{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Sample Quiz for Chapter 5 - Indiana University of...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Indiana University of Pennsylvania Department of Accounting ACCT 401/501: Advanced Accounting Dr. Rahman Sample Quiz for Chapter 5 Part I Circle the best choice. 1. The material sale of inventory items by a parent company to an affiliated company a. enters the consolidated revenue computation only if the transfer was the result of arm’s length bargaining. b. affects consolidated net income under a periodic inventory system but not under a perpetual inventory system. c. does not result in consolidated income until the merchandise is sold to outside parties. d. does not require a working paper adjustment if the merchandise was transferred at cost. 2. Honeyeater Corporation owns a 40% interest in Nectar Company, acquired several years ago at a cost equal to book value and fair value. Nectar sells merchandise to Honeyeater for the first time in 2018. In computing income from the investee for 2018 under the equity method, Honeyeater uses which equation? Use the following information to answer questions 3 through 6. Eagle Corporation owns 80% of Flyway Inc.’s common stock that was purchased at its underlying book value. The two companies report the following information for 2016 and 2017. During 2016, one company sold inventory to the other company for $50,000 which cost the transferor $40,000. As of the end of 2016, 30% of the inventory was unsold. In 2017, the remaining inventory was resold outside the consolidated entity. 2016 Selected Data: Eagle Flyway Sales Revenue $600,000 $320,000 Cost of Goods Sold 320,000 155,000 Other Expenses 100,000 89,000 Net Income $180,000 $ 76,000 Dividends Paid 19,000 0 2017 Selected Data: Eagle Flyway Sales Revenue $580,000 $445,000 Cost of Goods Sold 300,000 180,000 Other Expenses 130,000 171,000 Net Income $150,000 $ 94,000 Dividends Paid 16,000 5,000
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}