401 Practice Final

401 Practice Final - Name Date 1 If a portion of an...

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Name: __________________________ Date: _____________ 1. If a portion of an investment is sold, the value of the shares sold is determined by using the: 1. first-in, first-out method. 2. average cost method. 3. specific identification method. A) 1 B) 2 C) 3 D) 1 and 3 2. If a parent company acquires additional shares of its subsidiary's stock directly from the subsidiary for a price less than their book value: 1. total noncontrolling book value interest increases. 2. the controlling book value interest increases. 3. the controlling book value interest decreases. A) 1 B) 2 C) 3 D) 1 and 3 3. Under the partial equity method, the workpaper entry that reverses the effect of subsidiary income for the year includes a: 1. credit to Equity in Subsidiary Income. 2. debit to Subsidiary Income Sold. 3. debit to Equity in Subsidiary Income. Page 1
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4. Polk Company owned 24,000 of the 30,000 outstanding common shares of Sloan Company on January 1, 2010. Polk's shares were purchased at book value when the fair values of Sloan's assets and liabilities were equal to their book values. The stockholders' equity of Sloan Company on January 1, 2010, consisted of the following: Common stock, $15 par value $ 450,000 Other contributed capital 337,500 Retained earnings 712,500 Total $1,500,000 Sloan Company sold 7,500 additional shares of common stock for $90 per share on January 2, 2010. If Polk Company purchased all 7,500 shares, the book entry to record the purchase should increase the Investment in Sloan Company account by Page 2
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5. Polk Company owned 24,000 of the 30,000 outstanding common shares of Sloan Company on January 1, 2010. Polk's shares were purchased at book value when the fair values of Sloan's assets and liabilities were equal to their book values. The stockholders' equity of Sloan Company on January 1, 2010, consisted of the following: Common stock, $15 par value $ 450,000 Other contributed capital 337,500 Retained earnings 712,500 Total $1,500,000 Sloan Company sold 7,500 additional shares of common stock for $90 per share on January 2, 2010. If all 7,500 shares were sold to noncontrolling stockholders, the workpaper adjustment needed each time a workpaper is prepared should increase (decrease) the Investment in Sloan Company by Page 3
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6. On January 1, 2006, Parent Company purchased 32,000 of the 40,000 outstanding common shares of Sims Company for $1,520,000. On January 1, 2010, Parent Company sold 4,000 of its shares of Sims Company on the open market for $90 per share. Sims Company's stockholders' equity on January 1, 2006, and January 1, 2010, was as follows: 1/1/0 6 1/1/1 0 Com mon stock , $10 par value $400 ,000 $400 ,000 Othe r contr ibute d capit al 400, 000 400, 000 Retai ned earni ngs 800 ,000 1,4 Page 4
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A) $68,000. B) $170,000. C) $96,000. D) $200,000. E) None of these. Page 5
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