Exam 3: An Introduction to Consolidated Financial Statements

In the preparation of consolidated financial statements,which of the following intercompany transactions must be eliminated as part of the preparation of the consolidation working papers?

Pamula Corporation paid $279,000 for 90% of Shad Corporation's $10 par common stock on December 31,2014,when Shad Corporation's stockholders' equity was made up of $200,000 of Common Stock,$60,000 Additional Paid-in Capital and $40,000 of Retained Earnings.Shad's identifiable assets and liabilities reflected their fair values on December 31,2014,except for Shad's inventory which was undervalued by $5,000 and their land which was undervalued by $2,000.Balance sheets for Pamula and Shad immediately after the business combination are presented in the partially completed working papers. Required: Complete the consolidated balance sheet working papers for Pamula Corporation and Subsidiary.

On July 1,2014,when Salaby Company's total stockholders' equity was $360,000,Pogana Corporation purchased 14,000 shares of Salaby's common stock at $30 per share.Salaby had 20,000 shares of common stock outstanding both before and after the purchase by Pogana,and the book value of Salaby's net assets on July 1,2014 was equal to the fair value.On a consolidated balance sheet prepared at July 1,2014,goodwill would be

Passerby International purchased 80% of Standaround Company's outstanding common stock for $200,000 on January 2,2014.At that time,the fair value of Standaround's net assets were equal to the book values.The balance sheets of Passerby and Standaround at January 2,2014 are summarized as follows: Required: Determine the consolidated balances as of January 2,2014 for the following five balance sheet line items: Goodwill,Liabilities,Capital Stock,Retained Earnings,and Noncontrolling Interest.

A subsidiary can be excluded from consolidation when control does not rest with the majority owner.

On January 1,2014,Parry Incorporated paid $72,000 cash for 80% of Samuel Company's common stock.At that time Samuel had $40,000 capital stock and $30,000 retained earnings.The book values of Samuel's assets and liabilities were equal to fair values,and any excess amount is allocated to goodwill.Samuel reported net income of $18,000 during 2014 and declared $5,000 of dividends on December 31,2014.At the time the dividends were declared,Parry recorded a receivable for the amount they expected to receive the following month.A summary of the balance sheets of Parry and Samuel are shown below. Required: Complete the consolidated balance sheet working papers for Parry Corporation and Subsidiary at December 31,2014.

Perth Corporation acquired a 100% interest in Sansone Company for $1,600,000 when Sansone had no liabilities.The book values and fair values of Sansone's assets were: Immediately following the acquisition,equipment will be included on the consolidated balance sheet at

On January 1,2014,Pinnead Incorporated paid $300,000 for an 80% interest in Shalle Company.At that time,Shalle's total book value was $300,000.Patents were undervalued in the amount of $10,000.Patents had a 5-year remaining useful life,and any remaining excess value was attributed to goodwill.The income statements for the year ended December 31,2014 of Pinnead and Shalle are summarized below: Requirements: 1.Calculate the goodwill that will appear in the consolidated balance sheet of Pinnead and Subsidiary at December 31,2014. 2.Calculate consolidated net income for 2014. 3.Calculate the noncontrolling interest share for 2014.

The consolidated financial statements are primarily for the benefit of managers of the parent company.

When the fiscal periods of the parent and its subsidiaries differ,we prepare consolidated statements for and as of the end of both the parent's and the subsidiary's fiscal period.

Which method must be used if ASC 810-10-65 prohibits full consolidation of a 70% owned subsidiary?

In the consolidated income statement of Wattlebird Corporation and its 85% owned Forest subsidiary,the noncontrolling interest share was reported at $45,000.Assume the book value and fair value of Forest's net assets were equal at the acquisition date.What amount of net income did Forest have for the year?

Panini Corporation owns 85% of the outstanding voting stock of Strathmore Company and Malone Corporation owns the remaining 15% of Strathmore's voting stock.On the consolidated financial statements of Panini Corporation and Strathmore,Malone is

Push-down accounting is the process of recording the effects of the acquisition price assignment directly on the books of the parent company.

A corporation becomes a subsidiary when another corporation acquires a controlling interest in its issued voting stock.

A newly acquired subsidiary had pre-existing goodwill on its books.The parent company's consolidated balance sheet will

On January 1,2014,Myna Corporation issued 10,000 shares of its own $10 par value common stock for 9,000 shares of the outstanding stock of Berry Corporation in an acquisition.Myna common stock at January 1,2014 was selling at $70 per share.Just before the business combination,balance sheet information of the two corporations was as follows: Required: 1.Prepare the journal entry on Myna Corporation's books to account for the investment in Berry Company. 2.Prepare a consolidated balance sheet for Myna Corporation and Subsidiary immediately after the business combination.

Pregler Inc.has 70% ownership of Sach Company,but should exclude Sach from its consolidated financial statements if

Push-down accounting

Pool Industries paid $540,000 to purchase 75% of the outstanding stock of Swimmin Corporation,on December 31,2014.Any excess fair value over the identified assets and liabilities is attributed to goodwill.The following year-end information was available just before the purchase: Required: 1.Prepare Pool's consolidated balance sheet on December 31,2014.