3) ABC Company owns 60% of the stock of XYZ Company and prepares consolidated financial statements. The rationale for preparing consolidated financial statements is the economic entity assumption and comparability. (True/False)
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3) ABC Company owns 60% of the stock of XYZ Company and prepares consolidated financial statements. The rationale for preparing consolidated financial statements is the economic entity assumption and comparability. (True/False)
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- Company A owns 40 percent of Company B and exercisessignificant influence over the management of Company B.Therefore, Company A uses what accounting method forreporting its ownership of stock in Company B?a. The consolidation method.b. The fair value method for available-for-sale securities.c. The equity method.d. The fair value method for trading securitiesBest Appliances owns 90% of the voting stock of Wratchet, Inc. Which of the following is true? The financial statements of Best would be consolidated into Wratchet. Wratchet would be considered the parent entity. Best would be considered the parent entity. Both a and c are correct.Best Appliances owns 90% of the voting stock of Wratchet, Inc. Which of the following is true? a. The financial statements of Best would be consolidated into Wratchet. b. Wratchet would be considered the parent entity. c. Best would be considered the parent entity. d. Both a and c are correct.
- The Passers Co. acquired 70% of the net assets of Failures Co. for P1,100,000. The assets of Failures Co. have a book value of P1,200,000 and a fair market value of P1,300,000; its liabilities are P200,000. What is the amount of minority interest in the stockholders’ equity section of the consolidated balance sheet?Seseg Appliances owns 90% of the voting stock of Juan Co. Of the three following statements, which of the statements are true? Statements: (1) The financial statements of Seseg would be consolidated into Juan (2) Seseg would be considered the parent entity (3) Juan would be considered the parent entity A. 1 is true B. 2 is true C. 3 is true D. None of the above are truePab Corporation decided to establish Sollon Company as a wholly owned subsidiary by transferring some of its existing assets and liabilities to the new entity. In exchange, Sollon issued Pab 35,000 shares of $7 par value common stock. The following information is provided on the assets and accounts payable transferred: Cost Book Value Fair Value Cash $ 32,000 $ 32,000 $ 32,000 Inventory 83,000 83,000 83,000 Land 69,000 69,000 99,000 Buildings 188,000 147,000 249,000 Equipment 95,000 74,000 123,000 Accounts Payable 58,000 58,000 58,000 Required: Prepare the journal entry that Pab recorded for the transfer of assets and accounts payable to Sollon Prepare the journal entry that Sollon recorded for the receipt of assets and accounts payable from Pab.
- The Vary Company has total assets with a book value of $3,000,000 and a fair value of $4,000,000. A potential primary beneficiary company has guaranteed the debt of the Vary Company and will receive a share of income of the Vary Company based on contractual terms. The primary beneficiary will also have decision power. a. Will the primary beneficiary company record an investment in the equity of the Vary Company? b. Will the Vary Company need to be consolidated. If it is to be consolidated, what adjustments would be needed in the consolidation process?On January 1, 20X1, Par Inc acquires 85.77% of Sub Corp for $211,625 in cash. Immediately before the acquisition, the book value of Sub's identifiable net assets was $143,426 with a fair value of $161,060, while the book value of Par's net assets was $282,155. What will be the amount of total shareholders' equity on the consolidated balance sheet immediately after the acquisition if the fair-value-enterprise (FVE) method is used? $309,334 b. $333,129 c. $301,402 d. $317,265 e. $325,197Tempura Co. owns 85% of Sashimi Ltd. In preparing Tempuras's consolidated financial statements, which of the following statements is true? 100% of the book values of Sashimi's assets and liabilities are added to Tempura's. 100% of the fair values of Sashimi's assets and liabilities are added to Tempura's. 85% of the fair values of Sashimi's assets and liabilities are added to Tempura's. 85% of the book values of Sashimi's assets and liabilities are added to Tempura's.
- If Kamfer Limited owned 52% of the outstanding ordinary shares of Maenetja Limited, which reporting method would be appropriate? Select one: a. Cost method b. Consolidation c. Equity method d. Merger methodOn June 30, 20X1, Naeder Corporation purchased for cash at $10 per share all 100,000 shares of the outstanding common stock of the Tedd Company. The total fair value of all identifiable net assets of Tedd was $1,400,000. The only noncurrent asset is property with a fair value of $350,000. The consolidated balance sheet of Naeder and its wholly owned subsidiary on June 30, 20X1, should report a. a retained earnings balance that is inclusive of a gain of $400,000. b. goodwill of $400,000. c. a retained earnings balance that is inclusive of a gain of $350,000. d. a gain of $400,000Choose the correct. Dane, Inc., owns Carlton Corporation. For the current year, Dane reports net income (without consideration of its investment in Carlton) of $185,000 and the subsidiary reports $105,000. The parent had a bond payable outstanding on January 1, with a carrying amount of $209,000. The subsidiary acquired the bond on that date for $196,000. During the current year, Dane reported interest expense of $18,000 while Carlton reported interest income of $19,000, both related to the intra-entity bond payable. What is consolidated net income?a. $289,000b. $291,000c. $302,000d. $304,000
