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

Which of the following variable interests entitles a holder to residual profits, losses, and dividends?

What balances would need to be considered in order to prepare the consolidation entry in connection with these intra-entity bonds at December 31, 2019, the end of the first year of the intra-entity investment? Prepare schedules to show numerical answers for balances that would be needed for the entry.

Jet Corp.acquired all of the outstanding shares of Nittle Inc.on January 1, 2016, for $644,000 in cash.Of this consideration transferred, $42,000 was attributed to equipment with a ten-year remaining useful life.Goodwill of $56,000 had also been identified.Jet applied the partial equity method so that income would be accrued each period based solely on the earnings reported by the subsidiary. On January 1, 2019, Jet reported $280,000 in bonds outstanding with a book value of $263,200.Nittle purchased half of these bonds on the open market for $135,800. During 2019, Jet began to sell merchandise to Nittle.During that year, inventory costing $112,000 was transferred at a price of $140,000.All but $14,000 (at Jet's selling price) of these goods were resold to outside parties by year's end.Nittle still owed $50,400 for inventory shipped from Jet during December. The following financial figures were for the two companies for the year ended December 31, 2019. Required: Prepare a consolidation worksheet for the year ended December 31, 2019.

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.

What is the total acquisition-date fair value of Involved?

Parent Corporation acquired some of its subsidiary's outstanding bonds.Why might Parent purchase the bonds, rather than the subsidiary buying its own bonds?

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?

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

How is the loss on sale of land reported on the consolidated statement of cash flows?

With respect to Nichols' investment in Smith, determine the amount to be recorded and identify which account should be adjusted to reflect such amount.

After acquiring the additional shares, what adjustment is needed for Ryan's investment in Chase account?

A parent acquires all of a subsidiary's common stock and 60 percent of its preferred stock.The preferred stock has a cumulative dividend.No dividends are in arrears.How is the noncontrolling interest in the subsidiary's net income assigned?

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

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

A parent acquires 70% of a subsidiary's common stock and 60 percent of its preferred stock.The preferred stock is noncumulative.The current year's dividend was paid.How is the noncontrolling interest in the subsidiary's net income assigned?

How do intra-entity transfers of inventory affect the preparation of a consolidated statement of cash flows?

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

Keenan Company has had bonds payable of $20,000 outstanding for several years.On January 1, 2018, there was an unamortized premium of $2,000 with a remaining life of 10 years, Keenan's parent, Ross, Inc., purchased the bonds in the open market for $19,000.Keenan is a 90% owned subsidiary of Ross.The bonds pay 8% interest annually on December 31.The companies use the straight-line method to amortize interest revenue and expense.Compute the consolidated gain or loss on a consolidated income statement for 2018.

Compute the goodwill recognized in consolidation.

Johnson, Inc.owns control over Kaspar, Inc.Johnson reports sales of $400,000 during 2018 while Kaspar reports $250,000.Kaspar transferred inventory during 2018 to Johnson at a price of $50,000.On December 31, 2018, 30% of the transferred goods are still held in Johnson's inventory.Consolidated accounts receivable on January 1, 2018 was $120,000, and on December 31, 2018 is $130,000.Johnson uses the direct approach in preparing the statement of cash flows.How much is cash collected from customers in the consolidated statement of cash flows?