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Advanced Accounting of TEST BANK Exam 3 2024/2025 Questions With Completed & Verified Solutions.
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Advanced Accounting of TEST BANK Exam 3 2024/2025 Questions With Completed & Verified Solutions.
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Advanced Accounting Exam #3In the event of a bargain acquisition (after carefully considering the fair valuation of all
subsidiary assets and liabilities), FASB requires the following accounting: - ANS an ordinary
gain is reported in the financial statements of the consolidated entity
The difference between implied and book values that is not allocated to specific identifiable
assets or liabilities is treated as goodwill, which is: - ANS capitalized and checked periodically
for impairment
Assuming a FIFO cost flow, which account should normally be debited for the inventory
adjustment (assuming market value of subsidiary's inventory to be higher than its book value)
when allocating the difference between implied and book values at the end of the year of
acquisition? - ANS Cost of goods sold
Pristine Corp. own 80% of Serendipity Inc.'s common stock. During 2011, Pristine sold
Serendipity $250,000 of inventory on the same terms as sales made to third parties. Serendipity
sold all the inventory purchased from Pristine in 2011. The following data pertain to sales by
each company for the year.
__________________________________Pristine___________________Serendipity
Sales_________________________$1,000,000_________________$700,000
Cost of Goods Sold______400,000____________________350,000
How much should be reported as cost of goods sold in the consolidated income statement for
2011? - ANS $500,000
Polychromasia Company sold inventory costing $30,000 to its subsidiary, Simply Colorful, for
double its cost in 2012. Polychromasia owns 80% of Simply Colorful. Simply resold $50,000 of
this inventory for $60,000 to outsiders in 2012. How much unrealized profit exists at the end of
the year? - ANS $5,000
Skipper Company owns all the outstanding common stock of Anchorage Inc. During 2013,
Skipper sells merchandise to Anchorage that is in turn sold to outsiders. None of the
intercompany merchandise remains in Anchorage's year-end inventory, but some of the
intercompany purchases from Skipper have not yet been paid. Identify the accounts that will
reflect incorrect balances in the consolidated financial statements if no adjustments are made: -
ANS sales, cost of goods sold, accounts receivable, and accounts payable
Peller owns 80% of Sando Company common stock. During the fourth quarter of 2012, Sando
sold inventory to Peller for $200,000. At the end of December 2012, half this inventory remained
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