Final exam

Question 1

Journal entry made by P company to record sale of asset

Answer 1

Cash dr
Acc depreciation dr
Asset cr
Profit on asset sale

Question 2

Journal entry made by s company to record the purchase of the asset

Answer 2

Asset dr

Cash cr

Question 3

Elimination entry made by p company to eliminate the internal sale of assets

Answer 3

Asset dr
Profit on sale dr
Accumulated depreciation cr

Question 4

Elimination of unconfirmed profits from affiliated sale of assets

Answer 4

Accumulated depreciation dr

Depreciation expense

Question 5

How are unconfirmed profits on the sale of affiliated services dealt with?

Answer 5

If the purchasing affiliate capitalizes the service costs then there is the creation of the unconfirmed profit which will be deferred year by year until they are completely amortized.

If the purchasing affiliate expenses the costs then there is no unrealized profit or loss. But remember to eliminate the revenue and expenses account in the year the transaction has happened.

Question 6

Elimination entry for affiliated sales of services. (When the purchaser expenses the services)

Answer 6

Consulting services revenues dr

Consulting services expenses cr

Question 7

Elimination entries for affiliated depreciable asset sales.

Answer 7

Asset dr
Retained earnings dr
Accumulated depreciation cr

Accumulated depreciation dr
Depreciation expense cr

Question 8

Elimination entry to eliminate affiliated sale of land

Answer 8

Gain on sale of land (dr)

Land (cr)

Question 9

Entry to confirm the unconfirmed profits on affiliated sales of assets

Answer 9

Accumulated depreciation dr

Depreciation expense cr

Question 10

Minirity interest definition

Answer 10

Number and book value of the remaining outstanding shares of the voting stock of a subsidiary that were not purchased by a parent company during an acquisition

Question 11

Calculation of minority interest.

Answer 11

1) The total par value of voting stock + other contributed capital + retained earnings /retained deficit.
2) % of minority interest calculation.
3) multiply 1 x 2

Question 12

Accounting treatment of minority interest

Answer 12

1) in the consolidated balance sheet working paper
2) report in elimination section and consolidated b/s section
3) credit balance
4) recorded by elimination entry that debits: differential allocation; capital stock; retained earnings. And credits investment; minority interest.

Question 13

Differential allocation definition

Answer 13

The difference between what the purchaser paid for and the book value of the purchaser’s share of the acquired assets and liabilities.

Question 14

Consolidated net income computation

Answer 14

P company’s income from own operations + p company’s equity in subsidiary income

Question 15

Minority interest expense elimination entry and calculation

Answer 15

Minority’s net income x % of minority interest.

Minority interest expense dr
S company declared dividends cr
Minority interest cr