Chap003
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Chap003

Course Number: ACCT 5140, Spring 2011

College/University: UCLA

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Chapter 03 - Consolidations - Subsequent to the Date of Acquisition Chapter 03 Consolidations - Subsequent to the Date of Acquisition Multiple Choice Questions 1. Which one of the following accounts would not appear in the consolidated financial statements at the end of the first fiscal period of the combination? A. Goodwill. B. Equipment. C. Investment in Subsidiary. D. Common Stock. E. Additional Paid-In...

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03 Chapter - Consolidations - Subsequent to the Date of Acquisition Chapter 03 Consolidations - Subsequent to the Date of Acquisition Multiple Choice Questions 1. Which one of the following accounts would not appear in the consolidated financial statements at the end of the first fiscal period of the combination? A. Goodwill. B. Equipment. C. Investment in Subsidiary. D. Common Stock. E. Additional Paid-In Capital. 2. Which of the following internal record-keeping methods can a parent choose to account for a subsidiary acquired in a business combination? A. Initial value or book value. B. Initial value, lower-of-cost-or-market-value, or equity. C. Initial value, equity, or partial equity. D. Initial value, equity, or book value. E. Initial value, lower-of-cost-or-market-value, or partial equity. 3. Which one of the following varies between the equity, initial value, and partial equity methods of accounting for an investment? A. The amount of consolidated net income. B. Total assets on the consolidated balance sheet. C. Total liabilities on the consolidated balance sheet. D. The balance in the investment account on the parent's books. E. The amount of consolidated cost of goods sold. 4. Under the partial equity method, the parent recognizes income when A. dividends are received from the investee. B. dividends are declared by the investee. C. the related expense has been incurred. D. the related contract is signed by the subsidiary. E. it is earned by the subsidiary. 3-1 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 5. Push-down accounting is concerned with the A. impact of the purchase on the subsidiary's financial statements. B. recognition of goodwill by the parent. C. correct consolidation of the financial statements. D. impact of the purchase on the separate financial statements of the parent. E. recognition of dividends received from the subsidiary. 6. Racer Corp. acquired all of the common stock of Tangiers Co. in 2009. Tangiers maintained its incorporation. Which of Racer's account balances would vary between the equity method and the initial value method? A. Goodwill, Investment in Tangiers Co., and Retained Earnings. B. Expenses, Investment in Tangiers Co., and Equity in Subsidiary Earnings. C. Investment in Tangiers Co., Equity in Subsidiary Earnings, and Retained Earnings. D. Common Stock, Goodwill, and Investment in Tangiers Co. E. Expenses, Goodwill, and Investment in Tangiers Co. 7. How does the partial equity method differ from the equity method? A. In the total assets reported on the consolidated balance sheet. B. In the treatment of dividends. C. In the total liabilities reported on the consolidated balance sheet. D. Under the partial equity method, subsidiary income does not increase the balance in the parent's investment account. E. Under the partial equity method, the balance in the investment account is not decreased by amortization on allocations made in the acquisition of the subsidiary. 8. Jansen Inc. acquired all of the outstanding common stock of Merriam Co. on January 1, 2010, for $257,000. Annual amortization of $19,000 resulted from this acquisition. Jansen reported net income of $70,000 in 2010 and $50,000 in 2011 and paid $22,000 in dividends each year. Merriam reported net income of $40,000 in 2010 and $47,000 in 2011 and paid $10,000 in dividends each year. What is the Investment in Merriam Co. balance on Jansen's books as of December 31, 2011, if the equity method has been applied? A. $286,000. B. $295,000. C. $276,000. D. $344,000. E. $324,000. 3-2 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 9. Velway Corp. acquired Joker Inc. on January 1, 2010. The parent paid more than the fair value of the subsidiary's net assets. On that date, Velway had equipment with a book value of $500,000 and a fair value of $640,000. Joker had equipment with a book value of $400,000 and a fair value of $470,000. Joker decided to use push-down accounting. Immediately after the acquisition, what Equipment amount would appear on Joker's separate balance sheet and on Velway's consolidated balance sheet, respectively? A. $400,000 and $900,000 B. $400,000 and $970,000 C. $470,000 and $900,000 D. $470,000 and $970,000 E. $470,000 and $1,040,000 10. Parrett Corp. acquired one hundred percent of Jones Inc. on January 1, 2009, at a price in excess of the subsidiary's fair value. On that date, Parrett's equipment (ten-year life) had a book value of $360,000 but a fair value of $480,000. Jones had equipment (ten-year life) with a book value of $240,000 and a fair value of $350,000. Parrett used the partial equity method to record its investment in Jones. On December 31, 2011, Parrett had equipment with a book value of $250,000 and a fair value of $400,000. Jones had equipment with a book value of $170,000 and a fair value of $320,000. What is the consolidated balance for the Equipment account as of December 31, 2011? A. $387,000. B. $497,000. C. $508.000. D. $537,000. E. $570,000. 3-3 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition On January 1, 2010, Cale Corp. paid $1,020,000 to acquire Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to account for the investment. The following information is available for Kaltop's assets, liabilities, and stockholders' equity accounts: Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000 during the year. 11. The 2010 total amortization of allocations is calculated to be A. $4,000. B. $6,400. C. $(2,400). D. $(1,000). E. $3,800. 12. In Cale's accounting records, what amount would appear on December 31, 2010 for equity in subsidiary earnings? A. $77,000. B. $79,000. C. $125,000. D. $127,000. E. $81,800. 3-4 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 13. What is the balance in Cale's investment in subsidiary account at the end of 2010? A. $1,099,000. B. $1,020,000. C. $1,096,200. D. $1,098,000. E. $1,144,400. 14. At the end of 2010, the consolidation entry to eliminate Cale's accrual of Kaltop's earnings would include a credit to Investment in Kaltop Co. for A. $124,400. B. $126,000. C. $127,000. D. $76,400. E. $0. 15. If Cale Corp. had net income of $444,000 in 2010, exclusive of the investment, what is the amount of consolidated net income? A. $569,000. B. $570,000. C. $571,000. D. $566,400. E. $444,000. On January 1, 2010, Franel Co. acquired all of the common stock of Hurlem Corp. For 2010, Hurlem earned net income of $360,000 and paid dividends of $190,000. Amortization of the patent allocation that was included in the acquisition was $6,000. 3-5 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 16. How much difference would there have been in Franel's income with regard to the effect of the investment, between using the equity method or using the initial value method of internal recordkeeping? A. $190,000. B. $360,000. C. $164,000. D. $354,000. E. $150,000. 17. How much difference would there have been in Franel's income with regard to the effect of the investment, between using the equity method or using the partial equity method of internal recordkeeping? A. $170,000. B. $354,000. C. $164,000. D. $6,000. E. $174,000. Cashen Co. paid $2,400,000 to acquire all of the common stock of Janex Corp. on January 1, 2010. Janex's reported earnings for 2010 totaled $432,000, and it paid $120,000 in dividends during the year. The amortization of allocations related to the investment was $24,000. Cashen's net income, not including the investment, was $3,180,000, and it paid dividends of $900,000. 18. On the consolidated financial statements for 2010, what amount should have been shown for Equity in Subsidiary Earnings? A. $432,000. B. $-0-. C. $408,000. D. $120,000. E. $288,000. 3-6 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 19. On the consolidated financial statements for 2010, what amount should have been shown for consolidated dividends? A. $900,000. B. $1,020,000. C. $876,000. D. $996,000. E. $948,000. 20. What is the amount of consolidated net income for the year 2010? A. $3,180,000. B. $3,612,000. C. $3,300,000. D. $3,588,000. E. $3,420,000. Jans Inc. acquired all of the outstanding common stock of Tysk Corp. on January 1, 2009, for $372,000. Equipment with a ten-year life was undervalued on Tysk's financial records by $46,000. Tysk also owned an unrecorded customer list with an assessed fair value of $67,000 and an estimated remaining life of five years. Tysk earned reported net income of $180,000 in 2009 and $216,000 in 2010. Dividends of $70,000 were paid in each of these two years. Selected account balances as of December 31, 2011, for the two companies follow. 21. If the partial equity method had been applied, what was 2011 consolidated net income? A. $840,000. B. $768,400. C. $822,000. D. $240,000. E. $600,000. 3-7 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 22. If the equity method had been applied, what would be the Investment in Tysk Corp. account balance within the records of Jans at the end of 2011? A. $612,100. B. $744,000. C. $774,150. D. $372,000. E. $844,150. 23. Red Co. acquired 100% of Green, Inc. on January 1, 2010. On that date, Green had inventory with a book value of $42,000 and a fair value of $52,000. This inventory had not yet been sold at December 31, 2010. Also, on the date of acquisition, Green had a building with a book value of $200,000 and a fair value of $390,000. Green had equipment with a book value of $350,000 and a fair value of $280,000. The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life. How much total expense will be in the consolidated financial statements for the year ended December 31, 2010 related to the acquisition allocations of Green? A. $43,000. B. $33,000. C. $ 5,000. D. $15,000. E. 0. 24. All of the following are acceptable methods to account for a majority-owned investment in subsidiary except A. The equity method. B. The initial value method. C. The partial equity method. D. The fair-value method. E. Book value method. 25. Under the equity method of accounting for an investment, A. The investment account remains at initial value. B. Dividends received are recorded as revenue. C. Goodwill is amortized over 20 years. D. Income reported by the subsidiary increases the investment account. E. Dividends received increase the investment account. 3-8 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 26. Under the partial equity method of accounting for an investment, A. The investment account remains at initial value. B. Dividends received are recorded as revenue. C. The allocations for excess fair value allocations over book value of net assets at date of acquisition are applied over their useful lives to reduce the investment account. D. Amortization of the excess of fair value allocations over book value is ignored in regard to the investment account. E. Dividends received increase the investment account. 27. Under the initial value method, when accounting for an investment in a subsidiary, A. Dividends received by the subsidiary decrease the investment account. B. The investment account is adjusted to fair value at year-end. C. Income reported by the subsidiary increases the investment account. D. The investment account remains at initial value. E. Dividends received are ignored. 28. According to GAAP regarding amortization of goodwill and other intangible assets, which of the following statements is true? A. Goodwill recognized in consolidation must be amortized over 20 years. B. Goodwill recognized in consolidation must be expensed in the period of acquisition. C. Goodwill recognized in consolidation will not be amortized but subject to an annual test for impairment. D. Goodwill recognized in consolidation can never be written off. E. Goodwill recognized in consolidation must be amortized over 40 years. 3-9 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 29. When a company applies the initial method in accounting for its investment in a subsidiary and the subsidiary reports income in excess of dividends paid, what entry would be made for a consolidation worksheet? A. A above B. B above C. C above D. D above E. E above 30. When a company applies the initial value method in accounting for its investment in a subsidiary and the subsidiary reports income less than dividends paid, what entry would be made for a consolidation worksheet? A. A above B. B above C. C above D. D above E. E above 3-10 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 31. When a company applies the partial equity method in accounting for its investment in a subsidiary and the subsidiary's equipment has a fair value greater than its book value, what consolidation worksheet entry is made in a year subsequent to the initial acquisition of the subsidiary? A. A above B. B above C. C above D. D above E. E above 32. When a company applies the partial equity method in accounting for its investment in a subsidiary and initial value, book values, and fair values of net assets acquired are all equal, what consolidation worksheet entry would be made? A. A above B. B above C. C above D. D above E. E above 3-11 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 33. When consolidating a subsidiary under the equity method, which of the following statements is true? A. Goodwill is never recognized. B. Goodwill required is amortized over 20 years. C. Goodwill may be recorded on the parent company's books. D. The value of any goodwill should be tested annually for impairment in value. E. Goodwill should be expensed in the year of acquisition. 34. When consolidating a subsidiary under the equity method, which of the following statements is true with regard to the subsidiary subsequent to the year of acquisition? A. All net assets are revalued to fair value and must be amortized over their useful lives. B. Only net assets that had excess fair value over book value when acquired by the parent must be amortized over their useful lives. C. All depreciable net assets are revalued to fair value at date of acquisition and must be amortized over their useful lives. D. Only depreciable net assets that have excess fair value over book value must be amortized over their useful lives. E. Only assets that have excess fair value over book value must be amortized over their useful lives. 35. Which of the following statements is false regarding push-down accounting? A. Push-down accounting simplifies the consolidation process. B. Fewer worksheet entries are necessary when push-down accounting is applied. C. Push-down accounting provides better information for internal evaluation. D. Push-down accounting must be applied for all business combinations under a pooling of interests. E. Push-down proponents argue that a change in ownership creates a new basis for subsidiary assets and liabilities. 3-12 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 36. Which of the following is false regarding contingent consideration in business combinations? A. Contingent consideration payable in cash is reported under liabilities. B. Contingent consideration payable in stock shares is reported under stockholders' equity. C. Contingent consideration is recorded because of its substantial probability of eventual payment. D. The contingent consideration fair value is recognized as part of the acquisition regardless of whether eventual payment is based on future performance of the target firm or future stock price of the acquirer. E. Contingent consideration is reflected in the acquirer's balance sheet at the present value of the potential expected future payment. 37. Factors that should be considered in determining the useful life of an intangible asset include A. Legal, regulatory, or contractual provisions. B. The residual value of the asset. C. The entity's expected use of the intangible asset. D. The effects of obsolescence, competition, and technological change. E. All of the above choices are used in determining the useful life of an intangible asset. 38. Consolidated net income using the equity method for an acquisition combination is computed as follows: A. Parent company's income from its own operations plus the equity from subsidiary's income recorded by the parent. B. Parent's reported net income. C. Combined revenues less combined expenses less equity in subsidiary's income less amortization of fair-value allocations in excess of book value. D. Parent's revenues less expenses for its own operations plus the equity from subsidiary's income recorded by parent. E. All of the above. 3-13 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2010, for $3,800 cash. As of that date Hurley has the following trial balance; Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life. FIFO inventory valuation method is used. 3-14 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 39. Compute the consideration transferred in excess of book value acquired at January 1, 2010. A. $150. B. $700. C. $2,200. D. $550. E. $2,900. 40. Compute goodwill, if any, at January 1, 2010. A. $150. B. $250. C. $700. D. $1,200. E. $550. 41. Compute the amount of Hurley's inventory that would be reported in a January 1, 2010, consolidated balance sheet. A. $800. B. $100. C. $900. D. $150. E. $0. 42. Compute the amount of Hurley's buildings that would be reported in a December 31, 2010, consolidated balance sheet. A. $1,560. B. $1,260. C. $1,440. D. $1,160. E. $1,140. 3-15 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 43. Compute the amount of Hurley's equipment that would be reported in a December 31, 2010, consolidated balance sheet. A. $1,000. B. $1,250. C. $875. D. $1,125. E. $750. 44. Compute the amount of total expenses reported in an income statement for the year ended December 31, 2010, in order to recognize acquisition-date allocations of fair value and book value differences. A. $140. B. $190. C. $260. D. $285. E. $310. 45. Compute the amount of Hurley's long-term liabilities that would be reported in a December 31, 2010, consolidated balance sheet. A. $1,800. B. $1,700. C. $1,725. D. $1,675. E. $3,500. 46. Compute the amount of Hurley's buildings that would be reported in a December 31, 2011, consolidated balance sheet. A. $1,620. B. $1,380. C. $1,320. D. $1,080. E. $1,500. 3-16 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 47. Compute the amount of Hurley's equipment that would be reported in a December 31, 2011, consolidated balance sheet. A. $0. B. $1,000. C. $1,250. D. $1,125. E. $1,200. 48. Compute the amount of Hurley's land that would be reported in a December 31, 2011, consolidated balance sheet. A. $900. B. $1,300. C. $400. D. $1,450. E. $2,200. 49. Compute the amount of Hurley's long-term liabilities that would be reported in a December 31, 2011, consolidated balance sheet. A. $1,700. B. $1,800. C. $1,650. D. $1,750. E. $3,500. Kaye Company acquired 100% of Fiore Company on January 1, 2011. Kaye paid $1,000 excess consideration over book value which is being amortized at $20 per year. Fiore reported net income of $400 in 2011 and paid dividends of $100. 3-17 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 50. Assume the equity method is applied. How much will Kaye's income increase or decrease as a result of Fiore's operations? A. $400 increase. B. $300 increase. C. $380 increase. D. $280 increase. E. $480 increase. 51. Assume the partial equity method is applied. How much will Kaye's income increase or decrease as a result of Fiore's operations? A. $400 increase. B. $300 increase. C. $380 increase. D. $280 increase. E. $480 increase. 52. Assume the initial value method is applied. How much will Kaye's income increase or decrease as a result of Fiore's operations? A. $400 increase. B. $300 increase. C. $380 increase. D. $100 increase. E. $210 increase. 3-18 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 53. Assume the partial equity method is used. In the years following acquisition, what additional worksheet entry must be made for consolidation purposes that is not required for the equity method? A. Entry A. B. Entry B. C. Entry C. D. Entry D. E. Entry E. 54. Assume the initial value method is used. In the year subsequent to acquisition, what additional worksheet entry must be made for consolidation purposes that is not required for the equity method? A. Entry A. B. Entry B. C. Entry C. D. Entry D. E. Entry E. 3-19 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 55. Hoyt Corporation agreed to the following terms in order to acquire the net assets of Brown Company on January 1, 2011: (1.) To issue 400 shares of common stock ($10 par) with a fair value of $45 per share. (2.) To assume Brown's liabilities which have a fair value of $1,500. On the date of acquisition, the consideration transferred for Hoyt's acquisition of Brown would be A. $18,000. B. $16,500. C. $20,000. D. $18,500. E. $19,500. Following are selected accounts for Green Corporation and Vega Company as of December 31, 2013. Several of Green's accounts have been omitted. Green acquired 100% of Vega on January 1, 2009, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2009, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment. 3-20 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 56. Compute the book value of Vega at January 1, 2009. A. $997,500. B. $857,500. C. $1,200,000. D. $1,600,000. E. $827,500. 57. Compute the December 31, 2013, consolidated revenues. A. $1,400,000. B. $800,000. C. $500,000. D. $1,590,375. E. $1,390,375. 58. Compute the December 31, 2013, consolidated total expenses. A. $620,000. B. $280,000. C. $900,000. D. $909,625. E. $299,625. 59. Compute the December 31, 2013, consolidated buildings. A. $1,037,500. B. $1,007,500. C. $1,000,000. D. $1,022,500. E. $1,012,500. 60. Compute the December 31, 2013, consolidated equipment. A. $800,000. B. $808,000. C. $840,000. D. $760,000. E. $848,000. 3-21 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 61. Compute the December 31, 2013, consolidated land. A. $220,000. B. $180,000. C. $670,000. D. $630,000. E. $450,000. 62. Compute the December 31, 2013, consolidated trademark. A. $50,000. B. $46,875. C. $0. D. $34,375. E. $37,500. 63. Compute the December 31, 2013, consolidated common stock. A. $450,000. B. $530,000. C. $555,000. D. $635,000. E. $525,000. 64. Compute the December 31, 2013, consolidated additional paid-in capital. A. $210,000. B. $75,000. C. $1,102,500. D. $942,500. E. $525,000. 65. Compute the December 31, 2013 consolidated retained earnings. A. $1,645,375. B. $1,350,000. C. $1,565,375. D. $1,840,375. E. $1,265,375. 3-22 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 66. Compute the equity in Vega's income to be included in Green's consolidated income statement for 2013. A. $500,000. B. $300,000. C. $190,375. D. $200,000. E. $290,375. 67. One company acquires another company in a combination accounted for as an acquisition. The acquiring company decides to apply the initial value method in accounting for the combination. What is one reason the acquiring company might have made this decision? A. It is the only method allowed by the SEC. B. It is relatively easy to apply. C. It is the only internal reporting method allowed by generally accepted accounting principles. D. Operating results on the parent's financial records reflect consolidated totals. E. When the initial method is used, no worksheet entries are required in the consolidation process. 68. One company acquires another company in a combination accounted for as an acquisition. The acquiring company decides to apply the equity method in accounting for the combination. What is one reason the acquiring company might have made this decision? A. It is the only method allowed by the SEC. B. It is relatively easy to apply. C. It is the only internal reporting method allowed by generally accepted accounting principles. D. Operating results on the parent's financial records reflect consolidated totals. E. When the equity method is used, no worksheet entries are required in the consolidation process. 3-23 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 69. When is a goodwill impairment loss recognized? A. Annually on a systematic and rational basis. B. Never. C. If both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying values. D. If the fair value of a reporting unit falls below its original acquisition price. E. Whenever the fair value of the entity declines significantly. 70. Which of the following will result in the recognition of an impairment loss on goodwill? A. Goodwill amortization is to be recognized annually on a systematic and rational basis. B. Both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying values. C. The fair value of the entity declines significantly. D. The fair value of a reporting unit falls below the original consideration transferred for the acquisition. E. The entity is investigated by the SEC and its reputation has been severely damaged. Goehler, Inc. acquires all of the voting stock of Kenneth, Inc. on January 4, 2010, at an amount in excess of Kenneth's fair value. On that date, Kenneth has equipment with a book value of $90,000 and a fair value of $120,000 (10-year remaining life). Goehler has equipment with a book value of $800,000 and a fair value of $1,200,000 (10-year remaining life). On December 31, 2011, Goehler has equipment with a book value of $975,000 but a fair value of $1,350,000 and Kenneth has equipment with a book value of $105,000 but a fair value of $125,000. 71. If Goehler applies the equity method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2011? A. $1,080,000. B. $1,104,000. C. $1,100,000. D. $1,468,000. E. $1,475,000. 3-24 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 72. If Goehler applies the partial equity method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2011? A. $1,080,000. B. $1,104,000. C. $1,100,000. D. $1,468,000. E. $1,475,000. 73. If Goehler applies the initial value method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2011? A. $1,080,000. B. $1,104,000. C. $1,100,000. D. $1,468,000. E. $1,475,000. 74. How is the fair value allocation of an intangible asset allocated to expense when the asset has no legal, regulatory, contractual, competitive, economic, or other factors that limit its life? A. Equally over 20 years. B. Equally over 40 years. C. Equally over 20 years with an annual impairment review. D. No amortization, but annually reviewed for impairment and adjusted accordingly. E. No amortization over an indefinite period time. Harrison, Inc. acquires 100% of the voting stock of Rhine Company on January 1, 2010 for $400,000 cash. A contingent payment of $16,500 will be paid on April 15, 2011 if Rhine generates cash flows from operations of $27,000 or more in the next year. Harrison estimates that there is a 20% probability that Rhine will generate at least $27,000 next year, and uses an interest rate of 5% to incorporate the time value of money. The fair value of $16,500 at 5%, using a probability weighted approach, is $3,142. 3-25 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 75. What will Harrison record as its Investment in Rhine on January 1, 2010? A. $400,000. B. $403,142. C. $406,000. D. $409,142. E. $416,500. 76. Assuming Rhine generates cash flow from operations of $27,200 in 2010, how will Harrison record the $16,500 payment of cash on April 15, 2011 in satisfaction of its contingent obligation? A. Debit Contingent performance obligation $16,500, and Credit Cash $16,500. B. Debit Contingent performance obligation $3,142, debit Loss from revaluation of contingent performance obligation $13,358, and Credit Cash $16,500. C. Debit Investment in Subsidiary and Credit Cash, $16,500. D. Debit Goodwill and Credit Cash, $16,500. E. No entry. 77. When recording consideration transferred for the acquisition of Rhine on January 1, 2010, Harrison will record a contingent performance obligation in the amount of: A. $628.40. B. $2,671.60. C. $3,142. D. $13,358. E. $16,500. Beatty, Inc. acquires 100% of the voting stock of Gataux Company on January 1, 2010 for $500,000 cash. A contingent payment of $12,000 will be paid on April 1, 2011 if Gataux generates cash flows from operations of $26,500 or more in the next year. Beatty estimates that there is a 30% probability that Gataux will generate at least $26,500 next year, and uses an interest rate of 4% to incorporate the time value of money. The fair value of $12,000 at 4%, using a probability weighted approach, is $3,461. 3-26 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 78. What will Beatty record as its Investment in Gataux on January 1, 2010? A. $500,000. B. $503,461. C. $512,000. D. $515,461. E. $526,500. 79. Assuming Gataux generates cash flow from operations of $27,200 in 2010, how will Beatty record the $12,000 payment of cash on April 1, 2011 in satisfaction of its contingent obligation? A. Debit Contingent performance obligation $3,461, debit Goodwill $8,539, and Credit Cash $12,000. B. Debit Contingent performance obligation $3,461, debit Loss from revaluation of contingent performance obligation $8,539, and Credit Cash $12,000. C. Debit Goodwill and Credit Cash, $12,000. D. Debit Goodwill $27,200, credit Contingent performance obligation $15,200, and Credit Cash $12,000. E. No entry. 80. When recording consideration transferred for the acquisition of Gataux on January 1, 2010, Beatty will record a contingent performance obligation in the amount of: A. $692.20. B. $3,040. C. $3,461. D. $12,000. E. $15,200. Prince Company acquires Duchess, Inc. on January 1, 2009. The consideration transferred exceeds the fair value of Duchess' net assets. On that date, Prince has a building with a book value of $1,200,000 and a fair value of $1,500,000. Duchess has a building with a book value of $400,000 and fair value of $500,000. 3-27 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 81. If push-down accounting is used, what amounts in the Building account appear in Duchess' separate balance sheet and in the consolidated balance sheet immediately after acquisition? A. $400,000 and $1,600,000. B. $500,000 and $1,700,000. C. $400,000 and $1,700,000. D. $500,000 and $2,000,000. E. $500,000 and $1,600,000. 82. If push-down accounting is not used, what amounts in the Building account appear on Duchess' separate balance sheet and on the consolidated balance sheet immediately after acquisition? A. $400,000 and $1,600,000. B. $500,000 and $1,700,000. C. $400,000 and $1,700,000. D. $500,000 and $2,000,000. E. $500,000 and $1,600,000. Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2010. At that date, Glen owns only three assets and has no liabilities: 83. If Watkins pays $450,000 in cash for Glen, what amount would be represented as the subsidiary's Building in a consolidation at December 31, 2012, assuming the book value of the building at that date is still $200,000? A. $200,000. B. $285,000. C. $290,000. D. $295,000. E. $300,000. 3-28 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 84. If Watkins pays $400,000 in cash for Glen, what amount would be represented as the subsidiary's Building in a consolidation at December 31, 2012, assuming the book value of the building at that date is still $200,000? A. $200,000. B. $285,000. C. $260,000. D. $268,000. E. $300,000. 85. If Watkins pays $450,000 in cash for Glen, what amount would be represented as the subsidiary's Equipment in a consolidation at December 31, 2012, assuming the book value of the equipment at that date is still $80,000? A. $70,000. B. $73,500. C. $75,000. D. $76,500. E. $80,000. 86. If Watkins pays $450,000 in cash for Glen, what acquisition-date fair value allocation, net of amortization, should be attributed to the subsidiary's Equipment in consolidation at December 31, 2012? A. $(5,000). B. $80,000. C. $75,000. D. $73,500. E. $(3,500). 87. If Watkins pays $300,000 in cash for Glen, at what amount would the subsidiary's Building be represented in a January 2, 2010 consolidation? A. $200,000. B. $225,000. C. $273,000. D. $279,000. E. $300,000. 3-29 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 88. If Watkins pays $450,000 in cash for Glen, at what amount would Glen's Inventory acquired be represented in a December 31, 2010 consolidated balance sheet? A. $40,000. B. $50,000. C. $0. D. $10,000. E. $90,000. 89. If Watkins pays $450,000 in cash for Glen, and Glen earns $50,000 in net income and pays $20,000 in dividends during 2010, what amount would be reflected in consolidated net income for 2010 as a result of the acquisition? A. $20,000 under the initital value method. B. $30,000 under the partial equity method. C. $50,000 under the partial equity method. D. $44,500 under the equity method. E. $34,500 regardless of the internal accounting method used. Essay Questions 90. For an acquisition when the subsidiary retains its incorporation, which method of internal recordkeeping is the easiest for the parent to use? 3-30 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 91. For an acquisition when the subsidiary retains its incorporation, which method of internal recordkeeping gives the most accurate portrayal of the accounting results for the entire business combination? 92. For an acquisition when the subsidiary maintains its incorporation, under the partial equity method, what adjustments are made to the balance of the investment account? 93. From which methods can a parent choose for its internal recordkeeping related to the operations of a subsidiary? 94. What accounting method requires a subsidiary to record acquisition fair value allocations and the amortization of allocations in its internal accounting records? 3-31 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 95. What is the partial equity method? How does it differ from the equity method? What are its advantages and disadvantages compared to the equity method? 96. What advantages might push-down accounting offer for internal reporting? 97. What is the basic objective of all consolidations? 98. Yules Co. acquired Noel Co. in an acquisition transaction. Yules decided to use the partial equity method to account for the investment. The current balance in the investment account is $416,000. Describe in words how this balance was derived. 3-32 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 99. Paperless Co. acquired Sheetless Co. and in effecting this business combination, there was a cash-flow performance contingency to be paid in cash, and a market-price performance contingency to be paid in additional shares of stock. In what accounts and in what section(s) of a consolidated balance sheet are these contingent consideration items shown? 100. Avery Company acquires Billings Company in a combination accounted for as an acquisition and adopts the equity method to account for Investment in Billings. At the end of four years, the Investment in Billings account on Avery's books is $198,984. What items constitute this balance? 101. Dutch Co. has loaned $90,000 to its subsidiary, Hans Corp., which retains separate incorporation. How would this loan be treated on a consolidated balance sheet? 3-33 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 102. An acquisition transaction results in $90,000 of goodwill. Several years later a worksheet is being produced to consolidate the two companies. Describe in words at what amount goodwill will be reported at this date. 103. Why is push-down accounting a popular internal reporting technique? 104. On January 1, 2010, Jumper Co. acquired all of the common stock of Cable Corp. for $540,000. Annual amortization associated with the purchase amounted to $1,800. During 2010, Cable earned net income of $54,000 and paid dividends of $24,000. Cable's net income and dividends for 2011 were $86,000 and $24,000, respectively. Required: Assuming that Jumper decided to use the partial equity method, prepare a schedule to show the balance in the investment account at the end of 2011. 3-34 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 105. Hanson Co. acquired all of the common stock of Roberts Inc. on January 1, 2010, transferring consideration in an amount slightly more than the fair value of Roberts' net assets. At that time, Roberts had buildings with a twenty-year useful life, a book value of $600,000, and a fair value of $696,000. On December 31, 2011, Roberts had buildings with a book value of $570,000 and a fair value of $648,000. On that date, Hanson had buildings with a book value of $1,878,000 and a fair value of $2,160,000. Required: What amount should be shown for buildings on the consolidated balance sheet dated December 31, 2011? 106. Carnes Co. decided to use the partial equity method to account for its investment in Domino Corp. An unamortized trademark associated with the acquisition was $30,000, and Carnes decided to amortize the trademark over ten years. For 2011, Carnes' Equity in Subsidiary Earnings was $78,000. Required: What balance would have been in the Equity in Subsidiary Earnings account if Carnes had used equity accounting? 107. If the parent's net income reflected use of the equity method, what were the consolidated retained earnings on December 31, 2011? 8 3-35 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 108. If the parent's net income reflected use of the partial equity method, what were the consolidated retained earnings on December 31, 2011? 8 109. If the parent's net income reflected use of the initial value method, what were the consolidated retained earnings on December 31, 2011? 8 3-36 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition Jaynes Inc. acquired all of Aaron Co.'s common stock on January 1, 2010, by issuing 11,000 shares of $1 par value common stock. Jaynes' shares had a $17 per share fair value. On that date, Aaron reported a net book value of $120,000. However, its equipment (with a five-year remaining life) was undervalued by $6,000 in the company's accounting records. Any excess of consideration transferred over fair value of assets and liabilities is assigned to an unrecorded patent to be amortized over ten years. 110. What balance would Jaynes' Investment in Aaron Co. account have shown on December 31, 2010, when the equity method was applied for this acquisition? 3-37 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 111. What was consolidated net income for the year ended December 31, 2011? 112. What was consolidated equipment as of December 31, 2011? 113. What was consolidated patents as of December 31, 2011? Utah Inc. acquired all of the outstanding common stock of Trimmer Corp. on January 1, 2009. At that date, Trimmer owned only three assets and had no liabilities: 3-38 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 114. If Utah paid $300,000 in cash for Trimmer, what allocation should have been assigned to the subsidiary's Building account and its Equipment account in a December 31, 2011 consolidation? 3-39 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 115. Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2010. As of that date, Jackson had the following trial balance: During 2010, Jackson reported net income of $96,000 while paying dividends of $12,000. During 2011, Jackson reported net income of $132,000 while paying dividends of $36,000. Assume that Matthews Co. acquired the common stock of Jackson Co. for $588,000 in cash. As of January 1, 2010, Jackson's land had a fair value of $102,000, its buildings were valued at $188,000, and its equipment was appraised at $216,000. Any excess of consideration transferred over fair value of assets and liabilities acquired is due to an unamortized patent to be amortized over 10 years. Matthews decided to use the equity method for this investment. Required: (A.) Prepare consolidation worksheet entries for December 31, 2010. (B.) Prepare consolidation worksheet entries for December 31, 2011. 3-40 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 116. On January 1, 2009, Rand Corp. issued shares of its common stock to acquire all of the outstanding common stock of Spaulding Inc. Spaulding's book value was only $140,000 at the time, but Rand issued 12,000 shares having a par value of $1 per share and a fair value of $20 per share. Rand was willing to convey these shares because it felt that buildings (ten-year life) were undervalued on Spaulding's records by $60,000 while equipment (five-year life) was undervalued by $25,000. Any consideration transferred over fair value of identified net assets acquired is assigned to goodwill. Following are the individual financial records for these two companies for the year ended December 31, 2012. Required: Prepare a consolidation worksheet for this business combination. 3-41 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition Pritchett Company recently acquired three businesses, recognizing goodwill in each acquisition. Destin has allocated its acquired goodwill to its three reporting units: Apple, Banana, and Carrot. Pritchett provides the following information in performing the 2011 annual review for impairment: 117. Which of Pritchett's reporting units require both steps to test for goodwill impairment? 118. How much goodwill impairment should Pritchett report for 2011? 3-42 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition On 4/1/09, Sey Mold Corporation acquired 100% of DotDot.Com for $2,000,000 cash. On the date of acquisition, DotDot's net book value was $900,000. DotDot's assets included land that was undervalued by $300,000, a building that was undervalued by $400,000, and equipment that was overvalued by $50,000. The building had a remaining useful life of 8 years and the equipment had a remaining useful life of 4 years. Any excess fair value over consideration transferred is allocated to an undervalued patent and is amortized over 5 years. 119. Determine the amortization expense related to the combination at the year-end date of 12/31/09. 120. Determine the amortization expense related to the combination at the year-end date of 12/31/13. 121. Determine the amortization expense related to the consolidation at the year-end date of 12/31/19. 3-43 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition Matching Questions 122. For each of the following situations, select the best answer that applies to consolidating financial information subsequent to the acquisition date: 1. Initial value method, partial equity method, and equity method 2. Partial equity method and equity method but not initial value method 3. Initial value method and partial equity method but not equity method Method(s) available to the parent for internal record-keeping. ____ Easiest internal record-keeping method to apply. ____ ____ ____ ____ ____ ____ ____ ____ Income of the subsidiary is recorded by the parent when earned. Designed to create a parallel between the parent's investment accounts and changes in the 4. Initial value method underlying equity of the acquired company. For years subsequent to acquisition, requires 5. Initial value method the *C entry. 6. Partial equity method Uses the cash basis for income recognition. Investment account remains at initially 7. Initial value method recorded amount. Dividends received by the parent from the subsidiary reduce the parent's investment 8. Equity method account. Often referred to in accounting as a single9. Equity method line consolidation. Increases the investment account for 10. Partial equity method subsidiary earnings, but does not decrease the and equity method but not subsidiary account for equity adjustments such as initial value method amortizations. ____ 3-44 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition Chapter 03 Consolidations - Subsequent to the Date of Acquisition Answer Key Multiple Choice Questions 1. Which one of the following accounts would not appear in the consolidated financial statements at the end of the first fiscal period of the combination? A. Goodwill. B. Equipment. C. Investment in Subsidiary. D. Common Stock. E. Additional Paid-In Capital. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. 3-45 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 2. Which of the following internal record-keeping methods can a parent choose to account for a subsidiary acquired in a business combination? A. Initial value or book value. B. Initial value, lower-of-cost-or-market-value, or equity. C. Initial value, equity, or partial equity. D. Initial value, equity, or book value. E. Initial value, lower-of-cost-or-market-value, or partial equity. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Easy Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 3. Which one of the following varies between the equity, initial value, and partial equity methods of accounting for an investment? A. The amount of consolidated net income. B. Total assets on the consolidated balance sheet. C. Total liabilities on the consolidated balance sheet. D. The balance in the investment account on the parent's books. E. The amount of consolidated cost of goods sold. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Medium Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. 3-46 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 4. Under the partial equity method, the parent recognizes income when A. dividends are received from the investee. B. dividends are declared by the investee. C. the related expense has been incurred. D. the related contract is signed by the subsidiary. E. it is earned by the subsidiary. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Easy Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 5. Push-down accounting is concerned with the A. impact of the purchase on the subsidiary's financial statements. B. recognition of goodwill by the parent. C. correct consolidation of the financial statements. D. impact of the purchase on the separate financial statements of the parent. E. recognition of dividends received from the subsidiary. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Medium Learning Objective: 03-08 Understand in general the requirements of pushdown accounting and when its use is appropriate. 6. Racer Corp. acquired all of the common stock of Tangiers Co. in 2009. Tangiers maintained its incorporation. Which of Racer's account balances would vary between the equity method and the initial value method? A. Goodwill, Investment in Tangiers Co., and Retained Earnings. B. Expenses, Investment in Tangiers Co., and Equity in Subsidiary Earnings. C. Investment in Tangiers Co., Equity in Subsidiary Earnings, and Retained Earnings. D. Common Stock, Goodwill, and Investment in Tangiers Co. E. Expenses, Goodwill, and Investment in Tangiers Co. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Hard Learning Objective: 03-04a The equity method. Learning Objective: 03-04b The initial value method. 3-47 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 7. How does the partial equity method differ from the equity method? A. In the total assets reported on the consolidated balance sheet. B. In the treatment of dividends. C. In the total liabilities reported on the consolidated balance sheet. D. Under the partial equity method, subsidiary income does not increase the balance in the parent's investment account. E. Under the partial equity method, the balance in the investment account is not decreased by amortization on allocations made in the acquisition of the subsidiary. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. Learning Objective: 03-04a The equity method. Learning Objective: 03-04c The partial equity method. 8. Jansen Inc. acquired all of the outstanding common stock of Merriam Co. on January 1, 2010, for $257,000. Annual amortization of $19,000 resulted from this acquisition. Jansen reported net income of $70,000 in 2010 and $50,000 in 2011 and paid $22,000 in dividends each year. Merriam reported net income of $40,000 in 2010 and $47,000 in 2011 and paid $10,000 in dividends each year. What is the Investment in Merriam Co. balance on Jansen's books as of December 31, 2011, if the equity method has been applied? A. $286,000. B. $295,000. C. $276,000. D. $344,000. E. $324,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. Learning Objective: 03-04a The equity method. 3-48 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 9. Velway Corp. acquired Joker Inc. on January 1, 2010. The parent paid more than the fair value of the subsidiary's net assets. On that date, Velway had equipment with a book value of $500,000 and a fair value of $640,000. Joker had equipment with a book value of $400,000 and a fair value of $470,000. Joker decided to use push-down accounting. Immediately after the acquisition, what Equipment amount would appear on Joker's separate balance sheet and on Velway's consolidated balance sheet, respectively? A. $400,000 and $900,000 B. $400,000 and $970,000 C. $470,000 and $900,000 D. $470,000 and $970,000 E. $470,000 and $1,040,000 AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-08 Understand in general the requirements of pushdown accounting and when its use is appropriate. 10. Parrett Corp. acquired one hundred percent of Jones Inc. on January 1, 2009, at a price in excess of the subsidiary's fair value. On that date, Parrett's equipment (ten-year life) had a book value of $360,000 but a fair value of $480,000. Jones had equipment (ten-year life) with a book value of $240,000 and a fair value of $350,000. Parrett used the partial equity method to record its investment in Jones. On December 31, 2011, Parrett had equipment with a book value of $250,000 and a fair value of $400,000. Jones had equipment with a book value of $170,000 and a fair value of $320,000. What is the consolidated balance for the Equipment account as of December 31, 2011? A. $387,000. B. $497,000. C. $508.000. D. $537,000. E. $570,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 03-04c The partial equity method. 3-49 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition On January 1, 2010, Cale Corp. paid $1,020,000 to acquire Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to account for the investment. The following information is available for Kaltop's assets, liabilities, and stockholders' equity accounts: Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000 during the year. 11. The 2010 total amortization of allocations is calculated to be A. $4,000. B. $6,400. C. $(2,400). D. $(1,000). E. $3,800. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. Learning Objective: 03-04a The equity method. 3-50 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 12. In Cale's accounting records, what amount would appear on December 31, 2010 for equity in subsidiary earnings? A. $77,000. B. $79,000. C. $125,000. D. $127,000. E. $81,800. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. Learning Objective: 03-04a The equity method. 13. What is the balance in Cale's investment in subsidiary account at the end of 2010? A. $1,099,000. B. $1,020,000. C. $1,096,200. D. $1,098,000. E. $1,144,400. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. Learning Objective: 03-04a The equity method. 3-51 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 14. At the end of 2010, the consolidation entry to eliminate Cale's accrual of Kaltop's earnings would include a credit to Investment in Kaltop Co. for A. $124,400. B. $126,000. C. $127,000. D. $76,400. E. $0. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-04a The equity method. 15. If Cale Corp. had net income of $444,000 in 2010, exclusive of the investment, what is the amount of consolidated net income? A. $569,000. B. $570,000. C. $571,000. D. $566,400. E. $444,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-04a The equity method. On January 1, 2010, Franel Co. acquired all of the common stock of Hurlem Corp. For 2010, Hurlem earned net income of $360,000 and paid dividends of $190,000. Amortization of the patent allocation that was included in the acquisition was $6,000. 3-52 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 16. How much difference would there have been in Franel's income with regard to the effect of the investment, between using the equity method or using the initial value method of internal recordkeeping? A. $190,000. B. $360,000. C. $164,000. D. $354,000. E. $150,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. Learning Objective: 03-04a The equity method. Learning Objective: 03-04b The initial value method. 17. How much difference would there have been in Franel's income with regard to the effect of the investment, between using the equity method or using the partial equity method of internal recordkeeping? A. $170,000. B. $354,000. C. $164,000. D. $6,000. E. $174,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Easy Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. Learning Objective: 03-04a The equity method. Learning Objective: 03-04c The partial equity method. Cashen Co. paid $2,400,000 to acquire all of the common stock of Janex Corp. on January 1, 2010. Janex's reported earnings for 2010 totaled $432,000, and it paid $120,000 in dividends during the year. The amortization of allocations related to the investment was $24,000. Cashen's net income, not including the investment, was $3,180,000, and it paid dividends of $900,000. 3-53 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 18. On the consolidated financial statements for 2010, what amount should have been shown for Equity in Subsidiary Earnings? A. $432,000. B. $-0-. C. $408,000. D. $120,000. E. $288,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 19. On the consolidated financial statements for 2010, what amount should have been shown for consolidated dividends? A. $900,000. B. $1,020,000. C. $876,000. D. $996,000. E. $948,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Easy Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-54 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 20. What is the amount of consolidated net income for the year 2010? A. $3,180,000. B. $3,612,000. C. $3,300,000. D. $3,588,000. E. $3,420,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. Jans Inc. acquired all of the outstanding common stock of Tysk Corp. on January 1, 2009, for $372,000. Equipment with a ten-year life was undervalued on Tysk's financial records by $46,000. Tysk also owned an unrecorded customer list with an assessed fair value of $67,000 and an estimated remaining life of five years. Tysk earned reported net income of $180,000 in 2009 and $216,000 in 2010. Dividends of $70,000 were paid in each of these two years. Selected account balances as of December 31, 2011, for the two companies follow. 3-55 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 21. If the partial equity method had been applied, what was 2011 consolidated net income? A. $840,000. B. $768,400. C. $822,000. D. $240,000. E. $600,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 03-04c The partial equity method. 22. If the equity method had been applied, what would be the Investment in Tysk Corp. account balance within the records of Jans at the end of 2011? A. $612,100. B. $744,000. C. $774,150. D. $372,000. E. $844,150. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. Learning Objective: 03-04a The equity method. 3-56 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 23. Red Co. acquired 100% of Green, Inc. on January 1, 2010. On that date, Green had inventory with a book value of $42,000 and a fair value of $52,000. This inventory had not yet been sold at December 31, 2010. Also, on the date of acquisition, Green had a building with a book value of $200,000 and a fair value of $390,000. Green had equipment with a book value of $350,000 and a fair value of $280,000. The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life. How much total expense will be in the consolidated financial statements for the year ended December 31, 2010 related to the acquisition allocations of Green? A. $43,000. B. $33,000. C. $ 5,000. D. $15,000. E. 0. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 24. All of the following are acceptable methods to account for a majority-owned investment in subsidiary except A. The equity method. B. The initial value method. C. The partial equity method. D. The fair-value method. E. Book value method. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Easy Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 3-57 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 25. Under the equity method of accounting for an investment, A. The investment account remains at initial value. B. Dividends received are recorded as revenue. C. Goodwill is amortized over 20 years. D. Income reported by the subsidiary increases the investment account. E. Dividends received increase the investment account. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Easy Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 26. Under the partial equity method of accounting for an investment, A. The investment account remains at initial value. B. Dividends received are recorded as revenue. C. The allocations for excess fair value allocations over book value of net assets at date of acquisition are applied over their useful lives to reduce the investment account. D. Amortization of the excess of fair value allocations over book value is ignored in regard to the investment account. E. Dividends received increase the investment account. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 27. Under the initial value method, when accounting for an investment in a subsidiary, A. Dividends received by the subsidiary decrease the investment account. B. The investment account is adjusted to fair value at year-end. C. Income reported by the subsidiary increases the investment account. D. The investment account remains at initial value. E. Dividends received are ignored. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 3-58 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 28. According to GAAP regarding amortization of goodwill and other intangible assets, which of the following statements is true? A. Goodwill recognized in consolidation must be amortized over 20 years. B. Goodwill recognized in consolidation must be expensed in the period of acquisition. C. Goodwill recognized in consolidation will not be amortized but subject to an annual test for impairment. D. Goodwill recognized in consolidation can never be written off. E. Goodwill recognized in consolidation must be amortized over 40 years. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Easy Learning Objective: 03-05 Discuss the rationale for the goodwill impairment testing approach. 29. When a company applies the initial method in accounting for its investment in a subsidiary and the subsidiary reports income in excess of dividends paid, what entry would be made for a consolidation worksheet? A. A above B. B above C. C above D. D above E. E above AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 03-04b The initial value method. 3-59 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 30. When a company applies the initial value method in accounting for its investment in a subsidiary and the subsidiary reports income less than dividends paid, what entry would be made for a consolidation worksheet? A. A above B. B above C. C above D. D above E. E above AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 03-04b The initial value method. 3-60 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 31. When a company applies the partial equity method in accounting for its investment in a subsidiary and the subsidiary's equipment has a fair value greater than its book value, what consolidation worksheet entry is made in a year subsequent to the initial acquisition of the subsidiary? A. A above B. B above C. C above D. D above E. E above AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 03-04c The partial equity method. 3-61 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 32. When a company applies the partial equity method in accounting for its investment in a subsidiary and initial value, book values, and fair values of net assets acquired are all equal, what consolidation worksheet entry would be made? A. A above B. B above C. C above D. D above E. E above AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 03-04c The partial equity method. 33. When consolidating a subsidiary under the equity method, which of the following statements is true? A. Goodwill is never recognized. B. Goodwill required is amortized over 20 years. C. Goodwill may be recorded on the parent company's books. D. The value of any goodwill should be tested annually for impairment in value. E. Goodwill should be expensed in the year of acquisition. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Easy Learning Objective: 03-05 Discuss the rationale for the goodwill impairment testing approach. 3-62 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 34. When consolidating a subsidiary under the equity method, of which the following statements is true with regard to the subsidiary subsequent to the year of acquisition? A. All net assets are revalued to fair value and must be amortized over their useful lives. B. Only net assets that had excess fair value over book value when acquired by the parent must be amortized over their useful lives. C. All depreciable net assets are revalued to fair value at date of acquisition and must be amortized over their useful lives. D. Only depreciable net assets that have excess fair value over book value must be amortized over their useful lives. E. Only assets that have excess fair value over book value must be amortized over their useful lives. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. Learning Objective: 03-04a The equity method. 35. Which of the following statements is false regarding push-down accounting? A. Push-down accounting simplifies the consolidation process. B. Fewer worksheet entries are necessary when push-down accounting is applied. C. Push-down accounting provides better information for internal evaluation. D. Push-down accounting must be applied for all business combinations under a pooling of interests. E. Push-down proponents argue that a change in ownership creates a new basis for subsidiary assets and liabilities. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Easy Learning Objective: 03-08 Understand in general the requirements of pushdown accounting and when its use is appropriate. 3-63 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 36. Which of the following is false regarding contingent consideration in business combinations? A. Contingent consideration payable in cash is reported under liabilities. B. Contingent consideration payable in stock shares is reported under stockholders' equity. C. Contingent consideration is recorded because of its substantial probability of eventual payment. D. The contingent consideration fair value is recognized as part of the acquisition regardless of whether eventual payment is based on future performance of the target firm or future stock price of the acquirer. E. Contingent consideration is reflected in the acquirer's balance sheet at the present value of the potential expected future payment. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Medium Learning Objective: 03-07 Understand the accounting and reporting for contingent consideration subsequent to a business acquisition. 37. Factors that should be considered in determining the useful life of an intangible asset include A. Legal, regulatory, or contractual provisions. B. The residual value of the asset. C. The entity's expected use of the intangible asset. D. The effects of obsolescence, competition, and technological change. E. All of the above choices are used in determining the useful life of an intangible asset. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Medium Learning Objective: 03-06 Describe the procedures for conducting a goodwill impairment test. 3-64 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 38. Consolidated net income using the equity method for an acquisition combination is computed as follows: A. Parent company's income from its own operations plus the equity from subsidiary's income recorded by the parent. B. Parent's reported net income. C. Combined revenues less combined expenses less equity in subsidiary's income less amortization of fair-value allocations in excess of book value. D. Parent's revenues less expenses for its own operations plus the equity from subsidiary's income recorded by parent. E. All of the above. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Medium Learning Objective: 03-04a The equity method. 3-65 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2010, for $3,800 cash. As of that date Hurley has the following trial balance; Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life. FIFO inventory valuation method is used. 3-66 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 39. Compute the consideration transferred in excess of book value acquired at January 1, 2010. A. $150. B. $700. C. $2,200. D. $550. E. $2,900. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Easy Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 40. Compute goodwill, if any, at January 1, 2010. A. $150. B. $250. C. $700. D. $1,200. E. $550. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-67 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 41. Compute the amount of Hurley's inventory that would be reported in a January 1, 2010, consolidated balance sheet. A. $800. B. $100. C. $900. D. $150. E. $0. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 42. Compute the amount of Hurley's buildings that would be reported in a December 31, 2010, consolidated balance sheet. A. $1,560. B. $1,260. C. $1,440. D. $1,160. E. $1,140. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-68 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 43. Compute the amount of Hurley's equipment that would be reported in a December 31, 2010, consolidated balance sheet. A. $1,000. B. $1,250. C. $875. D. $1,125. E. $750. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 44. Compute the amount of total expenses reported in an income statement for the year ended December 31, 2010, in order to recognize acquisition-date allocations of fair value and book value differences. A. $140. B. $190. C. $260. D. $285. E. $310. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-69 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 45. Compute the amount of Hurley's long-term liabilities that would be reported in a December 31, 2010, consolidated balance sheet. A. $1,800. B. $1,700. C. $1,725. D. $1,675. E. $3,500. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 46. Compute the amount of Hurley's buildings that would be reported in a December 31, 2011, consolidated balance sheet. A. $1,620. B. $1,380. C. $1,320. D. $1,080. E. $1,500. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-70 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 47. Compute the amount of Hurley's equipment that would be reported in a December 31, 2011, consolidated balance sheet. A. $0. B. $1,000. C. $1,250. D. $1,125. E. $1,200. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 48. Compute the amount of Hurley's land that would be reported in a December 31, 2011, consolidated balance sheet. A. $900. B. $1,300. C. $400. D. $1,450. E. $2,200. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-71 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 49. Compute the amount of Hurley's long-term liabilities that would be reported in a December 31, 2011, consolidated balance sheet. A. $1,700. B. $1,800. C. $1,650. D. $1,750. E. $3,500. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. Kaye Company acquired 100% of Fiore Company on January 1, 2011. Kaye paid $1,000 excess consideration over book value which is being amortized at $20 per year. Fiore reported net income of $400 in 2011 and paid dividends of $100. 50. Assume the equity method is applied. How much will Kaye's income increase or decrease as a result of Fiore's operations? A. $400 increase. B. $300 increase. C. $380 increase. D. $280 increase. E. $480 increase. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 3-72 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 51. Assume the partial equity method is applied. How much will Kaye's income increase or decrease as a result of Fiore's operations? A. $400 increase. B. $300 increase. C. $380 increase. D. $280 increase. E. $480 increase. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 52. Assume the initial value method is applied. How much will Kaye's income increase or decrease as a result of Fiore's operations? A. $400 increase. B. $300 increase. C. $380 increase. D. $100 increase. E. $210 increase. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 3-73 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 53. Assume the partial equity method is used. In the years following acquisition, what additional worksheet entry must be made for consolidation purposes that is not required for the equity method? A. Entry A. B. Entry B. C. Entry C. D. Entry D. E. Entry E. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 03-04c The partial equity method. 3-74 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 54. Assume the initial value method is used. In the year subsequent to acquisition, what additional worksheet entry must be made for consolidation purposes that is not required for the equity method? A. Entry A. B. Entry B. C. Entry C. D. Entry D. E. Entry E. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Hard Learning Objective: 03-04b The initial value method. 3-75 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 55. Hoyt Corporation agreed to the following terms in order to acquire the net assets of Brown Company on January 1, 2011: (1.) To issue 400 shares of common stock ($10 par) with a fair value of $45 per share. (2.) To assume Brown's liabilities which have a fair value of $1,500. On the date of acquisition, the consideration transferred for Hoyt's acquisition of Brown would be A. $18,000. B. $16,500. C. $20,000. D. $18,500. E. $19,500. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Easy Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 3-76 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition Following are selected accounts for Green Corporation and Vega Company as of December 31, 2013. Several of Green's accounts have been omitted. Green acquired 100% of Vega on January 1, 2009, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2009, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment. 56. Compute the book value of Vega at January 1, 2009. A. $997,500. B. $857,500. C. $1,200,000. D. $1,600,000. E. $827,500. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 3-77 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 57. Compute the December 31, 2013, consolidated revenues. A. $1,400,000. B. $800,000. C. $500,000. D. $1,590,375. E. $1,390,375. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Easy Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 58. Compute the December 31, 2013, consolidated total expenses. A. $620,000. B. $280,000. C. $900,000. D. $909,625. E. $299,625. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-78 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 59. Compute the December 31, 2013, consolidated buildings. A. $1,037,500. B. $1,007,500. C. $1,000,000. D. $1,022,500. E. $1,012,500. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 60. Compute the December 31, 2013, consolidated equipment. A. $800,000. B. $808,000. C. $840,000. D. $760,000. E. $848,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-79 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 61. Compute the December 31, 2013, consolidated land. A. $220,000. B. $180,000. C. $670,000. D. $630,000. E. $450,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 62. Compute the December 31, 2013, consolidated trademark. A. $50,000. B. $46,875. C. $0. D. $34,375. E. $37,500. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-80 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 63. Compute the December 31, 2013, consolidated common stock. A. $450,000. B. $530,000. C. $555,000. D. $635,000. E. $525,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Easy Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 64. Compute the December 31, 2013, consolidated additional paid-in capital. A. $210,000. B. $75,000. C. $1,102,500. D. $942,500. E. $525,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Easy Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-81 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 65. Compute the December 31, 2013 consolidated retained earnings. A. $1,645,375. B. $1,350,000. C. $1,565,375. D. $1,840,375. E. $1,265,375. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 66. Compute the equity in Vega's income to be included in Green's consolidated income statement for 2013. A. $500,000. B. $300,000. C. $190,375. D. $200,000. E. $290,375. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-82 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 67. One company acquires another company in a combination accounted for as an acquisition. The acquiring company decides to apply the initial value method in accounting for the combination. What is one reason the acquiring company might have made this decision? A. It is the only method allowed by the SEC. B. It is relatively easy to apply. C. It is the only internal reporting method allowed by generally accepted accounting principles. D. Operating results on the parent's financial records reflect consolidated totals. E. When the initial method is used, no worksheet entries are required in the consolidation process. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Easy Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 68. One company acquires another company in a combination accounted for as an acquisition. The acquiring company decides to apply the equity method in accounting for the combination. What is one reason the acquiring company might have made this decision? A. It is the only method allowed by the SEC. B. It is relatively easy to apply. C. It is the only internal reporting method allowed by generally accepted accounting principles. D. Operating results on the parent's financial records reflect consolidated totals. E. When the equity method is used, no worksheet entries are required in the consolidation process. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Easy Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 3-83 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 69. When is a goodwill impairment loss recognized? A. Annually on a systematic and rational basis. B. Never. C. If both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying values. D. If the fair value of a reporting unit falls below its original acquisition price. E. Whenever the fair value of the entity declines significantly. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Medium Learning Objective: 03-05 Discuss the rationale for the goodwill impairment testing approach. 70. Which of the following will result in the recognition of an impairment loss on goodwill? A. Goodwill amortization is to be recognized annually on a systematic and rational basis. B. Both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying values. C. The fair value of the entity declines significantly. D. The fair value of a reporting unit falls below the original consideration transferred for the acquisition. E. The entity is investigated by the SEC and its reputation has been severely damaged. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Medium Learning Objective: 03-05 Discuss the rationale for the goodwill impairment testing approach. Goehler, Inc. acquires all of the voting stock of Kenneth, Inc. on January 4, 2010, at an amount in excess of Kenneth's fair value. On that date, Kenneth has equipment with a book value of $90,000 and a fair value of $120,000 (10-year remaining life). Goehler has equipment with a book value of $800,000 and a fair value of $1,200,000 (10-year remaining life). On December 31, 2011, Goehler has equipment with a book value of $975,000 but a fair value of $1,350,000 and Kenneth has equipment with a book value of $105,000 but a fair value of $125,000. 3-84 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 71. If Goehler applies the equity method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2011? A. $1,080,000. B. $1,104,000. C. $1,100,000. D. $1,468,000. E. $1,475,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04a The equity method. 72. If Goehler applies the partial equity method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2011? A. $1,080,000. B. $1,104,000. C. $1,100,000. D. $1,468,000. E. $1,475,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04c The partial equity method. 3-85 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 73. If Goehler applies the initial value method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2011? A. $1,080,000. B. $1,104,000. C. $1,100,000. D. $1,468,000. E. $1,475,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04b The initial value method. 74. How is the fair value allocation of an intangible asset allocated to expense when the asset has no legal, regulatory, contractual, competitive, economic, or other factors that limit its life? A. Equally over 20 years. B. Equally over 40 years. C. Equally over 20 years with an annual impairment review. D. No amortization, but annually reviewed for impairment and adjusted accordingly. E. No amortization over an indefinite period time. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Easy Learning Objective: 03-06 Describe the procedures for conducting a goodwill impairment test. Harrison, Inc. acquires 100% of the voting stock of Rhine Company on January 1, 2010 for $400,000 cash. A contingent payment of $16,500 will be paid on April 15, 2011 if Rhine generates cash flows from operations of $27,000 or more in the next year. Harrison estimates that there is a 20% probability that Rhine will generate at least $27,000 next year, and uses an interest rate of 5% to incorporate the time value of money. The fair value of $16,500 at 5%, using a probability weighted approach, is $3,142. 3-86 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 75. What will Harrison record as its Investment in Rhine on January 1, 2010? A. $400,000. B. $403,142. C. $406,000. D. $409,142. E. $416,500. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-07 Understand the accounting and reporting for contingent consideration subsequent to a business acquisition. 76. Assuming Rhine generates cash flow from operations of $27,200 in 2010, how will Harrison record the $16,500 payment of cash on April 15, 2011 in satisfaction of its contingent obligation? A. Debit Contingent performance obligation $16,500, and Credit Cash $16,500. B. Debit Contingent performance obligation $3,142, debit Loss from revaluation of contingent performance obligation $13,358, and Credit Cash $16,500. C. Debit Investment in Subsidiary and Credit Cash, $16,500. D. Debit Goodwill and Credit Cash, $16,500. E. No entry. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Hard Learning Objective: 03-07 Understand the accounting and reporting for contingent consideration subsequent to a business acquisition. 77. When recording consideration transferred for the acquisition of Rhine on January 1, 2010, Harrison will record a contingent performance obligation in the amount of: A. $628.40. B. $2,671.60. C. $3,142. D. $13,358. E. $16,500. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-07 Understand the accounting and reporting for contingent consideration subsequent to a business acquisition. 3-87 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition Beatty, Inc. acquires 100% of the voting stock of Gataux Company on January 1, 2010 for $500,000 cash. A contingent payment of $12,000 will be paid on April 1, 2011 if Gataux generates cash flows from operations of $26,500 or more in the next year. Beatty estimates that there is a 30% probability that Gataux will generate at least $26,500 next year, and uses an interest rate of 4% to incorporate the time value of money. The fair value of $12,000 at 4%, using a probability weighted approach, is $3,461. 78. What will Beatty record as its Investment in Gataux on January 1, 2010? A. $500,000. B. $503,461. C. $512,000. D. $515,461. E. $526,500. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-07 Understand the accounting and reporting for contingent consideration subsequent to a business acquisition. 79. Assuming Gataux generates cash flow from operations of $27,200 in 2010, how will Beatty record the $12,000 payment of cash on April 1, 2011 in satisfaction of its contingent obligation? A. Debit Contingent performance obligation $3,461, debit Goodwill $8,539, and Credit Cash $12,000. B. Debit Contingent performance obligation $3,461, debit Loss from revaluation of contingent performance obligation $8,539, and Credit Cash $12,000. C. Debit Goodwill and Credit Cash, $12,000. D. Debit Goodwill $27,200, credit Contingent performance obligation $15,200, and Credit Cash $12,000. E. No entry. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Hard Learning Objective: 03-07 Understand the accounting and reporting for contingent consideration subsequent to a business acquisition. 3-88 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 80. When recording consideration transferred for the acquisition of Gataux on January 1, 2010, Beatty will record a contingent performance obligation in the amount of: A. $692.20. B. $3,040. C. $3,461. D. $12,000. E. $15,200. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-07 Understand the accounting and reporting for contingent consideration subsequent to a business acquisition. Prince Company acquires Duchess, Inc. on January 1, 2009. The consideration transferred exceeds the fair value of Duchess' net assets. On that date, Prince has a building with a book value of $1,200,000 and a fair value of $1,500,000. Duchess has a building with a book value of $400,000 and fair value of $500,000. 81. If push-down accounting is used, what amounts in the Building account appear in Duchess' separate balance sheet and in the consolidated balance sheet immediately after acquisition? A. $400,000 and $1,600,000. B. $500,000 and $1,700,000. C. $400,000 and $1,700,000. D. $500,000 and $2,000,000. E. $500,000 and $1,600,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-08 Understand in general the requirements of pushdown accounting and when its use is appropriate. 3-89 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 82. If push-down accounting is not used, what amounts in the Building account appear on Duchess' separate balance sheet and on the consolidated balance sheet immediately after acquisition? A. $400,000 and $1,600,000. B. $500,000 and $1,700,000. C. $400,000 and $1,700,000. D. $500,000 and $2,000,000. E. $500,000 and $1,600,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-08 Understand in general the requirements of pushdown accounting and when its use is appropriate. Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2010. At that date, Glen owns only three assets and has no liabilities: 83. If Watkins pays $450,000 in cash for Glen, what amount would be represented as the subsidiary's Building in a consolidation at December 31, 2012, assuming the book value of the building at that date is still $200,000? A. $200,000. B. $285,000. C. $290,000. D. $295,000. E. $300,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-90 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 84. If Watkins pays $400,000 in cash for Glen, what amount would be represented as the subsidiary's Building in a consolidation at December 31, 2012, assuming the book value of the building at that date is still $200,000? A. $200,000. B. $285,000. C. $260,000. D. $268,000. E. $300,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 85. If Watkins pays $450,000 in cash for Glen, what amount would be represented as the subsidiary's Equipment in a consolidation at December 31, 2012, assuming the book value of the equipment at that date is still $80,000? A. $70,000. B. $73,500. C. $75,000. D. $76,500. E. $80,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-91 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 86. If Watkins pays $450,000 in cash for Glen, what acquisition-date fair value allocation, net of amortization, should be attributed to the subsidiary's Equipment in consolidation at December 31, 2012? A. $(5,000). B. $80,000. C. $75,000. D. $73,500. E. $(3,500). AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 87. If Watkins pays $300,000 in cash for Glen, at what amount would the subsidiary's Building be represented in a January 2, 2010 consolidation? A. $200,000. B. $225,000. C. $273,000. D. $279,000. E. $300,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 3-92 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 88. If Watkins pays $450,000 in cash for Glen, at what amount would Glen's Inventory acquired be represented in a December 31, 2010 consolidated balance sheet? A. $40,000. B. $50,000. C. $0. D. $10,000. E. $90,000. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 89. If Watkins pays $450,000 in cash for Glen, and Glen earns $50,000 in net income and pays $20,000 in dividends during 2010, what amount would be reflected in consolidated net income for 2010 as a result of the acquisition? A. $20,000 under the initital value method. B. $30,000 under the partial equity method. C. $50,000 under the partial equity method. D. $44,500 under the equity method. E. $34,500 regardless of the internal accounting method used. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-93 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition Essay Questions 90. For an acquisition when the subsidiary retains its incorporation, which method of internal recordkeeping is the easiest for the parent to use? The initial value method is the easiest to use. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Easy Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 91. For an acquisition when the subsidiary retains its incorporation, which method of internal recordkeeping gives the most accurate portrayal of the accounting results for the entire business combination? The equity method gives the most accurate portrayal of the results for the combined entity. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 92. For an acquisition when the subsidiary maintains its incorporation, under the partial equity method, what adjustments are made to the balance of the investment account? The balance of the investment account is increased for the subsidiary's net income. It is decreased for subsidiary dividends and losses. The amortization of excess fair value allocations does not affect the account balance. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 3-94 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 93. From which methods can a parent choose for its internal recordkeeping related to the operations of a subsidiary? The parent can choose from among the initial value method, equity method, and partial equity method. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Easy Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 94. What accounting method requires a subsidiary to record acquisition fair value allocations and the amortization of allocations in its internal accounting records? The appropriate method is termed push-down accounting. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Medium Learning Objective: 03-08 Understand in general the requirements of pushdown accounting and when its use is appropriate. 95. What is the partial equity method? How does it differ from the equity method? What are its advantages and disadvantages compared to the equity method? The partial equity method is a compromise between the initial value method and the equity method. It provides some of the advantages of the equity method but is easier to use. Under the partial equity method, the balance in the investment account is increased by the accrual of the subsidiary's income and decreased when the subsidiary pays dividends. The method is simpler than the equity method because amortization of excess fair value allocations is not done. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 3-95 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 96. What advantages might push-down accounting offer for internal reporting? Push-down accounting requires the subsidiary to record acquisition fair value allocations and amortizations in its accounting records. One advantage that the method offers to internal reporting is that it simplifies the consolidation process. More important, it provides better information for internal evaluation. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Medium Learning Objective: 03-08 Understand in general the requirements of pushdown accounting and when its use is appropriate. 97. What is the basic objective of all consolidations? The basic objective of all consolidations is to combine asset, liability, revenue, expense, and stockholders' equity accounts in a manner consistent with the concepts of the acquisition method to reflect substance over form in financial reporting for consolidations. When a parent has control (substance) over a subsidiary and separate incorporation is maintained (form), the consolidated financial statements will reflect results as if the multiple entities were one entity. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. 3-96 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 98. Yules Co. acquired Noel Co. in an acquisition transaction. Yules decided to use the partial equity method to account for the investment. The current balance in the investment account is $416,000. Describe in words how this balance was derived. The initial balance in the investment account would be the acquisition value implied by the fair value of consideration transferred. This would not include consideration paid for costs to effect the combination. After the acquisition, the balance in the account is increased by the parent's accrual of the subsidiary's income and decreased by the dividends paid by the subsidiary. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 99. Paperless Co. acquired Sheetless Co. and in effecting this business combination, there was a cash-flow performance contingency to be paid in cash, and a market-price performance contingency to be paid in additional shares of stock. In what accounts and in what section(s) of a consolidated balance sheet are these contingent consideration items shown? A cash-flow performance contingency is shown as a contingent performance obligation which is in the liability section of the consolidated balance sheet. A market-price performance contingency to be paid in stock is shown as additional paid-in capital - contingent equity outstanding which is in the stockholders' equity section of the consolidated balance sheet. AACSB: Analytic AICPA FN: Measurement Bloom's: Analysis Difficulty: Medium Learning Objective: 03-07 Understand the accounting and reporting for contingent consideration subsequent to a business acquisition. 3-97 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 100. Avery Company acquires Billings Company in a combination accounted for as an acquisition and adopts the equity method to account for Investment in Billings. At the end of four years, the Investment in Billings account on Avery's books is $198,984. What items constitute this balance? Since the equity method has been applied by Avery, the $198,984 is composed of four items: (a.) The acquisition value of consideration transferred by the parent; (b.) The annual accruals made by Avery to recognize income as it is earned by the subsidiary; (c.) The reductions that are created by the subsidiary's payment of dividends; (d.) The periodic amortization recognized by Avery in connection with the excess fair value allocations identified with its acquisition. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. 101. Dutch Co. has loaned $90,000 to its subsidiary, Hans Corp., which retains separate incorporation. How would this loan be treated on a consolidated balance sheet? The loan represents an intra-entity payable for Hans and receivable for Dutch, and each receivable and payable would be eliminated in preparing a consolidated balance sheet. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Medium Learning Objective: 03-06 Describe the procedures for conducting a goodwill impairment test. 3-98 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 102. An acquisition transaction results in $90,000 of goodwill. Several years later a worksheet is being produced to consolidate the two companies. Describe in words at what amount goodwill will be reported at this date. The $90,000 attributed to goodwill is reported at its original amount unless a portion of goodwill is impaired or a unit of the business where goodwill resides is sold. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Knowledge Difficulty: Easy Learning Objective: 03-05 Discuss the rationale for the goodwill impairment testing approach. 103. Why is push-down accounting a popular internal reporting technique? Push-down accounting has become popular for the parent's internal reporting purposes for two reasons. First, this method simplifies the consolidation process each year. If acquisition value allocations and subsequent amortization are recorded by the subsidiary, they do not need to be repeated each year on a consolidation worksheet. Second, recording of amortization by the subsidiary enables that company's information to provide a good representation of the impact that the acquisition has on the earnings of the business combination. For example, if the subsidiary earns $100,000 each year but annual amortization is $80,000, the acquisition is only adding $20,000 to the income of the combination each year rather than the $100,000 that is reported by the subsidiary unless push-down accounting is used. AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Medium Learning Objective: 03-08 Understand in general the requirements of pushdown accounting and when its use is appropriate. 3-99 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 104. On January 1, 2010, Jumper Co. acquired all of the common stock of Cable Corp. for $540,000. Annual amortization associated with the purchase amounted to $1,800. During 2010, Cable earned net income of $54,000 and paid dividends of $24,000. Cable's net income and dividends for 2011 were $86,000 and $24,000, respectively. Required: Assuming that Jumper decided to use the partial equity method, prepare a schedule to show the balance in the investment account at the end of 2011. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. Learning Objective: 03-04c The partial equity method. 3-100 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 105. Hanson Co. acquired all of the common stock of Roberts Inc. on January 1, 2010, transferring consideration in an amount slightly more than the fair value of Roberts' net assets. At that time, Roberts had buildings with a twenty-year useful life, a book value of $600,000, and a fair value of $696,000. On December 31, 2011, Roberts had buildings with a book value of $570,000 and a fair value of $648,000. On that date, Hanson had buildings with a book value of $1,878,000 and a fair value of $2,160,000. Required: What amount should be shown for buildings on the consolidated balance sheet dated December 31, 2011? AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-101 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 106. Carnes Co. decided to use the partial equity method to account for its investment in Domino Corp. An unamortized trademark associated with the acquisition was $30,000, and Carnes decided to amortize the trademark over ten years. For 2011, Carnes' Equity in Subsidiary Earnings was $78,000. Required: What balance would have been in the Equity in Subsidiary Earnings account if Carnes had used equity accounting? AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Easy Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. Learning Objective: 03-04a The equity method. Learning Objective: 03-04c The partial equity method. 107. If the parent's net income reflected use of the equity method, what were the consolidated retained earnings on December 31, 2011? 8 AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-04a The equity method. 3-102 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 108. If the parent's net income reflected use of the partial equity method, what were the consolidated retained earnings on December 31, 2011? 8 AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04c The partial equity method. 3-103 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 109. If the parent's net income reflected use of the initial value method, what were the consolidated retained earnings on December 31, 2011? 8 AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04b The initial value method. 3-104 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition Jaynes Inc. acquired all of Aaron Co.'s common stock on January 1, 2010, by issuing 11,000 shares of $1 par value common stock. Jaynes' shares had a $17 per share fair value. On that date, Aaron reported a net book value of $120,000. However, its equipment (with a five-year remaining life) was undervalued by $6,000 in the company's accounting records. Any excess of consideration transferred over fair value of assets and liabilities is assigned to an unrecorded patent to be amortized over ten years. 3-105 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 110. What balance would Jaynes' Investment in Aaron Co. account have shown on December 31, 2010, when the equity method was applied for this acquisition? An allocation of the acquisition value (based on the fair value of the shares issued) must first be made. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. Learning Objective: 03-04a The equity method. 3-106 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 111. What was consolidated net income for the year ended December 31, 2011? AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 112. What was consolidated equipment as of December 31, 2011? AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-107 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 113. What was consolidated patents as of December 31, 2011? AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. Utah Inc. acquired all of the outstanding common stock of Trimmer Corp. on January 1, 2009. At that date, Trimmer owned only three assets and had no liabilities: 3-108 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 114. If Utah paid $300,000 in cash for Trimmer, what allocation should have been assigned to the subsidiary's Building account and its Equipment account in a December 31, 2011 consolidation? Since Utah paid more than the $288,000 fair value of Trimmer's net assets, all allocations are based on fair value with the excess $12,000 assigned to goodwill. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-109 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 115. Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2010. As of that date, Jackson had the following trial balance: During 2010, Jackson reported net income of $96,000 while paying dividends of $12,000. During 2011, Jackson reported net income of $132,000 while paying dividends of $36,000. Assume that Matthews Co. acquired the common stock of Jackson Co. for $588,000 in cash. As of January 1, 2010, Jackson's land had a fair value of $102,000, its buildings were valued at $188,000, and its equipment was appraised at $216,000. Any excess of consideration transferred over fair value of assets and liabilities acquired is due to an unamortized patent to be amortized over 10 years. Matthews decided to use the equity method for this investment. Required: (A.) Prepare consolidation worksheet entries for December 31, 2010. (B.) Prepare consolidation worksheet entries for December 31, 2011. 3-110 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 3-111 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition B. Consolidated Worksheet Entries -2011: 3-112 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 03-04a The equity method. 3-113 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 116. On January 1, 2009, Rand Corp. issued shares of its common stock to acquire all of the outstanding common stock of Spaulding Inc. Spaulding's book value was only $140,000 at the time, but Rand issued 12,000 shares having a par value of $1 per share and a fair value of $20 per share. Rand was willing to convey these shares because it felt that buildings (ten-year life) were undervalued on Spaulding's records by $60,000 while equipment (five-year life) was undervalued by $25,000. Any consideration transferred over fair value of identified net assets acquired is assigned to goodwill. Following are the individual financial records for these two companies for the year ended December 31, 2012. Required: Prepare a consolidation worksheet for this business combination. 3-114 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition Consolidation Worksheet for Rand and Spaulding: CONSOLIDATION WORKSHEET-Acquisition For the Year Ended 12/31/2012 AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 03-04a The equity method. 3-115 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition Pritchett Company recently acquired three businesses, recognizing goodwill in each acquisition. Destin has allocated its acquired goodwill to its three reporting units: Apple, Banana, and Carrot. Pritchett provides the following information in performing the 2011 annual review for impairment: 117. Which of Pritchett's reporting units require both steps to test for goodwill impairment? Goodwill Impairment TestStep 1 Therefore, the Apple and the Carrot reporting units require both steps to test for goodwill impairment. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-06 Describe the procedures for conducting a goodwill impairment test. 3-116 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 118. How much goodwill impairment should Pritchett report for 2011? Goodwill Impairment TestStep 2 (Apple and Carrot only) Total impairment loss $5,000 + $75,000 = $80,000 AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Hard Learning Objective: 03-06 Describe the procedures for conducting a goodwill impairment test. On 4/1/09, Sey Mold Corporation acquired 100% of DotDot.Com for $2,000,000 cash. On the date of acquisition, DotDot's net book value was $900,000. DotDot's assets included land that was undervalued by $300,000, a building that was undervalued by $400,000, and equipment that was overvalued by $50,000. The building had a remaining useful life of 8 years and the equipment had a remaining useful life of 4 years. Any excess fair value over consideration transferred is allocated to an undervalued patent and is amortized over 5 years. 3-117 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 119. Determine the amortization expense related to the combination at the year-end date of 12/31/09. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 120. Determine the amortization expense related to the combination at the year-end date of 12/31/13. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-118 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition 121. Determine the amortization expense related to the consolidation at the year-end date of 12/31/19. By 2019, all of the fair value adjustments and the patent will have been fully amortized. The amortization expense for 2019 related to the combination will be $0. AACSB: Analytic AICPA FN: Measurement Bloom's: Application Difficulty: Medium Learning Objective: 03-01 Recognize the complexities in preparing consolidated financial reports that emerge from the passage of time. Learning Objective: 03-03 Understand that a parent's internal accounting method for its subsidiary investments has no effect on the resulting consolidated financial statements. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-119 Chapter 03 - Consolidations - Subsequent to the Date of Acquisition Matching Questions 122. For each of the following situations, select the best answer that applies to consolidating financial information subsequent to the acquisition date: 1. Initial value method, partial equity method, and equity method 2. Partial equity method and equity method but not initial value method 3. Initial value method and partial equity method but not equity method 4. Initial value method 5. Initial value method 6. Partial equity method 7. Initial value method 8. Equity method 9. Equity method 10. Partial equity method and equity method but not initial value method Method(s) available to the parent for internal record-keeping. 1 Easiest internal record-keeping method to apply. 4 Income of the subsidiary is recorded by the parent when earned. Designed to create a parallel between the parent's investment accounts and changes in the underlying equity of the acquired company. For years subsequent to acquisition, requires the *C entry. Uses the cash basis for income recognition. Investment account remains at initially recorded amount. Dividends received by the parent from the subsidiary reduce the parent's investment account. Often referred to in accounting as a single-line consolidation. Increases the investment account for subsidiary earnings, but does not decrease the subsidiary account for equity adjustments such as amortizations. 2 8 3 4 4 2 8 6 AACSB: Reflective thinking AICPA FN: Measurement Bloom's: Comprehension Difficulty: Hard Learning Objective: 03-02 Identify and describe the various methods available to a parent company in order to maintain its investment in subsidiary account in its internal records. Learning Objective: 03-04 Prepare consolidated financial statements subsequent to acquisition when the parent has applied in its internal records. 3-120

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UCLA - ACCT - 5140
Chapter 04 - Consolidated Financial Statements and Outside OwnershipChapter 04 Consolidated Financial Statements and Outside OwnershipMultiple Choice Questions1. For business combinations involving less than 100 percent ownership, the acquirer recogniz
UCLA - ACCT - 5140
Chapter 05 - Consolidated Financial Statements - Intra-Entity Asset TransactionsChapter 05 Consolidated Financial Statements - Intra-Entity Asset TransactionsMultiple Choice Questions1. On November 8, 2011, Power Corp. sold land to Wood Co., its wholly
UCLA - ACCT - 5140
Chapter 06 - Variable Interest Entities, Intra-Entity Debt, Consolidated Cash FloChapter 06 Variable Interest Entities, Intra-Entity Debt, Consolidated Cash FloMultiple Choice Questions1. On January 1, 2011, Riley Corp. acquired some of the outstanding
UCLA - ACCT - 5140
Chapter 07 - Consolidated Financial Statements - Ownership Patterns and IncomeChapter 07 Consolidated Financial Statements - Ownership Patterns and IncomeMultiple Choice QuestionsBuckette Co. owned 60% of Shuvelle Corp. and 40% of Tayle Corp., and Shuv
UCLA - ACCT - 5140
Chapter 08 - Segment and Interim ReportingChapter 08 Segment and Interim ReportingMultiple Choice Questions1. Generally accepted accounting principles require a U.S. corporation to disclose the following disaggregated information for each operating seg
UCLA - ACCT - 5140
Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange RiskChapter 09 Foreign Currency Transactions and Hedging Foreign Exchange RiskMultiple Choice Questions1. Pigskin Co., a U.S. corporation, sold inventory on credit to a British com
UCLA - ACCT - 5140
Chapter 10 - Translation of Foreign Currency Financial StatementsChapter 10 Translation of Foreign Currency Financial StatementsMultiple Choice Questions1. In accounting, the term translation refers to A. the calculation of gains or losses from hedging
UCLA - ACCT - 5140
Chapter 11 - Worldwide Accounting Diversity and International StandardsChapter 11 Worldwide Accounting Diversity and International StandardsMultiple Choice Questions1. In the United States, foreign companies filing annual reports with the SEC that are
UCLA - ACCT - 5140
Chapter 12 - Financial Reporting and the Securities and Exchange CommissionChapter 12 Financial Reporting and the Securities and Exchange CommissionMultiple Choice Questions1. Which one of the following is not a division of the SEC? A. The Division of
UCLA - ACCT - 5140
Chapter 13 - Accounting for Legal Reorganizations and LiquidationsChapter 13 Accounting for Legal Reorganizations and LiquidationsMultiple Choice Questions1. A Chapter 7 bankruptcy is a(n) A. involuntary reorganization. B. bankruptcy forced by a compan
UCLA - ACCT - 5140
Chapter 14 - Partnerships: Formation and OperationsChapter 14 Partnerships: Formation and OperationsMultiple Choice Questions1. Cherryhill and Hace had been partners for several years, and they decided to admit Quincy to the partnership. The accountant
UCLA - ACCT - 5140
Chapter 15 - Partnerships: Termination and LiquidationChapter 15 Partnerships: Termination and LiquidationMultiple Choice Questions1. When a partnership is insolvent and a partner has a deficit capital balance, that partner is legally required to: A. d
UCLA - ACCT - 5140
Chapter 16 - Accounting for State and Local Governments, (Part 1)Chapter 16 Accounting for State and Local Governments, (Part 1)Multiple Choice Questions1. Which standard issued by the Governmental Accounting Standards Board in 1999 requires two distin
UCLA - ACCT - 5140
Chapter 17 - Accounting for State and Local Governments, (Part 2)Chapter 17 Accounting for State and Local Governments, (Part 2)Multiple Choice Questions1. For government-wide financial statements, what account is credited when a piece of equipment is
UCLA - ACCT - 5140
Chapter 18 - Accounting and Reporting for Private Not-for-Profit OrganizationsChapter 18 Accounting and Reporting for Private Not-for-Profit OrganizationsMultiple Choice Questions1. Reciprocal transfers where both parties give and receive something of
UCLA - ACCT - 5140
Chapter 19 - Accounting for Estates and TrustsChapter 19 Accounting for Estates and TrustsMultiple Choice Questions1. When a person dies without leaving a valid will, how is the distribution of his or her property determined? A. In accordance with fede
Waterloo - STV - 100
1.BenefitofHumanity Someissuesobvious Satisfyhumanneeds(heat,food) Overcomerestrictionsofnaturalworld(famine,food) Extendhumanfaculties(energy) 2.IndustrialRevolution Whystudyit: A)Hugeimpactonourmodernconditions. B)Inthepast,societieshadtopassthroughindu
Waterloo - STV - 100
EnergyCharacteristicsEnergyverytopical Supplyshortages(political/economicissues) Environment(globalwarming) 2004 (petajoules) TotalEnergydemand 7,690 Totalindustrial 2,360 Totaltransportation 2350 Agriculture 210 Residential 1,310 Publicadministration 13
Waterloo - STV - 100
NuclearPower1.BackgroundtoNuclearPowerInlastsixyearshasbeenaremarkablerenewedinterestinnuclearpower. Whythishashappenedisawarenessofglobalwarming. Lecturelookatimpactsofrenewedinterest. Worldhaslotsofenergy InLecture3:BigThreeHydrocarbons: coalfoundinma
Waterloo - STV - 100
UrbanTransportationHighwayTransportUrban/suburban Intercity Passenger Freight Unsustainabilityofroadtransportationinurbanenvironments1.BackgroundLuxurytoWW1(1920s) BeneficialtoWW2 EssentialafterWar(1950today) Affectdesignofcities (a)Growthofsuburbia (
Waterloo - STV - 100
6.FreightTransportIssuesinfreighttransportquitedifferenttothoseofpassengerauto. Specificallymostfreightiscarriedby"commoncarriers"thatwillhandanybusinessgivento them. Economicsandspeedaredistinctiveelements.1.MethodofFreighttransportFivemodes: road(tru
Waterloo - STV - 100
7.RiskandEngineeringFailure1.Risk Probabilityofdanger,injury,loss Money,health/life,relationships,materialgoods(fire,theft,etc) Inthislecturemakethedifferencebetweensociety'sacceptabilityofactualrisk(that canbemeasured)andpereivedrisk(thatisbelieved) Per
Waterloo - STV - 100
Lecture8:Alternative/AppropriateTechnologiesONE:Definitions a)Alternative(intermediate)Technology Technologiesthatincludedbothindigenousexperienceandmodernconcepts.Use technologyinnovelways. b)AppropriateTechnology Useexistingtechnologiesthataresuitablef
Waterloo - STV - 100
Lecture9:BrownfieldsBrownfieldDefinition: "Abandoned,idled,orunderusedindustrialorcommercialfacilitieswhere expansionorredevelopmentiscomplicatedbyrealorperceivedenvironmental contamination" Brownfields 1.Whatarethey? 2.Whatproblemsdotheycontain 3.howare
Waterloo - STV - 100
Lecture10:IdeaofProgressThroughlectureanddiscussiongroupswehaveexaminedsocietalimpactsof technologiesonsociety; Especiallyenergyandtransportation. Technologyhasmadeourlivesmateriallybetter: Livelonger Betterunderstandingoftheworld Morephysicallycomfortab
Waterloo - BUS - 111W
BU 111Introduction to Management and Business OrganizationWe have wonderfully bright and talented students. They have almost unlimited potential.they deserve nothing less than an excellent education, an academic experience that challenges them to excel
Waterloo - BUS - 121W
Business Notes Critical Success Factors -Achieving financial performance -Meeting customer needs -Building quality products and services -Encouraging innovation and creativity -Gaining employee commitment Accounting -Comprehensive information system for c
Waterloo - AFM - 102
MIDTERM EXAM AFM 102: Introduction to Managerial Accounting Sections 001, 002, 003 and 004 Thursday February 25, 2010: 4:30 6:00 PM Instructors: Robert Ducharme and Thomas Vance STUDENT NAME: _ STUDENT ID: _ UWDIR/Quest Id: _ LECTURE: (select one) _ 7:00-
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 February 2, Master Click to edit 2011 subtitle styleService Department Cost Allocation5/11/11 Anthony Atkinson11Exam Location InstructionsTo find your exam seating assignments, go to: http:/accounting.uw
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 February 7, Master Click to edit 2011 subtitle styleActivity Based Costing5/11/11 Anthony Atkinson11Key Topics in Todays ClassTwo step allocation method revisitedToday organizing cost pools by activity
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 February 9, Master Click to edit 2011 subtitle styleTime Driven Activity Based Costing5/11/11 Anthony Atkinson11Key Topics in Todays ClassTime driven activity based costing5/11/11 Anthony Atkinson22S
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102February 16, 2011 Introduction to Relevant Costs1Key Concepts in Todays Class Relevant Cost Sunk Costs The make or buy decision2Relevant Cost A relevant cost is a cost or revenue that changes as a result
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 February 28, 2011 Click to edit Master subtitle styleRelevant Cost Analysis5/11/11 Anthony Atkinson11Key Concepts in Todays ClassRelevant cost analysisThe replacement decision5/11/11 Anthony Atkinson
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 January 5, 2011 Click to edit Master subtitle styleCourse Introduction5/11/1111Key Topics in Todays Class Course text ACE Website Companion Websitehttp:/wps.prenhall.com/bp_atkinson_mgmta Quizzes Chapte
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 January 7, 2011 Click to edit Master subtitle styleMission, Vision, and Strategy5/11/11 Anthony Atkinson11Key Topics in Todays Class The vision statement The mission statement Combining the twoThe OAS
Waterloo - AFM - 102
What is Management Accounting?Janet L. Pierce, FCM A CM C Vice President, professional Programs society of M anagement Accountants of Ontario1University of Waterloo M anagement AccountingJanet Pierce CV curriculum vitae CV =creating valueDont just m
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 January 12, Master Click to edit 2011 subtitle styleThe Balanced Scorecard5/11/11 Anthony Atkinson11Course Resources Course text Course web sitesACEhttps:/uwangel.uwaterloo.ca/uwangel/home. aspTest S
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 January 14, Master Click to edit 2011 subtitle styleStrategy Maps5/11/11 Anthony Atkinson11Key Topic in Todays ClassThe strategy map5/11/11 Anthony Atkinson22What is a Strategy Map?Companies use a p
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 January 19, Master Click to edit 2011 subtitle styleCost Flows in Organizations5/11/11 Anthony Atkinson11Key Topics in Todays ClassCost flows in organizationsManufacturing Retail Service Financial accou
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 January 24, Master Click to edit 2011 subtitle styleIntroduction to Cost Behaviour5/11/11 Anthony Atkinson11Key Topics in Todays ClassCost behaviourVariable Cost Fixed Cost Mixed Cost Step Cost Direct C
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 January 26, Master Click to edit 2011 subtitle styleCost Volume Profit Analysis5/11/11 Anthony Atkinson11Key Topics in Todays ClassCost Volume Profit (CVP) AnalysisThe CVP equation The CVP graph Breakev
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 January 28, Master Click to edit 2011 subtitle styleJob Order Costing5/11/11 Anthony Atkinson11Key Topics in Todays ClassJob order costingAccumulating direct costs for each job Allocating indirect costs
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 January 31, Master Click to edit 2011 subtitle styleProcess Costing5/11/11 Anthony Atkinson11Important MessagesQuiz 1Friday February 4, 4:30PM 6:00PM Quiz location will be posted on ACE on Tuesday Febru
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 March 2, 2011 Click to edit Master subtitle stylePricing and Product Planning5/11/11 Anthony Atkinson11Key Concepts in Todays Class Opportunity costs Allocating productive capacity in the short run5/11
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 March 7, 2011 Click to edit Master subtitle styleSpecial Order Problem5/11/11 Anthony Atkinson115/11/11 Anthony Atkinson22Key Concepts in Todays ClassDetermining a price for a one time special order5
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 Marchlick2011 Master subtitle style C 9, to editLong Term Pricing and Relevant Cost Review5/11/11 Anthony Atkinson11Key Concepts in Todays Class Issues in choosing a long run price Relevant cost concept
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 Marchlick to edit Master subtitle style C 18, 2011Static and Flexible Budgets5/11/1111Going ForwardQuiz 1 Quiz 2 Online Total 82 62 100 23% 27% 20% 70.00% 18.86 16.74 20.00 55.60 79.43%C lass Average Wei
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 Marchlick to edit Master subtitle style C 14, 2011Introduction to Budgets5/11/1111Key Concepts in Todays Class The nature of planning and control The master budget5/11/1122The Importance of PlanningT
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 Marchlick to edit Master subtitle style C 16, 2011Cash Flow Budgets5/11/1111Quiz 2 InformationSummary of answers indicated some reasonable interpretation alternatives Summary of gradesQuiz 1 Historical 7
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 Marchlick to edit Master subtitle style C 21, 2011Variance Analysis5/11/1111Key Concepts in Todays ClassDirect materialsMaterial price variance Material quantity variance Labour wage rate variance Labour
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 Marchlick to edit Master subtitle style C 23, 2011Time Value of Money5/11/1111Key Concepts in Todays Class Time value of money Present value of single payments Future value of single payments Nominal ver
Waterloo - AFM - 102
Introduction to Management Accounting AFM 102 Marchlick to edit Master subtitle style C 30, 2011Capital Budgeting Net Present Value5/11/1111Key Concepts in Todays ClassCapital budgetingThe net present value concept5/11/1122Net Present ValueThe n
Waterloo - AFM - 102
Activity-Based Cost SystemsChapter 4Simple Cost Accounting Systems: Ericson Ice Cream Company Example Ericson had been the low-cost producer of chocolate and vanilla ice cream, with profit margins exceeding 20% of sales Several years ago Ericson expand
Waterloo - AFM - 102
ManagementAccounting InformationforActivity andProcessDecisionsChapter 5EvaluationofFinancialImplicationsManagers must evaluate the financial implications of decisions that require trade-offs between the costs and the benefits of different alternatives
Waterloo - AFM - 102
Cost Information for Pricing and Product PlanningChapter 6Role Of Product Costs In Pricing And Product Mix Decisions Understanding how to analyze product costs is important for making pricing decisions: Managers make decisions about establishing or ac
Waterloo - AFM - 102
Introduction to Capital Budgeting: Capital budgeting is a systematic approach to evaluating long-term investments and/or financing decisions Central to long-term decision making is the time value of money If the option exists to earn positive returns on
Waterloo - AFM - 102
Capital Budgeting Approach: Capital budgeting is a systematic approach to evaluating long-term investments and/or financing decisions 4 common approaches include: Payback period Accounting rate of return Net present value Internal rate of returnCapital
Waterloo - AFM - 102
Internal Rate of Return Two ways to compute IRR (internal rate of return): A) Use solver, and solve for the rate of return needed to get a net present value of 0. B) Use IRR formula on the undiscounted cash flows Project A: Rate of Return Year 0 Year 1 Ca
Waterloo - AFM - 102
The University of Waterloo School of Accounting and Finance AFM 102 Introduction to Management Accounting Quiz 1 Friday February 4, 2011 4:30PM 6:00 PM IMPORTANT INSTRUCTIONS PLEASE READ CAREFULLY1. This is a ninety (90) minute examination. You should st
Waterloo - AFM - 102
The University of Waterloo School of Accounting and Finance AFM 102 Introduction to Management Accounting Quiz 2 Friday March 11, 2011 4:30PM 6:00 PM IMPORTANT INSTRUCTIONS PLEASE READ CAREFULLY1. This is a ninety (90) minute quiz. You should stop writin
Waterloo - ACTSC - 231
ACTSC231 ASSIGNMENT 1. DUE ON MAY 25, BEFORE CLASSThe problems are not in the order of diculties. (1) Jane deposits 500 into an account at the beginning of each 4-year period for 40 years. The account credits interest at an annual eective interest rate o