1. Point Co. purchased 90% of Sharpe Corp.’s voting stock on January 1, 20X2 for$5,580,000. Prior to

 
   

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1. Point Co. purchased 90% of Sharpe Corp.’s voting stock on January 1, 20X2 for$5,580,000. Prior to the acquisition, Point held a 10% equity position in Sharpe Company.On January 1, 20X2 Pointe’s 10% investment in Sharpe has a book value of $340,000and a fair value of $620,000. On January 1, 20X2 Point records the following:Debit Gain on revaluation of Sharpe’s stock $280,000Credit Investment in Sharpe stock $5,860,000Credit Gain on revaluation of Sharpe’s stock $280,000Debit Investment in Sharpe stock $6,200,0002. On August 31, 20X1, Wood Corp. issued 100,000 shares of its $20 par value commonstock for the net assets of Pine, Inc. in a business combination accounted for by theacquisition method. The market value of Wood’s common stock on August 31 was $36per share. Wood paid a fee of $160,000 to the consultant who arranged this acquisition.Costs of registering and issuing the equity securities amounted to $80,000. No goodwillwas involved in the purchase. What amount should Wood capitalize as the cost ofacquiring Pine’s net assets?$3,760,000$3,600,000$3,840,000$3,680,0003. Simmons Corporation paid $170,000 to acquire all of Bush Company’s net assets. Bushreported assets with a book value of $189,000 and a fair value of $206,000 and liabilitieswith a book value and fair value of $48,000 on the date of the combination. Simmons alsopaid $8,000 to a search firm for finder’s fees related to the acquisition. What amount willbe recorded as goodwill by Simmons Corporation when recording its investment in Bush?$10,000$29,000$12,000$20,0004. Pursuing an inorganic growth strategy, Wilson Company acquired Venus Company’s netassets and assigned them to four separate reporting divisions. Wilson assigned totalgoodwill of $134,000 to the four reporting divisions as given below:1?Based on the preceding information, what amount of goodwill will be reported for Alpha atyear-end?$10,000$0$30,000$20,0002?Based on the preceding information, what amount of goodwill will be reported for Beta atyear-end?$0$34,000$50,000$14,0003?Based on the preceding information, for Gamma:goodwill of $30,000 should be reported at year-end.goodwill impairment of $20,000 should be recognized at year-end.no goodwill should be reported at year-end.goodwill impairment of $30,000 should be recognized at year-end.4?Based on the preceding information, for Delta:goodwill of $30,000 should be reported at year-end.goodwill impairment of $20,000 should be recognized at year-end.goodwill impairment of $15,000 should be recognized at year-end.no goodwill should be reported at year-end.5?Based on the preceding information, what would be the total amount of goodwill thatWilson should report at year-end?$69,000$79,000$94,000$05?Based on the preceding information, what amount will be recorded by Zenith as itsinvestment in Plummet, if it paid $500,000 for the acquisition?$400,000$510,000$500,000$610,0006?Public Equity Corporation acquired Lenore Company through an exchange of commonshares. All of Lenore’s assets and liabilities were immediately transferred to Public Equity.Public’s common stock was trading at $20 per share at the time of exchange. Followingselected information is also available.1?Based on the preceding information, what number of shares was issued at the time of theexchange?17,50010,00012,5005,0002?Based on the preceding information, what is the par value of Public’s common stock?$5$1$10$43?Based on the preceding information, what is the fair value of Lenore’s net assets, if goodwill of$56,000 is recorded?$306,000$194,000$244,000$300,0007 ? Paul Corp. acquired 100 percent of Sam Inc.’s voting stock on July 1, 20X1. The followinginformation was available as of December 31, 20X1:How much net income should be reported in Paul Corp’s income statement for 20X1?$720,000$940,000$1,090,000$370,0008 ? During its inception, Devon Company purchased land for $100,000 and a building for$180,000. After exactly 3 years, it transferred these assets and cash of $50,000 to a newly createdsubsidiary, Regan Company, in exchange for 15,000 shares of Regan’s $10 par value stock. Devonuses straight-line depreciation. Useful life for the building is 30 years, with zero residual value. Anappraisal revealed that the building has a fair value of $200,000Based on the information provided, at the time of the transfer, Regan Company should record:Building at $200,000 and accumulated depreciation of $24,000.Building at $180,000 and accumulated depreciation of $18,000.Building at $180,000 and no accumulated depreciation.Building at $162,000 and no accumulated depreciation.9 ? The fair value of net identifiable assets of a reporting unit of X Company is $300,000. On XCompany’s books, the carrying value of this reporting unit’s net assets is $350,000, including$60,000 goodwill. If the fair value of the reporting unit as a whole is $335,000, what amount ofgoodwill impairment will be recognized for this unit?$25,000$35,000$0$10,00010?The fair value of net identifiable assets of a reporting unit of X Company is $300,000. On XCompany’s books, the carrying value of this reporting unit’s net assets is $350,000, including$60,000 goodwill. If the fair value of the reporting unit as a whole is $335,000, what amount ofgoodwill impairment will be recognized for this unit?$25,000$35,000$0$10,00011. Parent Co. purchases 100 percent of Son Company on January 1, 20X1, when Parent’sretained earnings balance is $520,000 and Son’s is $150,000. During 20X1, Son reports $15,000 ofnet income and declares $6,000 of dividends. Parent reports $105,000 of separate operatingearnings plus $15,000 of equity-method income from its 100 percent interest in Son; Parentdeclares dividends of $40,000.1 ?Based on the preceding information, what is Parent’s post-closing retained earnings balanceon December 31, 20X1?$600,000$505,000$485,000$525,0002?Based on the preceding information, what is Son’s post-closing retained earnings balance onDecember 31, 20X1?$150,000$165,000$141,000$159,0003 ? Based on the preceding information, what is the consolidated retained earnings balance onDecember 31, 20X1?$600,000$585,000$470,000$759,00012 ? Beta Company acquired 100 percent of the voting common shares of Standard VideoCorporation, its bitter rival, by issuing bonds with a par value and fair value of $150,000.Immediately prior to the acquisition, Beta reported total assets of $500,000, liabilities of$280,000, and stockholders’ equity of $220,000. At that date, Standard Video reported totalassets of $400,000, liabilities of $250,000, and stockholders’ equity of $150,000. Included inStandard’s liabilities was an account payable to Beta in the amount of $20,000, which Betaincluded in its accounts receivable.1?Based on the preceding information, what amount of total assets did Beta report in its balancesheet immediately after the acquisition?$650,000$900,000$750,000$500,0002 ? Based on the preceding information, what amount of total assets was reported in theconsolidated balance sheet immediately after acquisition?$920,000$750,000$650,000$880,0003 ? Based on the preceding information, what amount of total liabilities was reported in theconsolidated balance sheet immediately after acquisition?$280,000$660,000$500,000$530,0004?Based on the preceding information, what amount of stockholders’ equity was reported in theconsolidated balance sheet immediately after acquisition?$370,000$220,000$150,000$350,00013?On January 2, 20X5, Well Co. purchased 10 percent of Rea, Inc.’s outstanding common sharesfor $400,000. Well is the largest single shareholder in Rea, and Well’s officers are a majority onRea’s board of directors. As a result, Well is able to exercise significant influence over Rea. Reareported net income of $500,000 for 20X5, and paid dividends of $150,000. In its December 31,20X5, balance sheet, what amount should Well report as investment in Rea?$400,000$385,000$450,000$435,00014?On January 1, 20X7, Yang Corporation acquired 25 percent of the outstanding shares of SpielCorporation for $100,000 cash. Spiel Company reported net income of $75,000 and paiddividends of $30,000 for both 20X7 and 20X8. The fair value of shares held by Yang was $110,000and $105,000 on December 31, 20X7 and 20X8 respectivelyBased on the preceding information, what amount will be reported by Yang as balance ininvestment in Spiel on December 31, 20X8, if it used the equity method of accounting?$122,500$118,750$108,250$100,00015?Grant, Inc. acquired 30 percent of South Co.’s voting stock for $200,000 on January 2, 20X4.Grant’s 30 percent interest in South gave Grant the ability to exercise significant influence overSouth’s operating and financial policies. During 20X4, South earned $80,000 and paid dividendsof $50,000. South reported earnings of $100,000 for the six months ended June 30, 20X5, and$200,000 for the year ended December 31, 20X5. On July 1, 20X5, Grant sold half of its stock inSouth for $150,000 cash. South paid dividends of $60,000 on October 1, 20X5.In its 20X5 income statement, what amount should Grant report as a gain from the sale of half ofits investment?$24,500$45,500$35,000$30,50016. The Jamestown Corporation (Jamestown) reported net income for the current year of$200,000 and paid cash dividends of $30,000. The Stadium Company (Stadium) holds 22 percentof the outstanding voting stock of Jamestown. However, another corporation holds the other 78percent ownership and does not take Stadium’s wants and wishes into consideration whenmaking financing and operating decisions for Jamestown. What investment income shouldStadium recognize for the current year?$44,000$6,600$50,600$017. On January 1, 20X8, William Company acquired 30 percent of eGate Company’s commonstock, at underlying book value of $100,000. eGate has 100,000 shares of $2 par value, 5 percentcumulative preferred stock outstanding. No dividends are in arrears. eGate reported net incomeof $150,000 for 20X8 and paid total dividends of $72,000. William uses the equity method toaccount for this investment.1 ? Based on the preceding information, what amount would William Company receive asdividends from eGate for the year?$18,600$54,000$62,000$21,6002 ? Based on the preceding information, what amount of investment income will WilliamCompany report from its investment in eGate for the year?$45,000$62,000$42,000$35,0003?Based on the preceding information, what amount would be reported by William Company asthe balance in its investment account on December 31, 20X8?$120,400$100,000$142,000$123,40018. Orange Corporation owns 70 percent of the voting common shares of McNichols Corporation,purchased at book value. Noncontrolling interest was assigned $21,000 of income in the 20X0consolidated income statement. What amount of net income did McNichols Corporation reportfor the year?$147,000$30,000$63,000$70,00019. Maple Corporation and its subsidiary reported consolidated net income of $380,000 for theyear ended December 31, 20X5. Maple owns 75% of the common shares of its subsidiary,acquired at book value. Noncontrolling interest was assigned income of $25,000 in theconsolidated income statement for 20X5. What is the amount of separate operating incomereported by Maple for the year?$280,000$100,000$95,000$285,00020. Small-Town Retail owns 70 percent of Supplier Corporation’s common stock. For the currentfinancial year, Small-Town and Supplier reported sales of $450,000 and $300,000 and expenses of$290,000 and $240,000, respectively.1?Based on the preceding information, what is the amount of net income to be reported in theconsolidated income statement for the year under the parent company theory approach?$202,000$200,000$220,000$160,0002?Based on the preceding information, what is the amount of net income to be reported in theconsolidated income statement for the year under the entity theory approach?$160,000$220,000$210,000$202,00021. On January 3, 20X9, Jane Company acquired 75 percent of Miller Company’s outstandingcommon stock for cash. The fair value of the noncontrolling interest was equal to a proportionateshare of the book value of Miller Company’s net assets at the date of acquisition. Selectedbalance sheet data at December 31, 20X9, are as follows:1 ? Based on the preceding information, what amount should be reported as noncontrollinginterest in net assets in Jane Company’s December 31, 20X9, consolidated balance sheet?$36,000$54,000$90,000$02?Based on the preceding information, what amount will Jane Company report as common stockoutstanding in its consolidated balance sheet at December 31, 20X9?$180,000$264,000$120,000$156,00022. On January 1, 20X8, Wilhelm Corporation acquired 90 percent of Kaiser Company’s votingstock, at underlying book value. The fair value of the noncontrolling interest was equal to 10percent of the book value of Kaiser at that date. Wilhelm uses the equity method in accountingfor its ownership of Kaiser. On December 31, 20X9, the trial balances of the two companies are asfollows:1 ? Based on the preceding information, what amount would be reported as total assets in theconsolidated balance sheet at December 31, 20X9?$742,000$805,000$1,102,000$712,0002?Based on the preceding information, what amount would be reported as total liabilities in theconsolidated balance sheet at December 31, 20X9?$712,000$130,000$318,000$330,0003?Based on the preceding information, what amount would be reported as retained earnings inthe consolidated balance sheet prepared at December 31, 20X9?424,000294,000150,000314,0004 ? Based on the preceding information, what amount would be reported as noncontrollinginterest in the consolidated balance sheet at December 31, 20X9?$27,000$4,000$15,000$18,0005?Based on the preceding information, what amount would be reported as total stockholder’sequity in the consolidated balance sheet at December 31, 20X9?$348,000$412,000$394,000$542,0006?Based on the preceding information, what amount would be reported as income to controllinginterest in the consolidated financial statements for 20X9?$150,000$138,000$168,000$164,00023. On December 31, 20X9, Rudd Company acquired 80 percent of the common stock of WiltonCompany. At the time, Rudd held land with a book value of $100,000 and a fair value of$260,000; Wilton held land with a book value of $50,000 and fair value of $600,000. Using theparent company theory, at what amount would land be reported in a consolidated balance sheetprepared immediately after the combination?$700,000$550,000$860,000$590,00024. Princeton Company acquired 75 percent of the common stock of Sheffield Corporation onDecember 31, 20X9. On the date of acquisition, Princeton held land with a book value of$150,000 and a fair value of $300,000; Sheffield held land with a book value of $100,000 and fairvalue of $500,000. Using the entity theory, at what amount would land be reported in aconsolidated balance sheet prepared immediately after the combination?$375,000$500,000$550,000$650,00025. Blue Company owns 80 percent of the common stock of White Corporation. During the year,Blue reported sales of $1,000,000, and White reported sales of $500,000, including sales to Blueof $80,000. The amount of sales that should be reported in the consolidated income statementfor the year is:$1,420,000.$1,500,000.$1,300,000.$500,000.26. On January 3, 20X9, Redding Company acquired 80 percent of Frazer Corporation’s commonstock for $344,000 in cash. At the acquisition date, the book values and fair values of Frazer’sassets and liabilities were equal, and the fair value of the noncontrolling interest was equal to 20percent of the total book value of Frazer. The stockholders’ equity accounts of the two companiesat the acquisition date are1 ? Based on the preceding information, what amount will be assigned to the noncontrollinginterest on January 3, 20X9, in the consolidated balance sheet?$44,000$50,000$68,800$86,0002?Based on the preceding information, what is the total stockholders’ equity in the consolidatedbalance sheet as of January 3, 20X9?$1,064,000$1,150,000$1,236,000$1,580,0003 ? Based on the preceding information, what will be the amount of net income reported byFrazer Corporation in 20X9?$44,000$55,000$36,000$66,00027. Based on the preceding information, what will be the amount at which Garfield’s buildingsand equipment will be reported in consolidated statements using the current accountingpractice?$280,000$350,000$340,000$300,000