In y Ter Company
In y Ter Company
In y Ter Company
2.
3.
a.
b.
Corellas Income
from Hollow
No effect.
No effect.
No effect.
Decreased.
c.
d.
5.
No effect.
Decreased.
a.
b.
c.
d.
6.
Decreased.
Increased.
Consolidated Net
Assets
No effect.
No effect.
Decreased.
Decreased.
No effect.
Increased.
Decreased.
No effect.
On January 2, 2005 Kakapo Company sold a truck with book value of $45,000
to Flightless Corporation, its completely owned subsidiary, for $60,000. The
truck had a remaining useful life of three years with zero salvage value. Both
firms use the straight-line depreciation method, and assume no salvage value.
If Kakapo failed to make year-end equity adjustments, Kakapos investment in
Flightless at December 31, 2005 was
a.
b.
c.
d.
Cash
Accumulated depreciation
Truck
Gain on Sale of Truck
Debit
50,000
18,000
Credit
53,000
15,000
Avocet holds 60% of Shrimp. Shrimp reported net income of $55,000 in 2005
and Avocet's separate net income (excludes interest in Shrimp) for 2005 was
$98,000.
7.
8.
9.
10.
$121,000.
$125,000.
$131,000.
$143,000.
a.
b.
c.
d.
11.
12.
required no adjustment.
decreased by $4,000.
increased by $4,000
increased by $30,000.
In reference to the downstream or upstream sale of depreciable assets,
which of the following statements is correct?
a.
Upstream sales from the subsidiary to the parent company always result in
unrealized gains or losses.
The initial effect of unrealized gains and losses from downstream sales of
depreciable assets is different from the sale of nondepreciable assets.
Gains, but not losses, appear in the parent-company accounts in the year of
sale and must be eliminated by the parent company in determining its
investment income under the equity method of accounting.
Gains and losses appear in the parent-company accounts in the year of
sale and must be eliminated by the parent company in determining its
investment income under the equity method of accounting.
b.
c.
d.
13.
$18,000.
$22,000.
$23,000.
$27,000.
Falcon
750,000
( 200,000)
$
550,000
$
Rodent
300,000
( 50,000)
$ 250,000
$
Peregrine
$ 1,800,000
( 750,000)
( 450,000)
( 180,000)
$
420,000
Cliff
$ 1,050,000
45,000
( 285,000)
( 135,000)
( 450,000)
$ 225,000
a.
b.
c.
d.
15.
$161,550.
$162,000.
$166,050.
$202,500.
Kestrel
$
400,000
120,000
Reptile
$ 250,000
75,000
The consolidated amounts for Buildings and Accumulated Depreciation Buildings that appeared, respectively, on the balance sheet at December 31,
2005, were
a.
b.
c.
d.
16.
Pigeon Corporation purchased land from its 60%-owned subsidiary, Seed Inc.,
in 2003 at a cost $30,000 greater than Seeds book value. In 2005, Pigeon
sold the land to an outside entity for $40,000 more than Pigeons book value.
The 2005 consolidated income statement reported a gain on the sale of land
of
a.
b.
c.
d.
17.
$249,250.
$250,500.
$254,250.
$288,000.
19.
$40,000.
$42,000.
$58,000.
$70,000.
18.
$48,000.
$60,000.
$64,000.
$80,000.
a.
b.
c.
d.
20.
$710,000.
$764,000.
$800,000.
$900,000.
SOLUTIONS
Multiple Choice Questions
1
($53,000 - $50,000)
125,000
10
18,000
$ 1,050,000
(
25,000 )
$ 1,025,000
$
(
250,000
5,000 )
245,000
225,000
4,500
184,500
90%
166,050
$
(
$
650,000
30,000 )
620,000
11
12
13
14
15
45,000 )
17
18
19
20
$
(
195,000
3,000 )
192,000
288,000
45,000 )
11,250
254,250
22,500