Question 1

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.

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Question 2

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

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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.

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Question 4

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.

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Question 5

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

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Question 6

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.

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Question 7

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?

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Question 8

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.

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Question 9

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

Devin's income reported on Pepe's books for 2018 can be computed as follows:

Devin's income statement: 
Revenue: $400,000 
Expenses: 
- COGS: -$210,000 
- Salaries: -$25,000 
- Rent: -$24,000 
- Depreciation: -$12,000 
- Interest: -$3,600 
Net Income: $125,400

Devin's share of net income: 
50% x $125,400 = $62,700

Devin's income reported on Pepe's books: 
Devin's share of net income: $62,700 
Adjustment for excess amortization: $1,500 
Total income: $64,200

Therefore, choice C ($194,400) is the best choice since it is the total income for both Pepe and Devin.

$194,400 = Pepe's income reported on his books ($130,500) + Devin's income reported on Pepe's books ($64,200)

Question 10

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

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Question 11

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.

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Question 12

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?

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Question 13

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.

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Question 14

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.

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Question 15

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 16

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?

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Question 17

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.

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Question 18

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.

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Question 19

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.

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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.

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

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

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

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

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

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

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

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

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 gain or loss on equipment recognized by Devin on its internal accounting records 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?

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 income from Stark reported on Parker's books 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?

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?

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

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

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