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Last Name | _ | _ | _ | _ | _ | _ | _ | _ | _ | _ | _ | _ | First Name | _ | _ | _ | _ | _ | _ | _ | _ | _ | _ | _ | _ | Accounting & MIS 624 Exam II Summer 2007 Instructions: 1. Read  each question  carefully  and answer fully.   Unless otherwise  specified,   subsidiaries   do   not   use   the   push-down   method   of  accounting.  All consolidations are handled as purchases (not pooling)  unless indicated.  All firms use a calendar year.  2. Problems not supported by relevant and readable computations are  subject to point loss.  Where appropriate, terms like “net income,” “net  loss,” etc. must be included with number answers. 3. Budget your time carefully.  It is generally better to finish half of each  problem than to complete all of half the problems.   Students who  continue to work on exams after instructed to stop will receive a zero  on this exam. 4. It is the student's responsibility to verify that all the listed problems  and   pages   are   contained   is   this   booklet.     Unanswered   questions  receive zero points regardless of reason. Problem Pages Approximate Points Approximate Time I 2-3 30 16 – 20 minutes II 4-7 60 32 – 40 minutes III 8-10 50 28 – 34 minutes IV 11 20 12 – 14 minutes
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Total 160 88 - 108 minutes
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Page 3 of 12 P ROBLEM  I Parent purchased 100% of Sub on 1/1/2007 for cash.  A worksheet, presented below,  was   prepared   immediately   after   purchase.     The   purchase   price   reflects   the   following  information.  All current values and book values of Sub’s assets and liabilities are the same  except as follows. Inventory has a current value of $80.  Buildings and Equipment has a  current value of $180.  Land has a current value of $75.  Liabilities have a current value of  $90.  A covenant not to compete was obtained and valued at $60.   [Note:  you need not  complete the worksheet.] At Purchase Parent Sub Adjustments Consolidated Cash 80 40 Inventory 40 70 Equipment 100 300 Accum. Depr.-Equip. 10 50 Land 200 80 Investment in Sub. 400 Liabilities 300 105 Common Stock 10 60 Ret. Earnings, end 500 275 820 820 490 490 Part A. REQUIRED:  Produce the entry(ies) on the  Parent’s
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