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Flashcards in Mod 18 Wrong Answers Deck (14)
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Q

If a parent company issued $200,000 Bonds Payable at a $10,000 premium. What is the worksheet adjustment entry for consolidation assuming the subsidiary had purchased 50% of the bonds for $125,000?

A

Bonds Payable. 100,000
Premium on bonds payable. 5,000
Loss on extinguishment of bonds 20,000
Investment in bonds. 125,000

1
Q

If a subsidiary has ending inventory on hand of $20,000 that was acquired from the parent and a gross profit ratio of 10%, what is the worksheet consolidation adjustment entry to eliminate the profit in ending inventory for the intercompany transaction?

A

Cost of sales. 2,000

Ending inventory. 2,000

2
Q

What is the account that allocates excess fair value over book value, before it is closed to good will?

A

Differential

3
Q

When the noncontrolling interest = $10,000 and the cost of the investment is $30,000 , what is the fair value of net assets

A

FV of Net assets = noncontrolling interest + cost of investment

= $40,000

4
Q

When the equity earnings of the investee appears in the income statement for the year ended…

A

It has already been included in the year ended retained earnings

5
Q

If the parent “uses the equity method to account for the investment in sub” then…

A

Net income from the sub is already included in the parent’s

Retained earnings

6
Q

Sales to sub - COGS to sub =?

A

Ending inventory (intercompany)

7
Q

If a parent sells equipment to its sub, the depreciation expense on consolidated statements for the year should be…

A

Equal to depreciation as if parent never sold the equipment

8
Q

What is the eliminating journal entry for an intercompany sale of equipment, where the parent booked a gain?

A

Gain on equip. Xxx
Acc. Depreciation. Xxx
Equipment. Xxx

Acc. Depreciation. Xxx
Depreciation exp. Xxx

9
Q

In an elimination entry of gain on equipment, what accounts are restored?

2) how are they recorded?

A

Accumulated depreciation and equipment

2) as if sale was never made

10
Q

When a company holds merchandise from the parent with a $30,000 profit when it sold sold $60,000 worth of merchandise, what is the unrealized profit, when half of the inventory is still unsold?

A

$15,000

11
Q

When a company holds merchandise from the parent with a $30,000 profit when it sold sold $60,000 worth of merchandise, what is the eliminating journal entry to adjust for consolidation (no numbers needed) when half of the inventory is still unsold?

A

Sales. Xxx
COGS. XXX
Ending inventory. Xxx

12
Q

On December 31, yr. 2, the parent paid $91,000 to purchase $100,000 of the bonds outstanding issued by its sub. These bonds were originally issued at par. What is the eliminating entry for consolidation?

A

Bonds payable. Xxx
Discount on bonds payable Xxx
Gain on retirement of bonds. Xxx
Investment in bonds. Xxx

13
Q

If inter company sales are 20,000, GPR is 40% and 20% of inventory remains unsold, what is the elimination journal entry?

A

Sales. 20,000
COGS. 18,400
Ending Inventory 1,600