1、1Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallAdvanced Accounting, 11e (Beams/Anthony/Bettinghaus/Smith)Chapter 9 Indirect and Mutual HoldingsMultiple Choice Questions1) Pallet Corporation owns 80% of Adelt Corporation and Adelt owns 60% of Bajo Inc. Which of the following is co
2、rrect?A) Bajo should not be consolidated because noncontrolling interests hold 52%.B) Bajo should be consolidated because the 60% of Bajo stock is held in the affiliate structure.C) Pallet has 8% indirect ownership of Bajo.D) Pallet has 80% indirect ownership of Bajo.Answer: BObjective: LO1Difficult
3、y: Moderate2) Page Corporation acquired a 60% interest in Ace Corporation at a price $40,000 in excess of book value and fair value on January 1, 2010. On the same date, Ace acquired a 70% interest in Bader Corporation at a price $30,000 in excess of book value and fair value. The excess purchase co
4、st paid by Page and Ace was attributed to goodwill. Separate net incomes (excluding investment income) for the three affiliates for 2010 are as follows: Page, $500,000, Ace, $300,000, and Bader, $400,000.Pages controlling interest share of consolidated net income for 2010 isA) $808,000.B) $848,000.C
5、) $920,000.D) $960,000.Answer: BObjective: LO1Difficulty: ModerateUse the following information to answer the question(s) below.Paint Corporation owns 82% of Achille Corporation and Achille Corporation owns 80% of Badrack Corporation. For the current year, the separate net incomes (excluding investm
6、ent income) of Paint, Achille, and Badrack are $120,000, $100,000, and $50,000, respectively. The cost of each investment was equal to the book value of the investment, which was also equal to the fair value.3) Noncontrolling interest share for Badrack isA) $9,000.B) $10,000.C) $20,000.D) $40,000.An
7、swer: BExplanation: B) (0.20 $50,000 = $10,000)Objective: LO1Difficulty: Moderate2Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall4) Noncontrolling interest share for Achille isA) $18,000.B) $25,200.C) $36,200.D) $72,000.Answer: BExplanation: B) $100,000 + (0.80) ($50,000) 18% = $2
8、5,200Objective: LO1Difficulty: Moderate5) Controlling interest share of consolidated net income for Paint Corporation and Subsidiaries is:A) $234,800.B) $244,800.C) $260,000.D) $270,000.Answer: AExplanation: A) Paint Achille BadrackSeparate incomes $120,000 $100,000 $50,000Allocate 80% of Badrack to
9、 Achille _ 40,000 (40,000)Subtotal 120,000 140,000 10,000Allocate 82% of Achille to Paint 114,800 (114,800)Controlling interest share of cons. net income $234,800 _ _Noncontrolling interest share $25,200 $10,000Objective: LO1Difficulty: Moderate3Copyright 2012 Pearson Education, Inc. Publishing as P
10、rentice Hall6) Pabari Corporation owns an 80% interest in Alders Corporation and Alders owns a 60% interest in Babao Corporation. Both interests were acquired at a cost equal to book value equal to fair value. During 2010, Alders sells land to Babao at a profit of $12,000. Babao still holds the land
11、 at December 31, 2010. Net income(loss) of the three companies (excluding investment income) for 2010 are:Pabari Corporation $180,000Alders Corporation 72,000Babao Corporation (30,000)Controlling interest share of consolidated net income and noncontrolling interest share, respectively, for 2010 areA
12、) $211,200 and ($1,200).B) $211,200 and ($3,600).C) $213,600 and ($1,200).D) $213,600 and ($3,600).Answer: DExplanation: D) Noncont. interest share: $8,400 Profit + ($12,000) LossPabari Alders BabaoSeparate incomes $180,000 $72,000 $(30,000)Less: Unrealized profit on land _ (12,000) _Subtotal $180,0
13、00 $60,000 (30,000)Allocate Babaos net loss toAlders ($30,000) 60% _ (18,000) 18,000Subtotal 180,000 42,000 (12,000)Allocate 80% of Alders income to Pabari 33,600 (33,600)Controlling interest share of consolidated net income $213,600 _ _Noncontrolling interest share $8,400 $12,000Objective: LO1Diffi
14、culty: Moderate4Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall7) Pablo Corporation acquired 60% of Abagia Corporation on January 1, 2010, at a cost of $20,000 in excess of book value. Also, on July 1, 2010, Pablo acquired 60% of Babin Corporation at book value. On January 1, 2011
15、, Abagia acquired a 20% interest in Babin at a cost of $10,000 in excess of book value. The excess purchase costs paid by Pablo and Abagia were attributed to goodwill.On July 1, 2011, Pablo sold land with a book value of $20,000 to Abagia for $40,000. The $20,000 unrealized gain is included in Pablo
16、s separate income. Separate net incomes for the affiliated companies (excluding investment income) for 2011 are:Pablo $250,000Abagia 70,000Babin 100,000Controlling interest share of consolidated net income for 2011 isA) $304,000.B) $324,000.C) $344,000.D) $364,000.Answer: CExplanation: C) Pablo Abag
17、ia BabinSeparate incomes $250,000 $70,000 $100,000Less: Unrealized profit on land (20,000) _ _Separate realized incomes $230,000 $70,000 $100,000Allocate Babins income:60% to Pablo 60,000 (60,000)20% to Abagia _ 20,000 (20,000)Subtotal 290,000 90,000 20,000Allocate Abagias net income 60% to Pablo 54
18、,000 (54,000)Controlling interest share of consolidated net income $344,000 _ _Noncontrolling interest share $36,000 $20,000Objective: LO1Difficulty: Moderate5Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall8) Paglia Corporation owns 80% of Aburn Corporation and has separate net in
19、come of $200,000 for 2010. Aburn Corporation has separate net income of $100,000 and owns 70% of the outstanding stock of Badley Corporation. Badley Corporation has separate net income of $80,000. (Separate net incomes exclude investment income.) The cost of each investment was equal to book value a
20、nd fair value. The controlling interest share of consolidated net income for 2010 isA) $324,800.B) $328,800.C) $344,800.D) $344,800.Answer: AExplanation: A) Paglia Aburn BadleySeparate incomes $200,000 $100,000 $80,000Allocate Badleys income:70% to Aburn _ 56,000 (56,000)Subtotal $200,000 $156,000 $
21、24,000Allocate Aburns income:80% to Paglia 124,800 (124,800) _Controlling interest share of consolidated net income $324,800Noncontrolling interest share $31,200 $24,000Objective: LO1Difficulty: Moderate6Copyright 2012 Pearson Education, Inc. Publishing as Prentice HallUse the following information
22、to answer the question(s) below.Pace Corporation owns 70% of Abaza Corporation and 60% of Babon Corporation. Abaza Corporation owns 20% of Babon Corporation. Paces investment in Abaza was consummated in one transaction at a purchase price $20,000 in excess of the book value. Paces purchase of Babon
23、was made in one transaction at a price $30,000 above book value. Abazas investment in Babon was completed in one transaction at a purchase price $10,000 in excess of the book value. The purchase price differential for all three investments was attributable to goodwill. (There were no fair value/book
24、 value differences in assets and liabilities for each investment.) Paces separate net income for the current year is $100,000. Abazas separate net income is $190,000, which includes a $10,000 unrealized loss on the sale of land to Pace. Babons separate net income is $150,000. Separate net incomes ex
25、clude investment income.9) The controlling interest share of consolidated net income for the current year isA) $341,000.B) $348,400.C) $351,000.D) $355,000.Answer: CExplanation: C) Pace Abaza BabonSeparate incomes $100,000 $190,000 $150,000Plus: Unrealized loss on land sale to Pace _ 10,000 _Separat
26、e realized incomes $100,000 $200,000 $150,000Allocate Babons income:60% to Pace 90,000 (90,000)20% to Abaza _ 30,000 (30,000)Subtotal 190,000 230,000 30,000Allocate Abazas net income to Pace $230,000 70% 161,000 (161,000)Controlling interest share of consolidated net income $351,000 _ _Noncontrollin
27、g interest share $69,000 $30,000Objective: LO1Difficulty: Moderate10) The amount of noncontrolling interest share for the current year isA) $69,000.B) $85,000.C) $95,000.D) $99,000.Answer: DExplanation: D) ($69,000 + 30,000 = $99,000)Objective: LO1Difficulty: Moderate7Copyright 2012 Pearson Educatio
28、n, Inc. Publishing as Prentice HallUse the following information to answer the question(s) below.Pahm Corporation owns 80% of the outstanding voting common stock of Abussi Corporation, which was purchased for $60,000 over Abussis book value. The excess purchase price was attributable to goodwill. Ab
29、ussi Corporation owns 60% of the outstanding common stock of Badock Corporation, which was purchased at book value. The separate net incomes of Pahm, Abussi, and Badock (excluding investment income) for the year are $200,000, $240,000, and $260,000, respectively. There were no fair value/book value
30、differences in the assets and liabilities of Pahm, Abussi and Badock.11) Controlling interest share of consolidated net income for the current year isA) $504,800.B) $516,800.C) $545,200.D) $557,200.Answer: BExplanation: B) ($200,000 + (80%) $240,000 + (60%) (260,000) = $516,800)Objective: LO1Difficu
31、lty: Moderate12) The amount of income for the current year assigned to the noncontrolling shareholders of Badock Corporation isA) $100,000.B) $104,000.C) $120,000.D) $140,000.Answer: BExplanation: B) (40% $260,000 = $104,000)Objective: LO1Difficulty: Moderate8Copyright 2012 Pearson Education, Inc. P
32、ublishing as Prentice Hall13) The amount of income for the current year assigned to the noncontrolling shareholders of Abussi Corporation isA) $48,000.B) $53,200.C) $74,000.D) $79,200.Answer: DExplanation: D) (20% $240,000) + (20% $156,000) = $79,200Pahm Abussi BadockSeparate incomes $200,000 $240,0
33、00 $260,000Allocate Badocks income:60% to Abussi _ 156,000 (156,000)Subtotal $200,000 $396,000 $104,000Allocate Abussis net income toPahm $396,000 80% 316,800 (316,800)Controlling interest share of consolidated net income $516,800 _ _Noncontrolling interest share $79,200 $104,000Objective: LO1Diffic
34、ulty: Moderate14) The net income reported for Pahm Corporation for the current year isA) $504,800.B) $516,800.C) $545,200.D) $557,200.Answer: BExplanation: B) Pahms net income is the same as the controlling interest share of consolidated net income.Objective: LO2Difficulty: Moderate9Copyright 2012 P
35、earson Education, Inc. Publishing as Prentice HallUse the following information to answer the question(s) below.Paiva Corporation owns 80% of Ackroyd Corporations outstanding common stock and Ackroyd owns 80% of the outstanding common stock of Bailey Corporation. Bailey Corporation owns 10% of the o
36、utstanding common stock of Ackroyd Corporation. The cost of the investments was equal to book value and there were not fair value/book value differences for the investments. The separate net incomes for the three affiliated companies for the year ended December 31, 2011 (excluding investment income)
37、 are as follows: Paiva Corporation, $100,000, Ackroyd Corporation, $50,000, and Bailey Corporation, $30,000. Use the conventional approach.Symbols used:P = Income of Paiva on a consolidated basisA = Income of Ackroyd on a consolidated basisB = Income of Bailey on a consolidated basis15) The equation
38、, in a set of simultaneous equations, that computes Paiva Corporation income on a consolidated basis isA) P = $50,000 + 0.8B.B) P = $30,000 + 0.2A.C) P = $100,000 + 0.2A.D) P = $100,000 + 0.8A.Answer: DObjective: LO1Difficulty: Moderate16) Ackroyds noncontrolling interest share for 2011 isA) $ 7,609
39、.B) $ 8,044.C) $15,652.D) $23,696.Answer: BExplanation: B) P = $100,000 + 0.8AA = $50,000 + 0.8BB = $30,000 + 0.1AA = $50,000 + 0.8 ($30,000 + 0.1A)A = $50,000 + $24,000 + 0.08A0.92A = $74,000A = $80,435 (rounded)Noncontrolling interest shareAckroyd: $80,435 10% outside interest $8,044Objective: LO2
40、Difficulty: Moderate10Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall17) Baileys noncontrolling interest share for 2011 isA) $7,609.B) $8,044.C) $15,652.D) $23,696.Answer: AExplanation: A) (20% $38,044)Objective: LO2Difficulty: Moderate18) When mutually-held stock involves subsidi
41、aries holding the stock of each other, the _ method is not used.A) equityB) costC) conventionalD) treasury stockAnswer: DObjective: LO2Difficulty: Moderate19) Raymond Company owns 90% of Rachel Company. Rachel Company owns 10% of Raymond Company. The treasury stock method is used. On the books of Ra
42、chel Company, we maintain the Investment in Raymond using the _ method. The ending balance in Investment in Raymond is _ stockholders equity in the consolidated balance sheet.A) equity; deducted fromB) cost; deducted fromC) treasury stock; deducted fromD) conventional; added toAnswer: BObjective: LO
43、2Difficulty: Moderate11Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall20) On January 1, 2012, Pauline Company acquired 90% of Stephen Company at a cost of $90,000. On January 1, 2012, Stephen Company acquired 10% of Pauline Company at a cost of $10,000.On January 1, 2012, the foll
44、owing data is available:Stephen Company Pauline CompanyCommon Stock $50,000 Common Stock $50,000Retained Earnings $50,000 Retained Earnings $50,000Assets fair value $100,000 Assets fair value $100,000Assets book value $100,000 Assets book value $100,000Liabilities $0 Liabilities $0At December 31, 20
45、12, the following data is available:January 1, 2012 December 31, 2012On Pauline Books:Investment in Stephen $90,000 $105,000On Stephen Books:Investment in Pauline $10,000 $10,000Assuming the treasury stock method is used, what elimination entry is needed for the Investment in Pauline at December 31,
46、 2012?A) Retained earnings 5,000Common stock 5,000Investment in Pauline 10,000B) Investment in Stephen 10,000Investment in Pauline 10,000C) Income from Pauline 10,000Investment in Pauline 10,000D) Treasury stock 10,000Investment in Pauline 10,000Answer: DObjective: LO2Difficulty: Moderate12Copyright
47、 2012 Pearson Education, Inc. Publishing as Prentice HallExercises1) Paice Corporation owns 80% of the voting common stock of Accardi Corporation. Paice owns 60% of the voting common stock of Badger Corporation. Accardi owns 20% of the voting common stock of Badger. There are no cost/book value/fair
48、 value differentials to consider. The separate net incomes (excluding investment income) of these affiliated companies for 2011 are:Paice $300,000Accardi 160,000Badger 120,000Required:Calculate controlling interest share of consolidated net income and noncontrolling interest shares for Paice Corpora
49、tion and Subsidiaries for 2011.Answer: Paice Corporation and SubsidiariesIncome Allocation ScheduleFor the year 2011Paice Accardi BadgerSeparate earnings $300,000 $160,000 $120,000Allocate Badgers income:60% to Paice 72,000 (72,000)20% to Accardi _ 24,000 (24,000)Subtotal $372,000 $184,000 $24,000Allocate Accardis income:80% to Paice 147
