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ACC 266 2 Test Bank Questions With Complete Solutions
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ACC 266 2 Test Bank Questions With Complete Solutions
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ACC 266 2 Test Bank Questions With Complete Solutions. A parent acquires all of a subsidiary's common stock and 60
percent of its preferred stock. The preferred stock has a
cumulative dividend. No dividends are in arrears. How is the
noncontrolling interest in the subsidiary's net income assigned?
Correct Answer Income is assigned as 40 percent of the
preferred stock dividends.
[QUESTION]
15. Vontkins Inc. owned all of Quasimota Co. The subsidiary
had bonds payable outstanding on January 1, 2017, with a book
value of $265,000. The parent acquired the bonds on that date
for $288,000. Subsequently, Vontkins reported interest income
of $25,000 in 2017 while Quasimota reported interest expense of
$29,000. Consolidated financial statements were prepared for
2018. What adjustment would be required for the retained
earnings balance as of January 1, 2018?
A) Reduction of $27,000.
B) Reduction of $4,000.
C) Reduction of $19,000.
D) Reduction of $30,000.
E) Reduction of $20,000. Correct Answer C) Reduction of
$19,000.
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. Correct
Answer B. When Wood Co. sells the land to a third party.
1) When a U.S. company sells merchandise to a foreign
company denominated in the foreign currency, a foreign
exchange gain will result if the foreign currency depreciates
Correct Answer False
10. If a subsidiary is operating in a highly inflationary economy,
how are the financial sttements to be restated?
A. Historical rate.
B. Working Capital rate.
C. Translation.
D. Remeasurement.
E. Current rate. Correct Answer D. Remeasurement.
10. What amount should be attributed to the Noncontrolling
Interest in Garvin Co. following the sale of the 10,000 shares of
common stock?
A) $288,000.
B) $101,000.
C) $280,000.
D) $230,000.
E) $168,000. Correct Answer $280,000
10) A speculative derivative would be similar to which type of
hedge? Correct Answer An option designated as a fair value
hedge.
,11. Rojas Co. owned 7,000 shares (70%) of the outstanding
10%, $100 par, preferred stock and 60% of the outstanding
common stock of Brett Co. Assuming there are no excess
amortizations or intra-entity transactions, and Brett reports net
income of $780,000, what is the noncontrolling interest in the
subsidiary's income?
A) $234,000.
B) $273,000.
C) $302,000.
D) $312,000.
E) $284,000. Correct Answer C) $302,000.`
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. Correct Answer When the goods are sold to a
third party by Lord
12. What would Knight Co. report as consolidated basic
earnings per share (rounded)?
A) $6.37
B) $6.40
C) $7.00
D) $5.68
, E) $6.00 Correct Answer A) $6.37
13. Bauerly Co. owned 70% of the voting common stock of
Devin Co. During 2010, Devin made frequent sales of inventory
to Bauerly. There were unrealized gains of $40,000 in the
beginning inventory, and $25,000 at the end of the year. Devin
reported net income of $137,000 for 2010. Bauerly decided to
use the equity method to account for the investment. What is the
noncontrolling interest's share of Devin's net income for 2010?
A. $41,100.
B. $33,600.
C. $21,600.
D. $45,600.
E. $36,600. Correct Answer $45,600 (137,000 + (40,000 -
25,000) = 152,000 x .3 = 45,600)
13. What would Knight Co. report as consolidated diluted
earnings per share (rounded)?
A) $4.00.
B) $. 4.71
C) $8.71.
D) $5.89.
E) $6.37. Correct Answer D) $5.89.
14. Campbell Inc. owned all of Gordon Corp. For 2018,
Campbell reported net income (without consideration of its
investment in Gordon) of $280,000 while the subsidiary
reported $112,000. There are no excess amortizations associated
with this consolidation. The subsidiary had bonds payable
outstanding on January 1, 2018, with a book value of $297,000.
The parent acquired the bonds on that date for $281,000. During
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