Question 1 Pelican Corporation acquired a 25% interest in Seafare Incorporated at book value several years ago. Seafare declared $100,000 dividends in 2013 and reported its income for the year as follows: Income from continuing operations $600,000Loss on discontinued division (100,000)Net income $500,000 Pelican's Investment in Seafare account for 2013 should increase by Answers:A. $ 150,000. B. $ 125,000. C. $ 100,000. D. $ 180,000. Question 2 Durer Inc. acquired Sea Corporation in a business combination and Sea Corp. went out of existence. Sea Corp. developed a patent listed as an asset on Sea Corp.'s books at the patent office filing cost. In recording the combination, Answers:A. Sea Corp.'s prior expenses to develop the patent are recorded as an asset by Durer at purchase. B. the patent is recorded as an asset at fair market value. C. fair value is not assigned to the patent because the research and development costs have been expensed by Sea Corp. D. the patent's market value increases goodwill. Question 3 At the beginning of 2014, Parling Food Services acquired a 90% interest in Simmons' Orchards when Simmons' book values of identifiable net assets equaled their fair values. On December 26, 2014, Simmons declared dividends of $50,000, and the dividends were unpaid at year-end. Parling had not recorded the dividend receivable at December 31. A consolidated working paper entry is necessary to Answers:A. enter $50,000 dividends receivable in the consolidated balance sheet. B. enter $45,000 dividends receivable in the consolidated balance sheet. C. reduce the dividends payable account by $45,000 in the consolidated balance sheet. D. eliminate the dividend payable account from the consolidated balance sheet. Question 4 Which method of accounting will generally be used when one company purchases between 20% to 50% of the outstanding stock of another company? Answers:A. The GAAP prescribed the fair value method may be used. B. Only the equity method may be used. C. Only the fair value method may be used. D. The GAAP prescribed the equity method may be used. Question 5 When considering an acquisition, which of the following is NOT a method by which one company may gain control of another company? Answers:A. Purchase of the majority of outstanding voting stock of the acquired company. B. Purchase of all the outstanding voting stock of the acquired company. C. Purchase of 25% of outstanding voting stock of the acquired company. D. Purchase of all assets and liabilities of another company. Question 6 Under the current GAAP, Goodwill arising from a business combination is Answers:A. never amortized. B. charged to Retained Earnings after the acquisition is completed. C. amortized over 40 years or its useful life, whichever is shorter. D. amortized over 40 years or its useful life, whichever is longer. Question 7 Which of the following is NOT a reason for a company to expand through a combination, rather than by building new facilities? Answers:A. A combination might provide an opportunity to invest in a company without having to take responsibility for its financial results. B. A combination might provide fewer operating delays. C. A combination might provide easier access to intangible assets. D. A combination might provide cost advantages. Question 8 Which method must be used if ASC 810-10-65 prohibits full consolidation of a 70% owned subsidiary? Answers:A. The Liquidation value B. Market value C. The cost method D. Equity method Question 9 When preparing the consolidation workpaper for a company and its controlled subsidiary, which of the following would be used for the entities being consolidated? Answers:A. Adjusted trial balances B. Post-closing trial balances C. The adjusted trial balance for the parent and the unadjusted trial balance for all controlled subsidiaries D. Unadjusted trial balances Question 10 Panini Corporation owns 85% of the outstanding voting stock of Strathmore Company and Malone Corporation owns the remaining 15% of Strathmore's voting stock. On the consolidated financial statements of Panini Corporation and Strathmore, Malone is Answers:A. an equity investee. B. a noncontrolling interest. C. a related party. D. an affiliate.

Name: Question 1 Pelican Corporation acquired a 25% interest in Seafare In
Uploaded: 2024-03-04T10:43:15.000Z
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Description: Question 1 Pelican Corporation acquired a 25% interest in Seafare Incorporated at book value several years ago. Seafare declared $100,000 dividends in 2013 and reported its income for the year as follows: Income from continuing operations

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Question 1   Pelican Corporation acquired a 25% interest in Seafare Incorporated at book value several years ago. Seafare declared $100,000 dividends in 2013 and reported its income for the year as follows: Income from continuing operations                          $600,000Loss on discontinued division                                  (100,000)Net income                                                              $500,000 Pelican's Investment in Seafare account for 2013 should increase by   Answers:A. $ 150,000. B. $ 125,000. C. $ 100,000. D. $ 180,000.   Question 2   Durer Inc. acquired Sea Corporation in a business combination and Sea Corp. went out of existence. Sea Corp. developed a patent listed as an asset on Sea Corp.'s books at the patent office filing cost. In recording the combination,   Answers:A. Sea Corp.'s prior expenses to develop the patent are recorded as an asset by Durer at purchase. B. the patent is recorded as an asset at fair market value. C. fair value is not assigned to the patent because the research and development costs have been expensed by Sea Corp. D. the patent's market value increases goodwill.   Question 3   At the beginning of 2014, Parling Food Services acquired a 90% interest in Simmons' Orchards when Simmons' book values of identifiable net assets equaled their fair values. On December 26, 2014, Simmons declared dividends of $50,000, and the dividends were unpaid at year-end. Parling had not recorded the dividend receivable at December 31. A consolidated working paper entry is necessary to   Answers:A. enter $50,000 dividends receivable in the consolidated balance sheet. B. enter $45,000 dividends receivable in the consolidated balance sheet. C. reduce the dividends payable account by $45,000 in the consolidated balance sheet. D. eliminate the dividend payable account from the consolidated balance sheet.   Question 4   Which method of accounting will generally be used when one company purchases between 20% to 50% of the outstanding stock of another company?   Answers:A. The GAAP prescribed the fair value method may be used. B. Only the equity method may be used. C. Only the fair value method may be used. D. The GAAP prescribed the equity method may be used.   Question 5   When considering an acquisition, which of the following is NOT a method by which one company may gain control of another company?   Answers:A. Purchase of the majority of outstanding voting stock of the acquired company. B. Purchase of all the outstanding voting stock of the acquired company. C. Purchase of 25% of outstanding voting stock of the acquired company. D. Purchase of all assets and liabilities of another company.   Question 6   Under the current GAAP, Goodwill arising from a business combination is   Answers:A. never amortized. B. charged to Retained Earnings after the acquisition is completed. C. amortized over 40 years or its useful life, whichever is shorter. D. amortized over 40 years or its useful life, whichever is longer.   Question 7   Which of the following is NOT a reason for a company to expand through a combination, rather than by building new facilities?   Answers:A. A combination might provide an opportunity to invest in a company without having to take responsibility for its financial results. B. A combination might provide fewer operating delays. C. A combination might provide easier access to intangible assets. D.  A combination might provide cost advantages.   Question 8   Which method must be used if ASC 810-10-65 prohibits full consolidation of a 70% owned subsidiary?   Answers:A. The Liquidation value B. Market value C. The cost method D. Equity method   Question 9   When preparing the consolidation workpaper for a company and its controlled subsidiary, which of the following would be used for the entities being consolidated?   Answers:A. Adjusted trial balances B. Post-closing trial balances C. The adjusted trial balance for the parent and the unadjusted trial balance for all controlled subsidiaries D. Unadjusted trial balances   Question 10   Panini Corporation owns 85% of the outstanding voting stock of Strathmore Company and Malone Corporation owns the remaining 15% of Strathmore's voting stock. On the consolidated financial statements of Panini Corporation and Strathmore, Malone is   Answers:A. an equity investee. B. a noncontrolling interest. C. a related party. D. an affiliate.

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