Chapter 9 Test Bank
INDIRECT AND MUTUAL HOLDINGS
Multiple Choice Questions
Pallet Corporation owns 80% of Adelt Corporation and Adelt owns
60% of Bajo Inc. Which of the following is correct?
a. Bajo should not be consolidated because minority interests
b. Bajo should be consolidated because the 60% of Bajo stock
is held in the affiliate structure
c. Pallet has 8% indirect ownership of Bajo
d. Pallet has 80% indirect ownership of Bajo
Page Corporation acquired a 60% interest in Ace Corporation at
a price $40,000 in excess of book value and fair value on
January 1, 2005. On the same date, Ace acquired a 70% interest
in Bader Corporation at a price $30,000 in excess of book value
and fair value. The excess purchase cost paid by Page and Ace
was attributed to goodwill. Separate incomes (excluding
investment income) for the three affiliates for 2005 are as
follows: Page, $500,000, Ace, $300,000, and Bader, $400,000.
Page’s net income for 2005 is:
Use the following information in answering questions 3, 4, and 5.
Paint Corporation owns 82% of Achille corporation and Achille
Corporation owns 80% of Badrack Corporation. For the current year,
the separate incomes of Paint, Achille, and Badrack are $120,000,
$100,000, and $50,000, respectively.
Noncontrolling interest expense from Badrack is: