ACC 4700 QUIZ 5 Chapter 05 Consolidated Financial Statements

| December 3, 2017

ACC
4700
QUIZ
5
Chapter 05 Consolidated Financial Statements –
Intra-Entity Asset Transactions

Last Name

First Name

QUESTION #1
12.
During 2010, Von Co. sold inventory to its wholly-owned subsidiary,
Lord Co. The inventory cost $30,000
and was sold to Lord for $44,000. From
the perspective of the combination, when is the $14,000 gain realized?
A) When the goods are
sold to a third party by Lord.
B) When Lord pays Von for
the goods.
C) When Von sold the
goods to Lord.
D) When the goods are used
by Lord.
E) No gain can be
recognized since the transaction was between related parties.

QUESTION #2
17.
Yukon Co. acquired 75% percent of the voting common stock of Ontario
Corp. on January 1, 2011. During the
year, Yukon made sales of inventory to Ontario. The inventory cost Yukon $260,000 and was
sold to Ontario for $390,000. Ontario
still had $60,000 of the goods in its inventory at the end of the year. The amount of unrealized intercompany
profit that should be eliminated in the consolidation process at the end of
2011 is
A) $15,000.
B) $20,000.
C) $32,500.
D) $30,000.
E) $110,000.

QUESTION #3
18.
Prince Corp. owned 80% of Kile Corp.’s common stock. During October 2011, Kile sold merchandise
to Prince for $140,000. At December
31, 2011, 50% of this merchandise remained in Prince’s inventory. For 2011, gross profit percentages were 30%
of sales for Prince and 40% of sales for Kile. The amount of unrealized intercompany
profit in ending inventory at December 31, 2011 that should be eliminated in
the consolidation process is
A) $28,000.
B) $56,000.
C) $22,400.
D) $21,000.
E) $42,000.

QUESTION #4
1.
On November 8, 2011, Power Corp. sold land to Wood Co., its wholly
owned subsidiary. The land cost
$61,500 and was sold to Wood for $89,000.
From the perspective of the combination, when is the gain on the sale
of the land realized?
A) Proportionately over a
designated period of years.
B) When Wood Co. sells
the land to a third party.
C) No gain can be
recognized.
D) As Wood uses the land.

E) When Wood Co. begins
using the land productively.

QUESTION #5
8.
Justings Co. owned 80% of Evana Corp.
During 2011, Justings sold to Evana land with a book value of
$48,000. The selling price was $70,000. In its accounting records, Justings should
A) not recognize a gain
on the sale of the land since it was made to a related party.
B) recognize a gain of
$17,600.
C) defer recognition of
the gain until Evana sells the land to a third party.
D) recognize a gain of
$8,000.
E) recognize a gain of
$22,000.

QUESTION #6
14.
Chain Co. owned all of the voting common stock of Shannon Corp. The corporations’ balance sheets dated
December 31, 2010, include the following balances for land: for Chain–$416,000, and for
Shannon–$256,000. On the original
date of acquisition, the book value of Shannon’s land was equal to its fair
value. On April 4, 2011, Chain sold to
Shannon a parcel of land with a book value of $65,000. The selling price was $83,000. There were no other transactions which
affected the companies’ land accounts during 2010. What is the consolidated balance for
land on the 2011 balance sheet?
A) $672,000.
B) $690,000.
C) $755,000.
D) $737,000.
E) $654,000.

QUESTION #7
44.
Which of the following statements is true regarding an intra-entity
sale of land?
A) A loss is always
recognized but a gain is eliminated in a consolidated income statement.
B) A loss and a gain are
always eliminated in a consolidated income statement.
C) A loss and a gain are
always recognized in a consolidated income statement.
D) A gain is always
recognized but a loss is eliminated in a consolidated income statement.
E) A gain or loss is
eliminated by adjusting stockholders’ equity through comprehensive income.

QUESTION #8
45.
Parent sold land to its subsidiary for a gain in 2008. The subsidiary sold the land externally for
a gain in 2011. Which of the following
statements is true?
A) A gain will be
reported in the consolidated income statement in 2008.
B) A gain will be
reported in the consolidated income statement in 2011.
C) No gain will be
reported in the 2011 consolidated income statement.
D) Only the parent
company will report a gain in 2011.
E) The subsidiary will
report a gain in 2008.

REFERENCE:
Ref. 05_11
Stiller
Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on
March 1, 2010, for $75,000. The land
originally cost Leo $60,000. Stiller
reported net income of $125,000 and $140,000 for 2010 and 2011, respectively. Leo uses the equity method to account for
its investment.

QUESTION #9
REFER TO: Ref.
05_011
77.
Compute the gain or loss on the intra-entity sale of land.
A) $15,000 loss.
B) $15,000 gain.
C) $50,000 loss.
D) $50,000 gain.
E) $65,000 gain.

QUESTION #10
REFER TO: Ref.
05_11
78.
On a consolidation worksheet, what adjustment would be made for 2010
regarding the land transfer?
A) Debit gain for
$50,000.
B) Credit gain for
$50,000.
C) Debit land for
$15,000.
D) Credit land for
$15,000.
E) Credit gain for
$15,000.

REFERENCE:
Ref. 05_12
Stark
Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May
1, 2010, for $80,000. The land
originally cost Stark $85,000. Stark
reported net income of $200,000, $180,000, and $220,000 for 2010, 2011, and
2012, respectively. Parker sold the
land it purchased from Stark in 2010 for $92,000 in 2012.

QUESTION #11
REFER TO: Ref.
05_12
82.
Compute the gain or loss on the intra-entity sale of land.
A) $80,000 gain.
B) $80,000 loss.
C) $5,000 gain.
D) $5,000 loss.
E) $85,000 loss.

QUESTION #12
REFER TO: Ref.
05_12
83.
Which of the following will be included in a consolidation entry for
2010?
A) Debit loss for $5,000.

B) Credit loss for
$5,000.
C) Credit land for
$5,000.
D) Debit gain for $5,000.

E) Credit gain for
$5,000.

QUESTION
#13
REFER TO: Ref.
05_12
87. Compute Parker’s reported gain or loss
relating to the land for 2012.
A) $12,000 gain.
B) $5,000 loss.
C) $12,000 loss.
D) $7,000 gain.
E) $7,000 loss.

REFERENCE:
Ref. 05_04
On
January 1, 2011, Pride, Inc. acquired 80% of the outstanding voting common
stock of Strong Corp. for $364,000.
There is no active market for Strong’s stock. Of this payment, $28,000 was allocated to
equipment (with a five-year life) that had been undervalued on Strong’s books
by $35,000. Any remaining excess was
attributable to goodwill which has not been impaired.
As
of December 31, 2011, before preparing the consolidated worksheet, the
financial statements appeared as follows:

Pride, Inc.

Strong Corp.

Revenues

$ 420,000

$280,000

Cost of
goods sold

(196,000)

(112,000)

Operating
expenses

(28,000)

(14,000)

Net income

$ 196,000

$154,000

Retained
earnings, 1/1/11

$ 420,000

$210,000

Net income
(above)

196,000

154,000

Dividends
paid

0

0

Retained
earnings, 12/31/11

$ 616,000

$364,000

Cash and
receivables

$ 294,000

$126,000

Inventory

210,000

154,000

Investment
in Strong Corp

364,000

0

Equipment
(net)

616,000

420,000

Total assets

$1,484,000

$700,000

Liabilities

$ 588,000

$196,000

Common stock

280,000

140,000

Retained
earnings, 12/31/11 (above)

616,000

364,000

Total
liabilities and stockholders’ equity

$1,484,000

$700,000

During 2011, Pride bought inventory for $112,000 and sold it to Strong for
$140,000. Only half of this purchase
had been paid for by Strong by the end of the year. 60% of these goods were still in the company’s
possession on December 31.

QUESTION #14
REFER TO: Ref.
05_04
23.
What is the total of consolidated revenues?
A) $700,000.
B) $644,000.
C) $588,000.
D) $560,000.
E) $840,000.

QUESTION #15
REFER TO: Ref.
05_04
25.
What is the total of consolidated cost of goods sold?
A) $196,000.
B) $212,800.
C) $184,800.
D) $203,000.
E) $168,000.

QUESTION #16
REFER TO: Ref.
05_04
28.
What is the consolidated total for inventory at December 31,
2011?
A) $336,000.
B) $280,000.
C) $364,000.
D) $347,200.
E) $349,300.

REFERENCE:
Ref. 05_05
Strickland
Company sells inventory to its parent, Carter Company, at a profit during
2010. One-third of the inventory is sold by Carter in
2010.

QUESTION #17
REFER TO: Ref.
05_05
29.
In the consolidation worksheet for 2010, which of the following
choices would be a debit entry to eliminate the intra-entity transfer of
inventory?
A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in
Strickland Company.
E) Sales.

QUESTION #18
REFER TO: Ref.
05_05
30.
In the consolidation worksheet for 2010, which of the following
choices would be a credit entry to eliminate the intra-entity transfer of
inventory?
A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland
Company.
E) Sales.

QUESTION #19
REFER TO: Ref.
05_05
31.
In the consolidation worksheet for 2010, which of the following
choices would be a debit entry to eliminate unrealized intra-entity gross
profit with regard to the 2010 intra-entity sales?
A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in
Strickland Company.
E) Sales.

QUESTION #20
REFER TO: Ref.
05_05
32.
In the consolidation worksheet for 2010, which of the following
choices would be a credit entry to eliminate unrealized intra-entity gross
profit with regard to the 2010 intra-entity sales?
A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in
Strickland Company.
E) Sales.

REFERENCE:
Ref. 05_07
Gargiulo
Company, a 90% owned subsidiary of Posito Corporation, sells inventory to
Posito at a 25% profit on selling price.
The following data are available pertaining to intra-entity
purchases. Gargiulo was acquired on
January 1, 2010.

2010

2011

2012

Purchases
by Posito

$8,000

$12,000

$15,000

Ending
inventory on Posito’s books

1,200

4,000

3,000

Assume
the equity method is used. The following data are available pertaining to
Gargiulo’s income and dividends.

2010

2011

2012

Gargiulo’s
net income

$70,000

$85,000

$94,000

Dividends
paid by Gargiulo

10,000

10,000

15,000

QUESTION
#21
REFER TO: Ref.
05_07
50. Compute the equity in earnings of Gargiulo
reported on Posito’s books for 2010.
A) $63,000.
B) $62,730.
C) $63,270.
D) $70,000.
E) $62,700.

QUESTION #22
REFER TO: Ref.
05_07
56.
For consolidation purposes, what amount would be debited to cost of
goods sold for the 2010 consolidation worksheet with regard to unrealized
gross profit of the intra-entity transfer of merchandise?
A) $300.
B) $240.
C) $2,000.
D) $1,600.
E) $270.

QUESTION #23
REFER TO: Ref.
05_07
59.
For consolidation purposes, what amount would be debited to January 1
retained earnings for the 2010 consolidation worksheet entry with regard to
the unrealized gross profit of the 2010 intra-entity transfer of merchandise?

A) $0.
B) $1,600.
C) $300.
D) $240.
E) $270.

REFERENCE: Ref.
05_08
Patti Company
owns 80% of the common stock of Shannon, Inc.
In the current year, Patti reports sales of $10,000,000 and cost of
goods sold of $7,500,000. For the same
period, Shannon has sales of $200,000 and cost of goods sold of $160,000.
During the year, Patti sold merchandise to Shannon for $60,000 at a price
based on the normal markup. At the end
of the year, Shannon still possesses 30 percent of this inventory.

QUESTION #24
REFER TO: Ref.
05_08
62. Compute
consolidated sales.
A) $10,000,000.
B) $10,126,000.
C) $10,140,000.
D) $10,200,000.
E) $10,260,000.

QUESTION #25
REFER TO: Ref.
05_08
63. Compute consolidated
cost of goods sold.
A) $7,500,000.
B) $7,600,000.
C) $7,615,000.
D) $7,604,500.
E) $7,660,000.

QUESTION #26
REFER TO: Ref.
05_08
64. Assume the
same information, except Shannon sold inventory to Patti. Compute consolidated sales.
A) $10,000,000.
B) $10,126,000.
C) $10,140,000.
D) $10,200,000.
E) $10,260,000.

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