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2. Which one of the following varies between the equity, initial value and partial equity methods of accounting for an investment in a subsidiary?
2. Which one of the following varies between the equity, initial value and partial equity methods of accounting for an investment in a subsidiary? A. The retained earnings of the parent companyB. Total assets on the consolidated balance sheetC. Total liabilities on the consolidated balance sheetD. The non-controlling interest in the subsidiaryE. The amount of consolidated cost of goods sold3. One company acquires another company in a combination accounted for as an acquisition. The acquiring company decides to apply the initial value method in accounting for the combination. What is one reason the acquiring company might have made this decision? A. It is the only method allowed by the SECB. It is relatively easy to applyC. It is the only internal reporting method allowed by generally accepted accounting principlesD. Operating results on the parent's financial records reflect consolidated totalsE. When the initial value method is used, no worksheet entries are required in the consolidation process4. When consolidating a subsidiary that was acquired on a date other than the first day of the fiscal year, which of the following statements is true in the presentation of consolidated financial statements? A. Purchased pre-acquisition earnings of the subsidiary are excluded from consolidated earningsB. Purchased pre-acquisition revenues and expenses are included with combined revenues and expensesC. Purchased pre-acquisition earnings are deducted from the beginning consolidated stockholders' equityD. Purchased pre-acquisition earnings are added to the beginning consolidated stockholders' equityE. Purchased pre-acquisition earnings are reported separately on the consolidated income statementUse the following information for questions 10 and11. On January 1, 2009, Franel Co. acquired all of the common stock of Hurlem Corp. For 2009, Hurlem earned net income of $360,000 and paid dividends of $190,000. Amortization of the patent allocation that was included in the acquisition was $6,000.5. How much difference would there have been in Franel's income with regard to the effect of the investment, between using the equity method or using the initial value method of internal recordkeeping? A. $190,000B. $360,000C. $164,000D. $354,000E. $150,0006. How much difference would there have been in Franel's income with regard to the effect of the investment, between using the equity method or using the partial equity method of internal recordkeeping? A. $170,000B. $354,000C. $164,000D. $6,000E. $174,0007. When a parent uses the equity method throughout the year to account for investment in a subsidiary, which of the following statements is false? A. Parent company net income equals controlling interest in consolidated net incomeB. Parent company retained earnings equal consolidated retained earningsC. Parent company total assets are different from consolidated total assetsD. Parent company revenues are different from consolidated revenuesE. Goodwill recorded separately on the parent company balance sheet equals consolidated goodwill8. During 2009, Von Co. sold inventory to its wholly-owned subsidiary, Lord Co. The inventory cost $30,000 and was sold to Lord for $44,000. From the perspective of the combination, when is the $14,000 gain realized? A. When the goods are sold to a third party by LordB. When Lord pays Von for the goodsC. When Von sold the goods to LordD. When the goods are used by LordE. No gain can be recognized since the transaction was between related parties9. Parent sold land to its subsidiary for a gain in 2007. The subsidiary sold the land externally for a gain in 2010. Which of the following statements is false? A. A gain will be reported on the consolidated income statement in 2010B. No gain will be reported on the consolidated income statement in 2007C. A gain will be reported by the subsidiary on its 2010 income statementD. A gain will be reported by the subsidiary on its 2007 income statementE. A gain will be reported by the parent on its 2007 income statement10. On January 1, 2009, Payton Co. sold equipment to its subsidiary, Starker Corp., for $115,000. The equipment had cost $125,000 and the balance in accumulated depreciation was $45,000. The equipment had an estimated remaining useful life of eight years and $0 salvage value. Both companies use straight-line depreciation. On their separate 2009 income statements, Payton and Starker reported depreciation expense of $84,000 and $60,000, respectively. The amount of depreciation expense on the consolidated income statement for 2009 would have been A. $144,000B. $148,375C. $109,000D. $134,000E. $139,625
