Question 1

How does a gain on an intra-entity transfer of equipment affect the calculation of a noncontrolling interest?

Accepted Answer

The answer of How does a gain on an intra-entity...

Question 2

Compute the gain or loss relating to the land that will be reported in consolidated net income for 2019.
A) $ 5,000 loss.
B) $ 7,000 gain.
C) $12,000 gain.
D) $ 7,000 loss.
E) $12,000 loss.

Accepted Answer

The answer of Compute the gain or loss relating to...

Question 3

Compute Parker's reported gain or loss on its internal accounting records prior to consolidation relating to the land for 2019.
A) $12,000 gain.
B) $ 5,000 loss.
C) $12,000 loss.
D) $ 7,000 gain.
E) $ 7,000 loss.

Accepted Answer

Parker's reported gain on its internal accounting records prior to consolidation relating to the land for 2019 is $12,000. This is because Parker sold the land for $100,000, which is $12,000 more than its book value of $88,000.

Question 4

During 2018, Edwards Co.sold inventory to its parent company, Forsyth Corp.Forsyth still owned the entire amount of inventory purchased at the end of 2018.Why must the gross profit on the sale be deferred when consolidated financial statements are prepared at the end of 2018?

Accepted Answer

The answer of During 2018, Edwards Co.sold inventory to its...

Question 5

On April 7, 2018, Pate Corp.sold land to Shannahan Co., its subsidiary.From a consolidated financial statement point of view, when will the gain on this transfer actually be recognized?

Accepted Answer

The answer of On April 7, 2018, Pate Corp.sold land...

Question 6

What is the gain or loss on equipment recognized by Devin on its internal accounting records for 2017?
A) $54,000 gain.
B) $21,000 loss.
C) $21,000 gain.
D) $ 9,000 loss.
E) $ 9,000 gain.

Accepted Answer

The answer of What is the gain or loss on...

Question 7

Varton Corp.acquired all of the voting common stock of Caleb Co.on January 1, 2018.Varton owned some land with a book value of $84,000 that was sold to Caleb for its fair value of $120,000.How should this transfer be accounted for by the consolidated entity?

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Question 8

Assuming there are no excess amortizations or other intra-entity transactions, Compute the net income attributable to the noncontrolling interest of Devin for 2017.
A) $116,400.
B) $120,400.
C) $120,000.
D) $123,200.
E) $112,000.

Accepted Answer

The answer of Assuming there are no excess amortizations or...

Question 9

Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stark reported on Parker's books for 2019.
A) $204,300.
B) $202,500.
C) $193,500.
D) $191,700.
E) $198,000.

Accepted Answer

The answer of Assuming there are no excess amortizations or...

Question 10

Assuming there are no excess amortizations or other intra-entity transactions, compute the net income attributable to the noncontrolling interest of Devin for 2018.
A) $126,800.
B) $130,000.
C) $122,000.
D) $130,800.
E) $129,600.

Accepted Answer

The answer of Assuming there are no excess amortizations or...

Question 11

Assuming there are no excess amortizations or other intra-entity transactions, Compute the income from Devin reported on Pepe's books for 2018.
A) $190,200.
B) $196,000.
C) $194,400.
D) $187,000.
E) $195,000.

Accepted Answer

To find the income from Devin reported on Pepe's books, we need to eliminate any intra-entity transactions. The only intra-entity transaction mentioned is the $20,000 unrealized profit on inventory sold from Pepe to Devin. This means we need to eliminate this profit from Devin's reported income.

Devin's reported income on his own books is calculated as:
Sales revenue - Cost of goods sold - Operating expenses = Net income
= $1,000,000 - $580,000 - $230,000 = $190,000

However, we need to adjust for the intra-entity transaction. Since $20,000 of the sales revenue was unrealized profit, we should subtract this from Devin's reported income to get his true income:
$190,000 - $20,000 = $170,000

Now, we can add this income to Pepe's books as an addition to net income:
$170,000 x 1.14 (Devin's ownership percentage) = $194,400

Therefore, the answer is C) $194,400.

Question 12

How do upstream and downstream inventory transfers differ in their effect in a year-end consolidation?

Accepted Answer

The answer of How do upstream and downstream inventory transfers...

Question 13

What is the consolidated gain or loss on equipment for 2017?
A) $ 0.
B) $ 9,000 gain.
C) $ 9,000 loss.
D) $21,000 gain.
E) $21,000 loss.

Accepted Answer

Without additional context or information about the transactions or adjustments made to the equipment, the default assumption is that there is no gain or loss.

Question 14

Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stark reported on Parker's books for 2018.
A) $185,000.
B) $157,500.
C) $166,500.
D) $162,000.
E) $180,000.

Accepted Answer

The answer of Assuming there are no excess amortizations or...

Question 15

Assuming there are no excess amortizations or other intra-entity transactions, Compute the income from Devin reported on Pepe's books for 2017.
A) $174,600.
B) $184,800.
C) $172,000.
D) $171,000.
E) $180,000.

Accepted Answer

The answer of Assuming there are no excess amortizations or...

Question 16

Throughout 2018, Cleveland Co.sold inventory to Leeward Co., its subsidiary.From a consolidated financial statement point of view, when will the gross profit on this transfer be recognized?

Accepted Answer

The answer of Throughout 2018, Cleveland Co.sold inventory to Leeward...

Question 17

How is the gain on an intra-entity transfer of a depreciable asset recognized?

Accepted Answer

The answer of How is the gain on an intra-entity...

Question 18

Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stark reported on Parker's books for 2017.
A) $205,000.
B) $200,000.
C) $180,000.
D) $175,500.
E) $184,500.

Accepted Answer

The answer of Assuming there are no excess amortizations or...

Question 19

Compute Stark's reported gain or loss relating to the land for 2019.
A) $5,000 loss.
B) $5,000 gain.
C) $7,000 loss.
D) $7,000 gain.
E) $ 0.

Accepted Answer

Without additional context or information about the purchase price, sale price, or any other transactions involving the land in 2019, it's not possible to compute a gain or loss. Therefore, the default assumption is no gain or loss.

Question 20

For each of the following situations (1 - 10), select the correct entry (A -
E) that would be required on a consolidation worksheet.
(A) Debit retained earnings.
(B) Credit retained earnings.
(C) Debit investment in subsidiary.
(D) Credit investment in subsidiary.
(E) None of these answer choices are correct.
___ 1. Upstream beginning intra-entity gross profit on inventory, using the initial value method of accounting.
___ 2. Downstream beginning intra-entity gross profit on inventory, using the initial value method of accounting.
___ 3. Upstream ending intra-entity gross profit on inventory, using the initial value method of accounting.
___ 4. Downstream ending intra-entity gross profit on inventory, using the initial value method of accounting.
___ 5. Upstream transfer of depreciable assets, in the period after transfer, where subsidiary recognizes a gain, using the initial value method of accounting.
___ 6. Downstream transfer of depreciable assets, in the period after transfer, where parent recognizes a gain, using the initial value method of accounting.
___ 7. Upstream transfer of land, in the period after transfer, where subsidiary recognizes a loss, using the initial value method of accounting.
___ 8. Downstream transfer of land, in the period after transfer, where parent recognizes a loss, using the initial value method of accounting.
___ 9. Eliminate income from subsidiary, recorded under the equity method of accounting.
___ 10. Eliminate recorded amortization of acquisition-date fair value over book value, recorded under the equity method of accounting.

Accepted Answer

The answer of For each of the following situations (1...

Quiz 5: Consolidated Financial Statements Intra-Entity Asset Transactions

How does a gain on an intra-entity transfer of equipment affect the calculation of a noncontrolling interest?

Compute the gain or loss relating to the land that will be reported in consolidated net income for 2019.

Compute Parker's reported gain or loss on its internal accounting records prior to consolidation relating to the land for 2019.

During 2018, Edwards Co.sold inventory to its parent company, Forsyth Corp.Forsyth still owned the entire amount of inventory purchased at the end of 2018.Why must the gross profit on the sale be deferred when consolidated financial statements are prepared at the end of 2018?

On April 7, 2018, Pate Corp.sold land to Shannahan Co., its subsidiary.From a consolidated financial statement point of view, when will the gain on this transfer actually be recognized?

What is the gain or loss on equipment recognized by Devin on its internal accounting records for 2017?

Varton Corp.acquired all of the voting common stock of Caleb Co.on January 1, 2018.Varton owned some land with a book value of $84,000 that was sold to Caleb for its fair value of $120,000.How should this transfer be accounted for by the consolidated entity?

Assuming there are no excess amortizations or other intra-entity transactions, Compute the net income attributable to the noncontrolling interest of Devin for 2017.

Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stark reported on Parker's books for 2019.

Assuming there are no excess amortizations or other intra-entity transactions, compute the net income attributable to the noncontrolling interest of Devin for 2018.

Assuming there are no excess amortizations or other intra-entity transactions, Compute the income from Devin reported on Pepe's books for 2018.

How do upstream and downstream inventory transfers differ in their effect in a year-end consolidation?

What is the consolidated gain or loss on equipment for 2017?

Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stark reported on Parker's books for 2018.

Assuming there are no excess amortizations or other intra-entity transactions, Compute the income from Devin reported on Pepe's books for 2017.

Throughout 2018, Cleveland Co.sold inventory to Leeward Co., its subsidiary.From a consolidated financial statement point of view, when will the gross profit on this transfer be recognized?

How is the gain on an intra-entity transfer of a depreciable asset recognized?

Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stark reported on Parker's books for 2017.

Compute Stark's reported gain or loss relating to the land for 2019.