chap005 - Multiple Choice Questions 1. On November 8, 2003,...

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Multiple Choice Questions 1. On November 8, 2003, Power Corp. sold land to Wood Co., its wholly owned subsidiary. The land cost $61,500 and was sold to Wood for $89,000. From the perspective of the combination, when is the gain on the sale of the land realized? A) Proportionately over a designated period of years B) When Wood Co. sells the land to a third party C) No gain can be recognized. D) As Wood uses the land E) When Wood Co. begins using the land productively Answer: B Difficulty: Medium 2. Edgar Co. acquired 70% of Kindall Co. on January 1, 2003. During 2003, Edgar made several sales of inventory to Kindall. The cost and selling price of the goods were $140,000 and $206,000, respectively. Kindall still owned one-fourth of the goods at the end of 2003. Consolidated cost of goods sold for 2003 was $2,140,000. How would consolidated cost of goods sold have differed if the inventory transfers had been for the same amount and cost, but from Kindall to Edgar? A) Consolidated cost of goods sold would have been $2,140,000. B) Consolidated cost of goods sold would have been $2,175,000. C) The effect on consolidated cost of goods sold cannot be predicted from the information provided. D) Consolidated cost of goods sold would have been reduced because of the noncontrolling interest in the subsidiary. E) Consolidated cost of goods sold would have been higher because of the noncontrolling interest in the subsidiary. Answer: A Difficulty: Medium
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On January 1, 2003, Race Corp. purchased 80% of the voting common stock of Gallow Inc. During the year, Race sold to Gallow for $450,000 goods which cost $330,000. Gallow still owned 15% of the goods at year-end. Gallow's reported net income was $204,000, and Race's net income was $806,000. Race decided to use the equity method to account for this investment. What was the noncontrolling interest's share of consolidated net income ? A) $37,200 B) $22,800 C) $30,900 D) $32,900 E) $40,800 Answer: E Difficulty: Hard 4. Webb Co. purchased 100% of Rand Inc. on January 5, 2003. During 2003, Webb sold Rand for $2,400,000 goods that cost $1,900,000. Rand still owned 40% of the goods at the end of the year. Cost of goods sold was $10,800,000 for Webb and $6,400,000 for Rand. What was consolidated cost of goods sold ? A) $17,200,000 B) $15,000,000 C) $14,600,000 D) $19,400,000 E) $14,800,000 Answer: B Difficulty: Medium 5. Gentry Inc. purchased 100% of Gaspard Farms on January 5, 2003. During 2003, Gentry sold Gaspard Farms for $650,000 goods which had cost $200,000. Gaspard Farms still owned 15% of the goods at the end of the year. In 2004, Gentry sold goods with a cost of $800,000 to Gaspard Farms for $1,000,000, and Gaspard Farms still owned 20% of the goods at year-end. For 2004, cost of goods sold was $1,200,000 for Gaspard Farms and $5,400,000 for Gentry. What was consolidated cost of goods sold for 2004? A) $6,600,000
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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.

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chap005 - Multiple Choice Questions 1. On November 8, 2003,...

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