Question: Cairns owns 75 percent of the voting

> How much of this expense should Calloway’s income statement reflect for the quarter ending March 31? a. –0– b. $40,000 c. $120,000 d. $480,000

> Arryn, Inc., owns 95 percent of Stark Corporation’s voting stock. The acquisition price exceeded book and fair value by $85,500, which was appropriately attributed to goodwill. Stark holds 15 percent of Arryn’s voting stock. The price paid for the shares

> Arnold Corporation holds 70 percent of Belvista, which, in turn, owns 70 percent of Stang. Separate operating income figures (excluding investment income) and intra-entity upstream gains (on assets remaining within the consolidated group) included in the

> Diamond Company owns 80 percent of Emerald, and Emerald owns 90 percent of Sapphire, Inc. Separate operating income totals for the current year follow; they contain no investment income. None of these acquisitions required amortization expense. Included

> Which of the following is not a reason for two companies to file separate tax returns? a. The parent owns 68 percent of the subsidiary. b. They have no intra-entity transactions. c. Intra-entity dividends are tax-free only on separate returns. d. Neither

> How does the amortization of tax-deductible goodwill affect the computation of a parent com- pany’s income taxes? a. It is a deductible expense only if the parent owns at least 80 percent of the subsidiary’s voting stock. b. It is deductible only as impa

> Which of the following is correct for two companies that want to file a consolidated tax return as an affiliated group? a. One company must hold at least 51 percent of the other company’s voting stock. b. One company must hold at least 65 percent of the

> On January 1, Balanger Company buys 10 percent of the outstanding shares of its parent, Altgeld, Inc. Although the total book and fair values of Altgeld’s net assets equaled $3.2 million, the price paid for these shares was $340,000. During the year, Alt

> On January 1, 2019, Alpha acquired 80 percent of Delta. Of Delta’s total business fair value, $125,000 was allocated to copyrights with a 20-year remaining life. Subsequently, on January 1, 2020, Delta obtained 70 percent of Omega&acirc

> Costco Wholesale Corporation owns and operates membership warehouses in the United States, Canada, United Kingdom, Mexico, Japan, Korea, Australia, Spain, France, and Iceland. Costco also engages in retail operations through a majority-owned subsidiary i

> Parson Company acquired an 80 percent interest in Syber Company on January 1, 2020. Any portion of Syber’s business fair value in excess of its corresponding book value was assigned to trademarks. This intangible asset has subsequently

> On January 1, 2020, Travers Company acquired 90 percent of Yarrow Company’s outstanding stock for $720,000. The 10 percent noncontrolling interest had an assessed fair value of $80,000 on that date. Any acquisition-date excess fair valu

> Mighty Company purchased a 60 percent interest in Lowly Company on January 1, 2020, for $420,000 in cash. Lowly’s book value at that date was reported as $600,000, and the fair value of the noncontrolling interest was assessed at $280,000. Any excess acq

> House Corporation has been operating profitably since its creation in 1960. At the beginning of 2019, House acquired a 70 percent ownership in Wilson Company. At the acquisition date, House prepared the following fair-value allocation schedule: House reg

> King’s Road recently acquired all of Oxford Corporation’s stock and is now consolidating the financial data of this new subsidiary. King’s Road paid a total of $850,000 for Oxford, which has the follo

> Garrison holds a controlling interest in Robertson’s outstanding stock. For the current year, the following information has been gathered about these two companies: Garrison uses the initial value method to account for the investment in

> Lake acquired a controlling interest in Boxwood several years ago. During the current fiscal period, the two companies individually reported the following income (exclusive of any investment income): Lake paid a $90,000 cash dividend during the current y

> On January 1, 2020, Abbey acquires 90 percent of Benjamin’s outstanding shares. Financial information for these two companies for the years 2020 and 2021 follows (credit balances indicated by parentheses): Assume that a tax rate of 21 p

> Martin has a controlling interest in Rowen’s outstanding stock. At the current year-end, the following information has been accumulated for these two companies: Martin uses the initial value method to account for the investment in Rowen

> A subsidiary owns shares of its parent company. Which of the following is true concerning the treasury stock approach? a. It is one of several options to account for mutual holdings available under current accounting standards. b. The original cost of th

> Go to the website www.gasb.org and click on “Projects” included in the list that runs across the top of the page. Then click on “Current Projects & Pre-Agenda Research.” Click on one of the current projects that is listed. Read the sections that are titl

> Arriba and its 80 percent–owned subsidiary (Abajo) reported the following figures for the year ending December 31, 2021 (credit balances indicated by parentheses). Abajo paid dividends of $30,000 during this period. In 2020, intra-enti

> Sienna Company developed a specialized banking application software program that it licenses to various financial institutions through multiple-year agreements. On January 1, 2021, these licensing agreements have a fair value of $900,000 and represent Si

> Baxter, Inc., owns 90 percent of Wisconsin, Inc., and 20 percent of Cleveland Company. Wiscon- sin, in turn, holds 60 percent of Cleveland’s outstanding stock. No excess amortization resulted from these acquisitions. During the current

> Boulder, Inc., obtained 90 percent of Rock Corporation on January 1, 2019. Annual amortization of $22,000 is applicable on the allocations of Rock’s acquisition-date business fair value. On January 1, 2020, Rock acquired 75 percent of S

> On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company’s capital stock for $500,000 in cash and other assets. Nephew had a book value of $600,000, and the 20 percent non- controlling interest fair value was $125,000 on

> On January 1, 2019, Aspen Company acquired 80 percent of Birch Company’s voting stock for $288,000. Birch reported a $300,000 book value, and the fair value of the noncontrolling interest was $72,000 on that date. Then, on January 1, 20

> Lanister Company purchases all of Mountain Company for $401,600 in cash. On that date, the subsidiary has net assets with a $355,000 fair value but a $315,000 book value and tax basis. The tax rate is 21 percent. Neither company has reported any deferred

> What would be the answer to Problem 11 if a consolidated tax return were filed? a. –0– b. $1,785 c. $2,100 d. $8,925

> Paloma, Inc., owns 85 percent of Blanca Corporation. Both companies have been profitable for many years. During the current year, the parent sold merchandise to the subsidiary at a transfer price of $175,000. In recording the transfer, the parent recogni

> Kyle, Inc., owns 75 percent of CRT Company. During the current year, CRT reported net income of $425,000 but paid a total cash dividend of only $105,000. What deferred income tax liability must be recognized in the consolidated balance sheet? Assume the

> Kelly Fernandez and Michael Webster have decided to create a business. They have financing available and have a well-developed business plan. However, they have not yet decided which type of legal business structure would be best for them. Required Write

> On June 30, 2021, Plaster, Inc., paid $916,000 for 80 percent of Stucco Company’s outstanding stock. Plaster assessed the acquisition-date fair value of the 20 percent noncontrolling interest at $229,000. At acquisition date, Stucco rep

> On January 1, Paisley, Inc., paid $560,000 for all of Skyler Corporation’s outstanding stock. This cash payment was based on a price of $180 per share for Skyler’s $100 par value preferred stock and $38 per share for i

> Following are separate income statements for Austin, Inc., and its 80 percent–owned subsidiary, Rio Grande Corporation as well as a consolidated statement for the business combination as a whole (credit balances indicated by parentheses

> Bolero Company holds 80 percent of the common stock of Rivera, Inc., and 40 percent of this subsidiary’s convertible bonds. The following consolidated financial statements are for 2020 and 2021 (credit balances indicated by parentheses)

> On January 1, 2020, Mona, Inc., acquired 80 percent of Lisa Company’s common stock as well as 60 percent of its preferred shares. Mona paid $65,000 in cash for the preferred stock, with a call value of 110 percent of the $50 per share p

> Fred, Inc., and Herman Corporation formed a business combination on January 1, 2019, when Fred acquired a 60 percent interest in Herman’s common stock for $312,000 in cash. The book value of Herman’s assets and liabili

> Pavin acquires all of Stabler’s outstanding shares on January 1, 2018, for $460,000 in cash. Of this amount, $30,000 was attributed to equipment with a 10-year remaining life and $40,000 was assigned to trademarks expensed over a 20-yea

> On January 1, 2019, Aronsen Company acquired 90 percent of Siedel Company’s outstanding shares. Siedel had a net book value on that date of $480,000: common stock ($10 par value) of $200,000 and retained earnings of $280,000. Aronsen paid $584,100 for th

> Albuquerque, Inc., acquired 16,000 shares of Marmon Company several years ago for $600,000. At the acquisition date, Marmon reported a book value of $710,000, and Albuquerque assessed the fair value of the noncontrolling interest at $150,000. Any excess

> Bravo, Inc., owns all of the stock of Echo, Inc. For 2021, Bravo reports income (exclusive of any investment income) of $480,000. Bravo has 80,000 shares of common stock outstanding. It also has 5,000 shares of preferred stock outstanding that pay a divi

> Go to www.epiqbankruptcysolutions.com or www.kccllc.net and select a current active bankruptcy case. If available, go to an online business publication database such as Factiva or ABI-Inform. Search for articles that discuss the issues and problems that

> Alford Company and its 80 percent–owned subsidiary, Knight, have the following income statements for 2021: Additional Information for 2021 ∙ Intra-entity inventory transfers during the year amounted to $90,000. All int

> Through the payment of $10,468,000 in cash, Drexel Company acquires voting control over Young Company. This price is paid for 60 percent of the subsidiary’s 100,000 outstanding common shares ($40 par value) as well as all 10,000 shares of 8 percent, cumu

> Smith, Inc., has the following stockholders’ equity accounts as of January 1, 2021: Haried Company purchases all of Smith’s common stock on January 1, 2021, for $14,040,000. The preferred stock remains in the hands of

> Paulina, Incorporated, owns 90 percent of Southport Company. On January 1, 2021, Paulina acquires half of Southport’s $500,000 outstanding 13-year bonds. These bonds had been sold on the open market on January 1, 2018, at a 12 percent effective rate. The

> Several years ago, Brant, Inc., sold $900,000 in bonds to the public. Annual cash interest of 9 percent ($81,000) was to be paid on this debt. The bonds were issued at a discount to yield 12 percent. At the beginning of 2019, Zack Corporation (a wholly o

> Highlight, Inc., owns all outstanding stock of Kiort Corporation. The two companies report the following balances for the year ending December 31, 2020: On January 1, 2020, Highlight acquired on the open market bonds for $108,000 originally issued by Kio

> On January 1, 2021, Pikes Corporation loaned Venti Company $300,000 and agreed to guarantee all of Venti’s long-term debt in exchange for (1) decision-making authority over all of Venti’s activities and (2) an annual m

> On January 1, 2021, Access IT Company exchanged $1,000,000 for 40 percent of the outstanding voting stock of Net Connect. Especially attractive to Access IT was a research project underway at Net Connect that would enhance both the speed and quantity of

> On December 31, 2020, Petra Company invests $20,000 in Valery, a variable interest entity. In contractual agreements completed on that date, Petra established itself as the primary beneficiary of Valery. Previously, Petra had no equity interest in Valery

> Earlier this year, Alltime Company (headquartered in Kansas City, Missouri) acquired a small watch manufacturer in Berlin, Germany, that keeps its books in euros. (This is the first foreign direct investment made by Alltime.) The end of the fiscal year i

> The following describes a set of arrangements between TecPC Company and a variable interest entity (VIE) as of December 31, 2020. TecPC agrees to design and construct a new research and development (R&D) facility. The VIE’s sole purpose is to finance and

> Paige Clothing Company (Paige) helped form Apparel Media LLC, a company that will conduct e-commerce sales for Paige through a dedicated internet site. Two outside investors contributed $50,000 in start-up capital to Apparel Media as the sole owners of t

> On January 1, 2021, Stamford reacquires 8,000 of the outstanding shares of its own common stock for $24 per share. None of these shares belonged to Neill. How does this transaction affect the parent company’s Additional Paid-In Capital account? a. Has no

> On January 1, 2021, Stamford issues 10,000 additional shares of common stock for $15 per share. Neill does not acquire any of this newly issued stock. How does this transaction affect the parent company’s Additional Paid-In Capital account? a. Has no eff

> On January 1, 2021, Stamford issues 10,000 additional shares of common stock for $25 per share. Neill acquires 8,000 of these shares. How will this transaction affect the parent company’s Additional Paid-In Capital account? a. Has no effect on it b. Incr

> Dunn Corporation owns 100 percent of Grey Corporation’s common stock. On January 2, 2020, Dunn sold to Grey $40,000 of machinery with a carrying amount of $30,000. Grey is depreciating the acquired machinery over a five-year remaining l

> Angela, Inc., holds a 90 percent interest in Corby Company. During 2020, Corby sold inventory costing $77,000 to Angela for $110,000. Of this inventory, $40,000 worth was not sold to outsiders until 2021. During 2021, Corby sold inventory costing $72,000

> Parkette, Inc., acquired a 60 percent interest in Skybox Company several years ago. During 2020, Skybox sold inventory costing $160,000 to Parkette for $200,000. A total of 18 percent of this inventory was not sold to outsiders until 2021. During 2021, S

> What is the total for consolidated cost of goods sold? a. $670,000 b. $690,000 c. $788,000 d. $790,000

> What is the total for consolidated inventory? a. $143,000 b. $173,000 c. $175,000 d. $183,000

> Go to https://independentsector.org/resource/principles/. Click on “Principles Guide for Good Governance and Ethical Practice.” Read through the 33 Principles to be followed. Focus on the explanation for the six principles under the heading of Strong Fin

> What is the total for consolidated sales revenue? a. $800,000 b. $970,000 c. $1,000,000 d. $1,100,000

> Kelly Company acquired 75 percent of Helton Company’s outstanding voting shares on January 1, 2019, in exchange for $285,000 in cash. The subsidiary’s stockholders’ equity accounts totaled $326,000, a

> On January 1, 2020, Panther, Inc., issued securities with a total fair value of $577,000 for 100 per- cent of Stark Corporation’s outstanding ownership shares. Stark has long supplied inventory to Panther. The companies expect to achiev

> The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2021, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2020, in exchange for various considerations totaling $570,000. At the

> Assume the same basic information as presented in Problem 34 except that Monica employs the equity method of accounting. Hence, it reports $102,740 investment income for 2021 with an Investment account balance of $826,220. Under these circumstances, prep

> On January 1, 2019, Monica Company acquired 70 percent of Young Company’s outstanding common stock for $665,000. The fair value of the noncontrolling interest at the acquisition date was $285,000. Young reported stockholdersâ&#128

> On January 1, 2019, Plymouth Corporation acquired 80 percent of the outstanding voting stock of Sander Company in exchange for $1,200,000 cash. At that time, although Sander’s book value was $925,000, Plymouth assessed Sanderâ&#12

> On January 1, 2020, McIlroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $372,000. Stinson’s book value on that date consisted of common stock of $100,000 and retained earnings of $220,000. Also, the a

> Following are financial statements for Moore Company and Kirby Company for 2021: ∙ Moore purchased 90 percent of Kirby on January 1, 2020, for $657,000 in cash. On that date, the 10 percent noncontrolling interest was assessed to have a

> Compute the balances in Problem 29 again, assuming that all intra-entity transfers were made from ClipRite to ProForm.

> One of your colleagues has been hired by the Todd, Johnson, and Samuels partnership to guide it through the liquidation process. The partnership currently has cash in a bank account that exceeds the amount it owes creditors, and has other assets consisti

> ProForm acquired 70 percent of ClipRite on June 30, 2020, for $910,000 in cash. Based on Clip- Rite’s acquisition-date fair value, an unrecorded intangible of $400,000 was recognized and is being amortized at the rate of $10,000 per yea

> Pitino acquired 90 percent of Brey’s outstanding shares on January 1, 2019, in exchange for $342,000 in cash. The subsidiary’s stockholders’ equity accounts totaled $326,000, and the non- controlling

> On January 1, 2021, Sledge had common stock of $120,000 and retained earnings of $260,000. During that year, Sledge reported sales of $130,000, cost of goods sold of $70,000, and operating expenses of $40,000. On January 1, 2019, Percy, Inc., acquired 80

> Allison Corporation acquired 90 percent of Bretton on January 1, 2019. Of Bretton’s total acquisition-date fair value, $60,000 was allocated to undervalued equipment (with a 10-year remaining life) and $80,000 was attributed to franchis

> On January 1, 2021, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $200,000 in cash. The equipment had originally cost $180,000 but had a book value of only $110,000 when transferred. On that date, the equipment had a five-year rema

> Padre holds 100 percent of the outstanding shares of Sonora. On January 1, 2019, Padre transferred equipment to Sonora for $95,000. The equipment had cost $130,000 originally but had a $50,000 book value and five-year remaining life at the date of transf

> On January 1, 2020, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed, Inc., for $810,000 in cash and stock options. At the acquisition date, NetSpeed had common stock of $800,000 and Retained Earnings of $40,000. The acqu

> Akron, Inc., owns all outstanding stock of Toledo Corporation. Amortization expense of $15,000 per year for patented technology resulted from the original acquisition. For 2021, the companies had the following account balances: Intra-entity sales of $320

> Protrade Corporation acquired 80 percent of the outstanding voting stock of Seacraft Company on January 1, 2020, for $612,000 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft’s identifiable assets and

> On January 1, 2020, Doone Corporation acquired 60 percent of the outstanding voting stock of Rockne Company for $300,000 consideration. At the acquisition date, the fair value of the 40 percent noncontrolling interest was $200,000, and Rockne’s assets an

> You have been engaged to do the accounting for the termination and liquidation of the Miller, Smith, and Tavares partnership. Miller has requested an immediate distribution of cash from the partnership that is being questioned by the other partners. Alth

> Placid Lake Corporation acquired 80 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2020, when Scenic had a net book value of $400,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $5,000 per y

> On January 1, 2020, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing, Inc., for a total of $980,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $700,000, retained earnings of $250,0

> The following are several figures reported for Allister and Barone as of December 31, 2021: Allister acquired 90 percent of Barone in January 2020. In allocating the newly acquired sub- sidiary’s fair value at the acquisition date, Alli

> What is the consolidated total for inventory at December 31? a. $240,000 b. $248,000 c. $250,000 d. $260,000

> What is the consolidated total for equipment (net) at December 31? a. $735,000 b. $740,000 c. $760,000 d. $765,000

> What is the consolidated total of noncontrolling interest appearing on the balance sheet? a. $85,500 b. $83,100 c. $87,000 d. $70,500

> What is the total of consolidated expenses? a. $30,000 b. $36,000 c. $37,500 d. $39,000

> What is the total of consolidated cost of goods sold? a. $140,000 b. $152,000 c. $132,000 d. $145,000

> What is the total of consolidated revenues? a. $500,000 b. $460,000 c. $420,000 d. $400,000

> Thomson Corporation owns 70 percent of the outstanding stock of Stayer, Incorporated. On January 1, 2019, Thomson acquired a building with a 10-year life for $460,000. Thomson depreciated the building on the straight-line basis assuming no salvage value.

> Prior to 2018, Celgene Corporation, a biopharmaceutical company (with specialities in oncology, inflammation, and immunology) had owned a 9.6 percent equity interest in Juno Therapeutics Inc. (Juno). Juno is a scientific and manufacturing company special

> Assuming that Pride, in its internal records, accounts for its investment in Star using the equity method, what amount of retained earnings would Pride report on its January 1, 2021, consolidated balance sheet? a. $250,000 b. $286,000 c. $315,000 d. $360

> What is consolidated net income for 2021? a. $194,000 b. $197,500 c. $203,000 d. $238,000

> On January 1, 2020, Chamberlain Corporation pays $388,000 for a 60 percent ownership in Neville. Annual excess fair-value amortization of $15,000 results from the acquisition. On December 31, 2021, Neville reports revenues of $400,000 and expenses of $30