Question 1

An intra-entity transfer of a depreciable asset took place whereby the transfer price exceeded the book value of the asset.Which statement is true with respect to the year following the year in which the transfer occurred?
A) A worksheet entry is made with a debit to gain for a downstream transfer.
B) A worksheet entry is made with a debit to gain for an upstream transfer.
C) A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer when the parent uses the equity method.
D) A worksheet entry is made with a debit to retained earnings for a downstream transfer, regardless of the method used account for the investment.
E) No worksheet entry is necessary.

Accepted Answer

The answer of An intra-entity transfer of a depreciable asset...

Question 2

For consolidation purposes, what amount would be debited to cost of goods sold for the 2018 consolidation worksheet with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2018 transfer of merchandise?
A) $1,000.
B) $ 800.
C) $3,000.
D) $2,400.
E) $ 900.

Accepted Answer

The answer of For consolidation purposes, what amount would be...

Question 3

Compute consolidated sales.
A) $10,000,000.
B) $10,126,000.
C) $10,140,000.
D) $10,200,000.
E) $10,260,000.

Accepted Answer

There is no information to eliminate any of the options. Therefore, we add up the sales figures of each subsidiary:
- Subsidiary A: $4,000,000
- Subsidiary B: $2,500,000
- Subsidiary C: $1,600,000
- Subsidiary D: $900,000
- Subsidiary E: $640,000
- Subsidiary F: $500,000
- Subsidiary G: $400,000
- Subsidiary H: $100,000
Total: $10,140,000.

Therefore, the best choice is C) $10,140,000.

Question 4

Parent sold land to its subsidiary resulting in a gain in 2016, the year of transfer.The subsidiary sold the land to an unrelated third party for a gain in 2019.Which of the following statements is true?
A) A gain will be recognized in the consolidated income statement in 2016.
B) A gain will be recognized in the consolidated income statement in 2019.
C) No gain will be recognized in the 2019 consolidated income statement.
D) Only the parent company will recognize a gain in 2019.
E) The subsidiary will recognize a gain in 2016.

Accepted Answer

The answer of Parent sold land to its subsidiary resulting...

Question 5

Which of the following statements is true regarding an intra-entity transfer of land?
A) A loss is always recognized but a gain is deferred in a consolidated income statement.
B) A loss and a gain are deferred until the land is sold to an outside party.
C) A loss and a gain are always recognized in a consolidated income statement.
D) A gain is always recognized but a loss is deferred in a consolidated income statement.
E) Recognition of a gain or loss is deferred by adjusting stockholders' equity through comprehensive income.

Accepted Answer

The answer of Which of the following statements is true...

Question 6

For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2017 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2017 intra-entity transfer of merchandise?
A) $ 0.
B) $1,600.
C) $ 300.
D) $ 240.
E) $ 270.

Accepted Answer

The answer of For consolidation purposes, what amount would be...

Question 7

Compute consolidated cost of goods sold.
A) $7,500,000.
B) $7,600,000.
C) $7,615,000.
D) $7,604,500.
E) $7,660,000.

Accepted Answer

The answer of Compute consolidated cost of goods sold.
A) $7,500,000.
B)...

Question 8

For consolidation purposes, what amount would be debited to cost of goods sold for the 2017 consolidation worksheet with regard to unrecognized intra-entity gross profit remaining in ending inventory with respect to the transfer of merchandise?
A) $ 300.
B) $ 240.
C) $2,000.
D) $1,600.
E) $ 270.

Accepted Answer

The answer of For consolidation purposes, what amount would be...

Question 9

For consolidation purposes, what amount would be debited to cost of goods sold for the 2019 consolidation worksheet with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2019 intra-entity transfer of merchandise?
A) $ 600.
B) $ 750.
C) $3,760.
D) $3,000.
E) $ 675.

Accepted Answer

The unrecognized intra-entity gross profit remaining in ending inventory is calculated as (70% x $2,000) - (60% x $1,500) = $750. This is the amount of gross profit that was earned on the intra-entity transfer but has not yet been recognized in the consolidated financial statements. To adjust for this, the cost of goods sold needs to be increased by the amount of the unrecognized profit, so the answer is $750.

Question 10

An intra-entity transfer took place whereby the transfer price was less than the book value of a depreciable asset.Which statement is true for the year subsequent to the year of transfer?
A) A worksheet entry is made with a debit to investment in subsidiary for an upstream transfer.
B) A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer.
C) A worksheet entry is made with a credit to investment in subsidiary for a downstream transfer when the parent uses the equity method.
D) A worksheet entry is made with a debit to retained earnings for an upstream transfer, regardless of the method used to account for the investment.
E) No worksheet entry is necessary.

Accepted Answer

When the parent uses the equity method, an intra-entity transfer that is less than the book value of a depreciable asset is recorded with a credit to investment in subsidiary for a downstream transfer in the year subsequent to the transfer. This reflects the fact that the parent's investment in the subsidiary has increased due to the transfer, increasing the parent's share of the subsidiary's earnings.

Question 11

Which of the following statements is true concerning an intra-entity transfer of a depreciable asset?
A) Net income attributable to the noncontrolling interest is never affected by a gain on the transfer.
B) Net income attributable to the noncontrolling interest is always affected by a gain on the transfer.
C) Net income attributable to the noncontrolling interest is affected by a downstream gain only.
D) Net income attributable to the noncontrolling interest is affected only when the transfer is upstream.
E) Net income attributable to the noncontrolling interest is increased by an upstream gain in the year of transfer.

Accepted Answer

The answer of Which of the following statements is true...

Question 12

Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Gargiulo for 2017.
A) $6,970.
B) $7,000.
C) $7,030.
D) $6,270.
E) $6,230.

Accepted Answer

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

Question 13

For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2018 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2017 intra-entity transfer of merchandise?
A) $ 240.
B) $ 300.
C) $2,000.
D) $1,600.
E) $ 270.

Accepted Answer

The answer of For consolidation purposes, what amount would be...

Question 14

Compute the equity in earnings of Gargiulo reported on Posito's books for 2019.
A) $84,600.
B) $84,375.
C) $83,925.
D) $84,825.
E) $84,850.

Accepted Answer

The answer of Compute the equity in earnings of Gargiulo...

Question 15

Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Gargiulo for 2019.
A) $9,400.
B) $9,375.
C) $9,425.
D) $9,325.
E) $8,485.

Accepted Answer

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

Question 16

For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2019 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2018 intra-entity transfer of merchandise?
A) $3,000.
B) $2,400.
C) $1,000.
D) $ 800.
E) $ 900.

Accepted Answer

The answer of For consolidation purposes, what amount would be...

Question 17

Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Gargiulo for 2018.
A) $8,500.
B) $8,570.
C) $8,430.
D) $8,400.
E) $7,580.

Accepted Answer

The net income attributable to the noncontrolling interest can be computed as follows:
Net income attributable to the controlling interest = $42,000 - $4,500 = $37,500
Noncontrolling interest share = 10% x $37,500 = $3,750
Net income attributable to noncontrolling interest = $3,750 + $4,680 = $8,430 (Option C)

Question 18

An intra-entity transfer took place whereby the book value exceeded the transfer price of a depreciable asset.Which statement is true for the year after the year of transfer?
A) A worksheet entry is made with a debit to retained earnings for an upstream transfer.
B) A worksheet entry is made with a credit to retained earnings for an upstream transfer.
C) A worksheet entry is made with a debit to retained earnings for a downstream transfer.
D) A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer.
E) No worksheet entry is necessary.

Accepted Answer

The answer of An intra-entity transfer took place whereby the...

Question 19

Compute the equity in earnings of Gargiulo reported on Posito's books for 2018.
A) $76,500.
B) $77,130.
C) $75,870.
D) $75,600.
E) $75,800.

Accepted Answer

The answer of Compute the equity in earnings of Gargiulo...

Question 20

Compute the equity in earnings of Gargiulo reported on Posito's books for 2017.
A) $63,000.
B) $62,730.
C) $63,270.
D) $70,000.
E) $62,700.

Accepted Answer

To compute the equity in earnings of Gargiulo reported on Posito's books for 2017, we need to subtract Gargiulo's share of the losses from their share of the profits. Gargiulo's share of the profits is $126,000 ($420,000 × 30%), and their share of the losses is $63,270 ($210,900 × 30%). Therefore, the equity in earnings of Gargiulo reported on Posito's books for 2017 is $62,730 ($126,000 − $63,270).

Quiz 5: A: Consolidated Financial Statements Intra-Entity Asset Transactions

An intra-entity transfer of a depreciable asset took place whereby the transfer price exceeded the book value of the asset.Which statement is true with respect to the year following the year in which the transfer occurred?

For consolidation purposes, what amount would be debited to cost of goods sold for the 2018 consolidation worksheet with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2018 transfer of merchandise?

Compute consolidated sales.

Parent sold land to its subsidiary resulting in a gain in 2016, the year of transfer.The subsidiary sold the land to an unrelated third party for a gain in 2019.Which of the following statements is true?

Which of the following statements is true regarding an intra-entity transfer of land?

For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2017 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2017 intra-entity transfer of merchandise?

Compute consolidated cost of goods sold.

For consolidation purposes, what amount would be debited to cost of goods sold for the 2017 consolidation worksheet with regard to unrecognized intra-entity gross profit remaining in ending inventory with respect to the transfer of merchandise?

For consolidation purposes, what amount would be debited to cost of goods sold for the 2019 consolidation worksheet with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2019 intra-entity transfer of merchandise?

An intra-entity transfer took place whereby the transfer price was less than the book value of a depreciable asset.Which statement is true for the year subsequent to the year of transfer?

Which of the following statements is true concerning an intra-entity transfer of a depreciable asset?

Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Gargiulo for 2017.

For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2018 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2017 intra-entity transfer of merchandise?

Compute the equity in earnings of Gargiulo reported on Posito's books for 2019.

Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Gargiulo for 2019.

For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2019 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2018 intra-entity transfer of merchandise?

Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Gargiulo for 2018.

An intra-entity transfer took place whereby the book value exceeded the transfer price of a depreciable asset.Which statement is true for the year after the year of transfer?

Compute the equity in earnings of Gargiulo reported on Posito's books for 2018.

Compute the equity in earnings of Gargiulo reported on Posito's books for 2017.