Question 1

REFERENCE: 04-03
Femur Co.acquired 70% of the voting common stock of Harbor Corp.on January 1,2019.During 2019,Harbor had revenues of $2,500,000 and expenses of $2,000,000.The amortization of fair value allocations totaled $60,000 in 2019.Not including its investment in Harbor,Femur Co.had its own revenues of $4,500,000 and expenses of $3,000,000 for the year 2019.
-The noncontrolling interest's share of the earnings of Harbor Corp.for 2019 is calculated to be
A)$132,000.
B)$150,000.
C)$168,000.
D)$160,000.
E)$0.

Accepted Answer

Revenue $2,500,000 - Expenses $2,000,000 = $500,000 - $60,000 = $440,000 × .30 = $132,000

Question 2

REFERENCE: 04-04
Denber Co.acquired 60% of the common stock of Kailey Corp.on September 1,2019.For 2019,Kailey reported revenues of $810,000 and expenses of $630,000,not including its investment in Denber,and all reflected evenly throughout the year.The annual amount of amortization related to this acquisition was $15,000.
-What is the effect of including Kailey in consolidated net income for 2019?
A)$31,000.
B)$33,000.
C)$55,000.
D)$60,000.
E)$39,000.

Accepted Answer

Revenue $810,000 - Expenses $630,000 = Income $180,000 × 4/12 = $60,000 - Annual Amortization ($15,000 × 4/12)= $55,000

Question 3

REFERENCE: 04-04
Denber Co.acquired 60% of the common stock of Kailey Corp.on September 1,2019.For 2019,Kailey reported revenues of $810,000 and expenses of $630,000,not including its investment in Denber,and all reflected evenly throughout the year.The annual amount of amortization related to this acquisition was $15,000.
-In consolidation,the total amount of expenses related to Kailey,and to Denber's acquisition of Kailey,for 2019 is determined to be
A)$153,750.
B)$161,250.
C)$205,000.
D)$210,000.
E)$215,000.

Accepted Answer

Expenses $630,000 × 4/12 = $210,000;Amortization $15,000 × 4/12 = $5,000 = $215,000

Question 4

REFERENCE: 04-01
When Jolt Co.acquired 75% of the common stock of Yelts Corp. ,Yelts owned land with a book value of $70,000 and a fair value of $100,000.
-What is the total amount of excess land allocation at the acquisition date?
A)$ 0.
B)$30,000.
C)$22,500.
D)$25,000.
E)$17,500.

Accepted Answer

FV $100,000 - BV $70,000 = $30,000

Question 5

REFERENCE: 04-01
When Jolt Co.acquired 75% of the common stock of Yelts Corp. ,Yelts owned land with a book value of $70,000 and a fair value of $100,000.
-What amount should have been reported for the land in a consolidated balance sheet at the acquisition date?
A)$ 52,500.
B)$ 70,000.
C)$ 75,000.
D)$ 92,500.
E)$100,000.

Accepted Answer

$100,000 FV of Land at Acquisition

Question 6

For business combinations involving less than 100 percent ownership,the acquirer recognizes and measures all of the following at the acquisition date except:
A)Identifiable assets acquired,at fair value.
B)Liabilities assumed,at book value.
C)Non-controlling interest,at fair value.
D)Goodwill,or a gain from bargain purchase.
E)None of these choices is correct.

Accepted Answer

Liabilities assumed are recognized at fair value rather than book value in a business combination involving less than 100 percent ownership.

Question 7

REFERENCE: 04-01
When Jolt Co.acquired 75% of the common stock of Yelts Corp. ,Yelts owned land with a book value of $70,000 and a fair value of $100,000.
-What is the amount of excess land allocation attributed to the controlling interest at the acquisition date?
A)$ 0.
B)$30,000.
C)$22,500.
D)$25,000.
E)$17,500.

Accepted Answer

FV - BV ($30,000)× .75 = $22,500

Question 8

REFERENCE: 04-04
Denber Co.acquired 60% of the common stock of Kailey Corp.on September 1,2019.For 2019,Kailey reported revenues of $810,000 and expenses of $630,000,not including its investment in Denber,and all reflected evenly throughout the year.The annual amount of amortization related to this acquisition was $15,000.
-What is the amount of the noncontrolling interest's share of Kailey's income for 2019?
A)$22,000.
B)$24,000.
C)$48,000.
D)$66,000.
E)$72,000.

Accepted Answer

Total Income for September-December = $55,000 - Controlling Interest Portion $33,000 = $22,000.Revenue $810,000 - Expenses $630,000 = Income $180,000 × 4/12 = $60,000 - Annual Amortization ($15,000 × 4/12)= $55,000 × .40 = $22,000

Question 9

REFERENCE: 04-02
Perch Co.acquired 80% of the common stock of Float Corp.for $1,600,000.The fair value of Float's net assets was $1,850,000,and the book value was $1,500,000.The noncontrolling interest shares of Float Corp.are not actively traded.
-What amount of goodwill should be attributed to Perch at the date of acquisition?
A)$150,000.
B)$250,000.
C)$ 0.
D)$120,000.
E)$170,000.

Accepted Answer

(Purchase Price for 80%)$1,600,000 - (FV $1,850,000 × .80 = $1,480,000)= $120,000

Question 10

REFERENCE: 04-02
Perch Co.acquired 80% of the common stock of Float Corp.for $1,600,000.The fair value of Float's net assets was $1,850,000,and the book value was $1,500,000.The noncontrolling interest shares of Float Corp.are not actively traded.
-What is the dollar amount of noncontrolling interest that should appear in a consolidated balance sheet prepared at the date of acquisition?
A)$350,000.
B)$300,000.
C)$400,000.
D)$370,000.
E)$0.

Accepted Answer

FV of Stock at Acquisition Date for 100% ($1,600,000 / .80)$2,000,000 × .20 = $400,000

Question 11

REFERENCE: 04-02
Perch Co.acquired 80% of the common stock of Float Corp.for $1,600,000.The fair value of Float's net assets was $1,850,000,and the book value was $1,500,000.The noncontrolling interest shares of Float Corp.are not actively traded.
-What is the dollar amount of Float Corp.'s net assets that would be represented in a consolidated balance sheet prepared at the date of acquisition?
A)$1,600,000.
B)$1,480,000.
C)$1,200,000.
D)$1,780,000.
E)$1,850,000.

Accepted Answer

FV of Assets Acquired = $1,850,000

Question 12

REFERENCE: 04-02
Perch Co.acquired 80% of the common stock of Float Corp.for $1,600,000.The fair value of Float's net assets was $1,850,000,and the book value was $1,500,000.The noncontrolling interest shares of Float Corp.are not actively traded.
-What is the dollar amount of fair value over book value differences attributed to Perch at the date of acquisition?
A)$120,000.
B)$150,000.
C)$280,000.
D)$350,000.
E)$370,000.

Accepted Answer

FV $1,850,000 - BV $1,500,000 = $350,000 × .80 = $280,000

Question 13

REFERENCE: 04-02
Perch Co.acquired 80% of the common stock of Float Corp.for $1,600,000.The fair value of Float's net assets was $1,850,000,and the book value was $1,500,000.The noncontrolling interest shares of Float Corp.are not actively traded.
-What is the total amount of goodwill recognized at the date of acquisition?
A)$150,000.
B)$250,000.
C)$ 0.
D)$120,000.
E)$170,000.

Accepted Answer

FV $1,850,000 - FV of 100% of Float's Stock based on Purchase Price ($1,600,000 / .80)$2,000,000 = ($150,000)Goodwill

Question 14

REFERENCE: 04-03
Femur Co.acquired 70% of the voting common stock of Harbor Corp.on January 1,2019.During 2019,Harbor had revenues of $2,500,000 and expenses of $2,000,000.The amortization of fair value allocations totaled $60,000 in 2019.Not including its investment in Harbor,Femur Co.had its own revenues of $4,500,000 and expenses of $3,000,000 for the year 2019.
-What amount of consolidated net income for 2019 should be allocated to Femur's controlling interest in Harbor?
A)$ 582,000
B)$1,050,000
C)$1,358,000
D)$1,808,000
E)$2,140,000

Accepted Answer

Total Consolidated Net Income ($1,940,000 - 132,000 to NCI)= $1,808,000

Question 15

REFERENCE: 04-03
Femur Co.acquired 70% of the voting common stock of Harbor Corp.on January 1,2019.During 2019,Harbor had revenues of $2,500,000 and expenses of $2,000,000.The amortization of fair value allocations totaled $60,000 in 2019.Not including its investment in Harbor,Femur Co.had its own revenues of $4,500,000 and expenses of $3,000,000 for the year 2019.
-What amount would Femur Co.report as consolidated net income for 2019?
A)$440,000.
B)$500,000.
C)$1,500,000.
D)$1,940,000.
E)$2,000,000.

Accepted Answer

Femur Net Income (Femur Revenue $4,500,000 less Femur Expenses $3,000,000 = $1,500,000)+ Harbor Net Income (Harbor Revenue $2,500,000 - Harbor Expenses $2,000,000 - Amortizations for Excess Fair Value over Book Value = $500,000 - $60,000 = $440,000)= $1,500,000 + $440,000 = $1,940,000

Question 16

Which of the following methods is not used to value a noncontrolling interest under circumstances where a control premium is applied to determine the appropriate value for such interest?
A)Valuation models based on subsidiary discounted cash flows.
B)Valuation models based on subsidiary residual income projections.
C)Comparison with comparable investments.
D)The application of a safe harbor discount rate.
E)Fair value based on market trades.

Accepted Answer

The safe harbor discount rate is used to determine the fair value of a controlling interest when no control premium is involved. It is not used to value a noncontrolling interest when a control premium is applied. The other options (A, B, C, and E) are all valid methods to value a noncontrolling interest.

Question 17

REFERENCE: 04-02
Perch Co.acquired 80% of the common stock of Float Corp.for $1,600,000.The fair value of Float's net assets was $1,850,000,and the book value was $1,500,000.The noncontrolling interest shares of Float Corp.are not actively traded.
-What amount of goodwill should be attributed to the noncontrolling interest at the date of acquisition?
A)$ 0.
B)$ 20,000.
C)$ 30,000.
D)$100,000.
E)$120,000.

Accepted Answer

$150,000 Goodwill × .20 = $30,000 to Noncontrolling Interest

Question 18

REFERENCE: 04-04
Denber Co.acquired 60% of the common stock of Kailey Corp.on September 1,2019.For 2019,Kailey reported revenues of $810,000 and expenses of $630,000,not including its investment in Denber,and all reflected evenly throughout the year.The annual amount of amortization related to this acquisition was $15,000.
-What is the amount of Kailey's net income to the controlling interest for 2019?
A)$31,000.
B)$33,000.
C)$55,000.
D)$60,000.
E)$39,000.

Accepted Answer

Revenue $810,000 - Expenses $630,000 = Income $180,000 × 4/12 = $60,000 - Annual Amortization ($15,000 × 4/12)= $55,000 × .60 = $33,000

Question 19

MacHeath Inc.bought 60% of the outstanding common stock of Nomes Inc.in an acquisition that resulted in the recognition of goodwill.Nomes owned a piece of land that cost $250,000 but was worth $600,000 at the date of acquisition.What value would be attributed to this land in a consolidated balance sheet at the date of acquisition?
A)$250,000. 
B)$150,000.
C)$600,000.
D)$360,000.
E)$460,000.

Accepted Answer

FV of the Land $600,000

Question 20

REFERENCE: 04-01
When Jolt Co.acquired 75% of the common stock of Yelts Corp. ,Yelts owned land with a book value of $70,000 and a fair value of $100,000.
-What is the amount of excess land allocation attributed to the noncontrolling interest at the acquisition date?
A)$ 0.
B)$30,000.
C)$22,500.
D)$ 7,500.
E)$17,500.

Accepted Answer

FV - BV ($30,000)× .25 = $7,500

Quiz 4: Consolidated Financial Statements and Outside Ownership

REFERENCE: 04-01 When Jolt Co.acquired 75% of the common stock of Yelts Corp. ,Yelts owned land with a book value of $70,000 and a fair value of $100,000. -What is the total amount of excess land allocation at the acquisition date?

REFERENCE: 04-01 When Jolt Co.acquired 75% of the common stock of Yelts Corp. ,Yelts owned land with a book value of $70,000 and a fair value of $100,000. -What amount should have been reported for the land in a consolidated balance sheet at the acquisition date?

For business combinations involving less than 100 percent ownership,the acquirer recognizes and measures all of the following at the acquisition date except:

REFERENCE: 04-01 When Jolt Co.acquired 75% of the common stock of Yelts Corp. ,Yelts owned land with a book value of $70,000 and a fair value of $100,000. -What is the amount of excess land allocation attributed to the controlling interest at the acquisition date?

Which of the following methods is not used to value a noncontrolling interest under circumstances where a control premium is applied to determine the appropriate value for such interest?

REFERENCE: 04-01 When Jolt Co.acquired 75% of the common stock of Yelts Corp. ,Yelts owned land with a book value of $70,000 and a fair value of $100,000. -What is the amount of excess land allocation attributed to the noncontrolling interest at the acquisition date?