Question 1

Which of the following statements is true regarding the filing of income taxes for an affiliated group?

Accepted Answer

A) Domestic subsidiaries greater than 50% ownership must file a consolidated tax return. 
B) Domestic subsidiaries greater than 60% ownership must file a consolidated tax return. 
C) Domestic subsidiaries greater than 80% ownership must file a consolidated tax return. 
D) Domestic subsidiaries greater than 80% ownership may file a consolidated tax return. 
E) Foreign subsidiaries must file a consolidated tax return. 
A) Domestic subsidiaries greater than 50% ownership must file a consolidated tax return. 
B) Domestic subsidiaries greater than 60% ownership must file a consolidated tax return. 
C) Domestic subsidiaries greater than 80% ownership must file a consolidated tax return. 
D) Domestic subsidiaries greater than 80% ownership may file a consolidated tax return. 
E) Foreign subsidiaries must file a consolidated tax return. D

Question 2

REFERENCE: Ref.07_12
Paris,Inc.owns 80 percent of the voting stock of Stance,Inc.The excess total fair value over book value was $75,000.Stance holds 10 percent of the voting stock of Paris.The payment for that investment was in excess of book value and fair value by $15,000.Any excess fair value is assigned to trademarks to be amortized over a 10-year period.During the current year,Paris reported operating income of $200,000 and dividend income from Stance of $20,000.At the same time,Stance reported operating income of $40,000 and dividend income from Paris of $5,000.
-What is consolidated net income?

Accepted Answer

A) $229,500. 
B) $237,000. 
C) $245,000. 
D) $232,500. 
E) $240,000. 
A) $229,500. 
B) $237,000. 
C) $245,000. 
D) $232,500. 
E) $240,000. D

Question 3

REFERENCE: Ref.07_12
Paris,Inc.owns 80 percent of the voting stock of Stance,Inc.The excess total fair value over book value was $75,000.Stance holds 10 percent of the voting stock of Paris.The payment for that investment was in excess of book value and fair value by $15,000.Any excess fair value is assigned to trademarks to be amortized over a 10-year period.During the current year,Paris reported operating income of $200,000 and dividend income from Stance of $20,000.At the same time,Stance reported operating income of $40,000 and dividend income from Paris of $5,000.
-What is Paris' share of consolidated net income?

Accepted Answer

A) $232,500. 
B) $225,000. 
C) $224,500. 
D) $226,000. 
E) $233,500. 
A) $232,500. 
B) $225,000. 
C) $224,500. 
D) $226,000. 
E) $233,500. B

Question 4

Prescott Corp.owned 90% of Bell Inc. ,while Bell owned 10% of the outstanding common shares of Prescott.No goodwill or other allocations were recognized in connection with either of these acquisitions.Prescott reported operating income of $266,000 for 2009 whereas Bell earned $98,000 during the same period.No investment income was included within either of these income totals.How would the 10% investment in Prescott owned by Bell be presented on the consolidated balance sheet?

Accepted Answer

A) The 10% investment would be eliminated and the amount would not be shown on the consolidated balance sheet. 
B) The 10% investment would be reclassified on Bell's balance sheet as Treasury Stock before the consolidation process begins. 
C) The 10% investment would appear as treasury stock on the consolidated balance sheet. 
D) The 10% investment would be included as part of Additional Paid-In Capital because it is less than 20% and therefore indicates no significant influence is present. 
E) Prescott would treat the shares owned by Bell as if they had been repurchased on the open market,and a treasury stock account would be set up recording the shares at their market value on the date of combination. 
A) The 10% investment would be eliminated and the amount would not be shown on the consolidated balance sheet. 
B) The 10% investment would be reclassified on Bell's balance sheet as Treasury Stock before the consolidation process begins. 
C) The 10% investment would appear as treasury stock on the consolidated balance sheet. 
D) The 10% investment would be included as part of Additional Paid-In Capital because it is less than 20% and therefore indicates no significant influence is present. 
E) Prescott would treat the shares owned by Bell as if they had been repurchased on the open market,and a treasury stock account would be set up recording the shares at their market value on the date of combination.

Question 5

REFERENCE: Ref.07_05
Hardford Corp.held 80% of Inglestone Inc.which,in turn,owned 80% of Jade Co.Operating income figures (without investment income)as well as unrealized upstream gains included in the income for the current year follow:
  
-The accrual-based income of Jade Co.is calculated to be

Accepted Answer

A) $193,000. 
B) $189,000. 
C) $196,000. 
D) $201,000. 
E) $144,000. 
A) $193,000. 
B) $189,000. 
C) $196,000. 
D) $201,000. 
E) $144,000.

Question 6

Which of the following conditions will allow two companies to file a consolidated income tax return?

Accepted Answer

A) One company owns less than 50 percent of the other company's voting stock but has the ability to significantly influence the other company. 
B) One company holds 50 percent of the other company's voting stock. 
C) One company holds 75 percent of the other company's voting stock 
D) One company holds 83 percent of the other company's voting stock. 
E) None of the above. 
A) One company owns less than 50 percent of the other company's voting stock but has the ability to significantly influence the other company. 
B) One company holds 50 percent of the other company's voting stock. 
C) One company holds 75 percent of the other company's voting stock 
D) One company holds 83 percent of the other company's voting stock. 
E) None of the above.

Question 7

REFERENCE: Ref.07_11
Delta Corporation owns 90 percent of Sigma Company,and Sigma owns 90 percent of Pi,Inc. ,all of which are domestic corporations.Information for the three companies for the year ending December 31,2009 follows:
  
-What is the noncontrolling interest in Sigma's income for 2009?

Accepted Answer

A) $55,240. 
B) $56,420. 
C) $57,280. 
D) $59,420. 
E) $60,000. 
A) $55,240. 
B) $56,420. 
C) $57,280. 
D) $59,420. 
E) $60,000.

Question 8

In a father-son-grandson combination,which of the following statements is true?

Accepted Answer

A) Companies that are solely in subsidiary positions must have their realized income computed first in the consolidation process. 
B) Father-son-grandson configurations never require consolidation unless one company owns 100% of at least one other member of the combined group. 
C) The order of the computation of realized income is not important in the consolidation process. 
D) The parent must have its realized income computed first in the consolidation process. 
E) None of the above. 
A) Companies that are solely in subsidiary positions must have their realized income computed first in the consolidation process. 
B) Father-son-grandson configurations never require consolidation unless one company owns 100% of at least one other member of the combined group. 
C) The order of the computation of realized income is not important in the consolidation process. 
D) The parent must have its realized income computed first in the consolidation process. 
E) None of the above.

Question 9

-Required:
Prepare a schedule to show Kurton's share of controlling interest in Luvyn's net income.

Accepted Answer

The answer of  
-Required:
Prepare a schedule to show Kurton's...

Question 10

What amount should have been reported for consolidated net income?

Accepted Answer

A) $1,285,000. 
B) $1,331,700. 
C) $1,349,000. 
D) $1,315,000. 
E) $1,314,900. 
A) $1,285,000. 
B) $1,331,700. 
C) $1,349,000. 
D) $1,315,000. 
E) $1,314,900.

Question 11

On January 1,2009,a subsidiary buys 12 percent of the outstanding voting stock of its parent corporation.The payment of $400,000 exceeded book value of the acquired shares by $80,000,attributable to a copyright with a 10-year useful life.During the year,the parent reported operating income of $1,000,000 (excluding investment income from the subsidiary),and paid $120,000 in dividends.If the treasury stock approach is used,how is the Investment in Parent Stock reported on the consolidated balance sheet at December 31,2009?

Accepted Answer

A) Consolidated stockholders' equity is reduced by $400,000. 
B) Consolidated stockholders' equity is reduced by $320,000. 
C) Included in current assets. 
D) Included in noncurrent assets. 
E) There is no effect on the consolidated balance sheet,because the effects have been eliminated. 
A) Consolidated stockholders' equity is reduced by $400,000. 
B) Consolidated stockholders' equity is reduced by $320,000. 
C) Included in current assets. 
D) Included in noncurrent assets. 
E) There is no effect on the consolidated balance sheet,because the effects have been eliminated.

Question 12

How much will the consolidated group save if it decides to file a consolidated income tax return?

Accepted Answer

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Question 13

REFERENCE: Ref.07_09
White Company owns 60% of Cody Company.Separate tax returns are required.For 2009,White's operating income (excluding taxes and any income from Cody)was $300,000 while Cody reported a pretax income of $125,000.During the period,Cody paid a total of $25,000 in cash dividends,$15,000 (60%)to White with the remaining going to noncontrolling interest.The income tax rate for both companies is 30%.
-Compute the income tax payable by White for 2009.

Accepted Answer

A) $93,600. 
B) $91,350. 
C) $94,500. 
D) $90,900. 
E) $90,000. 
A) $93,600. 
B) $91,350. 
C) $94,500. 
D) $90,900. 
E) $90,000.

Question 14

REFERENCE: Ref.07_09
White Company owns 60% of Cody Company.Separate tax returns are required.For 2009,White's operating income (excluding taxes and any income from Cody)was $300,000 while Cody reported a pretax income of $125,000.During the period,Cody paid a total of $25,000 in cash dividends,$15,000 (60%)to White with the remaining going to noncontrolling interest.The income tax rate for both companies is 30%.
-Compute Cody's income tax expense for 2009.

Accepted Answer

A) $33,000. 
B) $34,500. 
C) $37,500. 
D) $30,000. 
E) $22,500. 
A) $33,000. 
B) $34,500. 
C) $37,500. 
D) $30,000. 
E) $22,500.

Question 15

REFERENCE: Ref.07_06
Chase Company owns 80% of Lawrence Company and 40% of Ross Company.Lawrence Company also owns 30% of Ross Company.Separate operating incomes for 2009 of Chase,Lawrence,and Ross are $450,000,$300,000,and $250,000,respectively.Each company also retains a $20,000 unrealized gain in their current income figures.Annual amortization expense of $15,000 is assigned to Chase's investment in Lawrence and another $15,000 is assigned to Lawrence's investment in Ross.
-Compute Lawrence's accrual-based income for 2009.

Accepted Answer

A) $354,000. 
B) $329,500. 
C) $334,000. 
D) $265,000. 
E) $344,500. 
A) $354,000. 
B) $329,500. 
C) $334,000. 
D) $265,000. 
E) $344,500.

Question 16

Prescott Corp.owned 90% of Bell Inc. ,while Bell owned 10% of the outstanding common shares of Prescott.No goodwill or other allocations were recognized in connection with either of these acquisitions.Prescott reported operating income of $266,000 for 2009 whereas Bell earned $98,000 during the same period.No investment income was included within either of these income totals.On a consolidated income statement,what is the noncontrolling interest in Bell's net income ?

Accepted Answer

A) $9,800. 
B) $13,692. 
C) $10,836. 
D) $12,460. 
E) $11,214. 
A) $9,800. 
B) $13,692. 
C) $10,836. 
D) $12,460. 
E) $11,214.

Question 17

REFERENCE: Ref.07_15
Jull Corp.owned 80% of Solaver Co.Solaver paid $250,000 for 10% of Jull's common stock.In 2009,Jull and Solaver reported operating income (not including income from the investment)of $300,000 and $80,000,respectively.Jull and Solaver paid dividends of $120,000 and $50,000,respectively.
-Required:
Under the treasury stock approach,what is the noncontrolling interest in Solaver Co.'s net income?

Accepted Answer

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Question 18

REFERENCE: Ref.07_04
Beagle Co.owned 80% of Maroon Corp.Maroon owned 90% of Eckston Inc.Operating income totals for 2010 are shown below;these figures contained no investment income.Amortization expense was not required by any of these acquisitions.Included in Eckston's operating income was a $56,000 unrealized gain on intercompany transfers to Maroon.
  
-The accrual-based income of Eckston Inc.is calculated to be

Accepted Answer

A) $234,000. 
B) $211,000. 
C) $221,000. 
D) $224,000. 
E) $246,000. 
A) $234,000. 
B) $211,000. 
C) $221,000. 
D) $224,000. 
E) $246,000.

Question 19

REFERENCE: Ref.07_14
Tate,Inc.owns 80 percent of Jeffrey,Inc.During the current year,Jeffrey sold merchandise costing $60,000 to Tate for $75,000.At the end of the year,10 percent of this merchandise was still being held.The tax rate is 30 percent.
-Assuming that separate income tax returns are being filed,what deferred income tax asset is created?

Accepted Answer

A) $0. 
B) $360. 
C) $450. 
D) $2,250. 
E) $3,600. 
A) $0. 
B) $360. 
C) $450. 
D) $2,250. 
E) $3,600.

Question 20

X Co.owned 80% of Y Corp. ,and Y Corp.owned 15% of X Co.Under the treasury stock approach,how would the dividends that are paid by X Co.to Y Corp.be handled on a consolidation worksheet?

Accepted Answer

The dividends must b

Which of the following statements is true regarding the filing of income taxes for an affiliated group?

REFERENCE: Ref.07_05 Hardford Corp.held 80% of Inglestone Inc.which,in turn,owned 80% of Jade Co.Operating income figures (without investment income)as well as unrealized upstream gains included in the income for the current year follow: -The accrual-based income of Jade Co.is calculated to be

Which of the following conditions will allow two companies to file a consolidated income tax return?

REFERENCE: Ref.07_11 Delta Corporation owns 90 percent of Sigma Company,and Sigma owns 90 percent of Pi,Inc. ,all of which are domestic corporations.Information for the three companies for the year ending December 31,2009 follows: -What is the noncontrolling interest in Sigma's income for 2009?

In a father-son-grandson combination,which of the following statements is true?

-Required: Prepare a schedule to show Kurton's share of controlling interest in Luvyn's net income.

What amount should have been reported for consolidated net income?

How much will the consolidated group save if it decides to file a consolidated income tax return?

X Co.owned 80% of Y Corp. ,and Y Corp.owned 15% of X Co.Under the treasury stock approach,how would the dividends that are paid by X Co.to Y Corp.be handled on a consolidation worksheet?

The Equity Method of Accounting for Investments

Consolidation of Financial Information

Consolidations - Subsequent to the Date of Acquisition

Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements - Intercompany Asset Transactions

Variable Interest Entities, intercompany Debt, consolidated Statement of Cash Flows, and Other Issues

Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Worldwide Accounting Diversity and International Accounting Standards

Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

Partnerships: Formation and Operation

Partnerships: Termination and Liquidation

Accounting for State and Local Governments, Part I

Accounting for State and Local Governments,part II

Accounting for Not-For-Profit Organizations

Accounting for Estates and Trusts

Filters

Exam 7: Consolidated Financial Statements - Ownership Patterns and Income Taxes

Which of the following statements is true regarding the filing of income taxes for an affiliated group?

REFERENCE: Ref.07_05 Hardford Corp.held 80% of Inglestone Inc.which,in turn,owned 80% of Jade Co.Operating income figures (without investment income)as well as unrealized upstream gains included in the income for the current year follow: -The accrual-based income of Jade Co.is calculated to be

Which of the following conditions will allow two companies to file a consolidated income tax return?

REFERENCE: Ref.07_11 Delta Corporation owns 90 percent of Sigma Company,and Sigma owns 90 percent of Pi,Inc. ,all of which are domestic corporations.Information for the three companies for the year ending December 31,2009 follows: -What is the noncontrolling interest in Sigma's income for 2009?

In a father-son-grandson combination,which of the following statements is true?

-Required: Prepare a schedule to show Kurton's share of controlling interest in Luvyn's net income.

What amount should have been reported for consolidated net income?

How much will the consolidated group save if it decides to file a consolidated income tax return?

X Co.owned 80% of Y Corp. ,and Y Corp.owned 15% of X Co.Under the treasury stock approach,how would the dividends that are paid by X Co.to Y Corp.be handled on a consolidation worksheet?

The Equity Method of Accounting for Investments

Consolidation of Financial Information

Consolidations - Subsequent to the Date of Acquisition

Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements - Intercompany Asset Transactions

Variable Interest Entities, intercompany Debt, consolidated Statement of Cash Flows, and Other Issues

Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Worldwide Accounting Diversity and International Accounting Standards

Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

Partnerships: Formation and Operation

Partnerships: Termination and Liquidation

Accounting for State and Local Governments, Part I

Accounting for State and Local Governments,part II

Accounting for Not-For-Profit Organizations

Accounting for Estates and Trusts

Filters