Question: What is meant by date alignment? Does

> Grande Machinery Company purchased, for cash, a $60,000 custom machine on January 1, 2015. The machine has an estimated 5-year life and will be straight-line depreciated with no salvage value. The machine was then leased to Sunshine Engineering Company,

> Linco Industries is a 90%- owned subsidiary of Sharp Incorporated. On January 1, 2015, Linco issued $100,000 of 10- year, 6% bonds for $86,580, to yield 8% interest. Interest is paid annually on January 1. The effective interest method is used to amortiz

> Carlton Company is an 80%- owned subsidiary of Mirage Company. On January 1, 2015, Carlton sold $100,000 of 10-year, 7% bonds for $101,000. Interest is paid annually on January 1. The market rate for this type of bond was 9% on January 2, 2017, when Mira

> On January 1, 2014, Dunbar Corporation, an 85%-owned subsidiary of Garfield Industries, received $48,055 for $50,000 of 8%, 5-year bonds it issued when the market rate was 9%. When Garfield Industries purchased these bonds for $47,513 on January 2, 2016,

> Cardinal Company is an 80%- owned subsidiary of Dove Corporation. Cardinal Company issued $100,000 of 8%, 10-year bonds for $96,000 on January 1, 2011. Annual interest is paid on January 1. Dove Corporation purchased the bonds on January 1, 2015, for $10

> Darcy Company is an 80%-owned subsidiary of Kraco Industries. Darcy Company issued 10-year, 8% bonds in the amount of $1,000,000 on January 1, 2015. The bonds were issued at face value, and interest is payable each January 1. On January, 1, 2017, Kraco I

> Model Engineering is a large corporation with the ability to obtain financing by selling its bonds at favorable rates. Currently, it pays 5% interest on its 10-year bond issues. In the past year, Model acquired an 80% interest in Mercer Industries. Merce

> Norton Corporation agrees to acquire the net assets of Payco Corporation. Just prior to the acquisition, Payco’s balance sheet is as follows: Fair values agree with book values except for the equipment, which has an estimated fair val

> Saratoga Company owns 80% of the outstanding common stock of Windsor Company. On May 1, 2017, Windsor Company arranges a 1-year, $50,000 loan from Saratoga Company. The loan agreement specifies that interest will accrue at the rate of 6% per annum and th

> Peninsula Company owns an 80% controlling interest in Sandbar Company. Sandbar regularly sells merchandise to Peninsula, which then sells to outside parties. The gross profit on all such sales is 40%. On January 1, 2015, Peninsula sells land and a buildi

> Jeter Corporation purchases 80% of the outstanding stock of Super Company for $275,000 on July 1, 2015. Super Company has the following stockholders’ equity on July 1, 2015: Common stock ($5 par). . . . . . . . . . . . . . . . . . . .

> The separate income statements of Danner Company and its 90%-owned subsidiary, Link Company, for the year ended December 31, 2016, are as follows: The following additional facts apply: a. On January 1, 2015, Link Company purchased a building, with a

> Hilton Corporation sold a press to its 80%-owned subsidiary, Agri Fab Inc., for $5,000 on January 1, 2016. The press originally was purchased by Hilton on January 1, 2015, for $20,000, and $6,000 of depreciation for 2015 had been recorded. The fair value

> Wavemasters Inc., owns an 80% interest in Sayner Development Company. In a prior period, Sayner Development purchased a parcel of land for $50,000. During 2015, it constructed a building on the land at a cost of $500,000. The land and building were sold

> On January 1, 2016, Jungle Company sold a machine to Safari Company for $30,000. The machine had an original cost of $24,000, and accumulated depreciation on the asset was $9,000 at the time of the sale. The machine has a 5-year remaining life and will b

> Norco Company is an 80%-owned subsidiary of Victory Corporation. The separate income statements of the two companies for 2016 are as follows: The following facts apply to 2016: a. Norco Company sold $90,000 of goods to Victory Corporation. The gross pr

> Hide Corporation is a wholly owned subsidiary of Seek Company. During 2015, Hide sold all of its production to Seek Company for $400,000, a price that includes a 25% gross profit. 2015 was the first year that such intercompany sales were made. By year-en

> Assume the same facts as in Exercise 11, but in addition, assume that Saratoga is itself in need of cash. It discounts the note received from Windsor at First Bank on July 1, 2017, at a discount rate of 8% per annum. 1. Prepare the entries that both comp

> Sorel is an 80%-owned subsidiary of Pattern Company. The two affiliates had the following separate income statements for 2015 and 2016. Sorel sells at the same gross profit percentage to all customers. During 2015, Sorel sold goods to Pattern for the

> Pederson Company acquires the net assets of Shelby Company by issuing 100,000 of its $1 par value shares of common stock. The shares have a fair value of $20 each. Just prior to the acquisition, Shelby’s balance sheet is as follows: F

> Whitney Company acquires an 80% interest in Masters Company common stock on January 1, 2015. Appraisals of Masters’ assets and liabilities are performed, and Whitney ends up paying an amount that is greater than the fair value of Master

> Sandin Company prepares the following balance sheet on January 1, 2015: On this date, Prescott Company purchases 8,000 shares of Sandin Company’s outstanding stock for a total price of $270,000. Also on this date, the buildings are u

> The trial balances of Parker and Sargent companies of Exercise 7 for December 31, 2016, are presented as follows: Parker Company continues to use the cost method. 1. Prepare all the eliminations and adjustments that would be made on the 2016 consolidat

> Parker Company acquires an 80% interest in Sargent Company for $300,000 in cash on January 1, 2015, when Sargent Company has the following balance sheet: The excess of the price paid over book value is attributable to the fixed assets, which have a fai

> Baker Enterprises purchases an 80% interest in Kohlenberg International for $850,000 on January 1, 2015. The estimated fair value of the NCI is $190,000. On the purchase date, Kohlenberg International has the following stockholders’ equ

> On January 1, 2015, Paro Company purchases 80% of the common stock of Solar Company for $320,000. On this date, Solar has common stock, other paid-in capital in excess of par, and retained earnings of $50,000, $100,000, and $150,000, respectively. Net in

> You are working on a consolidated trial balance of a parent and an 80% owned subsidiary. What components will enter into the total noncontrolling interest, and how will it be displayed in the consolidated balance sheet?

> Since a primary beneficiary’s share of VIE income is not based on common stock ownership, how might it be calculated?

> The trial balances of Parker and Sargent companies of Exercise 5 for December 31, 2016, are presented as follows: Parker Company continues to use the sophisticated equity method. 1. Prepare all the eliminations and adjustments that would be made on the

> A parent company may want to shift profits to the controlling interest and may use intercompany capital leases to accomplish that end. Is there an opportunity to do that with both direct financing and sales-type leases? What are the differences between t

> What does the elimination process accomplish?

> Panther Company is about to acquire a 100% interest in Snake Company. Snake has identifiable net assets with book and fair values of $300,000 and $500,000, respectively. As payment, Panther will issue common stock with a fair value of $750,000. How would

> Bell Corporation purchases all of the outstanding stock of Stockdon Corporation for $220,000 in cash on January 1, 2017. On the purchase date, Stockdon Corporation has the following condensed balance sheet: Any excess of book value over cost is attribu

> Major Corporation is acquiring Abrams Company by issuing its common stock in a nontaxable exchange. Major is issuing common stock with a fair value of $850,000for net identifiable assets with book and fair values of $400,000 and $600,000, respectively. W

> During 2015, Company P sold $50,000 of goods to subsidiary Company S at a profit of $12,000. One-fourth of the goods remain unsold at year-end. What specific adjustments are needed on the consolidated worksheet to deal with these issues?

> The Vary Company has total assets with a book value of $3,000,000 and a fair value of $4,000,000. A potential primary beneficiary company has guaranteed the debt of the Vary Company and will receive a share of income of the Vary Company based on contract

> Company R owns a 30% interest in Company E, which it acquires at book value. Company E reports net income of $50,000 for 2015 (ignore taxes). There is an intercompany sale of equipment at a gain of $20,000 on January 1, 2015. The equipment has a 5-year l

> Company R pays $170,000 for a 30% interest in Company E on January 1, 2015. Company E’s total stockholders’ equity on that date is $500,000. The excess price is attributed to equipment with a 5-year life. During 2015, Company E reports net income of $35,

> A parent company acquired an 80% interest in a subsidiary on January 1, 2015, at a price high enough to result in goodwill. Included in the assets of the subsidiary are inventory with a book value of $50,000 and a fair value of $55,000 and equipment with

> A parent company acquired an 80% interest in a subsidiary on July 1, 2015. The subsidiary closed its books on that date. The subsidiary reported net income of $60,000 for 2015, earned evenly during the year. The parent’s net income, exclusive of any inco

> Parker Company acquires an 80% interest in Sargent Company for $300,000 on January 1, 2015, when Sargent Company has the following balance sheet: The excess of the price paid over book value is attributable to the fixed assets, which have a fair value

> What is the noncontrolling share of consolidated net income? Does it reflect adjustments based on fair values at the purchase date? How has it been displayed in income statements in the past, and how should it be displayed?

> A parent company paid $500,000 for a 100% interest in a subsidiary. At the end of the first year, the subsidiary reported net income of $40,000 and paid $5,000 in dividends. The price paid reflected understated equipment of $70,000, which will be amortiz

> The trial balances of Charles Company and its subsidiary, Lehto, Inc., are as follows on December 31, 2017: On January 1, 2015, Charles Company exchanges 20,000 shares of its common stock, with a fair value of $20 per share, for all the outstanding sto

> It seems as if consolidated net income is always less than the sum of the parent’s and subsidiary’s separately calculated net incomes. Is it possible that the consolidated net income of the two affiliated companies could actually exceed the sum of their

> Pillow Company is purchasing an 80% interest in the common stock of Sleep Company for $800,000. Sleep’s balance sheet amounts at book and fair value are as follows: Use a valuation analysis schedule to determine what will be the amoun

> Pillow Company is purchasing an 80% interest in the common stock of Sleep Company. Sleep’s balance sheet amounts at book and fair values are as follows: Use valuation analysis schedules to determine what adjustments to recorded values

> Pillow Company is purchasing a 100% interest in the common stock of Sleep Company. Sleep’s balance sheet amounts at book and fair values are as follows: Use valuation analysis schedules to determine what adjustments to recorded values

> Paulos Company purchases a controlling interest in Sanjoy Company. Sanjoy had identifiable net assets with a book value of $500,000 and a fair value of $800,000. It was agreed that the total fair value of Sanjoy’s common stock was $1,200,000. Use value a

> Jacobson Company is considering an investment in the common stock of Biltrite Company. What are the accounting issues surrounding the recording of income in future periods if Jacobson purchases: a. 15% of Biltrite’s outstanding shares. b. 40% of Biltrite

> Company P owns 90% of Company S’s shares. Assume Company S then purchases 2% of Company P’s outstanding shares of common stock. When consolidating, what happens to the 2% holding in the consolidated financial statements?

> The trial balances of Parker and Sargent companies of Exercise 3 for December 31, 2016, are presented as follows: Parker Company continues to use the simple equity method. 1. Prepare all the eliminations and adjustments that would be made on the 2016

> Company A owns 80% of Company B. Company B owns 60% of Company C. From a consolidated viewpoint, does A control C? How will $10,000 of Company C income flow to the members of the consolidated firms when it is distributed at year-end?

> Quail Company purchases 80% of the common stock of Commo Company for $800,000. At the time of the purchase, Commo has the following balance sheet: The fair values of assets are as follows: Cash equivalents . . . . . . . . . . . . . . . . . $120,000 In

> Subsidiary Company S had the following stockholders’ equity on January 1, 2018, prior to issuing 5,000 additional new shares: Common stock ($1 par), 100,000 shares issued and outstanding . . . . . . . $ 100,000 Paid-in capital in excess of par . . . .

> Subsidiary Company S had the following stockholders’ equity on January 1, 2018, prior to issuing 20,000 additional new shares to noncontrolling shareholders: Common stock ($1 par), 100,000 shares issued and outstanding . . . . . . . $ 100,000 Paid-in c

> Subsidiary Company S had the following stockholders’ equity on December 31, 2017, prior to distributing a 10% stock dividend: Common stock ($1 par), 100,000 shares issued and outstanding . . . . . . . $ 100,000 Paid-in capital in excess of par . . . .

> Company S has the following stockholders’ equity on January 1, 2019: Common stock ($1 par, 100,000 shares). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000 6% preferred stock ($100 par, 2,000 shares) . . . . . . . . . . .

> Company P purchased an 80% interest (8,000 shares) in Company S for $800,000 on January 1, 2015. Company S’s equity on that date was $900,000. Any excess of cost over book value was attributed to equipment with a 10-year life. On January 1, 2019, Company

> Company P purchases an 80% interest in Company S on January 1, 2015, for $480,000. Company S had equity of $450,000 on that date. Any excess of cost over book value was attributed to equipment with a 10-year life. On July 1, 2020, Company P purchased ano

> Company S has 4,000 shares outstanding and a total stockholders’ equity of $200,000. It is about to issue 6,000 new shares to the prospective parent company. The shares will be sold for a total of $650,000. Will there be an excess of cost over book value

> Company S is an 80% owned subsidiary of Company P. On January 1, 2015, Company P sells equipment to Company S at a $50,000 profit. Assume a 30% corporate tax rate and an 80% dividend exclusion. The equipment has a 5-year life. The question is, would taxe

> Company S is an 80% owned subsidiary of Company P. For 2015, Company P reports internally generated income before tax of $100,000. Company S reports an income before tax of $40,000. A 30% tax rate applies to both companies. Calculate consolidated net inc

> Parker Company acquires an 80% interest in Sargent Company for $300,000 in cash on January 1, 2015, when Sargent Company has the following balance sheet: The excess of the price paid over book value is attributable to the fixed assets, which have a fai

> On January 1, 2015, Paro Company purchases 80% of the common stock of Solar Company for $320,000. On this date, Solar has common stock, other paid-in capital in excess of par, and retained earnings of $50,000, $100,000, and $150,000, respectively. Net in

> Refer to the preceding common information for Paulcraft’s acquisition of Switzer’s common stock. Assume that Paulcraft pays $440,000 for 80% of Switzer common stock. Paulcraft uses the simple equity method to account f

> Libra Company is purchasing 100% of the outstanding stock of Genall Company for $700,000. Genall has the following balance sheet on the date of acquisition: Appraisals indicate that the following fair values for the assets and liabilities should be ack

> Refer to the preceding information for Paulcraft’s acquisition of Switzer’s common stock. Assume that Paulcraft pays $480,000 for 100% of Switzer common stock. Paulcraft uses the cost method to account for its investme

> On January 1, 2015, Port Company acquires 8,000 shares of Solvo Company by issuing 10,000 of its common stock shares with a par value of $10 per share and a fair value of $70 per share. The price paid reflects a control premium. The market value of the s

> Use the preceding information for Palto’s purchase of Saleen common stock. Assume Palto purchases 100% of the Saleen common stock for $400,000 cash. Palto has the following balance sheet immediately after the purchase: Required 1. Pre

> Use the preceding information for Palto’s purchase of Saleen common stock. Assume Palto purchases 100% of the Saleen common stock for $500,000 cash. Palto has the following balance sheet immediately after the purchase: Required 1. Pre

> Using the data given in Problem 2-6, assume that Aron Company purchases 80% of the common stock of Shield Company for $320,000 cash. The following comparative balance sheets are prepared for the two companies immediately after the purchase: Required 1.

> On December 31, 2015, Aron Company purchases 100% of the common stock of Shield Company for $450,000 cash. On this date, any excess of cost over book value is attributed to accounts with fair values that differ from book values. These accounts of Shield

> On March 1, 2015, Collier Enterprises purchases a 100% interest in Robby Corporation for $480,000 cash. Robby Corporation applies push-down accounting principles to account for this acquisition. Robby Corporation has the following balance sheet on Februa

> On March 1, 2015, Penson Enterprises purchases an 80% interest in Express Corporation for $320,000 cash. Express Corporation has the following balance sheet on February 28, 2015: Penson Enterprises receives an independent appraisal on the fair values o

> On March 1, 2015, Carlson Enterprises purchases a 100% interest in Entro Corporation for $400,000. Entro Corporation has the following balance sheet on February 28, 2015: Carlson Enterprises receives an independent appraisal on the fair values of Entr

> Using the data given in Problem 2-1, assume that Roland Company exchanged 14,000 of its $45 fair value ($1 par value) shares for 16,000 of the outstanding shares of Downes Company. Required 1. Record the investment in Downes Company and any other purcha

> Woolco, Inc., purchased all the outstanding stock of Paint, Inc., for $980,000. Woolco also paid $10,000 in direct acquisition costs. Just before the investment, the two companies had the following balance sheets: Appraisals for the assets of Paint, In

> Use the preceding information for Purnell’s purchase of Sentinel common stock. Assume Purnell exchanges 16,000 shares of its own stock for 100% of the common stock of Sentinel. The stock has a market value of $50 per share and a par val

> Use the preceding information for Purnell’s purchase of Sentinel common stock. Assume Purnell exchanges 22,000 shares of its own stock for 100% of the common stock of Sentinel. The stock has a market value of $50 per share and a par val

> Use the preceding information for Palto’s purchase of Saleen common stock. Assume Palto purchases 80% of the Saleen common stock for $300,000 cash. Palto has the following balance sheet immediately after the purchase: Required 1. Prep

> Use the preceding information for Palto’s purchase of Saleen common stock. Assume Palto purchases 80% of the Saleen common stock for $400,000 cash. The shares of the noncontrolling interest have a fair value of $46 each. Palto has the f

> On July 1, 2016, Roland Company exchanged 18,000 of its $45 fair value ($1 par value) shares for all the outstanding shares of Downes Company. Roland paid acquisition costs of $40,000. The two companies had the following balance sheets on July 1, 2016:

> Use the preceding information for Purnell’s purchase of Sentinel common stock. Assume Purnell exchanges 10,000 shares of its own stock for 80% of the common stock of Sentinel. The stock has a market value of $50 per share and a par valu

> Use the preceding information for Purnell’s purchase of Sentinel common stock. Assume Purnell exchanges 19,000 shares of its own stock for 80% of the common stock of Sentinel. The stock has a market value of $50 per share and a par valu

> Duko Corporation is acquiring the net assets, exclusive of cash, of Weber Company as of January 1, 2015, at which time Weber Company’s balance sheet is as follows: Duko Corporation feels that the following fair values should be used f

> Hanson Company issues 10,000 shares of $10 par common stock for the net assets of Marcus Incorporated on December 31, 2016. The stock has a fair value of $65 per share. Acquisition costs are $10,000, and the cost of issuing the stock is $3,000. At the ti

> Sentry, Inc., acquires for $2,300,000 in cash, the net assets of New Equipment Company. The acquisition is made on December 31, 2015, at which time New Equipment has prepared the following balance sheet: The following information is available concernin

> Flom Company is considering the cash purchase of 100% of the outstanding stock of Vargas Company. The terms are not set, and alternative prices are being considered for negotiation. The balance sheet of Vargas Company shows the following values: Apprai

> Garman International wants to expand its operations and decides to acquire the net assets of Iris Company as of January 1, 2016. Garman issues 10,000 shares of its $5 par value common stock for the net assets of Iris. Garman’s stock is

> On July 1, 2015, Faber Enterprises acquired Ann’s Tool Company. Prior to the merger of the two companies, each company calculated its income for the entire year ended December 31, 2015. (It may be assumed that all Ann amounts occurred e

> Heinrich Company, owned by Elennor and Al Heinrich, has been experiencing financial difficulty for the past several years. Both Elennor and Al have not been in good health and have decided to find a buyer. P&F International, after reviewing the finan

> Holt Corporation is contemplating the acquisition of Sambo Company’s net assets on December 31, 2015. It is considering making an offer, which would include a cash payout of $225,000 along with giving 15,000 shares of its $2 par value c

> Tweeden Corporation is contemplating the acquisition of the net assets of Sylvester Corporation in anticipation of expanding its operations. The balance sheet of Sylvester Corporation on December 31, 2015, is as follows: An appraiser for Tweeden determ

> Jack Company is a corporation that was organized on July 1, 2015. The June 30, 2020, balance sheet for Jack is as follows: Liabilities and Equity Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,475,000 Common stock ($

> Kiln Corporation is considering the acquisition of Williams Incorporated. Kiln has asked you, its accountant, to evaluate the various offers it might make to Williams Incorporated. The December 31, 2015, balance sheet of Williams is as follows: The fol

> Moon Company iscontemplating the acquisition of Yount, Inc., on January 1, 2015. If Moon acquires Yount, it will pay $730,000 in cash to Yount and acquisition costs of $20,000. The January 1, 2015, balance sheet of Yount, Inc., is anticipated to be as fo

> Bar Corporation hasbeen looking to expand its operations and has decided to acquire the assets of Vicker Company and Kendal Company. Bar will issue 30,000 shares of its $10 par common stock to acquire the net assets of Vicker Company and will issue 15,00

> Born Corporation agrees to acquire the net assets of Wren Corporation on January 1, 2015. Wren has the following balance sheet on the date of acquisition: An appraiser determines that in-process R&D exists and has an estimated value of $20,000.The

> Glass Company is thinking about acquiring Plastic Company. Glass Company is considering two methods of accomplishing control and is wondering how the accounting treatment will differ under each method. Glass Company has estimated that the fair values of