Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
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Chapter A2, Problem 13MCQ
To determine
The account title that will not appear in the consolidated financial statement is to be determined.
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Determining ending consolidated balances in the second year following the acquisition-Equity method
Assume that your company acquired a subsidiary on January 1, 2012. The purchase price was $500,000 in excess of the subsidiary's book value of Stockholders' Equity on the acquisition date, and
that excess was assigned to the following [A] assets:
[A] Asset
Property, plant and equipment (PPE), net $250,000
Goodwill
250,000
$500,000
Income statement:
Sales
Cost of goods sold
Gross profit
Equity income
Operating expenses
Net income
Original
Original Useful Life
Amount (years)
The AAP asset relating to undervalued PPE with a 20-year useful life has been depreciated as part of the parent's equity method accounting. The financial statements of the parent and its subsidiary
for the year ended December 31, 2013, are as follows:
Parent Subsidiary
Statement of retained earnings:
BOY retained earnings
Net income
Dividends
Ending retained earnings
20
Indefinite
175,500
(825.000)
$890,500
$5,500,000…
Equity securities acquired by a corporation which are accounted for by recognizing unrealized holding gains
or losses as part of the net income are:
Securities where a company has holdings of between 20% and 50%
Securities where a company has holding of less than 20%
O Available-for-sale securities where a company has holdings of less than 20%
O Securities where a company has holdings of more than 50%
1. The cost method of accounting for stock investments is used when the company acquires
a. Greater than 50% of the company's stock
b. Between 20% to 50% of the company's stock
c. Less than 20% of the company's stock
2. The significance of percentage of ownership relates to how much _____________ the acquiring company has in the new company.
a. data
b. control
c. confidence
Chapter A2 Solutions
Cornerstones of Financial Accounting
Ch. A2 - How do long-term investments differ from...Ch. A2 - Prob. 2DQCh. A2 - Prob. 3DQCh. A2 - Prob. 4DQCh. A2 - Prob. 5DQCh. A2 - Prob. 6DQCh. A2 - Prob. 7DQCh. A2 - How does the equity method discourage the...Ch. A2 - Prob. 9DQCh. A2 - Prob. 10DQ
Ch. A2 - Prob. 11DQCh. A2 - Prob. 12DQCh. A2 - Prob. 13DQCh. A2 - Prob. 14DQCh. A2 - Prob. 15DQCh. A2 - Prob. 1MCQCh. A2 - Prob. 2MCQCh. A2 - Prob. 3MCQCh. A2 - Prob. 4MCQCh. A2 - Prob. 5MCQCh. A2 - Prob. 6MCQCh. A2 - Prob. 7MCQCh. A2 - Prob. 8MCQCh. A2 - Prob. 9MCQCh. A2 - Prob. 10MCQCh. A2 - Prob. 11MCQCh. A2 - When the market value of a companys...Ch. A2 - Prob. 13MCQCh. A2 - Prob. 14MCQCh. A2 - Prob. 15MCQCh. A2 - Prob. 16MCQCh. A2 - Prob. 17ECh. A2 - Trading Securities Pear Investments began...Ch. A2 - Prob. 19ECh. A2 - Prob. 20ECh. A2 - Adjusting the Allowance to Adjust Trading...Ch. A2 - Prob. 22ECh. A2 - Prob. 23ECh. A2 - Prob. 24ECh. A2 - Prob. 25ECh. A2 - Prob. 26ECh. A2 - Prob. 27ECh. A2 - Prob. 28ECh. A2 - Prob. 29ECh. A2 - Prob. 30E
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- Which of the following measures the portion of a corporations profit allocated to each outstanding share of common stock? A. retained earnings B. EPS C. EBITDA D. NOPATarrow_forwardWhich of the following is not normally found in the total equity section of a company's statement of financial position? A. Retained earnings B. Ordinary share capital C. Dividends payable to the ordinary shareholders D. Share premiumarrow_forwardFor an entity that has only ordinary shares outstanding, total shareholders’ equity divided by the number of shares outstanding represents * a. return on equity b. earnings per share c. liquidation value per share d. book value per sharearrow_forward
- Bholaarrow_forwardWhich of the following items has no effect on the Accumulated Adjustments Account (AAA) of an S Corporation? O Short-Term Capital Loss. O Additional stock purchases by a sharehoklder of the S Corporation. O Cost Of Goods Sold. O Administrative Expenses.arrow_forwardHow much is the shareholder's equity?arrow_forward
- What does book value per share measure? Current selling price of stock Amount shareholder would receive if assets sold for book value and the company was liquidated Net assets Total equityarrow_forwardFor each item below, indicate to which category of elements of financial statements it belongs. (Asset, liabilities, equity, none of them) a. Retained earnings. c. Share Premium. e. Depreciation. g. Interest payable. i. Gain on sale of investment. b. Sales. d. Inventory. f. Loss on sale of equipment. h. Dividends. j. Issuance of ordinary shares.arrow_forwardPutt Corporation acquired 70 percent of Slice Company's voting common stock on January 1, 20X3, for $158,900. Slice reported common stock outstanding of $100,000 and retained earnings of $85,000. The fair value of the noncontrolling interest was $68,100 at the date of acquisition. Buildings and equipment held by Slice had a fair value $25,000 higher than book value. The remainder of the differential was assigned to a copyright held by Slice. Buildings and equipment had a 10-year remaining life and the copyright had a 5- year life at the date of acquisition. Trial balances for Putt and Slice on December 31, 20X5, are as follows: Putt Corporation Slice Company Debit Credit Debit Credit Cash $ 15,850 $ 58,000 Accounts Receivable 65,000 70,000 Interest & Other Receivables 30,000 10,000 Inventory 150,000 180,000 Land 80,000 60,000 Buildings & Equipment 315,000 240,000 Bond Discount 15,000 Investment in Slice Company 157,630 Cost of Goods Sold 375,000 110,000 Depreciation Expense 25,000…arrow_forward
- Which statement is incorrect? a. Book value per share is the claim of a shareholder in the net assets of the corporation for every share held in the corporation. b. If a corporation has 2 classes of shareholders, the book value per share should be computed for both preference shares and ordinary shares. c. Book value per share assumes that assets are realized at book values and liabilities are liquidated at book values. Total gains (losses) on realization of assets and liquidation of liabilities, if there are any, are assumed to sum up to zero. d. Excess over par refers to the amount of shareholders’ equity in excess of the total par value of the preference shares and ordinary shares issued by the corporation. e. none of the abovearrow_forwardThe amount attributable to every share outstanding in case a corporation is liquidated.A. book valueB. par valueC. stated valueD. Market valuearrow_forwardrdinary share capitalOrdinary share capitalWhich of the following items would not form part of the shareholders' equity of a company on the statement of financial position? Select one: a. Retained profits b. Trade payables c. Share premium d. Ordinary share capitalarrow_forward
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