Acct 559 Quiz 1 Solution

Quiz I (Chapters 1and 2) Date Name ID Answer the followers Questions1. Tower Inc. owns 30% of Yale Co. and applies the lawfulness method. During the current year, Tower bought scrutinize toll $66,000 and then change it to Yale for $120,000. At year-end, only $24,000 of merchandise was still world held by Yale. What amount of inter- guild inventory profit mustiness be deferred by Tower? A. $6,480 B. $3,240 C. $10,800 D. $16,200 E. $6,6102. All of the succeeding(a) statements regarding the investment funds written report using the average-mindedness method argon legitimate except A. The investment is put down at comprise B.Dividends prevaild be reported as revenue C. benefit income of investee increases the investment account D. Dividends received reduce the investment account E. amortization of sporting value over cost reduces the investment account3. After exclusivelyocating cost in excess of book value, which asset or liability would non be amortized over a use ful life? A. Cost of goods change B. Property, plant, & equipment C. Patents D. Goodwill E. Bonds payable4. A fraternity should always use the equity method to account for an investment if A. it has the ability to deed significant forge over the operating policies of the investee.B. it owns 30% of another companys stock. C. it has a controlling involution (more than 50%) of another companys stock. D. the investment was made primarily to earn a return on excess cash. E. it does not have 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 jet parent. B. with the transfer of goods scheduled by contract to occur on a specified afterlife meshing. C. in which the goods are physically transported by gravy boat from a infantryman to its parent. D. ade by the investor to the investee. E. made by the investee to the investor.6. In a situation where the investor exer cises significant influence over the investee, which of the following entries is not actually posted to the books of the investor?1) Debit to the Investment account and a honorable mention to the Equity in Investee Income account.2) Debit to Cash (for dividends received from the investee) and a character reference 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. Entry 1 only D.Entry 2 only E. Entry 3 only7. All of the following statements regarding the investment account using the equity method are true except A. The investment is recorded 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 fairish value over cost reduces the investment account8. A company has been using the fair-value method to account for its investment. The company with out delay 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 method of history dogma must occur B. A prospective change in accounting dominion must occur C. A retrospective change in accounting principle must occur D. The investor will not receive future dividends from the investee E. Future dividends will stop to be recorded as revenue9. A company has been using the equity method to account for its investment. The company sells shares and does not continue to have significant control. Which of the following statements is true? A. A cumulative effect change in accounting principle must occur B. A prospective change in accounting principle must occur C. A retrospective change in accounting principle must occur D. The investor 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 stock exit be and call combining be tough in a business combination which is accounted for as an erudition when the subsidiary will retain its in breadbasket? A. fund issuance costs are a part of the acquisition costs and the direct combination costs are expensed B. occupy combination costs are a part of the acquisition costs and the stock issuance costs are a reduction to additional paid-in capital C. Direct combination costs are expensed and stock issuance costs are a reduction to additional paid-in capital D. twain are handle as part of the acquisition price E. Both are treated as a reduction to additional paid-in capital12. Lisa Co. paid cash for all of the voting car park stock of Victoria Corp. Victoria will continue to exist as a separate corporation. Entries for the consolidation of Lisa and Victoria would be recorded in A. A worksheet B. Lisas general ledger C. Victorias general journal D. Victorias secret consolidation journal E. The general journals of both companies13. At the date of an acquisition which is not a bar pretend 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 current 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 consolidation? A. The original companies dissolve bandage remaining as separate divisions of a newly created company B. Both companies remain in existence as legal corporations with one corpora tion 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 slight 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 reduce in equipoise to their fair determine. Any excess is recorded as a deferred credit D.Long-term assets of the acquired company are reduced in proportion to their fair values. Any excess is recorded as an extraordinary gain E. Long-term assets and liabilities of the acquired company 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 let down accounts of the parent and the land accounts of the subsidiary be combined? A. Entry A B. Entry B C. Entry C D. Entry D E. Entry E17. In a pooling of interests, A.Revenues and expenses are consolidated for the entire fiscal year, even if the combination occurred late in the year B. Goodwill whitethorn be recognized C. consolidation is accomplished using the fair values of both companies D. The transactions may involve the exchange of preferred stock or debt securities as tumesce as gross stock E. The transaction is properly regarded as an acquisition of one company by another Prior to beingness joined in a business combination, Botkins Inc. and Volkerson Corp. had the following stockholders equity figures Botkins issued 56,000 new shares of its viridity stock valued at $3. 5 per share for all of the enceinte stock of Volkerson.18. Assume that Botkins acquired Volkerson as a purchase combination. Immediately afterwards, what are consolidated Additional Paid-In Capital an d 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. Immediately afterwards, what is consolidated Additional Paid-In Capital? A. 138,000 B. $266,000 C. $130,000 D. $236,000 E. $135,00020. Chapel Hill follow had habitual stock of $350,000 and retained earnings of $490,000. Blue Town 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 acquisition. Immediately after the combination, what was the consolidated net assets? A. $2,520,000 B. $1,190,000 C. $1,680,000 D. $2,870,000 E. $2,030,000