Question 1

In preparing the consolidation worksheet as of December 31, 2018 for AHI and RMC, which of the following worksheet entry descriptions reflects what AHI should do to consolidate the financial statements?

Accepted Answer

A)   Consolidation Entry A is recorded to allocate the excess fair value to the noncontrolling interest and record a credit to the Asset in connection with a fair valuation on the date AHI obtains control of RMC as follows: Noncontrolling interest $96,000Asset $96,000
B)   Consolidation Entry P is recorded to eliminate the long-term receivable and debt representing AHI's initial investment in RMC as follows: Loan receivable from RMC $3,000,000Long-term debt $3,000,000
C)   Consolidation Entry S is recorded to eliminate the interest payment on the loan from RMC to AHI as follows: Interest expense $180,000Interest income $180,000
D)   Consolidation Entry E is recorded to amortize the excess fair value allocation to the Asset over its remaining useful life as follows: Other operating expenses $32,000Asset $32,000
E)   Consolidation Entry P is recorded to eliminate the beginning stockholders' equity of the VIE and recognize the 100% equity ownership of the noncontrolling interest as follows: Retained earnings - RMC 1/1/18 $ 6,000Common stock - RMC $34,000Retained Earnings-AHI $40,000

Question 2

Panton, Inc.acquired 18,000 shares of Glotfelty Corp.several years ago for $30 per share when Glotfelty had a book value of $450,000.Before and after that time, Glotfelty's stock traded at $30 per share.At the present time, Glotfelty reports the following stockholders' equity:  Glotfelty issues 5,000 shares of previously unissued stock to Panton for $35 per share.
Required: Describe how this transaction would affect Panton's books.

Accepted Answer

The investment account and APIC will be ...

Question 3

Carlson, Inc.owns 80 percent of Madrid, Inc.Carlson reports net income for 2018 (without consideration of its investment in Madrid, Inc.)  of $1,500,000.For the same year, Madrid reports net income of $705,000.Carlson had bonds payable outstanding on January 1, 2018 with a carrying value of $1,200,000.Madrid acquired the bonds on the open market on January 3, 2018 for $1,090,000.For the year 2018, Carlson reported interest expense on the bonds in the amount of $96,000, while Madrid reported interest income of $94,000 for the same bonds.Assuming there are no excess amortizations or other intra-entity transactions, what is Carlson's share of consolidated net income?

Accepted Answer

A)   $2,064,000.
B)   $2,066,000.
C)   $2,176,000.
D)   $2,207,000.
E)   $2,317,000.

Question 4

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

Accepted Answer

A)   Parent's earnings per share plus subsidiary's earnings per share.
B)   Parent's net income divided by parent's number of shares outstanding.
C)   Consolidated net income divided by parent's number of shares outstanding.
D)   Average of parent's earnings per share and subsidiary's earnings per share.
E)   Consolidated income divided by total number of shares outstanding for the parent and subsidiary.

Question 5

Which of the following is not a potential loss or return of a variable interest entity?

Accepted Answer

A)   Entitles holder to residual profits.
B)   Entitles holder to benefit from increases in asset fair value.
C)   Entitles holder to receive shares of common stock.
D)   If the variable interest entity cannot repay liabilities, honoring a debt guarantee will produce a loss.
E)   If leased asset declines below the residual value, honoring the guarantee will produce a loss.

Question 6

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

Accepted Answer

A)   $8,000 increase to net income as an operating activity.
B)   $8,000 decrease to net income as an operating activity.
C)   $6,400 increase to net income as an operating activity.
D)   $6,400 decrease to net income as an operating activity.
E)   $8,000 increase as an investing activity.

Question 7

A company had common stock with a total par value of $18,000,000 and fair value of $62,000,000; and 7% preferred stock with a total par value of $6,000,000 and a fair value of $8,000,000.The book value of the company was $85,000,000.Assuming ninety percent (90%)  of the company's total equity is acquired, what amount must be attributed to the noncontrolling interest?

Accepted Answer

A)   $8,500,000.
B)   $7,000,000.
C)   $6,200,000.
D)   $2,400,000.
E)   $6,929,400.

Question 8

Prepare Panton's journal entry to recognize the impact of this transaction.

Accepted Answer

Additional paid in c...

Question 9

A parent company owns a controlling interest in a subsidiary and on the last day of the year, the subsidiary issues new shares entirely to outside parties at $33 per share.The parent still holds control over the subsidiary.The adjusted subsidiary value at the date of the new stock issuance was $27 per share.Which of the following statements is true?

Accepted Answer

A)   Since the sale was made at the end of the year, the parent's investment account is not affected.
B)   Since the shares were sold for more than the adjusted subsidiary value per share, the parent's investment account must be increased.
C)   Since the shares were sold for more than the adjusted subsidiary value per share, the parent's investment account must be decreased.
D)   Since the shares were sold for more than the adjusted subsidiary value per share, but the parent did not buy any of the shares, the parent's investment account is not affected.
E)   None of these answer choices are correct.

Question 10

Net cash flow from financing activities was:

Accepted Answer

A)   $(129,000) .
B)   $ (96,000) .
C)   $(300,000) .
D)   $ (80,000) .
E)   $(126,000) .

Question 11

A parent company owns a controlling interest in a subsidiary whose stock has a valuation basis of $27 per share.On the last day of the year, the subsidiary issues new shares entirely to outside parties at $25 per share.The parent still holds control over the subsidiary.Which of the following statements is true?

Accepted Answer

A)   Since the sale was made at the end of the year, the parent's investment account is not affected.
B)   Since the shares were sold for less than the adjusted subsidiary value per share, the parent's investment account must be increased.
C)   Since the shares were sold for less than the adjusted subsidiary value per share, the parent's investment account must be decreased.
D)   Since the shares were sold for less than the adjusted subsidiary value per share, but the parent did not buy any of the shares, the parent's investment account is not affected.
E)   None of these answer choices are correct.

Question 12

What is the new percent ownership of Webb in Jones after the stock issuance?

Accepted Answer

A)   75%.
B)   90%.
C)   80%.
D)   64%.
E)   60%.

Question 13

On January 1, 2019, Cocker reacquired 8,000 of the outstanding shares of its own common stock for $34 per share.None of these shares belonged to Popper.How would this transaction have affected the additional paid-in capital of the parent company?

Accepted Answer

A)   $0.
B)   Decrease it by $32,900.
C)   Decrease it by $45,700.
D)   Decrease it by $23,100.
E)   Decrease it by $50,500.

Question 14

Which one of the following characteristics of preferred stock would make the stock a dilutive security for purposes of calculating earnings per share?

Accepted Answer

A)   The preferred stock is callable.
B)   The preferred stock is convertible.
C)   The preferred stock is cumulative.
D)   The preferred stock is noncumulative.
E)   The preferred stock is participating.

Question 15

A subsidiary issues new shares of common stock at an amount below book value.Outsiders buy all of these shares.Which of the following statements is true?

Accepted Answer

A)   The parent's additional paid-in capital will be increased.
B)   The parent's investment in subsidiary will be increased.
C)   The parent's retained earnings will be increased.
D)   The parent's additional paid-in capital will be decreased.
E)   The parent's retained earnings will be decreased.

Question 16

How do outstanding subsidiary stock warrants affect the calculation of consolidated earnings per share?

Accepted Answer

A)   They will be included in both basic and diluted earnings per share if they are dilutive.
B)   They will only be included in diluted earnings per share if they are dilutive.
C)   They will only be included in basic earnings per share if they are dilutive.
D)   Only the warrants owned by the parent company affect consolidated earnings per share.
E)   Because the warrants are for subsidiary shares, there will be no effect on consolidated earnings per share.

Question 17

What should the adjusted book value of Chase be after the treasury shares were purchased?

Accepted Answer

A)   $400,000.
B)   $480,000.
C)   $320,000.
D)   $336,000.
E)   $464,000.

Exam 6: Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues

Which of the following is not a potential loss or return of a variable interest entity?

Correct Answer
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Prepare Panton's journal entry to recognize the impact of this transaction.

Correct Answer
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Additional paid in c...
View Answer

What should the adjusted book value of Chase be after the treasury shares were purchased?

Correct Answer
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Correct Answer
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On January 1, 2019, Cocker reacquired 8,000 of the outstanding shares of its own common stock for $34 per share.None of these shares belonged to Popper.How would this transaction have affected the additional paid-in capital of the parent company?

Correct Answer
verified

In preparing the consolidation worksheet as of December 31, 2018 for AHI and RMC, which of the following worksheet entry descriptions reflects what AHI should do to consolidate the financial statements?

Correct Answer
verified

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

Correct Answer
verified

Which one of the following characteristics of preferred stock would make the stock a dilutive security for purposes of calculating earnings per share?

Correct Answer
verified

How do outstanding subsidiary stock warrants affect the calculation of consolidated earnings per share?

Correct Answer
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Correct Answer
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Net cash flow from financing activities was:

Correct Answer
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A subsidiary issues new shares of common stock at an amount below book value.Outsiders buy all of these shares.Which of the following statements is true?

Correct Answer
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Correct Answer
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What is the new percent ownership of Webb in Jones after the stock issuance?

Correct Answer
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Correct Answer
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The investment account and APIC will be ...
View Answer

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

Correct Answer
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Correct Answer
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Exam 6: Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues

Which of the following is not a potential loss or return of a variable interest entity?

Correct AnswerverifiedShow Answer

Prepare Panton's journal entry to recognize the impact of this transaction.

Correct AnswerverifiedAdditional paid in c...View AnswerShow Answer

What should the adjusted book value of Chase be after the treasury shares were purchased?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

On January 1, 2019, Cocker reacquired 8,000 of the outstanding shares of its own common stock for $34 per share.None of these shares belonged to Popper.How would this transaction have affected the additional paid-in capital of the parent company?

Correct AnswerverifiedShow Answer

In preparing the consolidation worksheet as of December 31, 2018 for AHI and RMC, which of the following worksheet entry descriptions reflects what AHI should do to consolidate the financial statements?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which one of the following characteristics of preferred stock would make the stock a dilutive security for purposes of calculating earnings per share?

Correct AnswerverifiedShow Answer

How do outstanding subsidiary stock warrants affect the calculation of consolidated earnings per share?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Net cash flow from financing activities was:

Correct AnswerverifiedShow Answer

A subsidiary issues new shares of common stock at an amount below book value.Outsiders buy all of these shares.Which of the following statements is true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is the new percent ownership of Webb in Jones after the stock issuance?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe investment account and APIC will be ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Additional paid in c...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The investment account and APIC will be ...
View Answer

Correct Answer
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Correct Answer
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