Fundamentals of Advanced Accounting 5Th Edition Hoyle Test Bank Full Chapter PDF
Fundamentals of Advanced Accounting 5Th Edition Hoyle Test Bank Full Chapter PDF
B. The loss should be allocated between Safire and Regency based on the
purchase price and the original face value of the debt.
C. The loss should be amortized over the life of the bonds and need not be
attributed to either party.
3. Which one of the following characteristics of preferred stock would make the
stock a dilutive security for earnings per share?
D. Because the consolidated balance sheet and income statement are used in
preparing the consolidated statement of cash flows, no special elimination
is required.
D. Average of parent's earnings per share and subsidiary's earnings per share.
The balance in Riney's Investment in Garvin Co. account was $552,000, and
the non-controlling interest was $138,000. On January 1, 2011, Garvin Co. sold
10,000 shares of previously unissued common stock for $15 per share. Riney
did not acquire any of these shares.
What is the balance in Investment in Garvin Co. after the sale of the 10,000
shares of common stock?
A. $552,000.
B. $560,000.
C. $460,000.
D. $404,000.
E. $672,000.
10. On January 1, 2011, Riney Co. owned 80% of the common stock of Garvin Co.
On that date, Garvin's stockholders' equity accounts had the following
balances:
The balance in Riney's Investment in Garvin Co. account was $552,000, and
the non-controlling interest was $138,000. On January 1, 2011, Garvin Co. sold
10,000 shares of previously unissued common stock for $15 per share. Riney
did not acquire any of these shares.
What is the balance in Non-controlling Interest in Garvin Co. after the sale of
the 10,000 shares of common stock?
A. $138,000.
B. $101,000.
C. $280,000.
D. $230,000.
E. $168,000.
11. Rojas Co. owned 7,000 shares (70%) of the outstanding 10%, $100 par
preferred stock and 60% of the outstanding common stock of Brett Co. When
Brett reported net income of $780,000, what was the non-controlling interest
in the subsidiary's income?
A. $234,000.
B. $273,000.
C. $302,000.
D. $312,000.
E. $284,000.
12. Knight Co. owned 80% of the common stock of Stoop Co. Stoop had 50,000
shares of $5 par value common stock and 2,000 shares of preferred stock
outstanding. Each preferred share received an annual per share dividend of
$10 and is convertible into four shares of common stock. Knight did not own
any of Stoop's preferred stock. Stoop also had 600 bonds outstanding, each of
which is convertible into ten shares of common stock. Stoop's annual after-
tax interest expense for the bonds was $22,000. Knight did not own any of
Stoop's bonds. Stoop reported income of $300,000 for 2011.
A. $300,000.
B. $240,000.
C. $257,600.
D. $322,000.
E. $201,250.
13. Knight Co. owned 80% of the common stock of Stoop Co. Stoop had 50,000
shares of $5 par value common stock and 2,000 shares of preferred stock
outstanding. Each preferred share received an annual per share dividend of
$10 and is convertible into four shares of common stock. Knight did not own
any of Stoop's preferred stock. Stoop also had 600 bonds outstanding, each of
which is convertible into ten shares of common stock. Stoop's annual after-
tax interest expense for the bonds was $22,000. Knight did not own any of
Stoop's bonds. Stoop reported income of $300,000 for 2011.
A. $5.62.
B. $3.26.
C. $3.11.
D. $5.03.
E. $4.28.
14. Campbell Inc. owned all of Gordon Corp. For 2011, Campbell reported net
income (without consideration of its investment in Gordon) of $280,000 while
the subsidiary reported $112,000. The subsidiary had bonds payable
outstanding on January 1, 2011, with a book value of $297,000. The parent
acquired the bonds on that date for $281,000. During 2011, Campbell reported
interest income of $31,000 while Gordon reported interest expense of
$29,000. What is consolidated net income for 2011?
A. $406,000.
B. $374,000.
C. $378,000.
D. $410,000.
E. $394,000.
15. Vontkins Inc. owned all of Quasimota Co. The subsidiary had bonds payable
outstanding on January 1, 2010, with a book value of $265,000. The parent
acquired the bonds on that date for $288,000. Subsequently, Vontkins
reported interest income of $25,000 in 2010 while Quasimota reported
interest expense of $29,000. Consolidated financial statements were prepared
for 2011. What adjustment would have been required for the retained
earnings balance as of January 1, 2011?
A. reduction of $27,000.
B. reduction of $4,000.
C. reduction of $19,000.
D. reduction of $30,000.
E. reduction of $20,000.
16. Tray Co. reported current earnings of $560,000 while paying $56,000 in cash
dividends. Sparrish Co. earned $140,000 in net income and distributed
$14,000 in dividends. Tray held a 70% interest in Sparrish for several years, an
investment that it originally acquired by transferring consideration equal to
the book value of the underlying net assets. Tray used the initial value
method to account for these shares.
On January 1, 2011, Sparrish acquired in the open market $70,000 of Tray's
8% bonds. The bonds had originally been issued several years ago at 92,
reflecting a 10% effective interest rate. On the date of the bond purchase, the
book value of the bonds payable was $67,600. Sparrish paid $65,200 based on
a 12% effective interest rate over the remaining life of the bonds.
What is the non-controlling interest's share of the subsidiary's net income?
A. $42,000.
B. $37,800.
C. $39,600.
D. $40,070.
E. $44,080.
17. A company had common stock with a total par value of $18,000,000 and fair
value of $62,000,000; and 7% preferred stock with a total par value of
$6,000,000 and a fair value of $8,000,000. The book value of the company was
$85,000,000. If 90% of this company's total equity was acquired by another,
what portion of the value would be assigned to the non-controlling interest?
A. $8,500,000.
B. $7,000,000.
C. $6,200,000.
D. $2,400,000.
E. $6,929,400.
18. Cadion Co. owned a controlling interest in Knieval Inc. Cadion reported sales
of $420,000 during 2011 while Knieval reported $280,000. Inventory costing
$28,000 was transferred from Knieval to Cadion (upstream) during the year
for $56,000. Of this amount, twenty-five percent was still in ending inventory
at year's end. Total receivables on the consolidated balance sheet were
$112,000 at the first of the year and $154,000 at year-end. No intra-entity
debt existed at the beginning or ending of the year. Using the direct approach,
what is the consolidated amount of cash collected by the business
combination from its customers?
A. $602,000.
B. $644,000.
C. $686,000.
D. $714,000.
E. $592,000.
19. Parker owned all of Odom Inc. Although the Investment in Odom Inc. account
had a balance of $834,000, the subsidiary's 12,000 shares had an underlying
book value of only $56 per share. On January 1, 2011, Odom issued 3,000 new
shares to the public for $70 per share. How does this transaction affect the
Investment in Odom Inc. account?
To acquire this interest in Cocker, Popper paid a total of $682,000 with any
excess acquisition date fair value over book value being allocated to goodwill,
which has been measured for impairment annually and has not been
determined to be impaired as of January 1, 2012.
On January 1, 2012, Cocker reported a net book value of $1,113,000 before
the following transactions were conducted. Popper uses the equity method to
account for its investment in Cocker, thereby reflecting the change in book
value of Cocker.
A. increase it by $28,700.
B. increase it by $16,800.
C. $0.
D. increase it by $280,000.
E. increase it by $593,600.
21. These questions are based on the following information and should be viewed
as independent situations.
Popper Co. acquired 80% of the common stock of Cocker Co. on January 1,
2009, when Cocker had the following stockholders' equity accounts.
To acquire this interest in Cocker, Popper paid a total of $682,000 with any
excess acquisition date fair value over book value being allocated to goodwill,
which has been measured for impairment annually and has not been
determined to be impaired as of January 1, 2012.
On January 1, 2012, Cocker reported a net book value of $1,113,000 before
the following transactions were conducted. Popper uses the equity method to
account for its investment in Cocker, thereby reflecting the change in book
value of Cocker.
On January 1, 2012, Cocker issued 10,000 additional shares of common stock
for $21 per share. Popper did not acquire any of this newly issued stock. How
would this transaction affect the additional paid-in capital of the parent
company?
A. $0.
B. decrease it by $23,240.
C. decrease it by $68,250.
D. decrease it by $45,060.
E. decrease it by $43,680.
22. These questions are based on the following information and should be viewed
as independent situations.
Popper Co. acquired 80% of the common stock of Cocker Co. on January 1,
2009, when Cocker had the following stockholders' equity accounts.
To acquire this interest in Cocker, Popper paid a total of $682,000 with any
excess acquisition date fair value over book value being allocated to goodwill,
which has been measured for impairment annually and has not been
determined to be impaired as of January 1, 2012.
On January 1, 2012, Cocker reported a net book value of $1,113,000 before
the following transactions were conducted. Popper uses the equity method to
account for its investment in Cocker, thereby reflecting the change in book
value of Cocker.
A. $0.
B. decrease it by $32,900.
C. decrease it by $45,700.
D. decrease it by $49,400.
E. decrease it by $50,500.
23. If newly issued debt is issued from a parent to its subsidiary, which of the
following statements is false?
A. Both the investment and debt accounts have to be eliminated now and for
each future consolidated financial statement despite containing differing
balances.
E. The gain or loss on the retirement of the debt must be recognized by the
business combination in the year the debt is acquired, even though this
balance does not appear on the financial records of either company.
25. Which of the following statements is true concerning the acquisition of
existing debt of a consolidated affiliate in the year of the debt acquisition?
26. Which of the following statements is false regarding the assignment of a gain
or loss on intercompany bond transfer?
A. Parent company earnings per share equals consolidated earnings per share
when the equity method is used.
E. Preferred dividends are not deducted from net income for consolidated
earnings per share.
30. A subsidiary issues new shares of common stock at an amount below book
value. Outsiders buy all of these shares. Which of the following statements is
true?
32. If a subsidiary reacquires its outstanding shares from outside ownership for
more than book value, which of the following statements is true?
E. No adjustment is necessary.
33. If a subsidiary issues a stock dividend, which of the following statements is
true?
E. No adjustment is necessary.
34. Stevens Company has had bonds payable of $10,000 outstanding for several
years. On January 1, 2011, when there was an unamortized discount of $2,000
and a remaining life of 5 years, its 80% owned subsidiary, Matthews
Company, purchased the bonds in the open market for $11,000. The bonds
pay 6% interest annually on December 31. The companies use the straight-
line method to amortize interest revenue and expense. Compute the
consolidated gain or loss on a consolidated income statement for 2011.
A. $1,000 gain.
B. $1,000 loss.
C. $2,000 loss.
D. $3,000 loss.
E. $3,000 gain.
35. Keenan Company has had bonds payable of $20,000 outstanding for several
years. On January 1, 2011, there was an unamortized premium of $2,000 with
a remaining life of 10 years, Keenan's parent, Ross, Inc., purchased the bonds
in the open market for $19,000. Keenan is a 90% owned subsidiary of Ross.
The bonds pay 8% interest annually on December 31. The companies use the
straight-line method to amortize interest revenue and expense. Compute the
consolidated gain or loss on a consolidated income statement for 2011.
A. $3,000 gain.
B. $3,000 loss.
C. $1,000 gain.
D. $1,000 loss.
E. $2,000 gain.
36. On January 1, 2009, Nichols Company acquired 80% of Smith Company's
common stock and 40% of its non-voting, cumulative preferred stock. The
consideration transferred by Nichols was $1,200,000 for the common and
$124,000 for the preferred. Any excess acquisition-date fair value over book
value is considered goodwill. The capital structure of Smith immediately prior
to the acquisition is:
A. $800,000.
B. $310,000.
C. $124,000.
D. $0.
E. $(196,000.)
38. On January 1, 2009, Nichols Company acquired 80% of Smith Company's
common stock and 40% of its non-voting, cumulative preferred stock. The
consideration transferred by Nichols was $1,200,000 for the common and
$124,000 for the preferred. Any excess acquisition-date fair value over book
value is considered goodwill. The capital structure of Smith immediately prior
to the acquisition is:
A. $486,000.
B. $480,000.
C. $300,000.
D. $150,000.
E. $120,000.
39. On January 1, 2009, Nichols Company acquired 80% of Smith Company's
common stock and 40% of its non-voting, cumulative preferred stock. The
consideration transferred by Nichols was $1,200,000 for the common and
$124,000 for the preferred. Any excess acquisition-date fair value over book
value is considered goodwill. The capital structure of Smith immediately prior
to the acquisition is:
D. Debit Common stock $500,000, debit Preferred stock $120,000, and debit
Additional paid-in capital $200,000.
(1.) Graham reports a loss on sale of land of $5,000. The land cost Graham
$20,000.
(2.) Non-controlling interest in Stage's net income was $30,000.
(3.) Graham paid dividends of $15,000.
(4.) Stage paid dividends of $10,000.
(5.) Excess acquisition-date fair value over book value was expensed by
$6,000.
(6.) Consolidated accounts receivable decreased by $8,000.
(7.) Consolidated accounts payable decreased by $7,000.
(1.) Graham reports a loss on sale of land of $5,000. The land cost Graham
$20,000.
(2.) Non-controlling interest in Stage's net income was $30,000.
(3.) Graham paid dividends of $15,000.
(4.) Stage paid dividends of $10,000.
(5.) Excess acquisition-date fair value over book value was expensed by
$6,000.
(6.) Consolidated accounts receivable decreased by $8,000.
(7.) Consolidated accounts payable decreased by $7,000.
(1.) Graham reports a loss on sale of land of $5,000. The land cost Graham
$20,000.
(2.) Non-controlling interest in Stage's net income was $30,000.
(3.) Graham paid dividends of $15,000.
(4.) Stage paid dividends of $10,000.
(5.) Excess acquisition-date fair value over book value was expensed by
$6,000.
(6.) Consolidated accounts receivable decreased by $8,000.
(7.) Consolidated accounts payable decreased by $7,000.
(1.) Graham reports a loss on sale of land of $5,000. The land cost Graham
$20,000.
(2.) Non-controlling interest in Stage's net income was $30,000.
(3.) Graham paid dividends of $15,000.
(4.) Stage paid dividends of $10,000.
(5.) Excess acquisition-date fair value over book value was expensed by
$6,000.
(6.) Consolidated accounts receivable decreased by $8,000.
(7.) Consolidated accounts payable decreased by $7,000.
How is the amount of excess acquisition-date fair value over book value
recognized in a consolidated statement of cash flows assuming the indirect
method is used?
A. It is ignored.
(1.) Graham reports a loss on sale of land of $5,000. The land cost Graham
$20,000.
(2.) Non-controlling interest in Stage's net income was $30,000.
(3.) Graham paid dividends of $15,000.
(4.) Stage paid dividends of $10,000.
(5.) Excess acquisition-date fair value over book value was expensed by
$6,000.
(6.) Consolidated accounts receivable decreased by $8,000.
(7.) Consolidated accounts payable decreased by $7,000.
Using the indirect method, where does the decrease in accounts receivable
appear in a consolidated statement of cash flows?
(1.) Graham reports a loss on sale of land of $5,000. The land cost Graham
$20,000.
(2.) Non-controlling interest in Stage's net income was $30,000.
(3.) Graham paid dividends of $15,000.
(4.) Stage paid dividends of $10,000.
(5.) Excess acquisition-date fair value over book value was expensed by
$6,000.
(6.) Consolidated accounts receivable decreased by $8,000.
(7.) Consolidated accounts payable decreased by $7,000.
Using the indirect method, where does the decrease in accounts payable
appear in a consolidated statement of cash flows?
Jones sells 20,000 shares of previously unissued shares of its common stock
to outside parties for $10 per share.
What is the adjusted book value of Jones after the sale of the shares?
A. $200,000.
B. $1,400,000.
C. $1,280,000.
D. $1,050,000.
E. $1,440,000.
48. Webb Company owns 90% of Jones Company. The original balances
presented for Jones and Webb as of January 1, 2011, are as follows:
Jones sells 20,000 shares of previously unissued shares of its common stock
to outside parties for $10 per share.
What is the new percent ownership of Webb in Jones after the stock
issuance?
A. 75%.
B. 90%.
C. 80%.
D. 64%.
E. 60%.
49. Webb Company owns 90% of Jones Company. The original balances
presented for Jones and Webb as of January 1, 2011, are as follows:
Jones sells 20,000 shares of previously unissued shares of its common stock
to outside parties for $10 per share.
A. $180,000 increase.
B. $180,000 decrease.
C. $30,000 increase.
D. $30,000 decrease.
E. No adjustment is necessary.
50. Webb Company owns 90% of Jones Company. The original balances
presented for Jones and Webb as of January 1, 2011 are as follows:
Assume Jones issues 20,000 new shares of its common stock for $15 per
share. Of this total, Webb acquires 18,000 shares to maintain its 90% interest
in Jones.
What is the adjusted book value of Jones after the stock issuance?
A. $1,500,000.
B. $1,200,000.
C. $1,350,000.
D. $1,080,000.
E. $1,335,000.
51. Webb Company owns 90% of Jones Company. The original balances
presented for Jones and Webb as of January 1, 2011 are as follows:
Assume Jones issues 20,000 new shares of its common stock for $15 per
share. Of this total, Webb acquires 18,000 shares to maintain its 90% interest
in Jones.
After acquiring the additional shares, what adjustment is needed for Webb's
investment in Jones account?
A. $270,000 increase.
B. $270,000 decrease.
C. $27,000 increase.
D. $27,000 decrease.
E. No adjustment is necessary.
52. Ryan Company owns 80% of Chase Company. The original balances
presented for Ryan and Chase as of January 1, 2011, are as follows:
Assume Chase issues 30,000 additional shares common stock solely to Ryan
for $12 per share.
A. 80.0%.
B. 87.5%.
C. 90.0%.
D. 75.0%.
E. 82.5%.
53. Ryan Company owns 80% of Chase Company. The original balances
presented for Ryan and Chase as of January 1, 2011, are as follows:
Assume Chase issues 30,000 additional shares common stock solely to Ryan
for $12 per share.
What is the adjusted book value of Chase Company after the issuance of the
shares?
A. $608,000.
B. $720,000.
C. $680,000.
D. $760,000.
E. $400,000.
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