Use the following information to answer the question(s) below. Goldberg Corporation owned a 70% interest in Savannah Corporation on December 31, 2013, and Goldberg's Investment in Savannah account had a balance of $3,900,000. Savannah's stockholders' equity on this date was as follows: \[\begin{array} { l l } \text { Capital stock, \$10 par value } & \$ 3,000,000 \\ \text { Retained Earnings } & \underline { 2,400,000 } \\ \text { Total Stockholders' Equity } &\underline { \$ 5,400,000} \end{array}\] -What is Goldberg's percentage ownership in Savannah after Savannah issues its stock to Goldberg?

A) 76.32% B) 80.43% C) 82.57% D) 83.43% A) 76.32% B) 80.43% C) 82.57% D) 83.43%

Use the following information to answer the question(s) below. Goldberg Corporation owned a 70% interest in Savannah Corporation on December 31, 2013, and Goldberg's Investment in Savannah account had a balance of $3,900,000. Savannah's stockholders' equity on this date was as follows: \[\begin{array} { l l } \text { Capital stock, \$10 par value } & \$ 3,000,000 \\ \text { Retained Earnings } & \underline { 2,400,000 } \\ \text { Total Stockholders' Equity } &\underline { \$ 5,400,000} \end{array}\] -On January 1,2014,assume the fair values of Savannah's identifiable assets and liabilities equal book values.What is the change in the amount of goodwill associated with the issuance of 80,000 additional shares to Goldberg? (Use four decimal places.)

A) Increase goodwill $38,176. B) Decrease goodwill $38,176. C) Increase goodwill $384,000. D) Decrease goodwill $384,000. A) Increase goodwill $38,176. B) Decrease goodwill $38,176. C) Increase goodwill $384,000. D) Decrease goodwill $384,000.

Use the following information to answer the question(s) below. Great Corporation acquired a 90% interest in SOS Corporation at its $810,000 book value on December 31, 2013. A summary of the stockholders' equity for SOS at the end of 2013 and 2014 is as follows: \[\begin{array} { l l l } & \underline { 12 / 31 / 13 } & \underline { 12 / 31 / 14 } \\ \text { Capital stock, } \$ 10 \text { par } & \$ 600,000 & \$ 500,000 \\ \text { Additional paid-in capital }& 30,000 & 30,000 \\ \text { Retained Earnings } & \underline { 270,000 } & \underline { 420,000 } \\ \text { Total stockholders' equity }&\underline { \$900,000}&\underline { \$1,050.000} \end{array}\] -If SOS sold the additional shares to the general public,Great's Investment in SOS account after the sale would be ________.(Use four decimal places.)

A) $945,000 B) $1,157,100 C) $1,225,000 D) $1,245,000 A) $945,000 B) $1,157,100 C) $1,225,000 D) $1,245,000

Exam 8: Consolidations - Changes in Ownership Interests

Jersey Company acquired 90% of York Company on April 1,2014.Both Jersey Company and York Company have December 31 fiscal year ends.Under current GAAP,which of the following statements is false?

Free

(Multiple Choice)

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Question 1

Correct Answer:

Verified

The acquisition of treasury stock by a subsidiary increases subsidiary equity and share outstanding.

Free

(True/False)

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Question 2

Correct Answer:

Verified

False

On December 31,2013,Dixie Corporation has the following information available: Common stock, \1 0 par \ 200,000 Additional paid-in capital 60,000 Retained earnings \ 4,000 Total stockholders' equity \ 300,000 On December 31,2013,Grimsled Corporation buys an 80% interest in Dixie Corporation for $240,000.On December 31,2013,the fair values of Dixie's assets and liabilities are equal to the respective book values. Required: 1.On January 1,2014,Dixie Corporation sells 5,000 additional shares of common stock to noncontrolling stockholders at $20 per share.Prepare the journal entry for Grimsled Corporation on January 1,2014. 2.On January 1,2014,Dixie Corporation sells 5,000 additional shares of common stock to noncontrolling stockholders at $35 per share.Prepare the journal entry for Grimsled Corporation on January 1,2014. 3.On January 1,2014,Dixie Corporation sells 5,000 additional shares of common stock to noncontrolling stockholders at $10 per share.Prepare the journal entry for Grimsled Corporation on January 1,2014.

Free

(Essay)

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Question 3

Correct Answer:

Verified

Requirement 1
Total stockholders' equity at January 1,2014:
$300,000 + $20 (5,000)= $400,000
Grimsled's percent ownership:
16,000 / 24,000 = 0.64
Grimsled's share of stockholders' equity at January 1,2014:
0.64 × $400,000 = $256,000
Grimsled's prior share of stockholders' equity at January 1,2014 (Before additional sale):
$300,000 × 80% = $240,000
Increase in ownership: $256,000 - $240,000 = $16,000
--------------------------------------------
$\begin{array} { l } \text { Investment }&16,000 \\\text { Additional paid-in capital }&&16,000\end{array}$ ---------------------------------------------
Requirement 2
Total stockholders' equity at January 1,2014:
$300,000 + $35 (5,000)= $475,000
Grimsled's percent ownership:
0.64
Grimsled's share of stockholders' equity at January 1,2014:
0.64 × $475,000 = $304,000
Grimsled's prior share of stockholders' equity at January 1,2014 (Before additional sale):
$300,000 × 80% = $240,000
Increase in ownership: $304,000 - $240,000 = $64,000
--------------------------------------------
$\begin{array}{lrr}\text { Investment }&64,000\\ \text { Additional paid-in capital } &&64,000\\\end{array}$
--------------------------------------------
Requirement 3
Total stockholders' equity at January 1,2014:
$300,000 + $10 (5,000)= $350,000
Grimsled's percent ownership:
0.64
Grimsled's share of stockholders' equity at January 1,2014:
0.64 × $350,000 = $224,000
Grimsled's prior share of stockholders' equity at January 1,2014 (Before additional sale):
$300,000 × 80% = $240,000
Decrease in ownership: $240,000 - $224,000 = $16,000
---------------------------------------------
$\begin{array}{lrr} \text {Additional paid-in capital } &16,000\\ \text { Investment} &&16,000\\\end{array}$
---------------------------------------------

Piecemeal acquisitions require the previously held investment to be measured at book value at the date control of the subsidiary is obtained.

(True/False)

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Question 4

On December 31,2013,Lorna Corporation has the following information available: Common stock, \1 0 par \ 200,000 Additional paid-in capital 60,000 Retained earnings \ 4,000 Total stockholders' equity \ 300,000 On December 31,2013,Gerald Corporation buys an 80% interest in Lorna Corporation for $240,000.On December 31,2013,the fair values of Lorna's assets and liabilities are equal to the respective book values. Required: 1.On January 1,2014,Lorna Corporation buys 500 shares of common stock from noncontrolling stockholders at $20 per share.Prepare the journal entry for Gerald Corporation on January 1,2014.Use four decimal places for the ownership percentage. 2.On January 1,2014,Lorna Corporation buys 500 shares of common stock from noncontrolling stockholders at $30 per share.Prepare the journal entry for Gerald Corporation on January 1,2014.Use four decimal places for the ownership percentage. 3.On January 1,2014,Lorna Corporation buys 500 shares of common stock from noncontrolling stockholders at $10 per share.Prepare the journal entry for Gerald Corporation on January 1,2014.Use four decimal places for the ownership percentage.

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Question 5

A stock split by a subsidiary increases the number of shares outstanding,but it does not affect the net assets of the subsidiary or the individual equity accounts.

(True/False)

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Question 6

Use the following information to answer the question(s) below. Goldberg Corporation owned a 70% interest in Savannah Corporation on December 31, 2013, and Goldberg's Investment in Savannah account had a balance of $3,900,000. Savannah's stockholders' equity on this date was as follows: Capital stock, \1 0 par value \ 3,000,000 Retained Earnings Total Stockholders' Equity -What is Goldberg's percentage ownership in Savannah after Savannah issues its stock to Goldberg?

(Multiple Choice)

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Question 7

Use the following information to answer the question(s) below. On December 31, 2013, Giant Corporation's Investment in Penguin Corporation account had a balance of $500,000. The balance consisted of 80% of Penguin's $625,000 stockholders' equity on that date. Giant owns 80% of Penguin. On January 2, 2014, Penguin increased its outstanding common stock from 15,000 to 18,000 shares. -Assume that Penguin sold the additional 3,000 shares to outside interests for $150,000 on January 2,2014.Giant's percentage ownership immediately after the sale of additional stock would be

(Multiple Choice)

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Question 8

Use the following information to answer the question(s) below. Goldberg Corporation owned a 70% interest in Savannah Corporation on December 31, 2013, and Goldberg's Investment in Savannah account had a balance of $3,900,000. Savannah's stockholders' equity on this date was as follows: Capital stock, \1 0 par value \ 3,000,000 Retained Earnings Total Stockholders' Equity -On January 1,2014,assume the fair values of Savannah's identifiable assets and liabilities equal book values.What is the change in the amount of goodwill associated with the issuance of 80,000 additional shares to Goldberg? (Use four decimal places.)

(Multiple Choice)

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Question 9

On January 1,2014,Fly Corporation held a 60% interest in Liptin Corporation.The investment account balance was $2,100,000,consisting of 60% of Liptin's $3,500,000 of net assets. During 2014,Liptin earned $300,000 uniformly and paid dividends of $110,000 on November 1.On October 1,2014,Fly sold 10% of its investment in Liptin for $364,000,thereby reducing its interest in Liptin to 54%. Required: Compute the following using the actual sales date assumption: 1.Gain or loss on sale. 2.Income from Liptin for 2014. 3.Noncontrolling interest share for 2014.

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Question 10

At December 31,2013,the stockholders' equity of Pearson Corporation and its 80%-owned subsidiary,Trompeter Corporation,are as follows: Pearson's Investment in Trompeter is equal to 80 percent of Trompeter's book value.Trompeter Corporation issued 400 additional shares of common stock directly to Pearson on January 1,2014 at $10 per share. Required: 1.Compute the balance in Pearson's Investment in Trompeter account on January 1,2014 after the new investment is recorded. 2.Determine the increase or decrease in goodwill from Pearson's new investment in the 400 Trompeter shares.Use four decimal places for the ownership percentage.Assume the fair value and book value of Trompeter's assets and liabilities are equal.

(Essay)

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Question 11

Use the following information to answer the question(s) below. Great Corporation acquired a 90% interest in SOS Corporation at its $810,000 book value on December 31, 2013. A summary of the stockholders' equity for SOS at the end of 2013 and 2014 is as follows: Capital stock, \ 10 par \ 600,000 \ 500,000 Additional paid-in capital 30,000 30,000 Retained Earnings Total stockholders' equity -If SOS sold the additional shares to the general public,Great's Investment in SOS account after the sale would be ________.(Use four decimal places.)

(Multiple Choice)

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Question 12

If a parent company and outside investors purchase shares of a subsidiary in relation to existing stock ownership (ratably),then

(Multiple Choice)

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Question 13

Whenever a parent ceases to have a controlling interest,the subsidiary should be deconsolidated and recorded as either an equity method or cost method investment.

(True/False)

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Question 14

Candy Corporation paid $240,000 on April 1,2013 for all of the common stock of Bun Corporation in a business acquisition.On January 1,2013,Bun's stockholders' equity was equal to $195,000.Bun's first quarter 2013 net income was $10,000 and first quarter 2013 dividends were $5,000.In 2013,preacquisition sales were $32,500 and preacquisition cost of sales was $22,500.(There were no other preacquisition expenses in 2013.)Dividends are paid quarterly on March 31,June 30,September 30 and December 31.Any excess cost over book value acquired is allocated to goodwill. Additional information: 1.Candy sold equipment with a 5-year remaining useful life to Bun on July 1,2013 for a gain of $10,000.Salvage value of the equipment is zero and both companies use the straight-line depreciation method. 2.Bun's accounts payable balance at December 31 includes $5,000 due to Candy from the sale of equipment. 3.Candy accounts for its investment in Bun using the equity method. Required: Complete the working papers to consolidate the financial statements of Candy and Bun Corporations for the year ending December 31,2013.

(Essay)

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Question 15

On December 31,2013,Pat Corporation has the following information available: Common stock, \1 0 par \ 100,000 Additional paid-in capital 60,000 Retained earnings \ 4,000 Total stockholders' equity \ 200,000 On December 31,2013,Anne Corporation buys an 80% interest in Pat Corporation for $160,000.On December 31,2013,the fair value of Pat's assets and liabilities are equal to the respective book values.Use four decimal places for the ownership percentage. Required: 1.On January 1,2014,Pat Corporation sells 2,000 additional shares of common stock to noncontrolling stockholders at $20 per share.Prepare the journal entry for Anne Corporation on January 1,2014. 2.On January 1,2014 Pat Corporation sells 2,000 additional shares of common stock to noncontrolling stockholders at $35 per share.Prepare the journal entry for Anne Corporation on January 1,2014. 3.On January 1,2014,Pat Corporation sells 2,000 additional shares of common stock to noncontrolling stockholders at $15 per share.Prepare the journal entry for Anne Corporation on January 1,2014.

(Essay)

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Question 16

Which of the following is correct? The direct sale of additional shares of stock at book value per share to only the parent company from a subsidiary

(Multiple Choice)

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Question 17

On January 1,2013,Starling Corporation held an 80% interest in Twig Corporation and the investment account balance was $900,000.On January 1,2013,Twig's total stockholders' equity was $1,125,000. During 2013,Twig uniformly earned $234,000 and paid dividends of $37,500 on April 1 and again on October 1.On August 1,2013,Starling sold 30% of its investment in Twig for $262,500,thereby reducing its interest in Twig to 56%. Required: Compute the following using the actual sales date assumption: 1.Gain or loss on sale. 2.Income from Twig for 2013. 3.Noncontrolling interest share for 2013.

(Essay)

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Question 18

A subsidiary split its stock 2 for 1.Which of the following statements is false?

(Multiple Choice)

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Question 19

Use the following information to answer the question(s) below. Bower Corporation purchased a 70% interest in Stage Corporation on June 1, 2013 at a purchase price of $350,000. On June 1, 2013, the book values of Stage's assets and liabilities were equal to fair values. On June 1, 2013, Stage's stockholders' equity consisted of $290,000 of Common Stock and $210,000 of Retained Earnings. All cost-book differentials were attributed to goodwill. During 2013, Stage earned $120,000 of net income, earned uniformly throughout the year and paid $6,000 of dividends on March 1 and another $6,000 on September 1. -Noncontrolling interest share for 2013 is

(Multiple Choice)

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Question 20

Showing 1 - 20 of 50

Jersey Company acquired 90% of York Company on April 1,2014.Both Jersey Company and York Company have December 31 fiscal year ends.Under current GAAP,which of the following statements is false?

The acquisition of treasury stock by a subsidiary increases subsidiary equity and share outstanding.

Piecemeal acquisitions require the previously held investment to be measured at book value at the date control of the subsidiary is obtained.

A stock split by a subsidiary increases the number of shares outstanding,but it does not affect the net assets of the subsidiary or the individual equity accounts.

If a parent company and outside investors purchase shares of a subsidiary in relation to existing stock ownership (ratably),then

Whenever a parent ceases to have a controlling interest,the subsidiary should be deconsolidated and recorded as either an equity method or cost method investment.

Which of the following is correct? The direct sale of additional shares of stock at book value per share to only the parent company from a subsidiary

A subsidiary split its stock 2 for 1.Which of the following statements is false?

Business Combinations

Stock Investments - Investor Accounting and Reporting

An Introduction to Consolidated Financial Statements

Consolidated Techniques and Procedures

Intercompany Profit Transactions - Inventories

Intercompany Profit Transactions - Plant Assets

Intercompany Profit Transactions - Bonds

Indirect and Mutual Holdings

Subsidiary Preferred Stock, consolidated Earnings Per Share, and Consolidated Income Taxation

Consolidation Theories, push-Down Accounting, and Corporate Joint Ventures

Derivatives and Foreign Currency: Concepts and Common Transactions

Accounting for Derivatives and Hedging Activities

Foreign Currency Financial Statements

Segment and Interim Financial Reporting

Partnerships - Formation,operations,and Changes in Ownership Interests

Partnership Liquidation

Corporate Liquidations and Reorganizations

An Introduction to Accounting for State and Local Governmental Units

Accounting for State and Local Governmental Units - Governmental Funds

Accounting for State and Local Governmental Units - Proprietary and Fiduciary Funds

Accounting for Not-For-Profit Organizations

Estates and Trusts

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