ACCY 401 Exam 1 Spring 2016.docx - 1 Professor Beck Name...

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1 Professor Beck Name_______________________ Spring 2016 Section Time____________ Accountancy 401 Mid-term Exam 1 Instructions: You will have 75 minutes in which to complete the exam. On questions involving numerical calculations, you must show your work to receive credit. Be sure to keep your eyes on your own exam and do your own work! Any students who are caught cheating will receive a score of “zero” on the exam and will not be allowed to use the comprehensive final exam to replace the missing points. Point allocations on the exam are as follows: Part Possible Points Points Earned I 30 II 12 III 12 IV 13 V 8 Total 75 Exam Scores will be scaled so that the exam counts 100 point per the Course Syllabus
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1 Part I. Equity Method Problem (30 pts) On 1/1/X1, P Company purchased 80% of S Company’s common stock for $5,200. Assume that S company reported the following equity balances on 1/1/X1: Account Balance Capital Stock 1,000.00 Paid in Capital 2,000.00 Retained Earnings 2,000.00 Total Equity 5,000.00 An appraisal of S Company’s assets revealed that two assets were under-valued: Building and Land. The building had an appraised value of $1,400 and a carrying value of $700 while the land had an appraised value of $1,200 and a carrying value of $600. S Company has used the straight-line method to depreciate the building which now has a remaining life of 10 years. 1. Record the investment purchase on 1/1/X1 and calculate the differential and allocate it to S Company’s assets. (11)
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2 2. During year X1, S Company reported a net income of $1,000 and paid cash dividends of $500.
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