Question 1

Which of the following is true with respect to performing consolidation adjustments for intragroup borrowings and the corresponding interest?

Accepted Answer

A) It is not necessary to perform consolidation adjustments with respect to intragroup borrowings and the corresponding interest. 
B) From the group's perspective, these transactions create assets and liabilities and revenues and expenses that do not exist in terms of the group's relationship with external entities 
C) The adjustment to the asset and liability is only necessary in the year the intragroup loan is issued. 
D) Only a tax adjustment is necessary. 
A) It is not necessary to perform consolidation adjustments with respect to intragroup borrowings and the corresponding interest. 
B) From the group's perspective, these transactions create assets and liabilities and revenues and expenses that do not exist in terms of the group's relationship with external entities 
C) The adjustment to the asset and liability is only necessary in the year the intragroup loan is issued. 
D) Only a tax adjustment is necessary.

Question 2

In 2010, Yorkshire Inc., which owns 100% of Blake Company, sold land to Blake Company at $50,000 greater than its cost. The land is still owned by Blake Company. The tax rate is 30%. What is the required consolidated financial statement adjustment in 2013?

Accepted Answer

A) Decrease Beginning Retained Earnings: $35,000, decrease Land: $35,000. 
B) Decrease Beginning Retained Earnings: $35,000, decrease Land: $50,000, and increase Deferred Tax Asset: $15,000. 
C) Decrease Beginning Retained Earnings: $50,000, decrease Land: $35,000, and decrease Deferred Tax Asset: $15,000. 
D) Decrease Beginning Retained Earnings: $50,000, decrease Land: $50,000. 
A) Decrease Beginning Retained Earnings: $35,000, decrease Land: $35,000. 
B) Decrease Beginning Retained Earnings: $35,000, decrease Land: $50,000, and increase Deferred Tax Asset: $15,000. 
C) Decrease Beginning Retained Earnings: $50,000, decrease Land: $35,000, and decrease Deferred Tax Asset: $15,000. 
D) Decrease Beginning Retained Earnings: $50,000, decrease Land: $50,000.

Question 3

On February 1, 2013 Smith Company sold inventory to its wholly owned subsidiary Orchid Ltd. for $10,000. These goods had previously cost $7,500. All of these goods were then sold by Orchid Ltd. for $25,000 by the February 28, 2013 year-end. What adjustments are required for the preparation of the consolidated financial statements? Ignore the effects of income taxes.

Accepted Answer

A) Decrease sales $10,000 and decrease cost of goods sold $10,000. 
B) Increase sales $10,000 and increase cost of goods sold $10,000. 
C) Decrease sales $10,000 and decrease cost of goods sold $7,500 and decrease ending inventory $2,500. 
D) None of the above 
A) Decrease sales $10,000 and decrease cost of goods sold $10,000. 
B) Increase sales $10,000 and increase cost of goods sold $10,000. 
C) Decrease sales $10,000 and decrease cost of goods sold $7,500 and decrease ending inventory $2,500. 
D) None of the above

Question 4

Assets in the consolidated statement of financial position must be shown as follows:

Accepted Answer

A) Cost to the group 
B) Cost to the parent. 
C) Market value to the group. 
D) Market value to the subsidiary. 
A) Cost to the group 
B) Cost to the parent. 
C) Market value to the group. 
D) Market value to the subsidiary.

Question 5

Consolidation adjustments are needed in relation to intragroup borrowings and interest thereon.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not true with respect to intercompany transfers that occurred during the year?

Accepted Answer

A) Comprehensive income will decrease for the amount of the unrealized profit. 
B) Comprehensive income will increase for the tax on the unrealized profit. 
C) The statement of financial position will include a decrease to the asset for the amount of the unrealized profit that still remains. 
D) The deferred tax asset will decrease for the amount of unrealized profit that still remains. 
A) Comprehensive income will decrease for the amount of the unrealized profit. 
B) Comprehensive income will increase for the tax on the unrealized profit. 
C) The statement of financial position will include a decrease to the asset for the amount of the unrealized profit that still remains. 
D) The deferred tax asset will decrease for the amount of unrealized profit that still remains.

Which of the following is true with respect to performing consolidation adjustments for intragroup borrowings and the corresponding interest?

In 2010, Yorkshire Inc., which owns 100% of Blake Company, sold land to Blake Company at $50,000 greater than its cost. The land is still owned by Blake Company. The tax rate is 30%. What is the required consolidated financial statement adjustment in 2013?

Assets in the consolidated statement of financial position must be shown as follows:

Consolidation adjustments are needed in relation to intragroup borrowings and interest thereon.

Which of the following is not true with respect to intercompany transfers that occurred during the year?

Accounting for Investments

Business Combinations

Consolidation: Wholly Owned Subsidiaries

Consolidation: Non-Controlling Interest

Accounting for Investments in Associates and Joint Ventures

Accounting for Foreign Currency

Accounting for Foreign Investments

Reporting for Not-For-Profit Organizations

Reporting for Public Sector Entities

Filters

Exam 4: Consolidations: Intragroup Transactions

Which of the following is true with respect to performing consolidation adjustments for intragroup borrowings and the corresponding interest?

In 2010, Yorkshire Inc., which owns 100% of Blake Company, sold land to Blake Company at $50,000 greater than its cost. The land is still owned by Blake Company. The tax rate is 30%. What is the required consolidated financial statement adjustment in 2013?

Assets in the consolidated statement of financial position must be shown as follows:

Consolidation adjustments are needed in relation to intragroup borrowings and interest thereon.

Which of the following is not true with respect to intercompany transfers that occurred during the year?

Accounting for Investments

Business Combinations

Consolidation: Wholly Owned Subsidiaries

Consolidation: Non-Controlling Interest

Accounting for Investments in Associates and Joint Ventures

Accounting for Foreign Currency

Accounting for Foreign Investments

Reporting for Not-For-Profit Organizations

Reporting for Public Sector Entities

Filters