Ch.3 – Exam Prep – Consolidations—Subsequent to the Date of

Student name:__________

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.
1) Which one of the following accounts would not appear in the consolidated financial statements at the end of the first fiscal period of the combination?

A) Goodwill.
B) Equipment.
C) Investment in Subsidiary.
D) Common Stock.
E) Additional Paid-In Capital.

2) Which one of the following accounts would not appear in the consolidated financial statements at the end of the first fiscal period of the combination?

A) Goodwill.
B) Equipment.
C) Retained Earnings.
D) Common Stock.
E) Equity in Subsidiary Earnings.

3) Which of the following internal record-keeping methods can a parent choose to account for a subsidiary acquired in a business combination?

A) Initial value or book value.
B) Initial value, lower-of-cost-or-market-value, or equity.
C) Initial value, equity, or partial equity.
D) Initial value, equity, or book value.
E) Initial value, lower-of-cost-or-market-value, or partial equity.

4) Which one of the following varies between the equity, initial value, and partial equity methods of accounting for an investment?

A) The amount of consolidated net income.
B) Total assets on the consolidated balance sheet.
C) Total liabilities on the consolidated balance sheet.
D) The balance in the investment account on the parent's books.
E) The amount of consolidated cost of goods sold.

5) Under the partial equity method, the parent recognizes income when

A) Dividends are received from the investee.
B) Dividends are declared by the investee.
C) The related expense has been incurred.
D) The related contract is signed by the subsidiary.
E) It is earned by the subsidiary.

6) Under the initial value method, the parent recognizes income when

A) Dividends are received from the investee.
B) Dividends are declared by the investee.
C) The related expense has been incurred.
D) The related contract is signed by the subsidiary.
E) It is earned by the subsidiary.

7) An impairment model is used

A) To assess whether asset write-downs are appropriate for indefinite-lived assets.
B) To calculate the fair value of intangible assets.
C) To calculate the amortization of indefinite-lived assets over their useful lives.
D) To determine whether the fair value of assets should be recognized.
E) To determine the likelihood that the fair value of an assumed liability will increase.

8) Craft Corp. acquired all of the common stock of Pitts Co. in 2019. Pitts maintained its incorporation. Which of Craft's account balances would vary between the equity method and the initial value method?

A) Goodwill, Investment in Pitts Co., and Retained Earnings.
B) Expenses, Investment in Pitts Co., and Equity in Subsidiary Earnings.
C) Investment in Pitts Co., Equity in Subsidiary Earnings, and Retained Earnings.
D) Common Stock, Goodwill, and Investment in Pitts Co.
E) Expenses, Goodwill, and Investment in Pitts Co.

9) How does the partial equity method differ from the equity method?

A) In the total assets reported on the consolidated balance sheet.
B) In the treatment of dividends.
C) In the total liabilities reported on the consolidated balance sheet.
D) Under the partial equity method, subsidiary income does not increase the balance in the parent's investment account.
E) Under the partial equity method, the balance in the investment account is not decreased by amortization on allocations made in the acquisition of the subsidiary.

10) Vaughn Inc. acquired all of the outstanding common stock of Roberts Co. on January 1, 2020, for $276,000. Annual amortization of $21,000 resulted from this acquisition. Vaughn reported net income of $80,000 in 2020 and $60,000 in 2021 and paid $24,000 in dividends each year. Roberts reported net income of $50,000 in 2020 and $57,000 in 2021 and paid $12,000 in dividends each year. What is the Investment in Roberts Co. balance on Vaughn's books as of December 31, 2021, if the equity method has been applied?

A) $317,000.
B) $326,000.
C) $341,000.
D) $368,000.
E) $383,000.

11) Vaughn Inc. acquired all of the outstanding common stock of Roberts Co. on January 1, 2020, for $276,000. Annual amortization of $21,000 resulted from this acquisition. Vaughn reported net income of $80,000 in 2020 and $60,000 in 2021 and paid $24,000 in dividends each year. Roberts reported net income of $50,000 in 2020 and $57,000 in 2021 and paid $12,000 in dividends each year. What is the Investment in Roberts Co. balance on Vaughn's books as of December 31, 2021, if the partial equity method has been applied?

A) $317,000.
B) $326,000.
C) $359,000.
D) $368,000.
E) $383,000.

12) Vaughn Inc. acquired all of the outstanding common stock of Roberts Co. on January 1, 2020, for $276,000. Annual amortization of $21,000 resulted from this acquisition. Vaughn reported net income of $80,000 in 2020 and $60,000 in 2021 and paid $24,000 in dividends each year. Roberts reported net income of $50,000 in 2020 and $57,000 in 2021 and paid $12,000 in dividends each year. What is the Investment in Roberts Co. balance on Vaughn's books as of December 31, 2021, if the initial value method has been applied?

A) $276,000.
B) $317,000.
C) $359,000.
D) $368,000.
E) $383,000.

13) Which of the following is not an example of an intangible asset?

A) Customer list
B) Database
C) Lease agreement
D) Broken equipment
E) Trademark

14) Reeder Corp. acquired one hundred percent of O’Neill Inc. on January 1, 2019, at a price in excess of the subsidiary's fair value. On that date, Reeder’s equipment (ten-year life) had a book value of $380,000 but a fair value of $460,000. O’Neill had equipment (ten-year life) with a book value of $240,000 and a fair value of $370,000. Reeder used the partial equity method to record its investment in O’Neill. On December 31, 2021, Reeder had equipment with a book value of $270,000 and a fair value of $400,000. O’Neill had equipment with a book value of $180,000 and a fair value of $300,000. What is the consolidated balance for the Equipment account as of December 31, 2021?

A) $450,000.
B) $531,000.
C) $541.000.
D) $567,000.
E) $580,000.

15) On January 1, 2020, Barber Corp. paid $1,160,000 to acquire Thompson Co. Thompson maintained separate incorporation. Barber used the equity method to account for the investment. The following information is available for Thompson’s assets, liabilities, and stockholders' equity accounts on January 1, 2020:

Thompson earned net income for 2020 of $134,000 and paid dividends of $51,000 during the year.The 2020 total excess amortization of fair-value allocations is calculated to be

A) ($2,200).
B) ($900).
C) $(1,300).
D) $(2,100).
E) $3,500.

16) On January 1, 2020, Barber Corp. paid $1,160,000 to acquire Thompson Co. Thompson maintained separate incorporation. Barber used the equity method to account for the investment. The following information is available for Thompson’s assets, liabilities, and stockholders' equity accounts on January 1, 2020:

Thompson earned net income for 2020 of $134,000 and paid dividends of $51,000 during the year.In Barber's accounting records, what amount would appear on December 31, 2020 for equity in subsidiary earnings?

A) $83,000.
B) $133,100.
C) $134,000.
D) $134,900.
E) $185,000.

17) On January 1, 2020, Barber Corp. paid $1,160,000 to acquire Thompson Co. Thompson maintained separate incorporation. Barber used the equity method to account for the investment. The following information is available for Thompson’s assets, liabilities, and stockholders' equity accounts on January 1, 2020:

Thompson earned net income for 2020 of $134,000 and paid dividends of $51,000 during the year.What is the balance in Barber’s investment in subsidiary account at the end of 2020?

A) $1,211,000.
B) $1,242,100.
C) $1,243,000.
D) $1,243,900.
E) $1,294,000.

18) On January 1, 2020, Barber Corp. paid $1,160,000 to acquire Thompson Co. Thompson maintained separate incorporation. Barber used the equity method to account for the investment. The following information is available for Thompson’s assets, liabilities, and stockholders' equity accounts on January 1, 2020:

Thompson earned net income for 2020 of $134,000 and paid dividends of $51,000 during the year.At the end of 2020, the consolidation entry to eliminate Barber’s accrual of Thompson’s earnings would include a credit to Investment in Thompson Co. for

A) $83,000.
B) $133,100.
C) $134,000.
D) $134,900.
E) $0.

19) On January 1, 2020, Barber Corp. paid $1,160,000 to acquire Thompson Co. Thompson maintained separate incorporation. Barber used the equity method to account for the investment. The following information is available for Thompson’s assets, liabilities, and stockholders' equity accounts on January 1, 2020:

Thompson earned net income for 2020 of $134,000 and paid dividends of $51,000 during the year.If Barber Corp. had net income of $468,000 in 2020, exclusive of the investment, what is the amount of consolidated net income?

A) $468,000.
B) $519,000.
C) $602,000.
D) $602,900.
E) $691,000.

20) On January 1, 2020, Hemingway Co. acquired all of the common stock of Crotec Corp. For 2020, Crotec earned net income of $375,000 and paid dividends of $200,000. Amortization of the patent allocation that was included in the acquisition was $8,000.How much difference would there have been in Hemingway’s income with regard to the effect of the investment, between using the equity method or using the initial value method of internal recordkeeping?

A) $8,000.
B) $167,000.
C) $175,000.
D) $200,000.
E) $375,000.

21) On January 1, 2020, Hemingway Co. acquired all of the common stock of Crotec Corp. For 2020, Crotec earned net income of $375,000 and paid dividends of $200,000. Amortization of the patent allocation that was included in the acquisition was $8,000.How much difference would there have been in Hemingway’s income with regard to the effect of the investment, between using the equity method or using the partial equity method of internal recordkeeping?

A) $8,000.
B) $167,000.
C) $175,000.
D) $200,000.
E) $375,000.

22) Scott Co. paid $2,800,000 to acquire all of the common stock of Dawn Corp. on January 1, 2020. Dawn’s reported earnings for 2020 totaled $512,000, and it paid $160,000 in dividends during the year. The amortization of allocations related to the investment was $28,000. Scott’s net income, not including the investment, was $3,310,000, and it paid dividends of $950,000.On the consolidated financial statements for 2020, what amount should have been shown for Equity in Subsidiary Earnings?

A) $-0-
B) $132,000.
C) $160,000.
D) $484,000.
E) $512,000.

23) Scott Co. paid $2,800,000 to acquire all of the common stock of Dawn Corp. on January 1, 2020. Dawn’s reported earnings for 2020 totaled $512,000, and it paid $160,000 in dividends during the year. The amortization of allocations related to the investment was $28,000. Scott’s net income, not including the investment, was $3,310,000, and it paid dividends of $950,000.On the consolidated financial statements for 2020, what amount should have been shown for consolidated dividends?

A) $-0-
B) $160,000.
C) $922,000.
D) $950,000.
E) $1,110,000.

24) Scott Co. paid $2,800,000 to acquire all of the common stock of Dawn Corp. on January 1, 2020. Dawn’s reported earnings for 2020 totaled $512,000, and it paid $160,000 in dividends during the year. The amortization of allocations related to the investment was $28,000. Scott’s net income, not including the investment, was $3,310,000, and it paid dividends of $950,000.What is the amount of consolidated net income for the year 2020?

A) $3,150,000.
B) $3,282,000.
C) $3,310,000.
D) $3,794,000.
E) $3,822,000.

25) Bassett Inc. acquired all of the outstanding common stock of Brinkman Corp. on January 1, 2019, for $422,000. Equipment with a ten-year life was undervalued on Brinkman’s financial records by $48,000. Brinkman also owned an unrecorded customer list with an assessed fair value of $71,000 and an estimated remaining life of five years.Brinkman earned reported net income of $185,000 in 2019 and $226,000 in 2020. Dividends of $75,000 were paid in each of these two years. Selected account balances as of December 31, 2021, for the two companies follow.

If the partial equity method had been applied, what was 2021 consolidated net income?

A) $260,000.
B) $620,000.
C) $861,000.
D) $880,000.
E) $1,291,000.

26) Bassett Inc. acquired all of the outstanding common stock of Brinkman Corp. on January 1, 2019, for $422,000. Equipment with a ten-year life was undervalued on Brinkman’s financial records by $48,000. Brinkman also owned an unrecorded customer list with an assessed fair value of $71,000 and an estimated remaining life of five years.Brinkman earned reported net income of $185,000 in 2019 and $226,000 in 2020. Dividends of $75,000 were paid in each of these two years. Selected account balances as of December 31, 2021, for the two companies follow.

If the equity method had been applied, what would be the Investment in Brinkman Corp. account balance within the records of Bassett at the end of 2021?

A) $806,000.
B) $811,000.
C) $863,000.
D) $920,000.
E) $1,036,000.

27) Black Co. acquired 100% of Blue, Inc. on January 1, 2020. On that date, Blue had land with a book value of $38,000 and a fair value of $49,000. Also, on the date of acquisition, Blue had a building with a book value of $250,000 and a fair value of $460,000. Blue had equipment with a book value of $340,000 and a fair value of $280,000. The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life. How much total expense will be in the consolidated financial statements for the year ended December 31, 2020 related to the acquisition allocations of Blue?

A) $0.
B) $9,000.
C) $12,000.
D) $21,000.
E) $30,000.

28) All of the following are acceptable methods to account for a majority-owned investment in subsidiary except

A) The equity method.
B) The initial value method.
C) The partial equity method.
D) The fair-value method.

29) Under the equity method of accounting for an investment:

A) The investment account remains at initial value.
B) Dividends received are recorded as revenue.
C) Goodwill is amortized over 20 years.
D) Income reported by the subsidiary increases the investment account.
E) Dividends received increase the investment account.

30) Under the partial equity method of accounting for an investment,

A) The investment account remains at initial value.
B) Dividends received are recorded as revenue.
C) The allocations for excess fair value allocations over book value of net assets at date of acquisition are applied over their useful lives to reduce the investment account.
D) Amortization of the excess of fair value allocations over book value is ignored in regard to the investment account.
E) Dividends received increase the investment account.

31) Under the initial value method, when accounting for an investment in a subsidiary,

A) Dividends received by the subsidiary decrease the investment account.
B) The investment account is adjusted to fair value at year-end.
C) Income reported by the subsidiary increases the investment account.
D) The investment account does not change from year to year.
E) Dividends received are ignored.

32) According to GAAP regarding amortization of goodwill, which of the following statements is true?

A) Goodwill recognized in consolidation must be amortized over 20 years.
B) Goodwill recognized in consolidation must be expensed in the period of acquisition.
C) Goodwill recognized in consolidation will not be amortized but subject to an annual test for impairment.
D) Goodwill recognized in consolidation can never be written off.
E) Goodwill recognized in consolidation must be amortized over 40 years.

33) When a company applies the initial value method in accounting for its investment in a subsidiary, and the subsidiary reports income in excess of dividends paid, what entry would be made to convert to full-accrual totals in a consolidation worksheet for the second year?

A) A above.
B) B above.
C) C above.
D) D above.
E) E above.

34) When a company applies the initial value method in accounting for its investment in a subsidiary and the subsidiary reports income less than dividends paid, what entry would be made to convert to full-accrual totals in a consolidation worksheet for the second year?

A) A above.
B) B above.
C) C above.
D) D above.
E) E above.

35) When a company applies the partial equity method in accounting for its investment in a subsidiary and the subsidiary’s equipment has a fair value greater than its book value, what consolidation worksheet entry is made to convert to full-accrual totals in a year subsequent to the initial acquisition of the subsidiary?

A) A above.
B) B above.
C) C above.
D) D above.
E) E above.

36) When consolidating parent and subsidiary financial statements, which of the following statements is true?

A) Goodwill is never recognized.
B) Goodwill required is amortized over 20 years.
C) Goodwill may be recorded on the parent company's books.
D) The value of any goodwill should be tested annually for impairment in value.
E) Goodwill should be expensed in the year of acquisition.

37) When consolidating a subsidiary under the equity method, which of the following statements is true with regard to the subsidiary subsequent to the year of acquisition?

A) All net assets are revalued to fair value and must be amortized over their useful lives.
B) Only net assets that had excess fair value over book value when acquired by the parent must be amortized over their useful lives.
C) All depreciable net assets are revalued to fair value at date of acquisition and must be amortized over their useful lives.
D) Only depreciable net assets that have excess fair value over book value must be amortized over their useful lives.
E) Only assets that have excess fair value over book value must be amortized over their useful lives.

38) Which of the following is not a factor to be considered when determining the useful life of an intangible asset?

A) Legal, regulatory or contractual provisions.
B) The effects of obsolescence.
C) The expected use of the asset by the organization.
D) The fair value of the asset.
E) The level of maintenance expenditures that will be required to obtain expected future benefits.

39) Which of the following is false regarding contingent consideration in business combinations?

A) Contingent consideration payable in cash is reported under liabilities.
B) Contingent consideration payable in stock shares is reported under stockholders' equity.
C) Contingent consideration is recorded because of its substantial probability of eventual payment.
D) The contingent consideration fair value is recognized as part of the acquisition regardless of whether eventual payment is based on future performance of the target firm or future stock price of the acquirer.
E) Contingent consideration is reflected in the acquirer's balance sheet at the present value of the potential expected future payment.

40) With respect to identifiable intangible assets other than goodwill, which of the following is true?

A) If the value of the identified asset meets a de minimis exception, the entity may elect to treat it as goodwill.
B) An identifiable intangible asset with an indefinite useful life must be assessed for impairment once every three years.
C) If the average fair value of the asset is less than the average carrying amount of the asset with respect to, and determined for, the preceding three-year period, the asset is considered impaired and the entity may recognize a loss.
D) A quantitative evaluation of value is required each year regardless of circumstances.
E) If a qualitative assessment of the asset performed by an entity indicates impairment is likely, a quantitative assessment must be performed to determine whether there has been a loss in fair value.

41) Consolidated net income using the equity method for an acquisition combination is computed as follows:

A) Parent company's revenues from its own operations plus subsidiary retained earnings.
B) Parent's reported net income plus subsidiary dividends.
C) Combined revenues less combined expenses less equity in subsidiary's earnings less amortization of fair-value allocations in excess of book value.
D) Parent's revenues less expenses for its own operations plus the equity from subsidiary's earnings less subsidiary dividends.
E) None of these answer choices are correct.

42) Jackson Company acquires 100% of the stock of Clark Corporation on January 1, 2020, for $4,100 cash. As of that date Clark has the following trial balance:

Net income and dividends reported by Clark for 2020 and 2021 follow:

The fair value of Clark’s net assets that differ from their book values are listed below:

Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life.Compute the consideration transferred in excess of book value acquired at January 1, 2020.

A) $900.
B) $1,400.
C) $1,900.
D) $2,400.
E) $2,600.

43) Jackson Company acquires 100% of the stock of Clark Corporation on January 1, 2020, for $4,100 cash. As of that date Clark has the following trial balance:

Net income and dividends reported by Clark for 2020 and 2021 follow:

The fair value of Clark’s net assets that differ from their book values are listed below:

Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life.Compute goodwill, if any, at January 1, 2020.

A) $0.
B) $100.
C) $400.
D) $900.
E) $1,300.

44) Jackson Company acquires 100% of the stock of Clark Corporation on January 1, 2020, for $4,100 cash. As of that date Clark has the following trial balance:

Net income and dividends reported by Clark for 2020 and 2021 follow:

The fair value of Clark’s net assets that differ from their book values are listed below:

Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life.Compute the amount of Clark’s inventory that would be reported in a January 1, 2020, consolidated balance sheet.

A) $0.
B) $100.
C) $400.
D) $550.
E) $900.

45) Jackson Company acquires 100% of the stock of Clark Corporation on January 1, 2020, for $4,100 cash. As of that date Clark has the following trial balance:

Net income and dividends reported by Clark for 2020 and 2021 follow:

The fair value of Clark’s net assets that differ from their book values are listed below:

Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life.Compute the amount of Clark’s buildings that would be reported in a December 31, 2020, consolidated balance sheet.

A) $1,200.
B) $1,280.
C) $1,520.
D) $1,600.
E) $1,680.

46) Jackson Company acquires 100% of the stock of Clark Corporation on January 1, 2020, for $4,100 cash. As of that date Clark has the following trial balance:

Net income and dividends reported by Clark for 2020 and 2021 follow:

The fair value of Clark’s net assets that differ from their book values are listed below:

Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life.Compute the amount of Clark’s equipment that would be reported in a December 31, 2020, consolidated balance sheet.

A) $825.
B) $1,000.
C) $1,175.
D) $1,350.
E) $1,525.

47) Jackson Company acquires 100% of the stock of Clark Corporation on January 1, 2020, for $4,100 cash. As of that date Clark has the following trial balance:

Net income and dividends reported by Clark for 2020 and 2021 follow:

The fair value of Clark’s net assets that differ from their book values are listed below:

Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life.Compute the amount of Clark’s long-term liabilities that would be reported in a December 31, 2020, consolidated balance sheet.

A) $1,700.
B) $1,750.
C) $1,800.
D) $1,850.
E) $1,900.

48) Jackson Company acquires 100% of the stock of Clark Corporation on January 1, 2020, for $4,100 cash. As of that date Clark has the following trial balance:

Net income and dividends reported by Clark for 2020 and 2021 follow:

The fair value of Clark’s net assets that differ from their book values are listed below:

Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life.Compute the amount of Clark’s buildings that would be reported in a December 31, 2021, consolidated balance sheet.

A) $1,200.
B) $1,280.
C) $1,360.
D) $1,440.
E) $1,600.

49) Jackson Company acquires 100% of the stock of Clark Corporation on January 1, 2020, for $4,100 cash. As of that date Clark has the following trial balance:

Net income and dividends reported by Clark for 2020 and 2021 follow:

The fair value of Clark’s net assets that differ from their book values are listed below:

Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life.Compute the amount of Clark’s equipment that would be reported in a December 31, 2021, consolidated balance sheet.

A) $0.
B) $1,000.
C) $1,175.
D) $1,350.
E) $1,700.

50) Jackson Company acquires 100% of the stock of Clark Corporation on January 1, 2020, for $4,100 cash. As of that date Clark has the following trial balance:

Net income and dividends reported by Clark for 2020 and 2021 follow:

The fair value of Clark’s net assets that differ from their book values are listed below:

Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life.Compute the amount of Clark’s land that would be reported in a December 31, 2021, consolidated balance sheet.

A) $400.
B) $900.
C) $1,300.
D) $1,500.
E) $2,200.

51) Jackson Company acquires 100% of the stock of Clark Corporation on January 1, 2020, for $4,100 cash. As of that date Clark has the following trial balance:

Net income and dividends reported by Clark for 2020 and 2021 follow:

The fair value of Clark’s net assets that differ from their book values are listed below:

Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life.Compute the amount of Clark’s long-term liabilities that would be reported in a December 31, 2021, consolidated balance sheet.

A) $1,750.
B) $1,800.
C) $1,850.
D) $1,900.
E) $2,000.

52) Kaye Company acquired 100% of Fiore Company on January 1, 2021. Kaye paid $1,000 excess consideration over book value, which is being amortized at $20 per year. There was no goodwill in the combination. Fiore reported net income of $400 in 2021 and paid dividends of $100.Assume the equity method is applied. How much equity income will Kaye report on its internal accounting records as a result of Fiore's operations?

A) $400
B) $300
C) $380
D) $280
E) $480

53) Kaye Company acquired 100% of Fiore Company on January 1, 2021. Kaye paid $1,000 excess consideration over book value, which is being amortized at $20 per year. There was no goodwill in the combination. Fiore reported net income of $400 in 2021 and paid dividends of $100.Assume the partial equity method is applied. How much equity income will Kaye report on its internal accounting records as a result of Fiore's operations?

A) $400
B) $300
C) $380
D) $280
E) $480

54) Kaye Company acquired 100% of Fiore Company on January 1, 2021. Kaye paid $1,000 excess consideration over book value, which is being amortized at $20 per year. There was no goodwill in the combination. Fiore reported net income of $400 in 2021 and paid dividends of $100.Assume the initial value method is applied. How much equity income will Kaye report on its internal accounting records as a result of Fiore's operations?

A) $400
B) $300
C) $380
D) $100
E) $210

55) Kaye Company acquired 100% of Fiore Company on January 1, 2021. Kaye paid $1,000 excess consideration over book value, which is being amortized at $20 per year. There was no goodwill in the combination. Fiore reported net income of $400 in 2021 and paid dividends of $100.Assume the partial equity method is used. In the year subsequent to acquisition, what additional worksheet entry must be made for consolidation purposes, but is not required for the equity method?

A) Entry A.
B) Entry B.
C) Entry C.
D) Entry D.
E) Entry E.

56) Kaye Company acquired 100% of Fiore Company on January 1, 2021. Kaye paid $1,000 excess consideration over book value, which is being amortized at $20 per year. There was no goodwill in the combination. Fiore reported net income of $400 in 2021 and paid dividends of $100.Assume the initial value method is used. In the year subsequent to acquisition, what additional worksheet entry must be made for consolidation purposes that is not required for the equity method?

A) Entry A.
B) Entry B.
C) Entry C.
D) Entry D.
E) Entry E.

57) Hoyt Corporation agreed to the following terms in order to acquire the net assets of Brown Company on January 1, 2021:To issue 400 shares of common stock ($10 par) with a fair value of $45 per share.To assume Brown's liabilities which have a book value of $1,600 and a fair value of $1,500.On the date of acquisition, the consideration transferred for Hoyt's acquisition of Brown would be

A) $18,000.
B) $16,500.
C) $20,000.
D) $18,500.
E) $19,500.

58) Following are selected accounts for Green Corporation and Vega Company as of December 31, 2023. Several of Green's accounts have been omitted.

Green acquired 100% of Vega on January 1, 2019, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2019, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment.Compute the book value of Vega at January 1, 2019.

A) $997,500.
B) $857,500.
C) $1,200,000.
D) $1,600,000.
E) $827,500.

59) Following are selected accounts for Green Corporation and Vega Company as of December 31, 2023. Several of Green's accounts have been omitted.

Green acquired 100% of Vega on January 1, 2019, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2019, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment.Compute the December 31, 2023, consolidated revenues.

A) $1,400,000.
B) $800,000.
C) $500,000.
D) $1,590,375.
E) $1,390,375.

60) Following are selected accounts for Green Corporation and Vega Company as of December 31, 2023. Several of Green's accounts have been omitted.

Green acquired 100% of Vega on January 1, 2019, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2019, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment.Compute the December 31, 2023, consolidated total expenses.

A) $620,000.
B) $280,000.
C) $900,000.
D) $909,625.
E) $299,625.

61) Following are selected accounts for Green Corporation and Vega Company as of December 31, 2023. Several of Green's accounts have been omitted.

Green acquired 100% of Vega on January 1, 2019, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2019, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment.Compute the December 31, 2023, consolidated buildings.

A) $1,037,500.
B) $1,007,500.
C) $1,000,000.
D) $1,022,500.
E) $1,012,500.

62) Following are selected accounts for Green Corporation and Vega Company as of December 31, 2023. Several of Green's accounts have been omitted.

Green acquired 100% of Vega on January 1, 2019, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2019, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment.Compute the December 31, 2023, consolidated equipment.

A) $800,000.
B) $808,000.
C) $840,000.
D) $760,000.
E) $848,000.

63) Following are selected accounts for Green Corporation and Vega Company as of December 31, 2023. Several of Green's accounts have been omitted.

Green acquired 100% of Vega on January 1, 2019, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2019, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment.Compute the December 31, 2023, consolidated land.

A) $220,000.
B) $180,000.
C) $670,000.
D) $630,000.
E) $450,000.

64) Following are selected accounts for Green Corporation and Vega Company as of December 31, 2023. Several of Green's accounts have been omitted.

Green acquired 100% of Vega on January 1, 2019, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2019, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment.Compute the December 31, 2023, consolidated trademark.

A) $50,000.
B) $46,875.
C) $0.
D) $34,375.
E) $37,500.

65) Following are selected accounts for Green Corporation and Vega Company as of December 31, 2023. Several of Green's accounts have been omitted.

Green acquired 100% of Vega on January 1, 2019, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2019, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment.Compute the December 31, 2023, consolidated common stock.

A) $450,000.
B) $530,000.
C) $555,000.
D) $635,000.
E) $525,000.

66) Following are selected accounts for Green Corporation and Vega Company as of December 31, 2023. Several of Green's accounts have been omitted.

Green acquired 100% of Vega on January 1, 2019, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2019, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment.Compute the December 31, 2023, consolidated additional paid-in capital.

A) $210,000.
B) $75,000.
C) $1,102,500.
D) $942,500.
E) $525,000.

67) Following are selected accounts for Green Corporation and Vega Company as of December 31, 2023. Several of Green's accounts have been omitted.

Green acquired 100% of Vega on January 1, 2019, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2019, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment.Compute the December 31, 2023 consolidated retained earnings.

A) $1,645,375.
B) $1,350,000.
C) $1,565,375.
D) $1,840,375.
E) $1,265,375.

68) One company acquires another company in a combination accounted for under the acquisition method. The acquiring company decides to apply the initial value method in accounting for the combination. What is one reason the acquiring company might have made this decision?

A) It is the only method allowed by the SEC.
B) It is relatively easy to apply.
C) It is the only internal reporting method allowed by generally accepted accounting principles.
D) Operating results on the parent's financial records reflect consolidated totals.
E) When the initial value method is used, no worksheet entries are required in the consolidation process.

69) One company acquires another company in a combination accounted for under the acquisition method. The acquiring company decides to apply the equity method in accounting for the combination. What is one reason the acquiring company might have made this decision?

A) It is the only method allowed by the SEC.
B) It is relatively easy to apply.
C) It is the only internal reporting method allowed by generally accepted accounting principles.
D) Operating results on the parent's financial records reflect consolidated totals.
E) When the equity method is used, no worksheet entries are required in the consolidation process.

70) When is a goodwill impairment loss recognized?

A) Annually on a systematic and rational basis.
B) Never.
C) When both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying values.
D) If the fair value of a reporting unit falls below its original acquisition price.
E) Whenever the fair value of the entity declines significantly.

71) Which of the following will result in the recognition of an impairment loss on goodwill?

A) Goodwill amortization is to be recognized annually on a systematic and rational basis.
B) Both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying values.
C) The fair value of the entity declines significantly.
D) The fair value of a reporting unit falls below the original consideration transferred for the acquisition.
E) The entity is investigated by the SEC and its reputation has been severely damaged.

72) Anderson, Inc. acquires all of the voting stock of Kenneth, Inc. on January 4, 2020, at an amount in excess of Kenneth’s fair value. On that date, Kenneth has equipment with a book value of $90,000 and a fair value of $120,000 (10-year remaining life). Anderson has equipment with a book value of $800,000 and a fair value of $1,200,000 (10-year remaining life). On December 31, 2021, Anderson has equipment with a book value of $975,000 but a fair value of $1,350,000 and Kenneth has equipment with a book value of $105,000 but a fair value of $125,000.If Anderson applies the equity method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2021?

A) $1,080,000.
B) $1,104,000.
C) $1,100,000.
D) $1,468,000.
E) $1,475,000.

73) Anderson, Inc. acquires all of the voting stock of Kenneth, Inc. on January 4, 2020, at an amount in excess of Kenneth’s fair value. On that date, Kenneth has equipment with a book value of $90,000 and a fair value of $120,000 (10-year remaining life). Anderson has equipment with a book value of $800,000 and a fair value of $1,200,000 (10-year remaining life). On December 31, 2021, Anderson has equipment with a book value of $975,000 but a fair value of $1,350,000 and Kenneth has equipment with a book value of $105,000 but a fair value of $125,000.If Anderson applies the partial equity method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2021?

A) $1,080,000.
B) $1,104,000.
C) $1,100,000.
D) $1,468,000.
E) $1,475,000.

74) Anderson, Inc. acquires all of the voting stock of Kenneth, Inc. on January 4, 2020, at an amount in excess of Kenneth’s fair value. On that date, Kenneth has equipment with a book value of $90,000 and a fair value of $120,000 (10-year remaining life). Anderson has equipment with a book value of $800,000 and a fair value of $1,200,000 (10-year remaining life). On December 31, 2021, Anderson has equipment with a book value of $975,000 but a fair value of $1,350,000 and Kenneth has equipment with a book value of $105,000 but a fair value of $125,000.If Anderson applies the initial value method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2021?

A) $1,080,000.
B) $1,104,000.
C) $1,100,000.
D) $1,468,000.
E) $1,475,000.

75) How is the fair value allocation of an intangible asset allocated to expense when the asset has no legal, regulatory, contractual, competitive, economic, or other factors that limit its life?

A) Equally over 20 years.
B) Equally over 40 years.
C) Equally over 20 years with an annual impairment review.
D) No amortization, but annually reviewed for impairment and adjusted accordingly.
E) No amortization over an indefinite period time.

76) Harrison, Inc. acquires 100% of the voting stock of Rhine Company on January 1, 2020 for $400,000 cash. A contingent payment of $16,500 will be paid on April 15, 2021 if Rhine generates cash flows from operations of $27,000 or more in the next year. Harrison estimates that there is a 20% probability that Rhine will generate at least $27,000 next year, and uses an interest rate of 5% to incorporate the time value of money. The fair value of $16,500 at 5%, using a probability-weighted approach, is $3,142.What will Harrison record as its Investment in Rhine on January 1, 2020?

A) $400,000.
B) $403,142.
C) $406,000.
D) $409,142.
E) $416,500.

77) Harrison, Inc. acquires 100% of the voting stock of Rhine Company on January 1, 2020 for $400,000 cash. A contingent payment of $16,500 will be paid on April 15, 2021 if Rhine generates cash flows from operations of $27,000 or more in the next year. Harrison estimates that there is a 20% probability that Rhine will generate at least $27,000 next year, and uses an interest rate of 5% to incorporate the time value of money. The fair value of $16,500 at 5%, using a probability-weighted approach, is $3,142.Assuming Rhine generates cash flow from operations of $27,200 in 2020, how will Harrison record the $16,500 payment of cash on April 15, 2021 in satisfaction of its contingent obligation?

A) Debit Contingent performance obligation $16,500, and Credit Cash $16,500.
B) Debit Contingent performance obligation $3,142, debit Loss from revaluation of contingent performance obligation $13,358, and Credit Cash $16,500.
C) Debit Investment in Subsidiary and Credit Cash, $16,500.
D) Debit Goodwill and Credit Cash, $16,500.
E) No entry.

78) Harrison, Inc. acquires 100% of the voting stock of Rhine Company on January 1, 2020 for $400,000 cash. A contingent payment of $16,500 will be paid on April 15, 2021 if Rhine generates cash flows from operations of $27,000 or more in the next year. Harrison estimates that there is a 20% probability that Rhine will generate at least $27,000 next year, and uses an interest rate of 5% to incorporate the time value of money. The fair value of $16,500 at 5%, using a probability-weighted approach, is $3,142.When recording consideration transferred for the acquisition of Rhine on January 1, 2020, Harrison will record a contingent performance obligation in the amount of:

A) $628.40
B) $2,671.60
C) $3,142.00
D) $13,358.00
E) $16,500.00

79) Beatty, Inc. acquires 100% of the voting stock of Gataux Company on January 1, 2020 for $80,000, consisting of $20,000 in cash and 6,000 shares of stock. A contingent payment of $12,000 in cash will be paid on April 1, 2021 if Gataux generates cash flows from operations of $26,500 or more in the next year. Beatty estimates that there is a 30% probability that Gataux will generate at least $26,500 next year, and uses an interest rate of 4% to incorporate the time value of money. The fair value of $12,000 at 4%, using a probability-weighted approach, is $3,461. A contingent payment of $20,000, payable in stock, will be paid to the former owners of Gataux on April 1, 2021 if the market value of Beatty stock drops below $10 per share. Beatty estimates there is a 15% probability that its share price will not exceed that threshold. Using the same interest rate and probability-weighted approach, Beatty calculates the market value of the stock contingency to be $2,884.What will Beatty record as its Investment in Gataux on January 1, 2020?

A) $12,000.
B) $80,000.
C) $83,461.
D) $86,345.
E) $26,500.

80) Beatty, Inc. acquires 100% of the voting stock of Gataux Company on January 1, 2020 for $80,000, consisting of $20,000 in cash and 6,000 shares of stock. A contingent payment of $12,000 in cash will be paid on April 1, 2021 if Gataux generates cash flows from operations of $26,500 or more in the next year. Beatty estimates that there is a 30% probability that Gataux will generate at least $26,500 next year, and uses an interest rate of 4% to incorporate the time value of money. The fair value of $12,000 at 4%, using a probability-weighted approach, is $3,461. A contingent payment of $20,000, payable in stock, will be paid to the former owners of Gataux on April 1, 2021 if the market value of Beatty stock drops below $10 per share. Beatty estimates there is a 15% probability that its share price will not exceed that threshold. Using the same interest rate and probability-weighted approach, Beatty calculates the market value of the stock contingency to be $2,884.Using the acquisition method, how will Beatty record the stock contingency?

A) Credit Contingent Performance Obligation, $20,000.
B) Debit Additional Paid-In Capital, $20,000.
C) Credit Additional Paid-In Capital, $2,884.
D) Debit Contingent Performance Obligation, $2,884.
E) No entry.

81) Beatty, Inc. acquires 100% of the voting stock of Gataux Company on January 1, 2020 for $80,000, consisting of $20,000 in cash and 6,000 shares of stock. A contingent payment of $12,000 in cash will be paid on April 1, 2021 if Gataux generates cash flows from operations of $26,500 or more in the next year. Beatty estimates that there is a 30% probability that Gataux will generate at least $26,500 next year, and uses an interest rate of 4% to incorporate the time value of money. The fair value of $12,000 at 4%, using a probability-weighted approach, is $3,461. A contingent payment of $20,000, payable in stock, will be paid to the former owners of Gataux on April 1, 2021 if the market value of Beatty stock drops below $10 per share. Beatty estimates there is a 15% probability that its share price will not exceed that threshold. Using the same interest rate and probability-weighted approach, Beatty calculates the market value of the stock contingency to be $2,884.On April 1, 2021, Beatty stock closes with a market value of $8.98 per share. How many shares of stock, rounded to the next whole number, must it issue to the former owners of Gataux?

A) 682
B) 2,000
C) 2,228
D) 2,884
E) 6,000

82) Prince Company acquires Duchess, Inc. on January 1, 2019. At the date of acquisition, Duchess has long-term debt with a fair value of $1,500,000 and a carrying amount of $1,200,000.With respect to long-term debt consolidation worksheet adjustments in periods following the acquisition, which of the following is correct?

A) Debit Interest Expense and Credit Long-Term Debt Expense.
B) Prince must recognize an increase in interest expense if the amount is material.
C) Do not adjust the value of the debt because Prince is not obligated to repay the debt.
D) Credit Long-Term Debt and Debit Interest Expense on the balance sheet of Duchess.
E) Debit Long-Term Debt and Credit Interest Expense.

83) With respect to the recognition of goodwill in a business combination, which of the following statements is true?

A) Only US GAAP requires recognition of goodwill when the fair value of the consideration transferred exceeds the net fair value of assets and liabilities.
B) US GAAP standards require goodwill to be allocated to reporting units expected to benefit from the goodwill.
C) Only IFRS standards require annual assessments for goodwill impairment.
D) IFRS requires a reporting unit’s implied fair value for goodwill to be calculated as the excess of such unit’s fair value over the fair value of its identifiable net assets.
E) Neither US GAAP, nor IFRS, provide that goodwill impairments will not be recoverable once recognized.

84) Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2020. At that date, Glen owns only three assets and has no liabilities:

If Watkins pays $450,000 in cash for Glen, what amount would be represented as the subsidiary’s Building in a consolidation at December 31, 2022, assuming the book value of the building at that date is still $200,000?

A) $200,000.
B) $285,000.
C) $290,000.
D) $295,000.
E) $300,000.

85) Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2020. At that date, Glen owns only three assets and has no liabilities:

If Watkins pays $400,000 in cash for Glen, what amount would be represented as the subsidiary’s Building in a consolidation at December 31, 2022, assuming the book value of the building at that date is still $200,000?

A) $200,000.
B) $285,000.
C) $260,000.
D) $268,000.
E) $300,000.

86) Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2020. At that date, Glen owns only three assets and has no liabilities:

If Watkins pays $450,000 in cash for Glen, what amount would be represented as the subsidiary’s Equipment in a consolidation at December 31, 2022, assuming the book value of the equipment at that date is still $80,000?

A) $70,000.
B) $73,500.
C) $75,000.
D) $76,500.
E) $80,000.

87) Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2020. At that date, Glen owns only three assets and has no liabilities:

If Watkins pays $450,000 in cash for Glen, what acquisition-date fair value allocation, net of amortization, should be attributed to the subsidiary’s Equipment in consolidation at December 31, 2022?

A) $(5,000).
B) $80,000.
C) $75,000.
D) $73,500.
E) $(3,500).

88) Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2020. At that date, Glen owns only three assets and has no liabilities:

If Watkins pays $300,000 in cash for Glen, at what amount would the subsidiary’s Building be represented in a January 2, 2020 consolidation?

A) $200,000.
B) $225,000.
C) $273,000.
D) $279,000.
E) $300,000.

89) Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2020. At that date, Glen owns only three assets and has no liabilities:

If Watkins pays $450,000 in cash for Glen, and Glen earns $50,000 in net income and pays $20,000 in dividends during 2020, what amount representing Glen would be reflected in consolidated net income for the year ended December 31, 2020?

A) $20,000 under the initial value method.
B) $30,000 under the partial equity method.
C) $50,000 under the partial equity method.
D) $44,500 under the equity method.
E) $45,500 regardless of the internal accounting method used.

90) According to the FASB ASC regarding the testing procedures for Goodwill Impairment, the proper procedure for conducting impairment testing is:

A) Goodwill recognized in consolidation may be amortized uniformly and only tested if the amortization method originally chosen is changed.
B) Goodwill recognized in consolidation must only be impairment tested prior to disposal of the consolidated unit to eliminate the impairment of goodwill from the gain or loss on the sale of that specific entity.
C) Goodwill recognized in consolidation may be impairment tested in a two-step approach, first by quantitative assessment of the possible impairment of the fair value of the unit relative to the book value, and then a qualitative assessment as to why the impairment, if any, occurred for disclosure.
D) Goodwill recognized in consolidation may be impairment tested in a two-step approach, first by qualitative assessment of the possibility of impairment of the unit fair value relative to the book value, and then quantitative assessments as to how much impairment, if any, occurred for disclosure.
E) Goodwill recognized in consolidation may be impairment tested in a two-step approach, first by qualitative assessment of the possibility of impairment of the unit fair value relative to the book value, and then quantitative assessments as to how much impairment, if any, occurred for asset write-down.

91) When is a goodwill impairment loss recognized?

A) Only after both a quantitative and qualitative assessment of the fair value of goodwill of a reporting unit.
B) After only definitive quantitative assessments of the fair value of goodwill is completed.
C) After only definitive qualitative assessments of the fair value of goodwill is completed.
D) If the fair value of a reporting unit falls to zero or below its original acquisition price.
E) Never.

92) Private companies, with respect to goodwill:

A) May elect to amortize it over a period of 15 years.
B) Must treat it as an intangible asset with an indefinite life.
C) Must amortize it over a 12-year period.
D) May amortize goodwill if the value of the company does not exceed $10 million.
E) May treat goodwill as a definite lived intangible asset with a 10-year useful life.

SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
93) On January 1, 2020, Jumper Co. acquired all of the common stock of Cable Corp. for $540,000. Annual amortization associated with the acquisition amounted to $1,800. During 2020, Cable recognized net income of $54,000 and paid dividends of $24,000. Cable's net income and dividends for 2021 were $86,000 and $24,000, respectively.Required:Assuming that Jumper decided to use the partial equity method, prepare a schedule to show the balance in the investment account at the end of 2021.

94) Hanson Co. acquired all of the common stock of Roberts Inc. on January 1, 2020, transferring consideration in an amount slightly more than the fair value of Roberts' net assets. At that time, Roberts had buildings with a twenty-year useful life, a book value of $600,000, and a fair value of $696,000. On December 31, 2021, Roberts had buildings with a book value of $570,000 and a fair value of $648,000. On that date, Hanson had buildings with a book value of $1,878,000 and a fair value of $2,160,000.Required:What amount should be shown for buildings on the consolidated balance sheet dated December 31, 2021?

95) Carnes Co. decided to use the partial equity method to account for its investment in Domino Corp. An unamortized trademark associated with the acquisition was $30,000, and Carnes decided to amortize the trademark over ten years. For 2021, Carnes' Equity in Subsidiary Earnings was $78,000.Required:What balance would have been in the Equity in Subsidiary Earnings account if Carnes had used the equity method?

96) Fesler Inc. acquired all of the outstanding common stock of Pickett Company on January 1, 2020. Annual amortization of $22,000 resulted from this transaction. On the date of the acquisition, Fesler reported retained earnings of $520,000 while Pickett reported a $240,000 balance for retained earnings. Fesler reported net income of $100,000 in 2020 and $68,000 in 2021, and paid dividends of $25,000 in dividends each year. Pickett reported net income of $24,000 in 2020 and $36,000 in 2021, and paid dividends of $10,000 in dividends each year.If the parent’s net income reflected use of the equity method, what were the consolidated retained earnings on December 31, 2021?

97) Fesler Inc. acquired all of the outstanding common stock of Pickett Company on January 1, 2020. Annual amortization of $22,000 resulted from this transaction. On the date of the acquisition, Fesler reported retained earnings of $520,000 while Pickett reported a $240,000 balance for retained earnings. Fesler reported net income of $100,000 in 2020 and $68,000 in 2021, and paid dividends of $25,000 in dividends each year. Pickett reported net income of $24,000 in 2020 and $36,000 in 2021, and paid dividends of $10,000 in dividends each year.If the parent’s net income reflected use of the partial equity method, what were the consolidated retained earnings on December 31, 2021?

98) Fesler Inc. acquired all of the outstanding common stock of Pickett Company on January 1, 2020. Annual amortization of $22,000 resulted from this transaction. On the date of the acquisition, Fesler reported retained earnings of $520,000 while Pickett reported a $240,000 balance for retained earnings. Fesler reported net income of $100,000 in 2020 and $68,000 in 2021, and paid dividends of $25,000 in dividends each year. Pickett reported net income of $24,000 in 2020 and $36,000 in 2021, and paid dividends of $10,000 in dividends each year.If the parent’s net income reflected use of the initial value method, what were the consolidated retained earnings on December 31, 2021?

99) Jaynes Inc. acquired all of Aaron Co.'s common stock on January 1, 2020, by issuing 11,000 shares of $1 par value common stock. Jaynes' shares had a $17 per share fair value. On that date, Aaron reported a net book value of $120,000. However, its equipment (with a five-year remaining life) was undervalued by $6,000 in the company's accounting records. Any excess of consideration transferred over fair value of assets and liabilities acquired is assigned to an unrecorded patent to be amortized over ten years.The following figures came from the individual accounting records of these two companies as of December 31, 2020:

The following figures came from the individual accounting records of these two companies as of December 31, 2021:

What balance would Jaynes' Investment in Aaron Co. account have shown on December 31, 2021, when the equity method was applied for this acquisition?

100) Jaynes Inc. acquired all of Aaron Co.'s common stock on January 1, 2020, by issuing 11,000 shares of $1 par value common stock. Jaynes' shares had a $17 per share fair value. On that date, Aaron reported a net book value of $120,000. However, its equipment (with a five-year remaining life) was undervalued by $6,000 in the company's accounting records. Any excess of consideration transferred over fair value of assets and liabilities acquired is assigned to an unrecorded patent to be amortized over ten years.The following figures came from the individual accounting records of these two companies as of December 31, 2020:

The following figures came from the individual accounting records of these two companies as of December 31, 2021:

What was consolidated net income for the year ended December 31, 2021?

101) Jaynes Inc. acquired all of Aaron Co.'s common stock on January 1, 2020, by issuing 11,000 shares of $1 par value common stock. Jaynes' shares had a $17 per share fair value. On that date, Aaron reported a net book value of $120,000. However, its equipment (with a five-year remaining life) was undervalued by $6,000 in the company's accounting records. Any excess of consideration transferred over fair value of assets and liabilities acquired is assigned to an unrecorded patent to be amortized over ten years.The following figures came from the individual accounting records of these two companies as of December 31, 2020:

The following figures came from the individual accounting records of these two companies as of December 31, 2021:

What was consolidated equipment as of December 31, 2021?

102) Jaynes Inc. acquired all of Aaron Co.'s common stock on January 1, 2020, by issuing 11,000 shares of $1 par value common stock. Jaynes' shares had a $17 per share fair value. On that date, Aaron reported a net book value of $120,000. However, its equipment (with a five-year remaining life) was undervalued by $6,000 in the company's accounting records. Any excess of consideration transferred over fair value of assets and liabilities acquired is assigned to an unrecorded patent to be amortized over ten years.The following figures came from the individual accounting records of these two companies as of December 31, 2020:

The following figures came from the individual accounting records of these two companies as of December 31, 2021:

What was the total for consolidated patents as of December 31, 2021?

103) Utah Inc. acquired all of the outstanding common stock of Trimmer Corp. on January 1, 2019. At that date, Trimmer owned only three assets and had no liabilities:

If Utah paid $300,000 in cash for Trimmer, what allocation and amortization should have been assigned to the subsidiary's Building account and its Equipment account in a December 31, 2021 consolidation?

104) Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2020. As of that date, Jackson had the following trial balance:

During 2020, Jackson reported net income of $96,000 while paying dividends of $12,000. During 2021, Jackson reported net income of $132,000 while paying dividends of $36,000. Assume that Matthews Co. acquired the common stock of Jackson Co. for $588,000 in cash. As of January 1, 2020, Jackson's land had a fair value of $102,000, its buildings were valued at $188,000, and its equipment was appraised at $216,000. Any excess of consideration transferred over fair value of assets and liabilities acquired is due to an unamortized patent to be amortized over 10 years.Matthews decided to use the equity method for this investment.Required:(A.) Prepare consolidation worksheet entries for December 31, 2020.(B.) Prepare consolidation worksheet entries for December 31, 2021.

105) On January 1, 2019, Rand Corp. issued shares of its common stock to acquire all of the outstanding common stock of Spaulding Inc. Spaulding's book value was only $140,000 at the time, but Rand issued 12,000 shares having a par value of $1 per share and a fair value of $20 per share. Rand was willing to convey these shares because it felt that buildings (ten-year life) were undervalued on Spaulding's records by $60,000 while equipment (five-year life) was undervalued by $25,000. Any consideration transferred over fair value of identified net assets acquired is assigned to goodwill.Following are the individual financial records for these two companies for the year ended December 31, 2022.

Required:Prepare a consolidation worksheet for this business combination.

106) Pritchett Company recently acquired three businesses, recognizing goodwill in each acquisition. Destin has allocated its acquired goodwill to its three reporting units: Apple, Banana, and Carrot. Pritchett provides the following information in performing the 2021 annual review for impairment:

Which of Pritchett’s reporting units require both steps to test for goodwill impairment?

107) Pritchett Company recently acquired three businesses, recognizing goodwill in each acquisition. Destin has allocated its acquired goodwill to its three reporting units: Apple, Banana, and Carrot. Pritchett provides the following information in performing the 2021 annual review for impairment: