Ch3 - Ch3 Student: _ Fargo Transport purchased 80 percent...

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Ch3 Student: ___________________________________________________________________________ Fargo Transport purchased 80 percent of the stock of Bismarck Trucking on December 31, 2006, for $480,000. The equity section of Bismarck's balance sheet on that date was as follows: Identifiable net assets of Bismarck had book values equal to market values. Any purchase differential is attributable to goodwill. In each of the years 2007 and 2008, Bismarck reported net income of $70,000 and dividends of $20,000. 1. Based on the preceding information, the likely overall fair value of Bismarck Trucking as a continuing operation on December 31, 2006, was: A. $400,000. B. $480,000. C. $500,000. D. $600,000. 2. Based on the preceding information, the amount of goodwill to be reported in the December 31, 2007, balance sheet is: A. $ 0. B. $ 78,000. C. $ 80,000. D. $100,000. 3. Based on the preceding information, the balance of Fargo's investment in the Bismarck account on December 31, 2008, before consolidated financial statements are prepared, should be: A. $480,000. B. $556,000. C. $560,000. D. $592,000. 4. Based on the preceding information, the amount that should be reported as noncontrolling interest in the December 31, 2006, consolidated balance sheet prepared immediately following the acquisition is: A. $ 0. B. $ 50,000. C. $100,000. D. $120,000.
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Users of consolidated financial statements need to be aware of which limitation of these financial statements? I. Poor performance of one or more companies may be hidden by good performance of others. II. Information about the financial status and results of operations of the separate economic entities will be reported. III. All the consolidated retained earnings balance may not be available for dividends of the parent. IV Supplemental information about individual companies or groups of companies included in consolidated statements may be necessary for a fair presentation. A. I, IV B. II, III C. I, III, IV D. I, II, III, IV The following balance sheet data were prepared by Jones Company on December 31, 2008. On January 1, 2009, Adams Corporation purchased 90 percent of the common stock of Jones Company at $20,000 over the underlying book value of the shares acquired. The fair value of Jones' buildings and equipment on the date of combination totaled $246,000. Any additional differential is attributable to goodwill. 6. Based on the information above, how much did Adams pay to acquire its 90 percent ownership of Jones? A. $306,000. B. $326,000. C. $360,000. D. $570,000. 7. Based on the information given above, what amount of the purchase differential will be reflected in some way in a consolidated balance sheet prepared immediately after the combination? A. $20,000.
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This note was uploaded on 05/26/2011 for the course ACCT 410 taught by Professor Khalib during the Spring '11 term at Strayer.

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Ch3 - Ch3 Student: _ Fargo Transport purchased 80 percent...

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