Eliminate subs stock holder equity account begin balances and BV component within the parents investment account.
Recognize the unamortized allocations (intangibles are recorded) of the beginning of current year associated with the adjustments to FV (subs assets adjusted to FV)
Eliminate the subs Income accrued by parent
Eliminate the subs Dividend
Recognize excess amortization Expenses for the current period on the allocations from the original adjustments to FV
eliminate intra entity debt
Convert parents begin RE from IV method to the Equity method
1. On January 1, 2011, Riley Corp. acquired some of the outstanding bonds of one of its subsidiaries. The bonds had a carrying value of $421,620, and Riley paid $401,937 for them. How should you account for the difference between the carrying value and the purchase price in the consolidated financial statements for 2011?
A. The difference is added to the carrying value of the debt.
B. The difference is deducted from the carrying value of the debt.
C. The difference is treated as a loss from the extinguishment of the debt.
D. The difference is treated as a gain from the extinguishment of the debt.
E. The difference does not influence the consolidated financial statements.
6. Where do intra-entity sales of inventory appear in a consolidated statement of cash flows?
A. They do not appear in the consolidated statement of cash flows.
B. Supplemental schedule of noncash investing and financing activities.
C. Cash flows from operating activities.
D. Cash flows from investing activities.
E. Cash flows from financing activities.
23. If newly issued debt is issued from a parent to its subsidiary, which of the following statements is false?
A. Any premium or discount on bonds payable is exactly offset by a premium or discount on bond investment.
B. There will be $0 net gain or loss on the bond transaction.
C. Interest expense needs to be eliminated on the consolidated income statement.
D. Interest revenue needs to be eliminated on the consolidated income statement.
E. A net gain or loss on the bond transaction will be reported.
E. A net gain or loss on the bond transaction will be reported.
25. Which of the following statements is true concerning the acquisition of existing debt of a consolidated affiliate in the year of the debt acquisition?
A. Any gain or loss is deferred on a consolidated income statement.
B. Any gain or loss is recognized on a consolidated income statement.
C. Interest revenue on the affiliated debt is recognized on a consolidated income statement.
D. Interest expense on the affiliated debt is recognized on a consolidated income statement.
E. Consolidated retained earnings is adjusted for the difference between the purchase price and the carrying value of the bonds.
1. Cherryhill and Hace had been partners for several years, and they decided to admit Quincy to the partnership. The accountant for the partnership believed that the dissolved partnership and the newly formed partnership were two separate entities. What method would the accountant have used for recording the admission of Quincy to the partnership?
A. The bonus method
.B. The equity method
.C. The goodwill method.
D. The proportionate method.E. The cost method
of the partnership form of business organization, compared to corporations, include
A. the legal requirements for formation.
B.unlimited liability for the partners.
C. the requirement for the partnership to pay income taxes
.D. the extent of governmental regulation.E. the complexity of operations.
. The advantages of the partnership form of business organization, compared to corporations, include
B. ease of raising capital.
C. mutual agency
.D. limited liability.
E. difficulty of formation
5. The dissolution of a partnership occurs
A. only when the partnership sells its assets and permanently closes its books
.B. only when a partner leaves the partnership.
C. at the end of each year, when income is allocated to the partners.
D. only when a new partner is admitted to the partnership.
E.when there is any change in the individuals who make up the partnership.
6. The partnership of Clapton, Seidel, and Thomas was insolvent and will be unable to pay $30,000 in liabilities currently due. What recourse was available to the partnership's creditors?
A. they must present equal claims to the three partners as individuals
.B. they must try obtain a payment from the partner with the largest capital account balance
.C. they cannot seek remuneration from the partners as individuals.
D.they may seek remuneration from any partner they choose.
E. they must present their claims to the three partners in the order of the partners' capital account balances.
4. Jell and Dell were partners with capital balances of $600 and $800 and an income sharing ratio of 2:3. They admitted Zell to a 30% interest in the partnership, and the total amount of goodwill credited to the original partners was $700. What amount did Zell contribute to the business?
-600+800+700=2100/70%=3000 x 30%= 900
2. The Abrams, Bartle, and Creighton partnership began the process of liquidation with the following balance sheet:
Abrams, Bartle, and Creighton share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $12,000.If the noncash assets were sold for $234,000, what amount of the loss would have been allocated to Bartle?
-434000-234000-12000 x 20%=42400
5. The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering liquidation:
Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. Noncash assets were sold for $180,000. Liquidation expenses were $10,000.Assume that Lewis was personally insolvent and could not contribute any assets to the partnership, while Keaton and Meador were both solvent. What amount of cash would Keaton have received from the distribution of partnership assets
22. What accounting transactions are
recorded by an accountant during partnership liquidation?
A. The conversion of partnership assets into cash
.B. The allocation of gains and losses from sales of assets.
C. The payment of liabilities and expenses.
D.The initiation of legal action by creditors of the partnership.
E. Writeoff of remaining unpaid debts.
The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances:
Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4. What amount of cash was available for safe payments, based on the above information?
24. What is the preferred method of resolving a partner's deficit balance, according to the
Uniform Partnership Act
? A. Partners never have a deficit balance
.B. The other partners must contribute personal assets to cover the deficit balance
.C. The partnership must sell assets in order to cover the deficit balance.
D.The partner with a deficit balance must contribute personal assets to cover the deficit balance.
E. The partner with a deficit balance contributes personal assets only if those personal assets exceed personal liabilities.
26. Which one of the following statements is correct?
A.is absorbed by the other partners in the profit and loss ratio of those partners
.B. Gains and losses from the sale of noncash assets are divided in the ratio of the partners' capital account balances if there is no income-sharing plan in the partnership contract
.C. A loan receivable from a partner is added to the partner's capital account balance in the preparation of a cash distribution plan
.D. Partners may not receive any cash be
1. Which of the following will
result in the termination and liquidation of a partnership?
1) Partners are incompatible and choose to cease operations.2) There are excessive losses that are expected to continue.3) Retirement of a partner.
A. 1 only
B. 1 and 2 only
C. 2 and 3 only
D. 3 only
E.1, 2, and 3
1. When a partnership is insolvent and a partner has a deficit capital balance, that partner is legally required to:
A. declare personal bankruptcy.
B. initiate legal proceedings against the partnership.
C. contribute cash to the partnership
.D. deliver a note payable to the partnership with specific payment terms
.E. None of the above. The partner has no legal responsibility to cover the capital deficit balance.
. Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value method to account for this investment. Trace reported net income of $110,000 for 2011 and paid dividends of $60,000 on October 1, 2011. How much income should Gaw recognize on this investment in 2011?
20. All of the following would require use of the equity method for investments except
: A. material intra-entity transactions
.B. investor participation in the policy-making process of the investee.
C.valuation at fair value
.D. technological dependency.
E. significant control.
7. When an investor sells shares of its investee company, which of the following statements is true?
A. A realized gain or loss is reported as the difference between selling price and original cost
.B. An unrealized gain or loss is reported as the difference between selling price and original cost.
C.A realized gain or loss is reported as the difference between selling price and carrying value.
D. An unrealized gain or loss is reported as the difference between selling price and carrying value.
E. Any gain or loss is reported as part as comprehensive income
9.Dodge incorp- Which adjustment would be made to change from the fair-value method to the equity method
A. A debit to additional paid-in capital for $15,000
.B. A credit to additional paid-in capital for $15,000
.C. A debit to retained earnings for $15,000.
D.A credit to retained earnings for $15,000.
E. A credit to a gain on investment
9. After allocating cost in excess of book value, which asset or liability would
not be amortized over a useful life?
A. Cost of goods sold.
B. Property, plant, & equipment
.E. Bonds payable
3. Which of the following results in a decrease in the investment account when applying the equity method?
A. Dividends paid by the investor.
B. Net income of the investee
.C. Net income of the investor.
D. Unrealized gain on intra-entity inventory transfers for the current year.
E. Purchase of additional common stock by the investor during the current year
4. Which of the following results in an increase in the investment account when applying the equity method?
A.Unrealized gain on intra-entity inventory transfers for the prior year
.B. Unrealized gain on intra-entity inventory transfers for the current year
.C. Dividends paid by the investor.
D. Dividends paid by the investee
.E. Sale of a portion of the investment during the current year