Deck 9: Consolidation Ownership Issues

Question 1

Protective Corporation acquired 70 percent of the common shares and 60 percent of the preferred shares of Safety Corporation at underlying book value on January 1,20X6.At that date,the fair value of the noncontrolling interest in Safety's common stock was equal to 30 percent of the book value of its common stock.Safety's balance sheet at the time of acquisition contained the following balances:
The preferred shares are cumulative and have an 8 percent annual dividend rate and are three years in arrears on January 1,20X6.All of the $10 par value preferred shares are callable at $12 per share.During 20X6,Safety reported net income of $80,000 and paid no dividends.
Based on the preceding information,what will be the amount of income to be assigned to the noncontrolling interest in the 20X6 consolidated income statement?

A)$3,200
B)$18,400
C)$21,600
D)$24,800

Answer 1

D

Question 2

Pooley Corporation owns 75 percent of the common shares and 60 percent of the preferred shares of Stanley Company,all acquired at underlying book value on January 1,20X8.At that date,the fair value of the noncontrolling interest in Stanley's common stock was equal to 25 percent of the book value of its common stock.The balance sheets of Pooley and Stanley immediately after the acquisition contained these balances:
Stanley's preferred stock pays a 12 percent dividend and is cumulative.For 20X8,Stanley reports net income of $40,000 and pays no dividends.Pooley reports income from its separate operations of $75,000 and pays dividends of $30,000 during 20X8.
Based on the preceding information,what amount of income is attributable to the controlling interest in the consolidated income statement for 20X8?

A)$75,000
B)$105,000
C)$96,000
D)$103,200

Answer 2

D

Question 3

Pooley Corporation owns 75 percent of the common shares and 60 percent of the preferred shares of Stanley Company,all acquired at underlying book value on January 1,20X8.At that date,the fair value of the noncontrolling interest in Stanley's common stock was equal to 25 percent of the book value of its common stock.The balance sheets of Pooley and Stanley immediately after the acquisition contained these balances:
Stanley's preferred stock pays a 12 percent dividend and is cumulative.For 20X8,Stanley reports net income of $40,000 and pays no dividends.Pooley reports income from its separate operations of $75,000 and pays dividends of $30,000 during 20X8.
Based on the preceding information,what is the total noncontrolling interest reported in the consolidated balance sheet as of January 1,20X8?

A)$80,000
B)$40,000
C)$50,000
D)$60,000

Answer 3

A

Question 4

Protective Corporation acquired 70 percent of the common shares and 60 percent of the preferred shares of Safety Corporation at underlying book value on January 1,20X6.At that date,the fair value of the noncontrolling interest in Safety's common stock was equal to 30 percent of the book value of its common stock.Safety's balance sheet at the time of acquisition contained the following balances:
The preferred shares are cumulative and have an 8 percent annual dividend rate and are three years in arrears on January 1,20X6.All of the $10 par value preferred shares are callable at $12 per share.During 20X6,Safety reported net income of $80,000 and paid no dividends.
Based on the preceding information,the amount assigned to the noncontrolling stockholders' share of preferred stock interest in the preparation of a consolidated balance sheet on January 1,20X6 is

A)$57,600.
B)$49,600.
C)$48,000.
D)$40,000.

Question 5

Pail Corporation acquired 80 percent of the common shares and 70 percent of the preferred shares of Shovel Corporation at underlying book value on January 1,20X9.At that date,the fair value of the noncontrolling interest in Shovel's common stock was equal to 20 percent of the book value of its common stock.Shovel's balance sheet at the time of acquisition contained the following balances:
The preferred shares are cumulative and have a 10 percent annual dividend rate and are four years in arrears on January 1,20X9.All of the $5 par value preferred shares are callable at $6 per share.During 20X9,Shovel reported net income of $100,000 and paid no dividends.
Based on the preceding information,what is the portion of Shovel's retained earnings assignable to its preferred shareholders on January 1,20X9?

A)$40,000
B)$50,000
C)$60,000
D)$70,000

Question 6

Pail Corporation acquired 80 percent of the common shares and 70 percent of the preferred shares of Shovel Corporation at underlying book value on January 1,20X9.At that date,the fair value of the noncontrolling interest in Shovel's common stock was equal to 20 percent of the book value of its common stock.Shovel's balance sheet at the time of acquisition contained the following balances:
The preferred shares are cumulative and have a 10 percent annual dividend rate and are four years in arrears on January 1,20X9.All of the $5 par value preferred shares are callable at $6 per share.During 20X9,Shovel reported net income of $100,000 and paid no dividends.
Based on the information provided,what amount will be reported as the noncontrolling interest in the consolidated balance sheet on January 1,20X9?

A)$70,000
B)$130,000
C)$118,000
D)$142,000

Question 7

Pail Corporation acquired 80 percent of the common shares and 70 percent of the preferred shares of Shovel Corporation at underlying book value on January 1,20X9.At that date,the fair value of the noncontrolling interest in Shovel's common stock was equal to 20 percent of the book value of its common stock.Shovel's balance sheet at the time of acquisition contained the following balances:
The preferred shares are cumulative and have a 10 percent annual dividend rate and are four years in arrears on January 1,20X9.All of the $5 par value preferred shares are callable at $6 per share.During 20X9,Shovel reported net income of $100,000 and paid no dividends.
Based on the preceding information,the amount assigned to noncontrolling stockholders' share of preferred stock interest in the preparation of a consolidated balance sheet on January 1,20X9,is:

A)$40,000
B)$42,000
C)$36,000
D)$48,000

Question 8

Pooley Corporation owns 75 percent of the common shares and 60 percent of the preferred shares of Stanley Company,all acquired at underlying book value on January 1,20X8.At that date,the fair value of the noncontrolling interest in Stanley's common stock was equal to 25 percent of the book value of its common stock.The balance sheets of Pooley and Stanley immediately after the acquisition contained these balances:
Stanley's preferred stock pays a 12 percent dividend and is cumulative.For 20X8,Stanley reports net income of $40,000 and pays no dividends.Pooley reports income from its separate operations of $75,000 and pays dividends of $30,000 during 20X8.
Based on the preceding information,what is the income assigned to the noncontrolling interest in the 20X8 consolidated income statement?

A)$10,000
B)$7,000
C)$11,800
D)$4,800

Question 9

Pooley Corporation owns 75 percent of the common shares and 60 percent of the preferred shares of Stanley Company,all acquired at underlying book value on January 1,20X8.At that date,the fair value of the noncontrolling interest in Stanley's common stock was equal to 25 percent of the book value of its common stock.The balance sheets of Pooley and Stanley immediately after the acquisition contained these balances:
Stanley's preferred stock pays a 12 percent dividend and is cumulative.For 20X8,Stanley reports net income of $40,000 and pays no dividends.Pooley reports income from its separate operations of $75,000 and pays dividends of $30,000 during 20X8.
Based on the preceding information,what amount is reported as preferred stock outstanding reported in the consolidated balance sheet as of January 1,20X8?

A)$0
B)$40,000
C)$50,000
D)$44,000

Question 10

On January 1,20X9,Princeton Company acquired 80 percent of the common stock and 60 percent of the preferred stock of Stanford Company,for $400,000 and $60,000,respectively.At the time of acquisition,the fair value of the common shares of Stanford Company held by the noncontrolling interest was $100,000.Stanford Company's balance sheet contained the following balances:
Preferred Stock ($5 par value)$ 100,000
Common Stock ($10 par value)200,000
Retained Earnings 300,000
Total Stockholders' Equity $ 600,000
For the year ended December 31,20X9,Stanford Company reported net income of $100,000 and paid dividends of $40,000.The preferred stock is cumulative and pays an annual dividend of 10 percent.
Based on the preceding information,the consolidating entry to prepare the consolidated financial statements for Princeton Company as of December 31,20X9 will include a credit to Investment in Stanford Company-Common Stock for:

A)$506,000
B)$448,000
C)$400,000
D)$500,000

Question 11

On January 1,20X9,Princeton Company acquired 80 percent of the common stock and 60 percent of the preferred stock of Stanford Company,for $400,000 and $60,000,respectively.At the time of acquisition,the fair value of the common shares of Stanford Company held by the noncontrolling interest was $100,000.Stanford Company's balance sheet contained the following balances:
Preferred Stock ($5 par value)$ 100,000
Common Stock ($10 par value)200,000
Retained Earnings 300,000
Total Stockholders' Equity $ 600,000
For the year ended December 31,20X9,Stanford Company reported net income of $100,000 and paid dividends of $40,000.The preferred stock is cumulative and pays an annual dividend of 10 percent.
Based on the preceding information,the consolidating entry to prepare the consolidated financial statements for Princeton Company as of December 31,20X9 will include a credit to noncontrolling interest in Stanford Company for:

A)$140,000
B)$154,000
C)$152,000
D)$150,000

Question 12

Pail Corporation acquired 80 percent of the common shares and 70 percent of the preferred shares of Shovel Corporation at underlying book value on January 1,20X9.At that date,the fair value of the noncontrolling interest in Shovel's common stock was equal to 20 percent of the book value of its common stock.Shovel's balance sheet at the time of acquisition contained the following balances:
The preferred shares are cumulative and have a 10 percent annual dividend rate and are four years in arrears on January 1,20X9.All of the $5 par value preferred shares are callable at $6 per share.During 20X9,Shovel reported net income of $100,000 and paid no dividends.
Based on the preceding information,what will be the amount of income to be assigned to the noncontrolling interest in the 20X9 consolidated income statement?

A)$21,000
B)$18,000
C)$23,000
D)$15,000

Question 13

Pail Corporation acquired 80 percent of the common shares and 70 percent of the preferred shares of Shovel Corporation at underlying book value on January 1,20X9.At that date,the fair value of the noncontrolling interest in Shovel's common stock was equal to 20 percent of the book value of its common stock.Shovel's balance sheet at the time of acquisition contained the following balances:
The preferred shares are cumulative and have a 10 percent annual dividend rate and are four years in arrears on January 1,20X9.All of the $5 par value preferred shares are callable at $6 per share.During 20X9,Shovel reported net income of $100,000 and paid no dividends.
Based on the preceding information,what is Shovel's contribution to consolidated net income for 20X9?

A)$80,000
B)$100,000
C)$90,000
D)$50,000

Question 14

Pooley Corporation owns 75 percent of the common shares and 60 percent of the preferred shares of Stanley Company,all acquired at underlying book value on January 1,20X8.At that date,the fair value of the noncontrolling interest in Stanley's common stock was equal to 25 percent of the book value of its common stock.The balance sheets of Pooley and Stanley immediately after the acquisition contained these balances:
Stanley's preferred stock pays a 12 percent dividend and is cumulative.For 20X8,Stanley reports net income of $40,000 and pays no dividends.Pooley reports income from its separate operations of $75,000 and pays dividends of $30,000 during 20X8.
Based on the preceding information,what is the total stockholders' equity reported in the consolidated balance sheet as of January 1,20X8?

A)$450,000
B)$530,000
C)$490,000
D)$370,000

Question 15

Pail Corporation acquired 80 percent of the common shares and 70 percent of the preferred shares of Shovel Corporation at underlying book value on January 1,20X9.At that date,the fair value of the noncontrolling interest in Shovel's common stock was equal to 20 percent of the book value of its common stock.Shovel's balance sheet at the time of acquisition contained the following balances:
The preferred shares are cumulative and have a 10 percent annual dividend rate and are four years in arrears on January 1,20X9.All of the $5 par value preferred shares are callable at $6 per share.During 20X9,Shovel reported net income of $100,000 and paid no dividends.
Based on the information provided,what is the book value of the common stock on January 1,20X9?

A)$410,000
B)$360,000
C)$390,000
D)$350,000

Question 16

Protective Corporation acquired 70 percent of the common shares and 60 percent of the preferred shares of Safety Corporation at underlying book value on January 1,20X6.At that date,the fair value of the noncontrolling interest in Safety's common stock was equal to 30 percent of the book value of its common stock.Safety's balance sheet at the time of acquisition contained the following balances:
The preferred shares are cumulative and have an 8 percent annual dividend rate and are three years in arrears on January 1,20X6.All of the $10 par value preferred shares are callable at $12 per share.During 20X6,Safety reported net income of $80,000 and paid no dividends.
Based on the preceding information,what is Safety's contribution to consolidated net income for 20X6?

A)$48,000
B)$56,000
C)$72,000
D)$80,000

Question 17

Protective Corporation acquired 70 percent of the common shares and 60 percent of the preferred shares of Safety Corporation at underlying book value on January 1,20X6.At that date,the fair value of the noncontrolling interest in Safety's common stock was equal to 30 percent of the book value of its common stock.Safety's balance sheet at the time of acquisition contained the following balances:
The preferred shares are cumulative and have an 8 percent annual dividend rate and are three years in arrears on January 1,20X6.All of the $10 par value preferred shares are callable at $12 per share.During 20X6,Safety reported net income of $80,000 and paid no dividends.
Based on the preceding information,what is the portion of Safety's retained earnings assignable to its preferred shareholders on January 1,20X6?

A)$52,000
B)$44,000
C)$36,000
D)$28,000

Question 18

Protective Corporation acquired 70 percent of the common shares and 60 percent of the preferred shares of Safety Corporation at underlying book value on January 1,20X6.At that date,the fair value of the noncontrolling interest in Safety's common stock was equal to 30 percent of the book value of its common stock.Safety's balance sheet at the time of acquisition contained the following balances:
The preferred shares are cumulative and have an 8 percent annual dividend rate and are three years in arrears on January 1,20X6.All of the $10 par value preferred shares are callable at $12 per share.During 20X6,Safety reported net income of $80,000 and paid no dividends.
Based on the information provided,what is the book value of the common stock on January 1,20X6?

A)$390,000
B)$420,000
C)$446,000
D)$490,000

Question 19

Protective Corporation acquired 70 percent of the common shares and 60 percent of the preferred shares of Safety Corporation at underlying book value on January 1,20X6.At that date,the fair value of the noncontrolling interest in Safety's common stock was equal to 30 percent of the book value of its common stock.Safety's balance sheet at the time of acquisition contained the following balances:
The preferred shares are cumulative and have an 8 percent annual dividend rate and are three years in arrears on January 1,20X6.All of the $10 par value preferred shares are callable at $12 per share.During 20X6,Safety reported net income of $80,000 and paid no dividends.
Based on the information provided,what amount will be reported as the noncontrolling interest in the consolidated balance sheet on January 1,20X6?

A)$133,800
B)$191,400
C)$204,600
D)$210,000

Question 20

On January 1,20X9,Princeton Company acquired 80 percent of the common stock and 60 percent of the preferred stock of Stanford Company,for $400,000 and $60,000,respectively.At the time of acquisition,the fair value of the common shares of Stanford Company held by the noncontrolling interest was $100,000.Stanford Company's balance sheet contained the following balances:
Preferred Stock ($5 par value)$ 100,000
Common Stock ($10 par value)200,000
Retained Earnings 300,000
Total Stockholders' Equity $ 600,000
For the year ended December 31,20X9,Stanford Company reported net income of $100,000 and paid dividends of $40,000.The preferred stock is cumulative and pays an annual dividend of 10 percent.
Based on the preceding information,what will be the equity method income reported by Princeton Company from its investment in Stanford Company during 20X9?

A)$32,000
B)$30,000
C)$72,000
D)$48,000

Question 21

On January 1,20X7,Pisa Company acquired 80 percent of Siena Company by purchasing 40,000 shares of Siena's common stock.There was no differential related to this transaction.The noncontrolling interest had a fair value equal to 20 percent of book value.The book value of Siena on December 31,20X7 was as follows:
On January 1,20X8,Pisa purchased an additional 12,500 shares directly from Siena for $25 per share.
Based on the preceding information,by what amount did the Investment in Siena account change?

A)Increase of $296,500
B)Decrease of $296,500
C)Increase of $64,000
D)Decrease of $64,000

Question 22

Patty Corporation holds 75 percent of Slider Corporation's voting common stock,acquired at book value.The fair value of the noncontrolling interest at the date of acquisition was equal to 25 percent of the book value of Slider Corporation.On December 31,20X8,Slider Corporation acquired 25 percent of Patty Corporation's stock.Slider records dividends received from Patty as nonoperating income.In 20X9,Patty reported operating income of $100,000 and paid dividends of $40,000.During the same year,Slider reported operating income of $75,000 and paid $20,000 in dividends.
Based on the information provided,what amount will be reported as income assigned to the controlling interest for 20X9 under the treasury stock method?

A)$18,750
B)$156,250
C)$175,000
D)$100,000

Question 23

Perfect Corporation acquired 70 percent of Storm Company's shares on December 31,20X8,for $140,000.At that date,the fair value of the noncontrolling interest was $60,000.On January 1,20X0,Perfect acquired an additional 10 percent of Storm's common stock for $32,500.Summarized balance sheets for Storm on the dates indicated are as follows:
Storm paid dividends of $10,000 in each of the three years.Perfect uses the fully adjusted equity method in accounting for its investment in Storm and amortizes all differentials over 5 years against the related investment income.All differentials are assigned to patents in the consolidated financial statements.
Based on the preceding information,Storm Company's net income for 20X9 and 20X0 are:

A)$10,000 and $20,000 respectively.
B)$25,000 and $35,000 respectively.
C)$35,000 and $45,000 respectively.
D)$25,000 and $45,000 respectively.

Question 24

Plate Corporation acquired 75 percent of the stock of Silver Company on January 1,20X7,for $225,000.At that date,the fair value of the noncontrolling interest was $75,000.Silver's balance sheet contained the following amounts at the time of the combination:
During each of the next three years,Silver reported net income of $30,000 and paid dividends of $10,000.On January 1,20X9,Plate sold 1,500 shares of Silver's $10 par value shares for $60,000 in cash.Plate used the fully adjusted equity method in accounting for its ownership of Silver Company.
Based on the preceding information,in the journal entry recorded by Plate for sale of shares,Additional Paid-in Capital will be credited for:

A)$0.
B)$15,000.
C)$9,000.
D)$45,000.

Question 25

Petunia Corporation acquired 90 percent of the stock of Spring Company on January 1,20X2,for $360,000.At that date,the fair value of the noncontrolling interest was $40,000.Spring's balance sheet contained the following amounts at the time of the combination:
During each of the next three years,Spring reported net income of $70,000 and paid dividends of $20,000.On January 1,20X4,Petunia sold 3,000 shares of Spring's $5 par value shares for $90,000 in cash.Petunia used the fully adjusted equity method in accounting for its ownership of Spring Company.
Based on the preceding information,what was the balance in the investment account reported by Petunia on January 1,20X4,before its sale of shares?

A)$360,000
B)$450,000
C)$486,000
D)$500,000

Question 26

Plate Corporation acquired 75 percent of the stock of Silver Company on January 1,20X7,for $225,000.At that date,the fair value of the noncontrolling interest was $75,000.Silver's balance sheet contained the following amounts at the time of the combination:
During each of the next three years,Silver reported net income of $30,000 and paid dividends of $10,000.On January 1,20X9,Plate sold 1,500 shares of Silver's $10 par value shares for $60,000 in cash.Plate used the fully adjusted equity method in accounting for its ownership of Silver Company.
Based on the preceding information,what was the balance in the investment account reported by Plate on January 1,20X9,before its sale of shares?

A)$225,000
B)$285,000
C)$245,000
D)$255,000

Question 27

Plate Corporation acquired 75 percent of the stock of Silver Company on January 1,20X7,for $225,000.At that date,the fair value of the noncontrolling interest was $75,000.Silver's balance sheet contained the following amounts at the time of the combination:
During each of the next three years,Silver reported net income of $30,000 and paid dividends of $10,000.On January 1,20X9,Plate sold 1,500 shares of Silver's $10 par value shares for $60,000 in cash.Plate used the fully adjusted equity method in accounting for its ownership of Silver Company.
Based on the preceding information,in the elimination entries to complete a full consolidation worksheet for 20X9,noncontrolling interest in the net income of Silver Co.will be credited for:

A)$12,000.
B)$7,500.
C)$8,000.
D)$2,500.

Question 28

Play Company acquired 70 percent of Screen Corporation's shares on December 31,20X5,at underlying book value of $98,000.At that date,the fair value of the noncontrolling interest was equal to 30 percent of the book value of Screen Corporation.Screen's balance sheet on January 1,20X8,contained the following balances:
On January 1,20X8,Screen acquired 5,000 of its own $2 par value common shares from Nonaffiliated Corporation for $6 per share.
Based on the preceding information,in the consolidating entry needed in preparing a consolidated balance sheet immediately following the acquisition of shares,Investment in Screen stock will be credited for:

A)$165,625.
B)$135,625.
C)$185,000.
D)$155,000.

Question 29

Play Company acquired 70 percent of Screen Corporation's shares on December 31,20X5,at underlying book value of $98,000.At that date,the fair value of the noncontrolling interest was equal to 30 percent of the book value of Screen Corporation.Screen's balance sheet on January 1,20X8,contained the following balances:
On January 1,20X8,Screen acquired 5,000 of its own $2 par value common shares from Nonaffiliated Corporation for $6 per share.
Based on the preceding information,the consolidating entry needed in preparing a consolidated balance sheet immediately following the acquisition of shares will include:

A)a credit to Noncontrolling Interest in Net Assets of Screen Corp.for $19,375.
B)a credit to Additional Paid-In Capital for $75,000.
C)a debit to Treasury Shares for $30,000.
D)a credit to Investment in Screen stock for $6,125.

Question 30

Petunia Corporation acquired 90 percent of the stock of Spring Company on January 1,20X2,for $360,000.At that date,the fair value of the noncontrolling interest was $40,000.Spring's balance sheet contained the following amounts at the time of the combination:
During each of the next three years,Spring reported net income of $70,000 and paid dividends of $20,000.On January 1,20X4,Petunia sold 3,000 shares of Spring's $5 par value shares for $90,000 in cash.Petunia used the fully adjusted equity method in accounting for its ownership of Spring Company.
Based on the preceding information,in the consolidation entries to complete a full consolidation worksheet for 20X4,noncontrolling interest in the net income of Spring will be credited for

A)$2,000.
B)$7,000.
C)$12,500.
D)$17,500.

Question 31

Play Company acquired 70 percent of Screen Corporation's shares on December 31,20X5,at underlying book value of $98,000.At that date,the fair value of the noncontrolling interest was equal to 30 percent of the book value of Screen Corporation.Screen's balance sheet on January 1,20X8,contained the following balances:
On January 1,20X8,Screen acquired 5,000 of its own $2 par value common shares from Nonaffiliated Corporation for $6 per share.
Based on the preceding information,what is the increase in the book value of the equity attributable to the parent as a result of the repurchase of shares by Screen Corporation?

A)$19,375
B)$6,125
C)$2,625
D)$9,000

Question 32

Petunia Corporation acquired 90 percent of the stock of Spring Company on January 1,20X2,for $360,000.At that date,the fair value of the noncontrolling interest was $40,000.Spring's balance sheet contained the following amounts at the time of the combination:
During each of the next three years,Spring reported net income of $70,000 and paid dividends of $20,000.On January 1,20X4,Petunia sold 3,000 shares of Spring's $5 par value shares for $90,000 in cash.Petunia used the fully adjusted equity method in accounting for its ownership of Spring Company.
Based on the preceding information,in the journal entry recorded by Petunia for the sale of shares,Additional Paid-in Capital will be credited for

A)$240,000.
B)$15,000.
C)$9,000.
D)$0.

Question 33

Plate Corporation acquired 75 percent of the stock of Silver Company on January 1,20X7,for $225,000.At that date,the fair value of the noncontrolling interest was $75,000.Silver's balance sheet contained the following amounts at the time of the combination:
During each of the next three years,Silver reported net income of $30,000 and paid dividends of $10,000.On January 1,20X9,Plate sold 1,500 shares of Silver's $10 par value shares for $60,000 in cash.Plate used the fully adjusted equity method in accounting for its ownership of Silver Company.
Based on the preceding information,in the journal entry recorded by Plate for sale of shares:

A)Cash will be credited for $60,000.
B)Investment in Silver Stock will be credited for $51,000.
C)Investment in Silver Stock will be credited for $60,000.
D)Additional Paid-in Capital will be credited for $45,000.

Question 34

Play Company acquired 70 percent of Screen Corporation's shares on December 31,20X5,at underlying book value of $98,000.At that date,the fair value of the noncontrolling interest was equal to 30 percent of the book value of Screen Corporation.Screen's balance sheet on January 1,20X8,contained the following balances:
On January 1,20X8,Screen acquired 5,000 of its own $2 par value common shares from Nonaffiliated Corporation for $6 per share.
Based on the preceding information,what will be the journal entry to be recorded on Play Company's books to recognize the change in the book value of the shares it holds?

A)Option A
B)Option B
C)Option C
D)Option D

Question 35

Patty Corporation holds 75 percent of Slider Corporation's voting common stock,acquired at book value.The fair value of the noncontrolling interest at the date of acquisition was equal to 25 percent of the book value of Slider Corporation.On December 31,20X8,Slider Corporation acquired 25 percent of Patty Corporation's stock.Slider records dividends received from Patty as nonoperating income.In 20X9,Patty reported operating income of $100,000 and paid dividends of $40,000.During the same year,Slider reported operating income of $75,000 and paid $20,000 in dividends.
Based on the information provided,what amount will be reported as consolidated net income for 20X9 under the treasury stock method?

A)$150,000
B)$100,000
C)$75,000
D)$175,000

Question 36

Plate Corporation acquired 75 percent of the stock of Silver Company on January 1,20X7,for $225,000.At that date,the fair value of the noncontrolling interest was $75,000.Silver's balance sheet contained the following amounts at the time of the combination:
During each of the next three years,Silver reported net income of $30,000 and paid dividends of $10,000.On January 1,20X9,Plate sold 1,500 shares of Silver's $10 par value shares for $60,000 in cash.Plate used the fully adjusted equity method in accounting for its ownership of Silver Company.
Based on the preceding information,in the consolidating entries to complete a full consolidation worksheet,Investment in Silver Stock at January 1,20X9,will be credited for:

A)$255,000.
B)$240,000.
C)$204,000.
D)$136,000.

Question 37

Petunia Corporation acquired 90 percent of the stock of Spring Company on January 1,20X2,for $360,000.At that date,the fair value of the noncontrolling interest was $40,000.Spring's balance sheet contained the following amounts at the time of the combination:
During each of the next three years,Spring reported net income of $70,000 and paid dividends of $20,000.On January 1,20X4,Petunia sold 3,000 shares of Spring's $5 par value shares for $90,000 in cash.Petunia used the fully adjusted equity method in accounting for its ownership of Spring Company.
Based on the preceding information,in the consolidation entries to complete a consolidation worksheet at January 1,20X4 (after the sale of the 3,000 shares of Spring stock),Investment in Spring Stock will be credited for

A)$360,000.
B)$375,000.
C)$405,000.
D)$450,000.

Question 38

Petunia Corporation acquired 90 percent of the stock of Spring Company on January 1,20X2,for $360,000.At that date,the fair value of the noncontrolling interest was $40,000.Spring's balance sheet contained the following amounts at the time of the combination:
During each of the next three years,Spring reported net income of $70,000 and paid dividends of $20,000.On January 1,20X4,Petunia sold 3,000 shares of Spring's $5 par value shares for $90,000 in cash.Petunia used the fully adjusted equity method in accounting for its ownership of Spring Company.
Based on the preceding information,in the journal entry recorded by Petunia for the sale of shares

A)Cash will be credited for $90,000.
B)Investment in Spring Stock will be credited for $90,000.
C)Investment in Spring Stock will be credited for $75,000.
D)Additional Paid-in Capital will be credited for $9,000.

Question 39

Perfect Corporation acquired 70 percent of Storm Company's shares on December 31,20X8,for $140,000.At that date,the fair value of the noncontrolling interest was $60,000.On January 1,20X0,Perfect acquired an additional 10 percent of Storm's common stock for $32,500.Summarized balance sheets for Storm on the dates indicated are as follows:
Storm paid dividends of $10,000 in each of the three years.Perfect uses the fully adjusted equity method in accounting for its investment in Storm and amortizes all differentials over 5 years against the related investment income.All differentials are assigned to patents in the consolidated financial statements.
Based on the preceding information,what was the balance in Perfect's Investment in Storm Company Stock account on December 31,20X0?

A)$211,500
B)$218,000
C)$173,000
D)$216,000

Question 40

Perfect Corporation acquired 70 percent of Storm Company's shares on December 31,20X8,for $140,000.At that date,the fair value of the noncontrolling interest was $60,000.On January 1,20X0,Perfect acquired an additional 10 percent of Storm's common stock for $32,500.Summarized balance sheets for Storm on the dates indicated are as follows:
Storm paid dividends of $10,000 in each of the three years.Perfect uses the fully adjusted equity method in accounting for its investment in Storm and amortizes all differentials over 5 years against the related investment income.All differentials are assigned to patents in the consolidated financial statements.
Based on the preceding information,what was the balance in Perfect's Investment in Storm Company Stock account on December 31,20X9?

A)$164,500
B)$157,500
C)$165,000
D)$168,000

Question 41

X Corporation owns 80 percent of Y Corporation's common stock and 40 percent of Z Corporation's common stock.Additionally,Y Corporation owns 35 percent of Z Corporation's common stock.The acquisitions were made at book values.The following information is available for 20X8:

Based on the information provided,what amount of income will be assigned to the noncontrolling interest in the 20X8 consolidated income statement?

A)$23,750
B)$25,000
C)$18,000
D)$33,750

Question 42

On January 1,20X9,A Company acquired 85 percent of B Company's voting common stock for $425,000.At that date,the fair value of the noncontrolling interest of B Company was $75,000.Immediately after A Company acquired its ownership,B Company acquired 75 percent of C Company's stock for $150,000.The fair value of the noncontrolling interest of C Company was $50,000 at that date.At January 1,20X9,the stockholders' equity sections of the balance sheets of the companies were as follows:
During 20X9,A Company reported operating income of $175,000 and paid dividends of $50,000.B Company reported operating income of $125,000 and paid dividends of $40,000.C Company reported net income of $100,000 and paid dividends of $25,000.
Based on the information provided,what amount of consolidated net income will A Company report for 20X9?

A)$175,000
B)$285,000
C)$356,250
D)$400,000

Question 43

On January 1,20X7,Pisa Company acquired 80 percent of Siena Company by purchasing 40,000 shares of Siena's common stock.There was no differential related to this transaction.The noncontrolling interest had a fair value equal to 20 percent of book value.The book value of Siena on December 31,20X7 was as follows:
On January 1,20X8,Pisa purchased an additional 12,500 shares directly from Siena for $25 per share.
Based on the preceding information,what is the ending balance in noncontrolling interest in the net assets of Siena?

A)$186,000
B)$418,500
C)$523,125
D)$232,500

Question 44

X Corporation owns 80 percent of Y Corporation's common stock and 40 percent of Z Corporation's common stock.Additionally,Y Corporation owns 35 percent of Z Corporation's common stock.The acquisitions were made at book values.The following information is available for 20X8:

Based on the information provided,what amount of consolidated net income will X Corporation report for 20X8?

A)$148,750
B)$175,000
C)$150,000
D)$158,750

Question 45

Plum Corporation acquired 80 percent of Saucy Corporation's common shares on January 1,20X7,at underlying book value.At that date,the fair value of the noncontrolling interest was equal to 20 percent of the book value of Saucy Corporation.Saucy prepared the following balance sheet as of December 31,20X8:
On January 1,20X9,Saucy declares a stock dividend of 9,000 shares on its $5 par value common stock.The current market price per share of Saucy stock on January 1,20X9,is $20.
Based on the preceding information,the investment elimination entry required to prepare a consolidated balance sheet immediately after the stock dividend is issued will include a debit to Retained Earnings for:

A)$200,000
B)$65,000
C)$155,000
D)$20,000

Question 46

On January 1,20X9,A Company acquired 85 percent of B Company's voting common stock for $425,000.At that date,the fair value of the noncontrolling interest of B Company was $75,000.Immediately after A Company acquired its ownership,B Company acquired 75 percent of C Company's stock for $150,000.The fair value of the noncontrolling interest of C Company was $50,000 at that date.At January 1,20X9,the stockholders' equity sections of the balance sheets of the companies were as follows:
During 20X9,A Company reported operating income of $175,000 and paid dividends of $50,000.B Company reported operating income of $125,000 and paid dividends of $40,000.C Company reported net income of $100,000 and paid dividends of $25,000.
Based on the information provided,what amount of income will be assigned to the noncontrolling interest in the consolidated income statement for 20X9?

A)$55,000
B)$25,000
C)$30,000
D)$43,750

Question 47

X Corporation owns 80 percent of Y Corporation's common stock and 40 percent of Z Corporation's common stock.Additionally,Y Corporation owns 35 percent of Z Corporation's common stock.The acquisitions were made at book values.The following information is available for 20X8:

Based on the information provided,what amount will be reported as dividends declared in X Corporation's 20X8 consolidated retained earnings statement?

A)$30,000
B)$50,000
C)$60,000
D)$0

Question 48

On January 1,20X9,A Company acquired 85 percent of B Company's voting common stock for $425,000.At that date,the fair value of the noncontrolling interest of B Company was $75,000.Immediately after A Company acquired its ownership,B Company acquired 75 percent of C Company's stock for $150,000.The fair value of the noncontrolling interest of C Company was $50,000 at that date.At January 1,20X9,the stockholders' equity sections of the balance sheets of the companies were as follows:
During 20X9,A Company reported operating income of $175,000 and paid dividends of $50,000.B Company reported operating income of $125,000 and paid dividends of $40,000.C Company reported net income of $100,000 and paid dividends of $25,000.
Based on the information provided,what amount of income will be assigned to the controlling interest in the consolidated income statement for 20X9?

A)$400,000
B)$345,000
C)$285,000
D)$175,000

Question 49

On January 1,20X7,Pisa Company acquired 80 percent of Siena Company by purchasing 40,000 shares of Siena's common stock.There was no differential related to this transaction.The noncontrolling interest had a fair value equal to 20 percent of book value.The book value of Siena on December 31,20X7 was as follows:
On January 1,20X8,Pisa purchased an additional 12,500 shares directly from Siena for $25 per share.
Based on the preceding information,what is Pisa's new ownership interest?

A)84 percent
B)55 percent
C)70 percent
D)64 percent

Question 50

On January 1,20X7,Pisa Company acquired 80 percent of Siena Company by purchasing 40,000 shares of Siena's common stock.There was no differential related to this transaction.The noncontrolling interest had a fair value equal to 20 percent of book value.The book value of Siena on December 31,20X7 was as follows:
On January 1,20X8,Pisa purchased an additional 12,500 shares directly from Siena for $25 per share.
Based on the preceding information,the elimination entry to prepare the consolidated financial statements on December 31,20X7 would include a:

A)credit to common stock for $625,000
B)debit to retained earnings for $37,500
C)credit to Investment in Siena Co.for $976,500
D)credit to NCI in the net assets of Siena Co.for $232,500

Question 51

Pratt Corporation acquired 90 percent of Splatt Corporation's common shares on January 1,20X6,at underlying book value.At that date,the fair value of the noncontrolling interest was equal to 10 percent of the book value of Splatt.Splatt Corporation prepared the following balance sheet as of January 1,20X9:

The company is considering the following alternatives:
1.A 3-for-1 stock split
2.A stock dividend of 7,000 shares on its $5 par value common stock
3.A stock dividend of 2,000 shares on its $5 par value common stock
The current market price per share of Splatt stock on January 1,20X9,is $15.
Required:
Give the investment elimination entry required to prepare a consolidated balance sheet at the close of business on January 1,20X9,for each of the alternative transactions under consideration by Splatt Corporation.

Question 52

Plum Corporation acquired 80 percent of Saucy Corporation's common shares on January 1,20X7,at underlying book value.At that date,the fair value of the noncontrolling interest was equal to 20 percent of the book value of Saucy Corporation.Saucy prepared the following balance sheet as of December 31,20X8:
On January 1,20X9,Saucy declares a stock dividend of 9,000 shares on its $5 par value common stock.The current market price per share of Saucy stock on January 1,20X9,is $20.
Based on the preceding information,the investment elimination entry required to prepare a consolidated balance sheet immediately after the stock dividend is issued will include a debit to Additional Paid-In Capital for:

A)$50,000.
B)$95,000.
C)$230,000.
D)$185,000.

Question 53

On January 1,20X7,Pisa Company acquired 80 percent of Siena Company by purchasing 40,000 shares of Siena's common stock.There was no differential related to this transaction.The noncontrolling interest had a fair value equal to 20 percent of book value.The book value of Siena on December 31,20X7 was as follows:
On January 1,20X8,Pisa purchased an additional 12,500 shares directly from Siena for $25 per share.
Based on the preceding information,the elimination entry to prepare the consolidated financial statements on December 31,20X7 would include a:

A)debit to common stock for $812,500
B)credit to additional paid-in capital for $187,500
C)credit to Investment in Siena Co.for $744,000
D)credit to retained earnings for $350,000

Question 54

Pratt Corporation owns 75 percent of Swan Corporation's outstanding common stock.Swan,in turn,owns 15 percent of Pratt's outstanding common stock.What percent of the dividends paid by Pratt is reported as dividends declared in the consolidated retained earnings statement?

A)None
B)100 percent
C)85 percent
D)75 percent

Question 55

On January 1,20X9,A Company acquired 85 percent of B Company's voting common stock for $425,000.At that date,the fair value of the noncontrolling interest of B Company was $75,000.Immediately after A Company acquired its ownership,B Company acquired 75 percent of C Company's stock for $150,000.The fair value of the noncontrolling interest of C Company was $50,000 at that date.At January 1,20X9,the stockholders' equity sections of the balance sheets of the companies were as follows:
During 20X9,A Company reported operating income of $175,000 and paid dividends of $50,000.B Company reported operating income of $125,000 and paid dividends of $40,000.C Company reported net income of $100,000 and paid dividends of $25,000.
Based on the information provided,the equity-method income recorded by A Company is:

A)$125,000
B)$200,000
C)$170,000
D)$181,250

Question 56

X Corporation owns 80 percent of Y Corporation's common stock and 40 percent of Z Corporation's common stock.Additionally,Y Corporation owns 35 percent of Z Corporation's common stock.The acquisitions were made at book values.The following information is available for 20X8:

Based on the information provided,what amount of income will be assigned to the controlling interest in the 20X8 consolidated income statement?

A)$130,750
B)$150,000
C)$141,250
D)$157,000

Question 57

Begin with the information provided,but assume instead that Saucy declared a stock dividend of 3,000 shares on its $5 par value common stock.The investment elimination entry required to prepare a consolidated balance sheet immediately after the stock dividend is issued will include a debit to Retained Earnings for:

A)$185,000.
B)$65,000.
C)$155,000.
D)$200,000.

Question 58

On January 1,20X8,Plandex Company acquired 70 percent of Simplex Company's stock at underlying book value.At that date,the fair value of the noncontrolling interest was equal to 30 percent of the book value of Simplex Company.On December 31,20X9,Simplex acquired 15 percent of Plandex's stock.Balance sheets for the two companies on December 31,20X9,are as follows:


Required:
Assuming that the treasury stock method is used in reporting Plandex's shares held by Simplex,prepare the elimination entries and a consolidated balance sheet worksheet for December 31,20X9.

Question 59

Begin with information provided,but assume instead that Saucy declared a stock dividend of 3,000 shares on its $5 par value common stock.The investment elimination entry required to prepare a consolidated balance sheet immediately after the stock dividend is issued will include a debit to Additional Paid-In Capital for:

A)$65,000.
B)$95,000.
C)$50,000.
D)$110,000.

Question 60

On January 1,20X7,Pisa Company acquired 80 percent of Siena Company by purchasing 40,000 shares of Siena's common stock.There was no differential related to this transaction.The noncontrolling interest had a fair value equal to 20 percent of book value.The book value of Siena on December 31,20X7 was as follows:
On January 1,20X8,Pisa purchased an additional 12,500 shares directly from Siena for $25 per share.
Based on the preceding information,the ending balance in Additional Paid-In Capital would be:

A)$0
B)$187,500
C)$312,500
D)$125,000