Chapter9ed10

Chapter9ed10 - Chapter 10 Test Bank SUBSIDIARY PREFERRED...

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Chapter 10 Test Bank SUBSIDIARY PREFERRED STOCK, COSOLIDATED EARNINGS PER SHARE, AND CONSOLIDATED INCOME TAXATION Multiple Choice Questions Use the following information for Questions 1 and 2. Parminter Corporation owns a 80% interest in the common stock of Sanchez Corporation and 20% of Sanchez’s preferred stock on December 31, 2005. Sanchez had 2005 net income of $30,000. Sanchez’s equity was as follows: 10% preferred stock $ 50,000 Common stock 350,000 LO1 1. How much should the Parminter’s Investment in Sanchez change during 2005? a. $ 5,000 b. $20,000 c. $25,000 d. $30,000 LO1 2. What should be the noncontrolling interest expense in the consolidated financial statements of Parminter? a. $ 5,000 b. $20,000 c. $25,000 d. $30,000 Use the following information for Questions 3, 4, and 5. On January 1, 2005, Pardy Corporation acquired a 70% interest in the common stock of Salter Corporation for $7,000,000 when Salter’s stockholders’ equity was as follows: 10% cumulative, nonparticipating preferred stock, $100 par, with a $105 liquidation preference callable at $110 $ 1,000,000 Common stock, $10 par value 6,000,000 Additional paid-in capital 1,500,000 Retained earnings 2,500,000 Total stockholders’ equity $11,000,000 238
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LO1 3. There were no dividends in arrears on the date of the business combination. The goodwill from Pardy’s investment in Salter on January 1, 2005 is: a. $ 0. b. $ 35,000. c. $ 70,000. d. $105,000. LO1 4. Salter has a 2005 net loss of $200,000. Pardy’s share of Salter’s net loss is: a. $ 50,000. b. $ 70,000. c. $140,000. d. $210,000. LO1 5. If Salter’s net income is $220,000, what is Pardy’s share of Salter’s net income? a. $ 84,000 b. $119,000 c. $154,000 d. $189,000 LO1 6. Pamplin Corporation stockholders’ equity consists of $1,000,000 of $10 par value Common Stock, $750,000 of Additional Paid-in Capital, and $3,000,000 of Retained Earnings on January 1, 2005. On this date, Pamplin purchased 90% of the outstanding common stock of Sage Corporation for $1,500,000 with all excess purchase cost assigned to goodwill. The stockholders’ equity of Sage on this date consists of $800,000 of $100 par value, 8% non-cumulative, preferred stock callable at $105, $900,000 of $10 par value common stock and $500,000 of Retained Earnings. Sage’s net income for 2005 is $100,000. In a separate transaction on January 1, 2005, Pamplin purchased 70% of Sage’s preferred stock for $600,000. At the end of 2005, the amount of Pamplin’s income from Sage (excluding dividends from preferred stock) and the balance in its Additional Paid-in Capital account, respectively, are: a. $62,400 and $710,000. b. $62,400 and $750,000. c. $90,000 and $710,000.
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This note was uploaded on 01/29/2009 for the course BA 459 taught by Professor Slattery during the Spring '09 term at Southern Oregon.

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Chapter9ed10 - Chapter 10 Test Bank SUBSIDIARY PREFERRED...

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