-
53
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

39.
 Basedontheinf
ormati
ongiv
en,
whati
stheamountofunpai
dconsul
ti
ngser
vices
atDecember31,2008,onwor
kdonebyXCompanyforYCompany? 
A. 
$0
B. 
$10,
000
C. 
$5,
000
D. 
$15,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

40. 
Basedont heinf
ormati
ongiven,whatbal
ancei
naccount
srecei
vabl
edi
dY
Companyr eportatDecember31,2008? 
A. 
$28,
000
B. 
$48,
000
C. 
$40,
000
D. 
$38,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

41. 
Basedontheinf
ormati
ongiven,XCompanyandYCompanyr
epor
tedwages
payabl
eof  
A. 
$50,
000and$28,000respect
ivel
y.
B. 
$60,
000and$32,000respect
ivel
y.
C. 
$40,
000and$35,000respect
ivel
y.
D. 
$28,000and$60,
000respect
ivel
y.

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
54
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

42. 
Basedontheinf
ormationgi
ven,
whatwast
hef
airv
alueofYCompanyasawhol
e
atthedateofacqui
sit
ion?
 
A. 
$155,000
B. 
$110,
000
C. 
$115,000
D. 
$135,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

43. 
Basedonthei
nfor
mat i
ongi
ven,
whatper
cent
ageofYCompany
'sshar
eswer
e
acquir
edbyXCompany ?
 
A. 
100percent
B. 
60percent
C. 
80percent
D. 
75percent

AACSB:Anal
yti
c
AI
CPA:Measurement
 

44. 
Basedontheinfor
mationgi
ven,whatamountwi
l
lber
epor
tedast
otal
cont
rol
l
ing
i
nterestint
heconsoli
dat
edbalancesheet
? 
A. 
$254,000
B. 
$285,000
C. 
$364,000
D. 
$395,000

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
55
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

45. 
OnJanuar y1,2008,ZetaCompanyacqui r
ed85per centofThetaCompany '
s
commonst ockfor$100,000cash.Thefai
rvalueofthenoncontrol
li
nginterestwas
determinedt obe15per centofthebookvalueofThetaatthatdate.Whatpor ti
onof
theretainedear ningsreport
edintheconsoli
datedbalancesheetprepar
ed
i
mmedi at elyaft
erthebusinesscombinati
onisassignedtothenoncontroll
i
ng
i
nterest? 
A. 
Nil
B. 
15per cent
C. 
100per cent
D. 
Cannotbedet ermined

AACSB:Ref
lect
iveThi
nki
ng
AI
CPA:Reporti
ng
 
 

EssayQuest
ions
 

5-
56
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

46. 
OnDecember31, 2008,
DefoeCorporat
ionacqui
red80percentofCrusoe
Company '
scommonst ockfor$104,
000cash.Thefairv
alueofthenoncontr
oll
ing
i
nterestatt
hatdat
ewasdet ermi
nedtobe$26,000.Datafrom t
hebalancesheetsof
thetwocompaniesincl
udedthefol
lowi
ngamount sasofthedateofacquisi
ti
on:

   

Ont hatdate,t
hebookvaluesofCrusoe'sasset
sandl
iabi
li
ti
esapproxi
mat edf
airval
ue
exceptf ori
nvent
ory
,whichhadaf airval
ueof$45,
000,andbui
ldi
ngsandequi pment,
whichhadaf ai
rval
ueof$100,000.AtDecember31,2008,Def
oereportedaccounts
payabl eof$15,
000toCrusoe,whichreport
edanequalamountini
tsaccounts
receivable.

Requir
ed:
1)Provi
detheeli
minati
ngent
ri
esneededtoprepareaconsol
i
dat
edbal
ancesheet
i
mmedi atel
yfol
l
owingthebusi
nesscombinati
on.
2)Prepar
eaconsolidat
edbal
ancesheetworkpaper.
3)Prepar
eaconsolidat
edbal
ancesheeti
ngoodf orm. 

5-
57
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

5-
58
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

1)

   

   

2)

   

5-
59
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

5-
60
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

3)

   

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
61
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

47. 
Magel lanCor porati
onacquired80per centowner shi pofDipperCorporat
ionon
January1, 2008,f or$200,
000.Att hatdate,Dipperrepor tedcommonst ock
outstandingof$75, 000andr etai
nedear ni
ngsof$150, 000.Thef ai
rval
ueoft he
noncontrolli
nginterestwas$50, 000.Thedifferenti
alisassi gnedtoequipment,which
hadaf airvalue$25, 000greaterthanbookv alueandar emai ni
ngeconomiclifeoffiv
e
yearsatthedat eoft hebusinesscombi nati
on. Cantonr eportedneti
ncomeof$40, 000
andpai ddividendsof$20,000i n2008.

Requir
ed:
1)Providethejournalentr
iesrecordedbyMagell
andur
ing2008onit
sbooksifi
t
accountsforit
si nvestmentinDipperusi
ngtheequi
tymethod.
2)Givetheeli
mi natingentr
iesneededatDecember31,2008,t
opr
epareconsol
i
dat
ed
fi
nancialst
atement s. 

5-
62
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er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

1)

   

2)

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ionofLess-
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l
yOwnedSubsi
diar
ies

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Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

   

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
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Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

48. 
OnJanuar y1,2007,Pli
msol Companyacqui r
ed100per centofShippi
ng
Corpor at
ion'
svoti
ngshares,atunderl
yi
ngbookv alue.Pli
msolusesthecostmethodi
n
account i
ngfori
tsinvest
menti nShippi
ng.Shippi
ng'sreport
edretai
nedearni
ngsof
$75,000ont hedateofacquisit
ion.Thetr
ialbal
ancesf orPl
imsolCompanyand
ShippingCorporat
ionasofDecember31, 2008,f
ollow:
 

Requir
ed:
1)Provi
deal
lel
i
minati
ngentri
esrequi
redtoprepar
eaful
lsetofconsol
i
dat
ed
stat
ementsf
or2008.
2)Prepar
eathr
ee-par
tconsol
idat
ionworkpaperi
ngoodf
orm asofDecember31,
2008. 

5-
66
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er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

1)

   

2)

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ionofLess-
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l
yOwnedSubsi
diar
ies

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Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

   

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
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Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

49. 
OnJanuary1,2008, Gr
egor
yCor porat
ionacquir
ed90per centofNovaCompany 's
voti
ngstock,
atunderly
ingbookval
ue. Thefai
rvalueofthenoncontrol
li
ngint
erestwas
equalt
o10per centofthebookval
ueofNov aatthatdate.Gregor
yusestheequity
methodinaccountingfori
tsownershipofNova.OnDecember31, 2008,t
hetrial
bal
ancesofthetwocompani esareasf ol
lows:

   

Requir
ed:
1)Provi
deal lel
iminati
ngent r
iesr equi
redasofDecember31,2008,
toprepar
e
consoli
datedf i
nancialstat
ement s.
2)Prepareathr ee-
partconsolidationworkpaper
.
3)Prepareaconsol i
dat edbal
ancesheet ,incomest
atement
,andret
ainedear
nings
stat
ementf or2008. 

5-
70
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er05-Consol
i
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ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

5-
71
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

1)

   
2)

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er05-Consol
i
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ionofLess-
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Whol
l
yOwnedSubsi
diar
ies

5-
73
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

   

3)

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er05-Consol
i
dat
ionofLess-
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Whol
l
yOwnedSubsi
diar
ies

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75
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

   

   

   

5-
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er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

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er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
78
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

50. 
OnJanuary1,2008, Gr
egor
yCor porat
ionacquir
ed90per centofNovaCompany 's
voti
ngstock,
atunderly
ingbookval
ue. Thefai
rvalueofthenoncontrol
li
ngint
erestwas
equalt
o10per centofthebookval
ueofNov aatthatdate.Gregor
yusestheequity
methodinaccountingfori
tsownershipofNova.OnDecember31, 2009,t
hetrial
bal
ancesofthetwocompani esareasf ol
lows:

   

Requir
ed:
1)Givealleli
minat
ingentr
iesr
equi
redonDecember31,2008,
toprepareconsol
i
dat
ed
fi
nancial
st at
ements.
2)Prepareat hr
ee-
partconsol
i
dati
onworkpaperasofDecember31,2008.
 

5-
79
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

5-
80
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

1)

   
2)

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er05-Consol
i
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ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

5-
82
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er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

   

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er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

AACSB:Anal
yti
c
AI
CPA:Measurement
 

5-
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Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

51. 
OnJanuar y1, 2008, VectorCompanyacqui red80per centofScal arCompany '
s
owner shiponf or$120, 000cash.Att hatdate,thef airv
alueofthenoncont r
oll
ing
i
nterestwas$30, 000.Thebookv alueofScal ar'
snetasset satacqui siti
onwas
$125,000. Thebookv aluesandf airvaluesofScal ar '
sassetsandliabili
ti
eswer eequal,
exceptf orbuil
dingsandequi pment ,
whi chwer ewor th$15,000mor ethanbookv al
ue.
Buil
dingsandequi pmentar edepreci at
edona10- yearbasis.Al
thoughgoodwi l
li
snot
amor t
ized, t
hemanagementofVect orconcludedatDecember31, 2008,thatgoodwill
fr
om itsacqui sit
ionofScal arshar eshadbeeni mpai redandt hecor r
ectcarryi
ng
amountwas$5, 000. Goodwi l
landgoodwi lli
mpai rmentwer eassignedpr oport
ionatel
y
tothecont rol
lingandnoncont rol
lingshar eholders.(NotethatVectorCompanydoes
notadj ustit
sIncomef rom Subsidi ar
yf orgoodwi ll
impai r
mentundert hebasicequity
method. )Noaddi tionalimpairmentoccur redin2009.

Tr
ial
bal
ancedat
aforVect
orandScal
aronDecember31,
2009,
areasf
oll
ows:

   

Requi
red:

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85
Chapt
er05-Consol
i
dat
ionofLess-
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Whol
l
yOwnedSubsi
diar
ies

5-
86
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

1)Provi
deallel
i
minati
ngentr
iesneededt
opr
epar
eat
hree-
par
tconsol
i
dat
ion
workpaperasofDecember31,2009.

2)Pr
epar
eat
hree-
par
tconsol
i
dat
ionwor
kpaperf
or2009i
ngoodf
orm.
 

1)El
i
minat
ingent
ri
es

   

   

2)
 

5-
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er05-Consol
i
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ionofLess-
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Whol
l
yOwnedSubsi
diar
ies

5-
88
Chapt
er05-Consol
i
dat
ionofLess-
than-
Whol
l
yOwnedSubsi
diar
ies

(
cont
d.)

AACSB:Anal
yti
c
AI
CPA:Measurement
 

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