Mod 18 Wrong Answers

Question 0

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?

Answer 0

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

Question 1

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?

Answer 1

Cost of sales. 2,000

Ending inventory. 2,000

Question 2

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

Answer 2

Differential

Question 3

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

Answer 3

FV of Net assets = noncontrolling interest + cost of investment

= $40,000

Question 4

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

Answer 4

It has already been included in the year ended retained earnings

Question 5

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

Answer 5

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

Retained earnings

Question 6

Sales to sub - COGS to sub =?

Answer 6

Ending inventory (intercompany)

Question 7

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

Answer 7

Equal to depreciation as if parent never sold the equipment

Question 8

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

Answer 8

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

Acc. Depreciation. Xxx
Depreciation exp. Xxx

Question 9

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

2) how are they recorded?

Answer 9

Accumulated depreciation and equipment

2) as if sale was never made

Question 10

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?

Answer 10

$15,000

Question 11

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?

Answer 11

Sales. Xxx
COGS. XXX
Ending inventory. Xxx

Question 12

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?

Answer 12

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

Question 13

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

Answer 13

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