Question 1

Norek Corp.owned 70% of the voting common stock of Thelma Co.On January 2,2017,Thelma sold a parcel of land to Norek.The land had a book value of $32,000 and was sold to Norek for $45,000.Thelma's reported net income for 2017 was $119,000.Assuming there are no excess amortizations associated with the consolidation,and no other intra-entity asset transfers,what is net income attributable to the noncontrolling interest?
A)$35,700.
B)$31,800.
C)$39,600.
D)$22,200.
E)$26,100.

Accepted Answer

Sales Price $45,000 - BV $32,000 = Intra-Entity Gain on Transfer That Is Deferred ($13,000)
Subsidiary's Net Income ($ 119,000)- Deferred Intra-Entity Gain on Transfer ($13,000)= Adjusted Subsidiary Net Income ($106,000)
Noncontrolling Interest in Net Income = $106,000 × 30% Ownership Interest in Subsidiary = $31,800

Question 2

Bauerly Co.owned 70% of the voting common stock of Devin Co.During 2017,Devin made frequent sales of inventory to Bauerly.There was deferred intra-entity gross profit of $40,000 in the beginning inventory and $25,000 of intra-entity gross profit at the end of the year.Devin reported net income of $137,000 for 2017.Bauerly decided to use the equity method to account for the investment.Assuming there are no excess amortizations associated with the consolidation,and no other intra-entity asset transfers,what is the net income attributable to the noncontrolling interest for 2017?
A)$41,100.
B)$33,600.
C)$21,600.
D)$45,600.
E)$36,600.

Accepted Answer

Subsidiary's Net Income $137,000 + Recognition of prior year Deferred Recognized Gross profit $40,000 - Deferred gross profit at end of the year $25,000 = $152,000 X Noncontrolling Interest 30% = $45,600 Net Income Attributable to the Noncontrolling Interest

Question 3

Prince Co.owned 80% of Kile Corp.'s common stock.During October 2018,Kile sold merchandise to Prince for $140,000.At December 31,2018,50% of this merchandise remained in Prince's inventory.For 2018,gross profit percentages were 30% of sales for Prince and 40% of sales for Kile.The amount of intra-entity gross profit remaining in ending inventory at December 31,2018 that should be eliminated in the consolidation process is:
A)$28,000.
B)$56,000.
C)$22,400.
D)$21,000.
E)$42,000.

Accepted Answer

Intra-Entity Gross Profit ($140,000 X .40 (Kile GP Percentage))$56,000 X Intra-Entity transfers Remaining In Ending Inventory (50%)= $28,000

Question 4

Gentry Inc.acquired 100% of Gaspard Farms on January 5,2017.During 2017,Gentry sold Gaspard Farms $625,000 of goods,which had cost $425,000.Gaspard Farms still owned 12% of the goods at the end of the year.In 2018,Gentry sold goods with a cost of $800,000 to Gaspard Farms for $1,000,000,and Gaspard Farms still owned 10% of the goods at year-end.For 2018,the cost of goods sold totaled $5,400,000 for Gentry,and $1,200,000 for Gaspard Farms.What was consolidated cost of goods sold for 2018?
A)$6,600,000.
B)$6,604,000.
C)$5,620,000.
D)$5,596,000.
E)$5,625,000.

Accepted Answer

Intra-Entity Gross Profit ($1,000,000 - $800,000)$200,000 × Intra-Entity Gross Profit Remaining in Ending Inventory (10%)= $20,000.
Consolidated COGS = Parent's COGS ($5,400,000)+ Subsidiary's COGS ($1,200,000)- Total COGS in Intra-Entity Transfer ($1,000,000)- Intra-Entity Gross Profit Deferred from 2017 ($24,000)+ Intra-Entity Gross Profit Deferred from 2018 ($20,000)= $5,596,000

Question 5

On November 8,2018,Power Corp.sold land to Wood Co. ,its wholly owned subsidiary.The land cost $61,500 and was sold to Wood for $89,000.For consolidated financial statement reporting purposes,when must the gain on the sale of the land be recognized?
A)Proportionately over a designated period of years.
B)When Wood Co.sells the land to a third party.
C)No gain may be recognized.
D)As Wood uses the land.
E)When Wood Co.begins using the land productively.

Accepted Answer

The answer of On November 8,2018,Power Corp.sold land to Wood...

Question 6

Gibson Corp.owned a 90% interest in Sparis Co.Sparis frequently made sales of inventory to Gibson.The sales,which include a markup over cost of 25%,were $420,000 in 2017 and $500,000 in 2018.At the end of each year,Gibson still owned 30% of the goods.Net income for Sparis was $912,000 during 2018.Assuming there are no excess amortizations associated with the consolidation,and no other intra-entity asset transfers,what was the net income attributable to the noncontrolling interest for 2018?
A)$84,300.
B)$85,680.
C)$90,720.
D)$91,680.
E)$96,720.

Accepted Answer

Gross Profit Rate = Gross Profit ÷ COGS = GPR ÷ (1 - GPR)= 25% ÷ (1 + 25%)= .2
Intra-Entity Gross Profit = Transfer Price × GPR (.2)
Gross Profit 2017: 84,000 × 30% = $25,200
Gross Profit 2018: 100,000 × 30% = $30,000
Subsidiary's Net Income ($912,000)+ Intra-Entity Gross Profit in Ending Inventory for 2017 ($25,200)- Intra-Entity Gross Profit in 2018 Inventory Deferred ($30,000)= $907,200 × Noncontrolling Interest 10% = $90,720 Net Income Attributable to the Noncontrolling Interest

Question 7

On January 1,2018,Payton Co.sold equipment to its subsidiary,Starker Corp. ,for $115,000.The equipment had cost $125,000,and the balance in accumulated depreciation was $45,000.The equipment had an estimated remaining useful life of eight years and $0 salvage value.Both companies use straight-line depreciation.On their separate 2018 income statements,Payton and Starker reported depreciation expense of $84,000 and $60,000,respectively.The amount of depreciation expense on the consolidated income statement for 2018 would have been:
A)$144,000.
B)$148,375.
C)$109,000.
D)$134,000.
E)$139,625.

Accepted Answer

Sales Price $115,000 - BV $80,000 = $35,000 Gain on Sale / 8yrs = $4,375 Annual Amortization of Unrealized Gain over Expected Useful Life of the Asset
Parent's Depreciation $84,000 + Subsidiary's Depreciation $60,000 - Annual amortization $4,375 = $139,625

Question 8

REFERENCE: 05-03
Pot Co.holds 90% of the common stock of Skillet Co.During 2018,Pot reported sales of $1,120,000 and cost of goods sold of $840,000.For this same period,Skillet had sales of $420,000 and cost of goods sold of $252,000.
-Included in the amounts for Pot's sales were Pot's sales of merchandise to Skillet for $140,000.There were no intra-entity transfers from Skillet to Pot.Intra-entity transfers had the same markup as sales to outsiders.Skillet still held 40% of the intra-entity gross profit remaining in ending inventory at the end of 2018.What are consolidated sales and cost of goods sold,respectively for 2018?
A)$1,400,000 and $ 952,000.
B)$1,400,000 and $ 966,000.
C)$1,540,000 and $1,078,000.
D)$1,400,000 and $1,022,000.
E)$1,540,000 and $1,092,000.

Accepted Answer

Consolidated Sales = Parent's Sales ($1,120,000)+ Subsidiary's Sales ($420,000)= $1,540,000 - Intra-Entity Transfers ($140,000)= $1,400,000
Consolidated COGS = Parent's COGS ($840,000)+ Subsidiary's COGS ($252,000)- Total Intra-Entity Inventory transfers ($140,000)+ Deferred Unrecognized Gross Profit ($14,000)= $966,000

Question 9

Yukon Co.acquired 75% percent of the voting common stock of Ontario Corp.on January 1,2018.During the year,Yukon made sales of inventory to Ontario.The inventory cost Yukon $260,000 and was sold to Ontario for $390,000.Ontario held $60,000 of the goods in its inventory at the end of the year.The amount of intra-entity gross profit for which recognition is deferred,and should therefore be eliminated in the consolidation process at the end of 2018,is:
A)$15,000.
B)$20,000.
C)$32,500.
D)$30,000.
E)$110,000.

Accepted Answer

Intra-Entity Gross Profit ($390,000 - $260,000)$130,000 X Intra-Entity Gross Profit Remaining In Ending Inventory ($60,000 / $390,000)= $20,000

Question 10

On January 1,2018,Race Corp.acquired 80% of the voting common stock of Gallow Inc.During the year,Race sold to Gallow for $450,000 goods that cost $330,000.At year-end,Gallow owned 15% of the goods transferred.Gallow reported net income of $204,000,and Race's net income was $806,000.Race decided to use the equity method to account for this investment.Assuming there are no excess amortizations associated with the consolidation,and no other intra-entity asset transfers,what was the net income attributable to the noncontrolling interest?
A)$ 3,600.
B)$22,800.
C)$30,900.
D)$32,900.
E)$40,800.

Accepted Answer

Subsidiary's Net Income $204,000 × .20 (Noncontrolling Interest)= $40,800

Question 11

REFERENCE: 05-03
Pot Co.holds 90% of the common stock of Skillet Co.During 2018,Pot reported sales of $1,120,000 and cost of goods sold of $840,000.For this same period,Skillet had sales of $420,000 and cost of goods sold of $252,000.
-Included in the amounts for Skillet's sales were intra-entity gross profits related to Skillet's intra-entity transfer of merchandise to Pot for $140,000.There were no intra-entity transfers from Pot to Skillet.Intra-entity transfers had the same markup as sales to outsiders.Pot still had 40% of the intra-entity gross profit remaining in ending inventory at the end of 2018.What are consolidated sales and cost of goods sold for 2018?
A)$1,400,000 and $ 952,000.
B)$1,400,000 and $ 966,000.
C)$1,540,000 and $1,078,000.
D)$1,400,000 and $ 974,400.
E)$1,540,000 and $1,092,000.

Accepted Answer

Consolidated Sales = Parent's Sales ($1,120,000)+ Subsidiary's Sales ($420,000)= $1,540,000 - Intra-Entity Transfers ($140,000)= $1,400,000
Consolidated COGS = Parent's COGS ($840,000)+ Subsidiary's COGS ($252,000)- Total Intra-Entity Gross Profit Remaining in Ending Inventory ($140,000)+ Intra-Entity Gross Profit Deferred ($22,400)= $974,400

Question 12

Chain Co.owned all of the voting common stock of Shannon Corp.The corporations' balance sheets dated December 31,2017,include the following balances for land: for Chain--$416,000,and for Shannon--$256,000.On the original date of acquisition,the book value of Shannon's land was equal to its fair value.On April 4,2018,Chain sold to Shannon a parcel of land with a book value of $65,000.The selling price was $83,000.There were no other transfers,which affected the companies' land accounts during 2017.What is the consolidated balance for land on the 2018 balance sheet?
A)$672,000.
B)$690,000.
C)$755,000.
D)$737,000.
E)$654,000.

Accepted Answer

Parent's Land $416,000 + Subsidiary's Land $256,000 = $672,000 - Any gain on the transfer is deferred until the parcel is sold outside the entity in the future.

Question 13

REFERENCE: 05-01
Edgar Co.acquired 60% of Stendall Co.on January 1,2018.During 2018,Edgar made several sales of inventory to Stendall.The cost and sales price of the goods were $140,000 and $200,000,respectively.Stendall still owned one-fourth of the goods at the end of 2018.Consolidated cost of goods sold for 2018 was $2,140,000 due to a consolidating adjustment for intra-entity transfers less intra-entity gross profit in Stendall's ending inventory.
-How would consolidated cost of goods sold have differed if the inventory transfers had been for the same amount and cost,but from Stendall to Edgar?
A)Consolidated cost of goods sold would have remained $2,140,000.
B)Consolidated cost of goods sold would have been more than $2,140,000 because of the controlling interest in the subsidiary.
C)Consolidated cost of goods sold would have been less than $2,140,000 because of the noncontrolling interest in the subsidiary.
D)Consolidated cost of goods sold would have been more than $2,140,000 because of the noncontrolling interest in the subsidiary.
E)The effect on consolidated cost of goods sold cannot be predicted from the information provided.

Accepted Answer

$2,140,000 COGS is unaffected by intra-entity gross profits in Consolidated Ending Inventory value

Question 14

REFERENCE: 05-02
Clemente Co.owned all of the voting common stock of Snider Co.On January 2,2017,Clemente sold equipment to Snider for $125,000.The equipment cost Clemente $140,000.At the time of the transfer,the balance in accumulated depreciation was $40,000.The equipment had a remaining useful life of five years and a $0 salvage value.Both entities use the straight-line method of depreciation.
-At what amount should the equipment (net of depreciation)be included in the consolidated balance sheet dated December 31,2017?
A)$105,000.
B)$100,000.
C)$ 95,000.
D)$ 80,000.
E)$ 85,000.

Accepted Answer

Sales Price $125,000 - BV $140,000 = Loss on Transfer of $15,000,which is ignored.
Equipment is transferred at BV (Cost $140,000 - Accumulated Depreciation of $40,000)= $100,000 on transfer
Depreciation for 2017: $100,000 ÷ 5 = $20,000
Equipment Total Net of Depreciation: $100,000 ? $20,000 = $80,000 BV at 12/31/2017.

Question 15

During 2017,Von Co.sold inventory to its wholly-owned subsidiary,Lord Co.The inventory cost $30,000 and was sold to Lord for $44,000.For consolidation reporting purposes,when is the $14,000 intra-entity gross profit recognized?
A)When goods are transferred to a third party by Lord.
B)When Lord pays Von for the goods.
C)When Von sold the goods to Lord.
D)When Lord receives the goods.
E)No gain can be recognized since the transfer was between related parties.

Accepted Answer

The answer of During 2017,Von Co.sold inventory to its wholly-owned...

Question 16

REFERENCE: 05-02
Clemente Co.owned all of the voting common stock of Snider Co.On January 2,2017,Clemente sold equipment to Snider for $125,000.The equipment cost Clemente $140,000.At the time of the transfer,the balance in accumulated depreciation was $40,000.The equipment had a remaining useful life of five years and a $0 salvage value.Both entities use the straight-line method of depreciation.
-At what amount should the equipment (net of depreciation)be included in the consolidated balance sheet dated December 31,2018?
A)$110,000.
B)$105,000.
C)$100,000.
D)$ 90,000.
E)$ 60,000.

Accepted Answer

Sales Price $125,000 - BV $140,000 = Loss on Transfer of $15,000,which is ignored.
Equipment is transferred at BV (Cost $140,000 - Accumulated Depreciation $40,000)$100,000 - Depreciation for 2017 & 2018 ($100,000 / 5)$40,000 = $60,000 BV at 12/31/2018

Question 17

X-Beams Inc.owned 70% of the voting common stock of Kent Corp.During 2018,Kent made several sales of inventory to X-Beams.The total selling price was $180,000 and the cost was $100,000.At the end of the year,20% of the goods were still in X-Beams' inventory.Kent's reported net income was $300,000.Assuming there are no excess amortizations associated with the consolidation,and no other intra-entity asset transfers,what was the net income attributable to the noncontrolling interest in Kent?
A)$90,000.
B)$85,200.
C)$54,000.
D)$94,800.
E)$86,640.

Accepted Answer

Subsidiary's Net Income ($300,000)- Intra-Entity Gross Profit Deferred ($16,000)= $284,000 × Noncontrolling Interest (30%)= $85,200 Net Income Attributable to the Noncontrolling Interest

Question 18

Webb Co.acquired 100% of Rand Inc.on January 5,2018.During 2018,Webb sold goods to Rand for $2,400,000 that cost Webb $1,800,000.Rand still owned 40% of the goods at the end of the year.Cost of goods sold was $10,800,000 for Webb and $6,400,000 for Rand.What was consolidated cost of goods sold?
A)$17,200,000.
B)$15,040,000.
C)$14,800,000.
D)$15,400,000.
E)$14,560,000.

Accepted Answer

Intra-Entity Gross Profit ($2,400,000 - $1,800,000)$600,000 × Intra-Entity Gross Profit Remaining in Ending Inventory (40%)= $240,000
Consolidated COGS = Parent's COGS ($10,800,000)+ Subsidiary's COGS ($6,400,000)- COGS in Intra-Entity Transfer ($2,400,000)+ Intra-Entity Gross Profit Deferred ($240,000)= $15,040,000

Question 19

REFERENCE: 05-01
Edgar Co.acquired 60% of Stendall Co.on January 1,2018.During 2018,Edgar made several sales of inventory to Stendall.The cost and sales price of the goods were $140,000 and $200,000,respectively.Stendall still owned one-fourth of the goods at the end of 2018.Consolidated cost of goods sold for 2018 was $2,140,000 due to a consolidating adjustment for intra-entity transfers less intra-entity gross profit in Stendall's ending inventory.
-How would net income attributable to the noncontrolling interest be different if the transfers had been for the same amount and cost,but from Stendall to Edgar?
A)Net income attributable to the noncontrolling interest would have decreased by $6,000.
B)Net income attributable to the noncontrolling interest would have increased by $24,000.
C)Net income attributable to the noncontrolling interest would have increased by $20,000.
D)Net income attributable to the noncontrolling interest would have decreased by $18,000.
E)Net income attributable to the noncontrolling interest would have decreased by $56,000.

Accepted Answer

$200,000 Revenue - $140,000 COGS = $60,000 Gross Profit on Intra-Entity Transfer × 25% (Amount in Ending Inventory)= $15,000 Reduction in consolidated net income.
Consolidation Adjustment to Net Income × 40% for Noncontrolling Interest = $6,000 Reduction in Net Income Attributable to the Noncontrolling Interest

Question 20

Justings Co.owned 80% of Evana Corp.During 2018,Justings sold to Evana land with a book value of $48,000.The selling price was $70,000.For purposes of the December 31,2018 consolidated financial statements,at what amount should the land be reported?
A)$17,600.
B)$22,000.
C)$48,000.
D)$56,000.
E)$70,000.

Accepted Answer

$48,000,the original book value of the Land.Any intra-entity profit from the transfer is eliminated.

Quiz 5: Consolidated Financial Statements Intra-Entity Asset Transactions

On November 8,2018,Power Corp.sold land to Wood Co. ,its wholly owned subsidiary.The land cost $61,500 and was sold to Wood for $89,000.For consolidated financial statement reporting purposes,when must the gain on the sale of the land be recognized?

During 2017,Von Co.sold inventory to its wholly-owned subsidiary,Lord Co.The inventory cost $30,000 and was sold to Lord for $44,000.For consolidation reporting purposes,when is the $14,000 intra-entity gross profit recognized?

Webb Co.acquired 100% of Rand Inc.on January 5,2018.During 2018,Webb sold goods to Rand for $2,400,000 that cost Webb $1,800,000.Rand still owned 40% of the goods at the end of the year.Cost of goods sold was $10,800,000 for Webb and $6,400,000 for Rand.What was consolidated cost of goods sold?

Justings Co.owned 80% of Evana Corp.During 2018,Justings sold to Evana land with a book value of $48,000.The selling price was $70,000.For purposes of the December 31,2018 consolidated financial statements,at what amount should the land be reported?