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Unformatted text preview: Multiple Choice Questions 1. Which one of the following accounts would not appear on the consolidated financial statements at the end of the first fiscal period of the combination? A) Goodwill B) Equipment C) Investment in Subsidiary D) Common Stock E) Additional Paid-In Capital Answer: C Difficulty: Easy 2. Which of the following internal record-keeping methods can a parent choose to account for a subsidiary acquired in a purchase transaction ? A) cost or book value B) cost, lower-of-cost-or-market-value, or equity C) cost, equity, or partial equity D) cost, equity, or book value E) cost, lower-of-cost-or-market-value, or partial equity Answer: C Difficulty: Easy 3. Which one of the following varies between the equity, cost, and partial equity methods of accounting for an investment? A) the amount of consolidated net income B) total assets on the consolidated balance sheet C) total liabilities on the consolidated balance sheet D) the balance in the investment account on the parent's books E) the amount of consolidated cost of goods sold Answer: D Difficulty: Medium 4. Under the partial equity method , the parent recognizes income when A) dividends are received from the investee. B) dividends are declared by the investee. C) the related expense has been incurred. D) the related contract is signed by the subsidiary. E) it is earned by the subsidiary. Answer: E Difficulty: Easy 5. Push-down accounting is concerned with the A) impact of the purchase on the subsidiary's financial statements. B) recognition of goodwill by the parent. C) correct consolidation of the financial statements. D) impact of the purchase on the separate financial statements of the parent. E) recognition of dividends received from the subsidiary. Answer: A Difficulty: Easy 6. Racer Corp. purchased all of the common stock of Tangiers Co. several years ago. Tangiers maintained its incorporation. Balances in which of Racer's accounts would vary between the equity method and the cost method ? A) Goodwill , Investment in Tangiers Co. , and Retained Earnings . B) Expenses , Investment in Tangiers Co. , and Equity in Subsidiary Earnings . C) Investment in Tangiers Co. , Equity in Subsidiary Earnings , and Retained Earnings . D) Common Stock , Goodwill , and Investment in Tangiers Co. E) Expenses , Goodwill , and Investment in Tangiers Co. Answer: C Difficulty: Hard 7. How does the partial equity method differ from the equity method ? A) in the total assets reported on the consolidated balance sheet B) in the treatment of dividends C) in the total liabilities reported on the consolidated balance sheet D) Under the partial equity method , subsidiary income does not increase the balance in the parent's investment account....
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This note was uploaded on 02/15/2012 for the course ACCOUNTING 101 taught by Professor Mrhot during the Spring '11 term at Clarion.
- Spring '11