ACC 401 WEEK 03 QUIZ

A+ Graded Tutorial Available At:

http://hwsoloutions.com/?product=week-03-quiz

Visit Our website: http://hwsoloutions.com/

Description
ACC 401 Week 3 Quiz,
ACC 401 Week 3 Quiz Strayer
Chapter 3
Consolidated Financial StatementsDate of Acquisition
Multiple Choice
1. A majority-owned subsidiary that is in legal reorganization should normally be accounted for using
a. consolidated financial statements.
b. the equity method.
c. the market value method.
d. the cost method.
2. Under the acquisition method, indirect costs relating to acquisitions should be
a. included in the investment cost.
b. expensed as incurred.
c. deducted from other contributed capital.
d. none of these.
3. Eliminating entries are made to cancel the effects of intercompany transactions and are made on
the
a. books of the parent company.
b. books of the subsidiary company.
c. workpaper only.
d. books of both the parent company and the subsidiary.

4. One reason a parent company may pay an amount less than the book value of the subsidiarys
stock acquired is
a. an undervaluation of the subsidiarys assets.
b. the existence of unrecorded goodwill.
c. an overvaluation of the subsidiarys liabilities.
d. none of these.
5. In a business combination accounted for as an acquisition, registration costs related to common
stock issued by the parent company are
a. expensed as incurred.
b. deducted from other contributed capital.
c. included in the investment cost.
d. deducted from the investment cost.
6. On the consolidated balance sheet, consolidated stockholders equity is
a. equal to the sum of the parent and subsidiary stockholders equity.
b. greater than the parents stockholders equity.
c. less than the parents stockholders equity.
equal to the parents stockholders equity.
7. Majority-owned subsidiaries should be excluded from the consolidated statements when
a. control does not rest with the majority owner.
b. the subsidiary operates under governmentally imposed uncertainty.
c. a foreign subsidiary is domiciled in a country with foreign exchange restrictions or controls.
d. any of these circumstances exist.
8. Under the economic entity concept, consolidated financial statements are intended primarily for the
benefit of the
a. stockholders of the parent company.
b. creditors of the parent company.
c. minority stockholders.
d. all of the above.
9. Reasons a parent company may pay more than book value for the subsidiary companys stock
include all of the following except
the fair value of one of the subsidiarys assets may exceed its recorded value because of
appreciation.
b. the existence of unrecorded goodwill.

c. liabilities may be overvalued.

d. stockholders equity may be undervalued.
10. What is the method of presentation required by SFAS 160 of non-controlling interest on a
consolidated balance sheet?
a. As a deduction from goodwill from consolidation.
b. As a separate item within the long-term liabilities section.
c. As a part of stockholders equity.
d. As a separate item between liabilities and stockholders equity.
11. Which of the following is a limitation of consolidated financial statements?
a. Consolidated statements provide no benefit for the stockholders and creditors of the parent
company.
b. Consolidated statements of highly diversified companies cannot be compared with industry
standards.
c. Consolidated statements are beneficial only when the consolidated companies operate within the
same industry.
Consolidated statements are beneficial only when the consolidated companies operate in different
industries.
12. Pine Corp. owns 60% of Sage Corp.s outstanding common stock. On May 1, 2011, Pine
advanced Sage $90,000 in cash, which was still outstanding at December 31, 2011. What portion of
this advance should be eliminated in the preparation of the December 31, 2011 consolidated balance
sheet?
a. $90,000.
b. $54,000.
c. $36,000.
$-0-.
Use the following information for questions 13-15.
On January 1, 2011, Polk Company and Sigler Company had condensed balance sheets as follows:
Polk Sigler
Current assets $ 280,000 $ 80,000
Noncurrent assets _360,000 __160,000
Total assets $ 640,000 $240,000
Current liabilities $ 120,000 $ 40,000
Long-term debt 200,000 -0Stockholders equity __320,000 200,000

Total liabilities & stockholders equity $ 640,000 $240,000

On January 2, 2011 Polk borrowed $240,000 and used the proceeds to purchase 90% of the
outstanding common stock of Sigler. This debt is payable in 10 equal annual principal payments, plus
interest, starting December 30, 2011. Any difference between book value and the value implied by the
purchase price relates to land.
On Polks January 2, 2011 consolidated balance sheet,
13. Noncurrent assets should be
a. $520,000.
b. $536,000.
c. $544,000.
d. $586,667.
14. Current liabilities should be
a. $200,000.
b. $184,000.
c. $160,000.
d. $120,000.
15. Noncurrent liabilities should be
a. $440,000.
b. $416,000.
c. $240,000.
$216,000.
16. A newly acquired subsidiary has pre-existing goodwill on its books. The parent companys
consolidated balance sheet will:
treat the goodwill the same as other intangible assets of the acquired company.
will always show the pre-existing goodwill of the subsidiary at its book value.
not show any value for the subsidiarys pre-existing goodwill.
do an impairment test to see if any of it has been impaired.
17. The Difference between Implied and Book Value account is:
an account necessary for the preparation of consolidated working papers.
used in allocating the amounts paid for recorded balance sheet accounts that are different than
their fair values.
the excess implied value assigned to goodwill.
the unamortized excess that cannot be assigned to any related balance sheet accounts
18. The main evidence of control for purposes of consolidated financial statements involves

possessing majority ownership

having decision-making ability that is not shared with others.
being the sole shareholder
having the parent company and the subsidiary participating in the same industry.
19. In which of the following cases would consolidation be inappropriate?
The subsidiary is in bankruptcy.
Subsidiarys operations are dissimilar from those of the parent.
The parent owns 90 percent of the subsidiarys common stock, but all of the subsidiarys nonvoting
preferred stock is held by a single investor.
Subsidiary is foreign.
20. Princeton Company acquired 75 percent of the common stock of Sheffield Corporation on
December 31, 2011. On the date of acquisition, Princeton held land with a book value of $150,000
and a fair value of $300,000; Sheffield held land with a book value of $100,000 and fair value of
$500,000. What amount would land be reported in the consolidated balance sheet prepared
immediately after the combination?
$650,000
$500,000
$550,000
$375,000
Use the following information to answer questions 21 23.
On January 1, 2011, Pena Company and Shelby Company had condensed balanced sheets as
follows:
Pena Shelby
Current assets $ 210,000 $ 60,000
Noncurrent assets 270,000 120,000
Total assets $480,000 $180,000
Current liabilities $ 90,000 $ 30,000
Long-term debt 150,000 -0Stock holders equity 240,000 150,000
Total liabilities & stockholders equity $ 480,000 $ 180,000
On January 2, 2011 Pena borrowed $180,000 and used the proceeds to purchase 90% of the
outstanding common stock of Shelby. This debt is payable in 10 equal annual principal payments,
plus interest, starting December 30, 2011. Any difference between book value and the value implied
by the purchase price relates to land.
On Penas January 2, 2011 consolidated balance sheet,
21. Noncurrent assets should be
a. $390,000.

b. $402,000.
c. $408,000.
d. $440,000.
22. Current liabilities should be
a. $150,000.
b. $138,000.
c. $120,000.
d. $90,000.
23. Noncurrent liabilities should be
a. $330,000.
b. $312,000.
c. $180,000.
d. $162,000.
24. On January 1, 2011, Primer Corporation acquired 80 percent of Sutter Corporations voting
common stock.
Sutterss buildings and equipment had a book value of $300,000 and a fair value of $350,000 at the
time of
acquisition. At what amount will Sutters buildings and equipment will be reported in the consolidated
statements ?
$350,000
$340,000
$280,000
$300,000