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Exam 4: Consolidated Techniques and Procedures

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Question 21

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On January 2,2011,PBL Enterprises purchased 90% of Santos Incorporated outstanding common stock for $1,687,500 cash.Santos' net assets had a book value of $1,300,000 at the time.A building with a 15-year remaining life and a book value of $100,000 had a fair value of $175,000.Any other excess amount was attributed to goodwill.PBL reported net income for the first year of $350,000 (without regard for its ownership in Santos),while Santos had $175,000 in earnings. Required: 1.Calculate the amount of goodwill related to this acquisition as reported on the consolidated balance sheet at January 2,2011. 2.Calculate the amount of consolidated net income for the year ended December 31,2011. 3.What is the amount that will be assigned to the building on the consolidated balance sheet at the date of acquisition?

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Question 22

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Use the following information to answer question(s) below. On January 1,2011,Punch Corporation purchased 80% of the common stock of Soopy Co.Separate balance sheet data for the companies at the acquisition date(after the acquisition) are given below: At the date of the acquisition,the book values of Soopy's net assets were equal to the fair value except for Soopy's inventory,which had a fair value of $60,000. Determine below what the consolidated balance would be for each of the requested accounts. -What is the amount of consolidated Retained Earnings?

A) $224,000
B) $259,200
C) $304,000
D) $324,000

E) A) and B)
F) None of the above

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Question 23

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Use the following information to answer question(s) below. On January 1,2011,Punch Corporation purchased 80% of the common stock of Soopy Co.Separate balance sheet data for the companies at the acquisition date(after the acquisition) are given below: At the date of the acquisition,the book values of Soopy's net assets were equal to the fair value except for Soopy's inventory,which had a fair value of $60,000. Determine below what the consolidated balance would be for each of the requested accounts. -What is the reported amount for the noncontrolling interest?

Pull Incorporated and Shove Company reported summarized balance sheets as shown below,on December 31,2011. On January 1,2012,Pull purchased 70% of the outstanding capital stock of Shove for $392,000,of which $92,000 was paid in cash,and $300,000 was borrowed from their bank.The debt is to be repaid in 10 annual installments beginning on December 31,2012,with each payment consisting of $30,000 principal,plus accrued interest. The excess fair value of Shove Company over the underlying book value is allocated to inventory (60 percent)and to goodwill (40 percent). Required: Calculate the balance in each of the following accounts,on the consolidated balance sheet,immediately following the acquisition. a.Current assets b.Noncurrent assets c.Current liabilities d.Long-term debt e.Stockholders' equity

Puddle Corporation acquired all the voting stock of Soggi Company for $500,000 on January 1,2011 when Soggi had Capital Stock of $300,000 and Retained Earnings of $150,000.The book value of Soggi's assets and liabilities were equal to the fair value except for the plant assets.The entire cost-book value differential is allocated to plant assets and is fully depreciated on a straight-line basis over a 10-year period. During 2011,Puddle borrowed $25,000 on a short-term non-interest-bearing note from Soggi,and on December 31,2011,Puddle mailed a check to Soggi to settle the note.Soggi deposited the check on January 5,2012,but receipt of payment of the note was not reflected in Soggi's December 31,2011 balance sheet. Required: Complete the consolidation working papers for the year ended December 31,2011.

A parent company uses the equity method to account for its wholly-owned subsidiary.Which of the following will be a correct procedure for the Investment account?

On December 31,2010,Patenne Incorporated purchased 60% of Smolin Manufacturing for $300,000.The book value and fair value of Smolin's assets and liabilities were equal with the exception of plant assets which were undervalued by $60,000 and had a remaining life of 10 years,and a patent which was undervalued by $40,000 and had a remaining life of 5 years.At December 31,2012,the companies showed the following balances on their respective adjusted trial balances: Requirement 1: Calculate the balance in the Plant assets - net and the Patent accounts on the consolidated balance sheet as of December 31,2012. Requirement 2: Calculate consolidated net income for 2012,and the amount allocated to the controlling and noncontrolling interests. Requirement 3: Calculate the balance of the noncontrolling interest in Smolin to be reported on the consolidated balance sheet at December 31,2012.

Which of the following statements is not true with respect to the statement of cash flows for a consolidated entity?

Pawl Corporation acquired 90% of Snab Corporation on January 1,2011 for $72,000 cash when Snab's stockholders' equity consisted of $30,000 of Capital Stock and $30,000 of Retained Earnings.The difference between the fair value of Pawl's assets and liabilities and the book value was allocated to a plant asset with a remaining 10-year straight-line life that was overvalued on the books by $5,000.The remainder was attributable to goodwill.The separate company statements for Pawl and Snab appear in the first two columns of the partially completed consolidation working papers. Required: Complete the consolidation working papers for Pawl and Snab for the year 2011.

Parakeet Company has the following information collected in order to prepare a cash flow statement and uses the direct method for Cash Flow from Operations.The annual report year end is December 31,2011. Required: 1.Prepare the Cash Flow for Operations part of the cash flow statement for Parakeet for the year ended December 31,2011.

Use the following information to answer question(s) below. On January 1,2011,Punch Corporation purchased 80% of the common stock of Soopy Co.Separate balance sheet data for the companies at the acquisition date(after the acquisition) are given below: At the date of the acquisition,the book values of Soopy's net assets were equal to the fair value except for Soopy's inventory,which had a fair value of $60,000. Determine below what the consolidated balance would be for each of the requested accounts. -What is the amount of total assets?

A parent company uses the equity method to account for its wholly-owned subsidiary,but has applied it incorrectly.In each of the past four full years,the company adjusted the Investment account when it received dividends from the subsidiary but did not adjust the account for any of the subsidiary's profits.The subsidiary had four years of profits and paid yearly dividends in amounts that were less than reported net incomes.Which one of the following statements is correct if the parent company discovered its mistake at the end of the fourth year,and is now preparing consolidation working papers?

Pommu Corporation paid $78,000 for a 60% interest in Schtick Inc.on January 1,2011,when Schtick's Capital Stock was $80,000 and its Retained Earnings $20,000.The fair values of Schtick's identifiable assets and liabilities were the same as the recorded book values on the acquisition date.Trial balances at the end of the year on December 31,2011 are given below: During 2011,Pommu made only two journal entries with respect to its investment in Schtick.On January 1,2011,it debited the Investment in Schtick account for $78,000 and on November 1,2011,it credited Dividend Income for $6,000. Required: 1.Prepare a consolidated income statement and a statement of retained earnings for Pommu and Subsidiary for the year ended December 31,2011. 2.Prepare a consolidated balance sheet for Pommu and Subsidiary as of December 31,2011.

At the beginning of 2011,Parling Food Services acquired a 90% interest in Simmons' Orchards when Simmons' book values of identifiable net assets equaled their fair values.On December 26,2011,Simmons declared dividends of $50,000,and the dividends were unpaid at year-end.Parling had not recorded the dividend receivable at December 31.A consolidated working paper entry is necessary to

Use the following information to answer question(s) below. On January 1,2011,Punch Corporation purchased 80% of the common stock of Soopy Co.Separate balance sheet data for the companies at the acquisition date(after the acquisition) are given below: At the date of the acquisition,the book values of Soopy's net assets were equal to the fair value except for Soopy's inventory,which had a fair value of $60,000. Determine below what the consolidated balance would be for each of the requested accounts. -What amount of Inventory will be reported?

Parrot Corporation acquired 90% of Swallow Co.on January 1,2011 for $27,000 cash when Swallow's stockholders' equity consisted of $10,000 of Capital Stock and $5,000 of Retained Earnings.The difference between the fair value and book value of Swallow's net assets was allocated solely to a patent amortized over 5 years.The separate company statements for Parrot and Swallow appear in the first two columns of the partially completed consolidation working papers. Required: Complete the consolidation working papers for Parrot and Swallow for the year 2011.

Platt Corporation paid $87,500 for a 70% interest in Suve Corporation on January 1,2011,when Suve's Capital Stock was $70,000 and its Retained Earnings $30,000.The fair values of Suve's identifiable assets and liabilities were the same as the recorded book values on the acquisition date.Trial balances at the end of the year on December 31,2011 are given below: During 2011,Platt made only two journal entries with respect to its investment in Suve.On January 1,2011,it debited the Investment in Suve account for $87,500 and on November 1,2011,it credited Dividend Income for $7,000. Required: 1.Prepare a consolidated income statement and a statement of retained earnings for Platt and Subsidiary for the year ended December 31,2011. 2.Prepare a consolidated balance sheet for Platt and Subsidiary as of December 31,2011.

Which one of the following will increase consolidated retained earnings?