Question 1

What amount should be attributed to the Noncontrolling Interest in Garvin Co.following the sale of the 10,000 shares of common stock?

Accepted Answer

A)  $288,000. 
B)  $101,000. 
C)  $280,000. 
D)  $230,000. 
E)  $168,000.

Question 2

Which of the following characteristics is not indicative of an enterprise qualifying as a primary beneficiary with a controlling financial interest in a variable interest entity?

Accepted Answer

A)  The power to direct the most significant economic performance activities. 
B)  The power through voting or similar rights to direct activities, which significantly impact economic performance. 
C)  The obligation to absorb potentially significant losses of the entity. 
D)  No ability to make decisions about the entity's activities. 
E)  The right to receive potentially significant benefits of the entity.

Question 3

Which of the following statements is false regarding the assignment of a gain or loss when an affiliate's debt instrument is acquired on the open market?

Accepted Answer

A)  Subsidiary net income is not affected by a gain on the debt transaction. 
B)  Subsidiary net income is not affected by a loss on the debt transaction. 
C)  Parent Company net income is not affected by a gain on the debt transaction. 
D)  Parent Company net income is not affected by a loss on the debt transaction. 
E)  Consolidated net income is not affected by a gain or loss on the debt transaction.

Question 4

On January 1, 2019, Cocker reacquired 8,000 of the outstanding shares of its own common stock for $34 per share.None of these shares belonged to Popper.How would this transaction have affected the additional paid-in capital of the parent company?

Accepted Answer

A)  $0. 
B)  Decrease it by $32,900. 
C)  Decrease it by $45,700. 
D)  Decrease it by $23,100. 
E)  Decrease it by $50,500.

Question 5

If a subsidiary re-acquires its outstanding shares from outside ownership for more than the noncontrolling interest valuation basis at the date of buying such treasury stock, which of the following statements is true?

Accepted Answer

A)  Additional paid-in capital on the parent company's books will decrease. 
B)  Investment in subsidiary will increase. 
C)  Treasury stock on the parent's books will increase. 
D)  Treasury stock on the parent's books will decrease. 
E)  No adjustment is necessary.

Question 6

Assuming Involved's accounts are correctly valued within the company's financial statements, what amount of goodwill should be recognized for the Investment in Involved?

Accepted Answer

A)  $(100,000.) 
B)  $ 0. 
C)  $ 200,000. 
D)  $ 812,500. 
E)  $2,112,500.

Question 7

Where do dividends paid to the noncontrolling interest of a subsidiary appear on a consolidated statement of cash flows?

Accepted Answer

A)  Cash flows from operating activities. 
B)  Cash flows from investing activities. 
C)  Cash flows from financing activities. 
D)  Supplemental schedule of noncash investing and financing activities. 
E)  They do not appear in the consolidated statement of cash flows.

Question 8

Cadion Co.owned a controlling interest in Knieval Inc.Cadion reported sales of $420,000 during 2018 while Knieval reported $280,000.Inventory costing $28,000 was transferred from Knieval to Cadion (upstream) during the year for $56,000.Of this amount, twenty-five percent was still in ending inventory at year's end.Total receivables on the consolidated balance sheet were $112,000 at the first of the year and $154,000 at year-end.No intra-entity debt existed at the beginning or ending of the year.Using the direct approach, what is the consolidated amount of cash collected by the business from its customers?

Accepted Answer

A)  $602,000. 
B)  $644,000. 
C)  $686,000. 
D)  $714,000. 
E)  $592,000.

Question 9

If Smith's net income is $100,000 in the year following the acquisition,

Accepted Answer

A)  The portion allocated to the common stock (residual amount) is $92,800. 
B)  $10,800 preferred stock dividend will be subtracted from net income attributed to common stock in arriving at noncontrolling interest in consolidated income. 
C)  The noncontrolling interest in consolidated net income is $27,200. 
D)  The preferred stock dividend will be ignored in noncontrolling interest in consolidated net income because Nichols owns the noncontrolling interest of preferred stock. 
E)  The noncontrolling interest in consolidated net income is $30,800.

Question 10

During 2018, the subsidiary paid dividends of $14,000.
Required:
Prepare a consolidated statement of cash flows for this business combination for the year ending December 31, 2018.Either the direct method or the indirect method may be used.

Accepted Answer

The answer of During 2018, the subsidiary paid dividends of...

Question 11

How is the amount of excess acquisition-date fair value over book value recognized in a consolidated statement of cash flows assuming the indirect method is used?

Accepted Answer

A)  It is ignored. 
B)  $6,000 subtracted from net income. 
C)  $4,800 subtracted from net income. 
D)  $6,000 added to net income. 
E)  $4,800 added to net income.

Question 12

Using the indirect method, where does the decrease in accounts payable appear in a consolidated statement of cash flows?

Accepted Answer

A)  $7,000 increase to net income as an operating activity. 
B)  $7,000 decrease to net income as an operating activity. 
C)  $5,600 increase to net income as an operating activity. 
D)  $5,600 decrease to net income as an operating activity. 
E)  $7,000 increase as a financing activity.

Question 13

When Ryan's new percent ownership is rounded to a whole number, what adjustment is needed for Ryan's investment in Chase account?

Accepted Answer

A)  $16,000 decrease. 
B)  $60,000 decrease. 
C)  $46,000 increase. 
D)  $46,000 decrease. 
E)  No adjustment is necessary.

Question 14

What is the balance in Riney's "Investment in Garvin Co.Account" following the sale of the 10,000 shares of common stock?

Accepted Answer

A)  $552,000. 
B)  $560,000. 
C)  $460,000. 
D)  $404,000. 
E)  $672,000.

Question 15

What consolidation entry would be recorded in connection with these intra-entity bonds on December 31, 2020?

Accepted Answer

The answer of What consolidation entry would be recorded in...

Question 16

Net cash flow from operating activities was:

Accepted Answer

A)  $43,000. 
B)  $44,800. 
C)  $46,200. 
D)  $50,000. 
E)  $25,000.

Question 17

How does the existence of a noncontrolling interest affect the preparation of a consolidated statement of cash flows?

Accepted Answer

The answer of How does the existence of a noncontrolling...

Exam 6: A: Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues