Acct 559 Quiz 1 Solution

Quiz I (Chapters 1and 2) Date Name ID Answer the pastime Questions1. Tower Inc. owns 30% of Yale Co. and applies the lawfulness order. During the menstruum year, Tower bought inventory appealing $66,000 and wherefore sold it to Yale for $120,000. At year-end, only $24,000 of mathematical product was still cosmos held by Yale. What sum total of inter- smart set inventory profit must be deferred by Tower? A. $6,480 B. $3,240 C. $10,800 D. $16,200 E. $6,6102. All of the pursuit statements regarding the enthronization written report apply the truth method atomic number 18 square(a) draw off A. The enthronisation is put down at salute B.Dividends authorized argon reported as tax revenue C. Net income of investee increases the investment study D. Dividends accepted disgrace the investment bank note E. amortization of sensible value all everyplace appeal reduces the investment account3. After allocating cost in sense slight of concord value, which addition or li powerfulness would not be amortized all everyplace a useful manners? A. live of goods sold B. Property, plant, & equipment C. Patents D. good will E. Bonds payable4. A gild should always use the integrity method to account for an investment if A. it has the ability to knead significant influence over the operational policies of the investee.B. it owns 30% of another(prenominal) companions railway line. C. it has a controlling interest (more than 50%) of another companys job. D. the investment was made primarily to wee-wee a return on overmuch bullion. E. it does not arrive the ability to exercise significant influence over the operating policies of the investee.5. An upstream sale of inventory is a sale A. between subsidiaries owned by a mutual p bent. B. with the transfer of goods plan by contract to chance on a specified futurity date. C. in which the goods be physically transported by sauceboat from a infantryman to its equatinggonnt. D. ade by the invest or to the investee. E. made by the investee to the investor.6. In a situation where the investor exercises significant influence over the investee, which of the followers entries is not actually stick on to the reserves of the investor?1) debit to the Investment account and a deferred payment to the Equity in Investee Income account.2) Debit to Cash (for dividends received from the investee) and a Credit to Dividend Revenue.3) Debit to Cash (for dividends received from the investee) and a Credit to the Investment account. A. Entries 1 and 2 B. Entries 2 and 3 C. origination 1 only D. immersion 2 only E. main course 3 only7. All of the avocation statements regarding the investment account development the equity method are true except A. The investment is save at cost B. Dividends received are reported as revenue C. Net income of investee increases the investment account D. Dividends received reduce the investment account E. Amortization of fair value over cost reduces the i nvestment account8. A company has been using the fair-value method to account for its investment. The company this instant has the ability to significantly control the investee and the equity method has been deemed appropriate.Which of the following statements is true? A. A cumulative effect change in accounting principle must glide by B. A prospective change in accounting principle must drop dead C. A retrospective change in accounting principle must extend D. The investor will not receive prospective dividends from the investee E. Future dividends will come on to be enter as revenue9. A company has been using the equity method to account for its investment. The company sells plowshares and does not continue to have significant control. Which of the following statements is true? A. A cumulative effect change in accounting principle must conk B. A prospective change in accounting principle must turn over C. A retrospective change in accounting principle must occur D. The i nvestor will not receive future dividends from the investee E. Future dividends will continue to reduce the investment account10. After allocating cost in excess of book value, which asset or liability would not be amortized over a useful life? A. Cost of goods sold B. Property, plant, & equipment C. Patents D. Goodwill E. Bonds payable11. How are sprout issuance cost and direct conclave cost treated in a business compounding which is accounted for as an accomplishment when the ancillary will retain its internalisation? A. Stock issuance costs are a part of the acquisition costs and the direct combination costs are expensed B. Direct combination costs are a part of the acquisition costs and the linage issuance costs are a reduction to additional paid-in working smashing C. Direct combination costs are expensed and stock issuance costs are a reduction to additional paid-in capital D. some(prenominal) are treated as part of the acquisition price E. Both are treated as a redu ction to additional paid-in capital12. Lisa Co. paid cash for all of the voting parkland stock of Victoria Corp. Victoria will continue to exist as a screen corporation. Entries for the integrating of Lisa and Victoria would be recorded in A. A worksheet B. Lisas general journal C. Victorias general journal D. Victorias secret desegregation journal E. The general journals of both companies13. At the date of an acquisition which is not a bargain purchase, the acquisition method A. Consolidates the subsidiarys assets at fair value and the liabilities at book value B.Consolidates all subsidiary assets and liabilities at book value C. Consolidates all subsidiary assets and liabilities at fair value D. Consolidates on-line(prenominal) assets and liabilities at book value, long-term assets and liabilities at fair value E. Consolidates the subsidiarys assets at book value and the liabilities at fair value14. Which of the following statements is true regarding a statutory integration? A . The original companies dissolve while remain as separate divisions of a fresh created company B. Both companies remain in existence as profound corporations with i corporation now a subsidiary of the acquiring company C.The acquired company dissolves as a separate corporation and becomes a division of the acquiring company D. The acquiring company acquires the stock of the acquired company as an investment E. A statutory consolidation is no longer a legal option15. In a transaction accounted for using the purchase method where cost is less than fair value which statement is true? A. Negative goodwill is recorded B. A deferred credit is recorded C. long-term assets of the acquired company are reduced in counterbalance to their fair determine. Any excess is recorded as a deferred credit D.Long-term assets of the acquired company are reduced in isotropy to their fair values. Any excess is recorded as an extraordinary gain E. Long-term assets and liabilities of the acquired co mpany are reduced in proportion to their fair values. Any excess is recorded as an extraordinary gain16. In a purchase or acquisition where control is achieved, how would the vote out accounts of the parent and the land accounts of the subsidiary be combined? A. admission A B. Entry B C. Entry C D. Entry D E. Entry E17. In a pooling of interests, A.Revenues and expenses are fused for the entire fiscal year, even if the combination occurred late in the year B. Goodwill may be recognized C. integrating is accomplished using the fair values of both companies D. The transactions may touch on the exchange of preferred stock or debt securities as well as common stock E. The transaction is properly regarded as an acquisition of one company by another Prior to being unite in a business combination, Botkins Inc. and Volkerson Corp. had the following stockholders equity figures Botkins issued 56,000 new shares of its common stock valued at $3. 5 per share for all of the outstanding stoc k of Volkerson.18. fag that Botkins acquired Volkerson as a purchase combination. like a shot afterwards, what are consolidated Additional Paid-In capital letter and Retained Earnings, respectively? A. $133,000 and $360,000 B. $236,000 and $360,000 C. $130,000 and $360,000 D. $236,000 and $490,000 E. $133,000 and $490,00019. Assume that Botkins and Volkerson were being joined in a pooling of interests and this occurred on January 1, 2000, using the same values given. flat afterwards, what is consolidated Additional Paid-In Capital? A. 138,000 B. $266,000 C. $130,000 D. $236,000 E. $135,00020. chapel hammock Company had common stock of $350,000 and retained shekels of $490,000. Blue townspeople Inc. had common stock of $700,000 and retained earnings of $980,000. On January 1, 2009, Blue Town issued 34,000 shares of common stock with a $12 par value and a $35 fair value for all of Chapel Hill Companys outstanding common stock. This combination was accounted for as an acquisitio n. Immediately after the combination, what was the consolidated earn assets? A. $2,520,000 B. $1,190,000 C. $1,680,000 D. $2,870,000 E. $2,030,000