ACC 411 Project 1 Power point with complete solution
A common way to obtain corporate control is
(a) by purchasing more than 50% of an entity's nonvoting preferred stock
(b) by bribing the CEO
(c) by playing video game about that company
(d) by purchasing more than 50% of an entity's common stock
(e) none of the above - ✔✔ANSWER✔✔>>(d) by purchasing more than 50% of an
entity's common stock
What amounts does Phillip report? (FV vs Equity)
a. Investment income for 20X4
b. Investment in Sleeper at year-end
c. RE increase - ✔✔ANSWER✔✔>>a. Investment income for 20X4
• FV = $65,000 [(240000*.25)+ unrealized gain of 5000]
• Equity = $90,000 [360000*.25]
b. Investment in Sleeper at year-end
• FV = $655,000 [=FV at year end]
• Equity = $680,000 [650000+(360000*.25)-(240000*.25)]
c. RE increase [=investment income]
• FV = $65,000
• Equity = $90,000
A primary benefit of consolidated financial statements is that they
(a) provide info directly applicable to the needs of regulators
(b) obscure data of individual companies
(c) present data of 2 or more entities that clearly reports their individual performance
(d) give a picture of the use of resources under the parent's control
(e) none of the above - ✔✔ANSWER✔✔>>(d) give a picture of the use of resources
under the parent's control
P owns 60% of X & 75% of Y. If X & Y jointly own 100% of Z, under what circumstance
would P not be deemed to control Z?
(a) Z is a bank
(b) Z's products are largely sold overseas
(c) Z is currently in Chapter 11 bankrupcy
(d) Z has a CEO known to have a bad temper
(e) None of the above - ✔✔ANSWER✔✔>>(b) Z's products are largely sold overseas
, The noncontrolling interest in a corporation can best be described as
(a) a group of disinterested shareholders who rarely vote on company issues
(b) all employees below the manager level
(c) all shareholders other than the parent company
(d) a group of investors who plan to sell their stock within the next 12 months
(e) none of the above - ✔✔ANSWER✔✔>>(c) all shareholders other than the parent
company
The primary difference in consolidating a less-than-wholly-owned subsidiary relative to a
wholly owned subsidiary is:
(a) income & net assets of the sub must be divided between the parent & the NCI
shareholders
(b) the title of the worksheet must specify "less than wholly owned"
(c) you only consolidate the parent's % ownership
(d) there is no difference - ✔✔ANSWER✔✔>>(a) income & net assets of the sub must
be divided between the parent & the NCI shareholders
The primary difference in the worksheet when consolidating a less-then-wholly-owned
subsidiary is:
(a) only the parent's % is consolidated
(b) extra columns are added to split the sub into 2 or more pieces
(c) extra rows are added to divide the NI & NA of the sub between the parent & NCI
shareholders
(d) there is no difference - ✔✔ANSWER✔✔>>(c) extra rows are added to divide the NI
& NA of the sub between the parent & NCI shareholders
Which of the following statements is true regarding combined FSs:
(a) the parent company is always included in combined FSs
(b) companies included in combined FSs simultaneously own a majority of each other's
stock
(c) combined FSs combine the FSs of a group of companies that have the same owner
(d) all intercompany transactions remain in the accounts of combined FSs -
✔✔ANSWER✔✔>>(c) combined FSs combine the FSs of a group of companies that
have the same owner
On 1/1/X2, Pocahontas, Inc. invested $480,000 in Smith (80%). For 20X2, Smith:
(1) earned $70,000,
(2) declared dividends of $60,000, &
(3) paid dividends of $50,000
What amounts does Pocahontas report? (Cost vs. Equity method)
• investment income for 20X2
• investment in Smith at year-end
• RE increase - ✔✔ANSWER✔✔>>investment income for 20X2
• cost = 48,000 (60000*80%)
• equity = 56,000 (70000*80%)
investment in Smith at year-end
A common way to obtain corporate control is
(a) by purchasing more than 50% of an entity's nonvoting preferred stock
(b) by bribing the CEO
(c) by playing video game about that company
(d) by purchasing more than 50% of an entity's common stock
(e) none of the above - ✔✔ANSWER✔✔>>(d) by purchasing more than 50% of an
entity's common stock
What amounts does Phillip report? (FV vs Equity)
a. Investment income for 20X4
b. Investment in Sleeper at year-end
c. RE increase - ✔✔ANSWER✔✔>>a. Investment income for 20X4
• FV = $65,000 [(240000*.25)+ unrealized gain of 5000]
• Equity = $90,000 [360000*.25]
b. Investment in Sleeper at year-end
• FV = $655,000 [=FV at year end]
• Equity = $680,000 [650000+(360000*.25)-(240000*.25)]
c. RE increase [=investment income]
• FV = $65,000
• Equity = $90,000
A primary benefit of consolidated financial statements is that they
(a) provide info directly applicable to the needs of regulators
(b) obscure data of individual companies
(c) present data of 2 or more entities that clearly reports their individual performance
(d) give a picture of the use of resources under the parent's control
(e) none of the above - ✔✔ANSWER✔✔>>(d) give a picture of the use of resources
under the parent's control
P owns 60% of X & 75% of Y. If X & Y jointly own 100% of Z, under what circumstance
would P not be deemed to control Z?
(a) Z is a bank
(b) Z's products are largely sold overseas
(c) Z is currently in Chapter 11 bankrupcy
(d) Z has a CEO known to have a bad temper
(e) None of the above - ✔✔ANSWER✔✔>>(b) Z's products are largely sold overseas
, The noncontrolling interest in a corporation can best be described as
(a) a group of disinterested shareholders who rarely vote on company issues
(b) all employees below the manager level
(c) all shareholders other than the parent company
(d) a group of investors who plan to sell their stock within the next 12 months
(e) none of the above - ✔✔ANSWER✔✔>>(c) all shareholders other than the parent
company
The primary difference in consolidating a less-than-wholly-owned subsidiary relative to a
wholly owned subsidiary is:
(a) income & net assets of the sub must be divided between the parent & the NCI
shareholders
(b) the title of the worksheet must specify "less than wholly owned"
(c) you only consolidate the parent's % ownership
(d) there is no difference - ✔✔ANSWER✔✔>>(a) income & net assets of the sub must
be divided between the parent & the NCI shareholders
The primary difference in the worksheet when consolidating a less-then-wholly-owned
subsidiary is:
(a) only the parent's % is consolidated
(b) extra columns are added to split the sub into 2 or more pieces
(c) extra rows are added to divide the NI & NA of the sub between the parent & NCI
shareholders
(d) there is no difference - ✔✔ANSWER✔✔>>(c) extra rows are added to divide the NI
& NA of the sub between the parent & NCI shareholders
Which of the following statements is true regarding combined FSs:
(a) the parent company is always included in combined FSs
(b) companies included in combined FSs simultaneously own a majority of each other's
stock
(c) combined FSs combine the FSs of a group of companies that have the same owner
(d) all intercompany transactions remain in the accounts of combined FSs -
✔✔ANSWER✔✔>>(c) combined FSs combine the FSs of a group of companies that
have the same owner
On 1/1/X2, Pocahontas, Inc. invested $480,000 in Smith (80%). For 20X2, Smith:
(1) earned $70,000,
(2) declared dividends of $60,000, &
(3) paid dividends of $50,000
What amounts does Pocahontas report? (Cost vs. Equity method)
• investment income for 20X2
• investment in Smith at year-end
• RE increase - ✔✔ANSWER✔✔>>investment income for 20X2
• cost = 48,000 (60000*80%)
• equity = 56,000 (70000*80%)
investment in Smith at year-end
