accounting-Chapter 05 Consolidated Financial Statements – Intra-Entity Asset Transactions

ACC
4700
QUIZ 5
Chapter 05 Consolidated Financial Statements –
Intra-Entity Asset Transactions

Last Name

First Name

QUESTION #1
12. During 2010, 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
Lord.
B) When Lord pays Von for the goods.
C) When Von sold the goods to Lord.
D) When the goods are used by Lord.
E) No gain can be recognized since the
transaction was between related parties.

QUESTION #2
17. Yukon Co. acquired
75% percent of the voting common stock of Ontario Corp. on January 1,
2011. During the year, Yukon made
sales of inventory to Ontario. The
inventory cost Yukon $260,000 and was sold to Ontario for $390,000. Ontario still had $60,000 of the goods in
its inventory at the end of the year.
The amount of unrealized intercompany profit that should be eliminated
in the consolidation process at the end of 2011 is
A) $15,000.
B) $20,000.
C) $32,500.
D) $30,000.
E) $110,000.

QUESTION #3
18. Prince Corp. owned
80% of Kile Corp.’s common stock.
During October 2011, Kile sold merchandise to Prince for
$140,000. At December 31, 2011, 50% of
this merchandise remained in Prince’s inventory. For 2011, gross profit percentages were 30%
of sales for Prince and 40% of sales for Kile. The amount of unrealized intercompany
profit in ending inventory at December 31, 2011 that should be eliminated in
the consolidation process is
A) $28,000.
B) $56,000.
C) $22,400.
D) $21,000.
E) $42,000.

QUESTION #4
1. On November 8, 2011,
Power Corp. sold land to Wood Co., its wholly owned subsidiary. The land cost $61,500 and was sold to Wood
for $89,000. From the perspective of
the combination, when is the gain on the sale of the land realized?
A) Proportionately over a designated period of
years.
B) When Wood Co. sells the land to a third
party.
C) No gain can be recognized.
D) As Wood uses the land.
E) When Wood Co. begins using the land
productively.

QUESTION #5
8. Justings Co. owned 80%
of Evana Corp. During 2011, Justings
sold to Evana land with a book value of $48,000. The selling price was $70,000. In its accounting records, Justings should
A) not recognize a gain on the sale of the
land since it was made to a related party.
B) recognize a gain of $17,600.
C) defer recognition of the gain until Evana
sells the land to a third party.
D) recognize a gain of $8,000.
E) recognize a gain of $22,000.

QUESTION #6
14. Chain Co. owned all
of the voting common stock of Shannon Corp.
The corporations’ balance sheets dated December 31, 2010, include the
following balances for land:
for Chain–$416,000, and for Shannon–$256,000. On the original date of acquisition, the
book value of Shannon’s land was equal to its fair value. On April 4, 2011, Chain sold to Shannon a
parcel of land with a book value of $65,000.
The selling price was $83,000.
There were no other transactions which affected the companies’ land
accounts during 2010. What is the consolidated
balance for land on the 2011 balance sheet?
A) $672,000.
B) $690,000.
C) $755,000.
D) $737,000.
E) $654,000.

QUESTION #7
44. Which of the
following statements is true regarding an intra-entity sale of land?
A) A loss is always recognized but a gain is
eliminated in a consolidated income statement.
B) A loss and a gain are always eliminated in
a consolidated income statement.
C) A loss and a gain are always recognized in
a consolidated income statement.
D) A gain is always recognized but a loss is
eliminated in a consolidated income statement.
E) A gain or loss is eliminated by adjusting
stockholders’ equity through comprehensive income.

QUESTION #8
45. Parent sold land to
its subsidiary for a gain in 2008. The
subsidiary sold the land externally for a gain in 2011. Which of the following statements is true?
A) A gain will be reported in the consolidated
income statement in 2008.
B) A gain will be reported in the consolidated
income statement in 2011.
C) No gain will be reported in the 2011
consolidated income statement.
D) Only the parent company will report a gain
in 2011.
E) The subsidiary will report a gain in 2008.

REFERENCE:
Ref. 05_11
Stiller
Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on
March 1, 2010, for $75,000. The land
originally cost Leo $60,000. Stiller
reported net income of $125,000 and $140,000 for 2010 and 2011, respectively. Leo uses the equity method to account for
its investment.

QUESTION #9
REFER TO: Ref. 05_011
77. Compute the gain or
loss on the intra-entity sale of land.
A) $15,000 loss.
B) $15,000 gain.
C) $50,000 loss.
D) $50,000 gain.
E) $65,000 gain.

QUESTION #10
REFER TO: Ref. 05_11
78. On a consolidation
worksheet, what adjustment would be made for 2010 regarding the land
transfer?
A) Debit gain for $50,000.
B) Credit gain for $50,000.
C) Debit land for $15,000.
D) Credit land for $15,000.
E) Credit gain for $15,000.

REFERENCE:
Ref. 05_12
Stark
Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May
1, 2010, for $80,000. The land
originally cost Stark $85,000. Stark
reported net income of $200,000, $180,000, and $220,000 for 2010, 2011, and
2012, respectively. Parker sold the
land it purchased from Stark in 2010 for $92,000 in 2012.

QUESTION #11
REFER TO: Ref. 05_12
82. Compute the gain or
loss on the intra-entity sale of land.
A) $80,000 gain.
B) $80,000 loss.
C) $5,000 gain.
D) $5,000 loss.
E) $85,000 loss.

QUESTION #12
REFER TO: Ref. 05_12
83. Which of the
following will be included in a consolidation entry for 2010?
A) Debit loss for $5,000.
B) Credit loss for $5,000.
C) Credit land for $5,000.
D) Debit gain for $5,000.
E) Credit gain for $5,000.

QUESTION #13
REFER TO: Ref. 05_12
87. Compute Parker’s reported gain or loss
relating to the land for 2012.
A) $12,000 gain.
B) $5,000 loss.
C) $12,000 loss.
D) $7,000 gain.
E) $7,000 loss.

REFERENCE:
Ref. 05_04
On January 1,
2011, Pride, Inc. acquired 80% of the outstanding voting common stock of
Strong Corp. for $364,000. There is no
active market for Strong’s stock. Of
this payment, $28,000 was allocated to equipment (with a five-year life) that
had been undervalued on Strong’s books by $35,000. Any remaining excess was attributable to
goodwill which has not been impaired.
As of
December 31, 2011, before preparing the consolidated worksheet, the financial
statements appeared as follows:

Pride, Inc.

Strong Corp.

Revenues

$ 420,000

$280,000

Cost of goods sold

(196,000)

(112,000)

Operating expenses

(28,000)

(14,000)

Net income

$
196,000

$154,000

Retained earnings,
1/1/11

$ 420,000

$210,000

Net income (above)

196,000

154,000

Dividends paid

0

0

Retained earnings,
12/31/11

$
616,000

$364,000

Cash and receivables

$ 294,000

$126,000

Inventory

210,000

154,000

Investment in Strong
Corp

364,000

0

Equipment (net)

616,000

420,000

Total assets

$1,484,000

$700,000

Liabilities

$ 588,000

$196,000

Common stock

280,000

140,000

Retained earnings,
12/31/11 (above)

616,000

364,000

Total liabilities and
stockholders’ equity

$1,484,000

$700,000

During 2011, Pride bought inventory for $112,000 and sold it to Strong for
$140,000. Only half of this purchase
had been paid for by Strong by the end of the year. 60% of these goods were still in the company’s
possession on December 31.

QUESTION #14
REFER TO: Ref. 05_04
23. What is the total of consolidated
revenues?
A) $700,000.
B) $644,000.
C) $588,000.
D) $560,000.
E) $840,000.

QUESTION #15
REFER TO: Ref. 05_04
25. What is the total of consolidated
cost of goods sold?
A) $196,000.
B) $212,800.
C) $184,800.
D) $203,000.
E) $168,000.

QUESTION #16
REFER TO: Ref. 05_04
28. What is the
consolidated total for inventory at December 31, 2011?
A) $336,000.
B) $280,000.
C) $364,000.
D) $347,200.
E) $349,300.

REFERENCE:
Ref. 05_05
Strickland
Company sells inventory to its parent, Carter Company, at a profit during
2010. One-third of the inventory is sold by Carter in 2010.

QUESTION #17
REFER TO: Ref. 05_05
29. In the consolidation
worksheet for 2010, which of the following choices would be a debit entry to
eliminate the intra-entity transfer of inventory?
A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

QUESTION #18
REFER TO: Ref. 05_05
30. In the consolidation
worksheet for 2010, which of the following choices would be a credit entry to
eliminate the intra-entity transfer of inventory?
A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

QUESTION #19
REFER TO: Ref. 05_05
31. In the consolidation
worksheet for 2010, which of the following choices would be a debit entry to
eliminate unrealized intra-entity gross profit with regard to the 2010
intra-entity sales?
A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

QUESTION #20
REFER TO: Ref. 05_05
32. In the consolidation
worksheet for 2010, which of the following choices would be a credit entry to
eliminate unrealized intra-entity gross profit with regard to the 2010
intra-entity sales?
A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

REFERENCE: Ref. 05_07
Gargiulo Company,
a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a
25% profit on selling price. The
following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1,
2010.

2010

2011

2012

Purchases
by Posito

$8,000

$12,000

$15,000

Ending
inventory on Posito’s books

1,200

4,000

3,000

Assume the
equity method is used. The following data are available pertaining to
Gargiulo’s income and dividends.

2010

2011

2012

Gargiulo’s
net income

$70,000

$85,000

$94,000

Dividends
paid by Gargiulo

10,000

10,000

15,000

QUESTION #21
REFER TO: Ref. 05_07
50. Compute the equity in earnings of Gargiulo
reported on Posito’s books for 2010.
A) $63,000.
B) $62,730.
C) $63,270.
D) $70,000.
E) $62,700.

QUESTION #22
REFER TO: Ref. 05_07
56. For consolidation
purposes, what amount would be debited to cost of goods sold for the 2010
consolidation worksheet with regard to unrealized gross profit of the
intra-entity transfer of merchandise?
A) $300.
B) $240.
C) $2,000.
D) $1,600.
E) $270.

QUESTION #23
REFER TO: Ref. 05_07
59. For consolidation
purposes, what amount would be debited to January 1 retained earnings for the
2010 consolidation worksheet entry with regard to the unrealized gross profit
of the 2010 intra-entity transfer of merchandise?
A) $0.
B) $1,600.
C) $300.
D) $240.
E) $270.

REFERENCE: Ref. 05_08
Patti Company owns 80% of
the common stock of Shannon, Inc. In
the current year, Patti reports sales of $10,000,000 and cost of goods sold
of $7,500,000. For the same period,
Shannon has sales of $200,000 and cost of goods sold of $160,000. During the
year, Patti sold merchandise to Shannon for $60,000 at a price based on the
normal markup. At the end of the year,
Shannon still possesses 30 percent of this inventory.

QUESTION #24
REFER TO: Ref. 05_08
62. Compute consolidated
sales.
A) $10,000,000.
B) $10,126,000.
C) $10,140,000.
D) $10,200,000.
E) $10,260,000.

QUESTION #25
REFER TO: Ref. 05_08
63. Compute consolidated
cost of goods sold.
A) $7,500,000.
B) $7,600,000.
C) $7,615,000.
D) $7,604,500.
E) $7,660,000.

QUESTION #26
REFER TO: Ref. 05_08
64. Assume the same
information, except Shannon sold inventory to Patti. Compute consolidated sales.
A) $10,000,000.
B) $10,126,000.
C) $10,140,000.
D) $10,200,000.
E) $10,260,000.

 

CLICK HERE TO ORDER A SIMILAR PAPER

We pride ourselves in writing quality essays

CLICK HERE TO CONTACT US

Lets Start Working

Plagiarism Free

We use anti-plagiarism software to ensure you get high-quality, unique papers. Besides, our writers have a zero plagiarism mentality

On Time Delivery

Your essay will be delivered strictly within the deadline.  If you have an urgent order, we can do it!

Money Back Guarantee

We offer warranty service, including free revisions, and a right to request a refund incase your expectations are not met!

THE BEST PAPER WRITER HELPER

Our Advantage

  • Say “NO” to plagiarism – FREE plagiarism report as an addition to your paper
  • The lowest prices that fit excellent quality
  • Authorship – you are the one who possesses the paper. We DO NOT re-sale or re-use any of them.

OUR PAPER WRITER HELPER GOODIES

Our Freebies

  • Free Cover Page
  • Free Revisions
  • Free Reference Page
  • Free 24/7 support

Pin It on Pinterest

Share This