151.Wellington Company purchased 100% of the ordinary shares of Royal Company on December 31, 2014. The cost of the investment was equal to the book value of the subsidiary's net assets. Selected account balances from the separate statements of financial position of Wellington and Royal on December 31, 2014 are as follows
AccountWellington Royal
Plant assets, net £2,070,000 £2,110,000
Investment in Royal 7,110,000 –
Share capital 5,370,000 5,110,000
Retained earnings 11,210,000 2,000,000
The amount of plant assets, net reported on the consolidation statement of financial position at December 31, 2014 is
a.£2,070,000.
b.£2,110,000.
c.£4,180,000.
d.cannot be determined from the information given.
a152.Wellington Company purchased 100% of the ordinary shares of Royal Company on December 31, 2014. The cost of the investment was equal to the book value of the subsidiary's net assets. Selected account balances from the separate statements of financial position of Wellington and Royal on December 31, 2014 are as follows
AccountWellington Royal
Plant assets, net £2,070,000 £2,110,000
Investment in Royal 7,110,000 –
Share capital 5,370,000 5,110,000
Retained earnings 11,210,000 2,000,000
The consolidation worksheet eliminations at December 31, 2014 will include
a.a debit to Royal's plant assets, net account for £2,110,000.
b.a credit to Wellington's Investment in Royal account for £7,110,000.
c.a debit to Wellington's Share Capital account for £5,370,000.
d.a credit to Royal's Share Capital account for £5,110,000.
a153.Wellington Company purchased 100% of the ordinary shares of Royal Company on December 31, 2014. The cost of the investment was equal to the book value of the subsidiary's net assets. Selected account balances from the separate statements of financial position of Wellington and Royal on December 31, 2014 are as follows:
AccountWellington Royal
Plant assets, net £2,070,000 £2,110,000
Investment in Royal 7,110,000 –
Share capital 5,370,000 5,110,000
Retained earnings 11,210,000 2,000,000
The amount of equity reported on the consolidation statement of financial position at December 31, 2014 is
a.£13,210,000.
b.£16,580,000.
c.£23,690,000.
d.cannot be determined from the information given.
*154.Daniel Corporation acquired 100% of the ordinary shares of Tysen Company for €1,400,000. On the date of acquisition, Tysen Company’s equity consisted of: Share Capital, €700,000; Retained Earnings, €540,000. The intercompany elimination to be made on a worksheet to prepare a consolidated statement of financial position is
a.Share Capital?Tysen ................................700,000
Retained Earnings?Tysen .....................................540,000
Investment in Tysen Shares ....................................1,240,000
b.Investment in Tysen Shares ...........................1,400,000
Cash ...........................................1,400,000
c.Share Capital?Daniel ................................700,000
Retained Earnings?Daniel .....................................540,000
Goodwill 160,000
Investment in Tysen Shares ....................................1,400,000
d.Share Capital?Tysen ................................700,000
Retained Earnings?Tysen .....................................540,000
Excess of Cost Over Book Value of Subsidiary .......................160,000
Investment in Tysen Shares....................................1,400,000
*155.If a parent company acquires a wholly owned subsidiary at an amount greater than the fair value of the net assets, the excess should be
a.allocated to expense on the date of acquisition.
b.allocated to identifiable assets to the extent of their fair values, with any remainder allocated to goodwill.
c.allocated to goodwill, with any remainder allocated to the identifiable assets.
d.set up as a liability to the controlling interest.
*156.The consolidated worksheet shows Excess of Cost Over Book Value of Subsidiary of $210,000. Management of the parent company determines that the market values for subsidiary company plant assets are $90,000 higher than book values. In the consolidated statement of financial position, goodwill will be reported at
a.$210,000.
b.$120,000.
c.$90,000.
d.$0.
*157.A consolidated income statement will show
a.revenue and expense transactions between the consolidated entity and parties outside the affiliated group.
b.only the parent company’s net income.
c.only the income of partially owned subsidiaries.
d.only the income of wholly owned subsidiaries.
*158.When preparing a consolidated income statement,
a.only the revenues and expenses of the parent company are presented.
b.the income from partially owned subsidiaries is excluded.
c.all revenue and expense transactions between the parent and subsidiaries must be eliminated.
d.intercompany transactions between affiliated companies do not have to be eliminated.
a159.Wu Inc. Purchased 100% of the ordinary shares of Lee Inc. on December 31, 2014. The cost of the investment exceeded the book value of the subsidiary's net assets by HK$200,000. The fair value of Lee’s plant assets at December 31, 2014 is HK$10,255,000. Selected account balances from the separate statements of financial position of Wu and Royal on December on December 31, 2014 are as follows:
AccountWu Inc. Lee Inc.
Plant assets, net HK$11,435,000 HK$10,055,000
Investment in Lee 13,755,000 –
Share capital 12,685,000 12,555,000
Retained earnings 15,605,000 1,000,000
The amount of plant assets, net reported on the consolidation statement of financial position at December 31, 2014 is
a.HK$21,690,000.
b.HK$21,490,000.
c.HK$11,635,000.
d.HK$11,435,000.
160.Which of the following reasons best explains why a company that experiences seasonal fluctuations in sales may purchase investments in debt or share securities?
a.The company may have excess cash.
b.The company may generate a significant portion of its earnings from investment income.
c.The company may invest for the strategic reason of establishing a presence in a related industry.
d.The company may invest for speculative reasons to increase the value in pension funds.