Question 1

What are the essential criteria for including a subsidiary within an affiliated group?

Accepted Answer

A subsidiary may be included in an affil

Question 2

Under what conditions must a deferred income tax asset be recorded?

Accepted Answer

A deferred income tax asset is recorded

Question 3

West Corp. owned 70% of the voting common stock of East Co. East owned 60% of Compass Co. West and East both used the initial value method to account for their investments. The following information was available from the financial statements and records of the three companies:   Operating income included unrealized intra-entity gains (which are related to inventory transfers) but did not include dividend income from investment in subsidiary.
What amount of dividends did West Corp. receive from Compass Co.?

Accepted Answer

A)  $-0- 
B)  $25,200. 
C)  $36,000. 
D)  $42,000. 
E)  $90,000. 
A)  $-0- 
B)  $25,200. 
C)  $36,000. 
D)  $42,000. 
E)  $90,000.

Question 4

The benefits of filing a consolidated tax return include all of the following except

Accepted Answer

A)  Intercompany profits are not taxed until realized. 
B)  Intercompany profits are deferred. 
C)  Intercompany dividends are not taxable. 
D)  Losses incurred by an affiliated company can be used to reduce taxable income earned by other members to that affiliated group. 
E)  Intercompany profits are taxed before realized, but intercompany losses are deferred. 
A)  Intercompany profits are not taxed until realized. 
B)  Intercompany profits are deferred. 
C)  Intercompany dividends are not taxable. 
D)  Losses incurred by an affiliated company can be used to reduce taxable income earned by other members to that affiliated group. 
E)  Intercompany profits are taxed before realized, but intercompany losses are deferred.

Question 5

White Company owns 60% of Cody Company. Separate tax returns are required. For 2012, 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 and $10,000 to the non-controlling interest. White paid dividends of $180,000. The income tax rate for both companies is 30%.
Compute the income tax payable by White for 2013.

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 6

West Corp. owned 70% of the voting common stock of East Co. East owned 60% of Compass Co. West and East both used the initial value method to account for their investments. The following information was available from the financial statements and records of the three companies:   Operating income included unrealized intra-entity gains (which are related to inventory transfers) but did not include dividend income from investment in subsidiary.
For West Corp. and consolidated subsidiaries, what total amount would have been reported for the non-controlling interest's share of subsidiaries' net income?

Accepted Answer

A)  $165,300. 
B)  $199,300. 
C)  $191,000. 
D)  $228,000. 
E)  $153,000. 
A)  $165,300. 
B)  $199,300. 
C)  $191,000. 
D)  $228,000. 
E)  $153,000.

Question 7

Which of the following statements is true regarding goodwill?

Accepted Answer

A)  For accounting purposes, goodwill may be amortized over a period not to exceed 40 years. 
B)  For accounting purposes, goodwill may be amortized over a period not to exceed 20 years. 
C)  For tax purposes, goodwill amortization cannot be deductible. 
D)  For tax purposes, goodwill amortization may be deductible over a 20-year period. 
E)  For tax purposes, goodwill amortization may be deductible over a 15-year period. 
A)  For accounting purposes, goodwill may be amortized over a period not to exceed 40 years. 
B)  For accounting purposes, goodwill may be amortized over a period not to exceed 20 years. 
C)  For tax purposes, goodwill amortization cannot be deductible. 
D)  For tax purposes, goodwill amortization may be deductible over a 20-year period. 
E)  For tax purposes, goodwill amortization may be deductible over a 15-year period.

Question 8

Alpha Corporation owns 100 percent of Beta Company, and Beta owns 80 percent of Gamma, Inc. all of which are domestic corporations. Information for the three companies for the year ending December 31, 2013 follows:   What is Beta's accrual-based income for 2013?

Accepted Answer

A)  $200,000. 
B)  $276,800. 
C)  $280,000. 
D)  $296,000. 
E)  $300,000. 
A)  $200,000. 
B)  $276,800. 
C)  $280,000. 
D)  $296,000. 
E)  $300,000.

Question 9

River Co. owned 80% of Boat Inc. The two companies filed a consolidated income tax return and River used the initial value method to account for the investment. The following information was available from the two companies' financial statements:   Operating income included net unrealized gains, which are associated with transfers of inventories between the two companies, but it did not include dividends received from a subsidiary. The income tax rate was 30%.
What is the amount of taxable income reported on the consolidated income tax return?

Accepted Answer

A)  $720,000. 
B)  $625,000. 
C)  $621,000. 
D)  $665,000. 
E)  $655,000. 
A)  $720,000. 
B)  $625,000. 
C)  $621,000. 
D)  $665,000. 
E)  $655,000.

Question 10

B Co. owned 70% of the voting common stock of C Corp.; C Corp. owned 20% of B Co. For 2013, B Co. and C Corp. reported net income (not including the investment) of $600,000 and $300,000, respectively. B Co. and C Corp. paid dividends of $80,000 and $60,000, respectively.
Required:
Prepare a schedule showing B Co.'s share of consolidated net income for 2013 using the treasury stock approach.

Accepted Answer

The answer of B Co. owned 70% of the voting...

Question 11

Beagle Co. owned 80% of Maroon Corp. Maroon owned 90% of Eckston Inc. Operating income totals for 2013 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 intra-entity transfers to Maroon.   The accrual-based income of Beagle Co. is calculated to be

Accepted Answer

A)  $706,670. 
B)  $755,980. 
C)  $805,280. 
D)  $838,150. 
E)  $815,770. 
A)  $706,670. 
B)  $755,980. 
C)  $805,280. 
D)  $838,150. 
E)  $815,770.

Question 12

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 non-controlling interest in the net income of Inglestone Inc. is calculated to be

Accepted Answer

A)  $106,950. 
B)  $102,640. 
C)  $114,530. 
D)  $106,960. 
E)  $103,680. 
A)  $106,950. 
B)  $102,640. 
C)  $114,530. 
D)  $106,960. 
E)  $103,680.

Question 13

Which of the following statements is true regarding mutual ownership between a parent and its subsidiary?

Accepted Answer

A)  The shares of the parent held by a subsidiary should be treated as outstanding stock on the consolidated balance sheet. 
B)  Only the subsidiary's shares held by the parent should be eliminated in consolidation. 
C)  The treasury stock approach is required to reflect parent shares held by the subsidiary. 
D)  The treasury stock approach is required to eliminate subsidiary shares held by the parent company. 
E)  The parent company does not need to file consolidated financial statements if there is mutual ownership. 
A)  The shares of the parent held by a subsidiary should be treated as outstanding stock on the consolidated balance sheet. 
B)  Only the subsidiary's shares held by the parent should be eliminated in consolidation. 
C)  The treasury stock approach is required to reflect parent shares held by the subsidiary. 
D)  The treasury stock approach is required to eliminate subsidiary shares held by the parent company. 
E)  The parent company does not need to file consolidated financial statements if there is mutual ownership.

Question 14

When indirect control is present, which of the following statements is true?

Accepted Answer

A)  At least one company within the business combination holds a parent and a subsidiary relationship. 
B)  The parent company owns a percent of subsidiary and subsidiary owns a percent of the parent. 
C)  Consolidated financial statements are required for only one subsidiary. 
D)  Recognition of income for an indirectly owned subsidiary is ignored. 
E)  Only dividend income is recognized for an indirectly owned subsidiary. 
A)  At least one company within the business combination holds a parent and a subsidiary relationship. 
B)  The parent company owns a percent of subsidiary and subsidiary owns a percent of the parent. 
C)  Consolidated financial statements are required for only one subsidiary. 
D)  Recognition of income for an indirectly owned subsidiary is ignored. 
E)  Only dividend income is recognized for an indirectly owned subsidiary.

Question 15

Kurton Inc. owned 90% of Luvyn Corp.'s voting common stock. The consideration paid exceeded book value by $110,000. Of this amount, one half is attributable to a patent and is to be amortized over 5 years. Luvyn held 20% of Kurton's voting common stock which cost $28,000 more than fair value.
During the current year, Kurton reported operating income of $224,000 and dividend income from Luvyn of $37,800. At the same time, Luvyn reported operating income of $70,000 and dividend income from Kurton of $19,600.
Required:
Prepare a schedule to show Kurton's share of controlling interest in Luvyn's net income.

Accepted Answer

@#IMG-DLM&_TB2311_00

What are the essential criteria for including a subsidiary within an affiliated group?

Under what conditions must a deferred income tax asset be recorded?

The benefits of filing a consolidated tax return include all of the following except

Which of the following statements is true regarding goodwill?

Alpha Corporation owns 100 percent of Beta Company, and Beta owns 80 percent of Gamma, Inc. all of which are domestic corporations. Information for the three companies for the year ending December 31, 2013 follows: What is Beta's accrual-based income for 2013?

Which of the following statements is true regarding mutual ownership between a parent and its subsidiary?

When indirect control is present, which of the following statements is true?

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 Intra-Entity Asset Transactions

Variable Interest Entities, Intra-Entity Debt, Consolidated 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

Accounting for State and Local Governments

Accounting and Reporting for Private Not-For-Profit Organizations

Accounting for Estates and Trusts

Filters

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

What are the essential criteria for including a subsidiary within an affiliated group?

Under what conditions must a deferred income tax asset be recorded?

The benefits of filing a consolidated tax return include all of the following except

Which of the following statements is true regarding goodwill?

Alpha Corporation owns 100 percent of Beta Company, and Beta owns 80 percent of Gamma, Inc. all of which are domestic corporations. Information for the three companies for the year ending December 31, 2013 follows: What is Beta's accrual-based income for 2013?

Which of the following statements is true regarding mutual ownership between a parent and its subsidiary?

When indirect control is present, which of the following statements is true?

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 Intra-Entity Asset Transactions

Variable Interest Entities, Intra-Entity Debt, Consolidated 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

Accounting for State and Local Governments

Accounting and Reporting for Private Not-For-Profit Organizations

Accounting for Estates and Trusts

Filters