Group Chp4 1-10 - Patience Sampah, Kelley Wolff, Kristen...

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Patience Sampah, Kelley Wolff, Kristen Jack Note: Problems 1 through 37 assume the use of the acquisition method. Problems 38 through 40 assume the use of the purchase method. 1. LO1 What is a basic premise of the acquisition method regarding accounting for a noncontrolling interest? a. Consolidated financial statements should be primarily for the benefit of the parent company's stockholders. b. Consolidated financial statements should be produced only if both the parent and the subsidiary are in the same basic industry. c. A subsidiary is an indivisible part of a business combination and should be included in its entirety regardless of the degree of ownership. d. Consolidated financial statements should not report a noncontrolling interest balance because these outside owners do not hold stock in the parent company. 2. LO2 Bailey, Inc., buys 60 percent of the outstanding stock of Luebs, Inc. Luebs owns a piece of land that cost $200,000 but was worth $500,000 at the acquisition date. What value should be attributed to this land in a consolidated balance sheet at the date of takeover? a. $120,000. b. $300,000. c. $380,000. d. $500,000. 3. LO2 Jordan, Inc., holds 75 percent of the outstanding stock of Paxson Corporation. Paxson currently owes Jordan $400,000 for inventory acquired over the past few months. In preparing consolidated financial statements, what amount of this debt should be eliminated? a.
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Group Chp4 1-10 - Patience Sampah, Kelley Wolff, Kristen...

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