ACCT 4370 Final Exam | Answered with complete
solutions
During 200X, Papa Company sold inventory, which cost it $18,000, to its subsidiary,
Sonnyco, for $27,000. At the end of 200X, Sonnyco had $9,000 of the intercompany
goods still on its books. The balance had been resold to unaffiliated customers for
$24,000. Which one of the following is the amount of intercompany sales that should be
eliminated for 200X consolidated statements?
$27,000
$24,000
$18,000
$12,000 - Answer27000
/.Which one of the following will occur on consolidated financial statements if an
intercompany inventory transaction is not eliminated?
An understatement of sales.
An overstatement of sales.
An understatement of purchases.
An overstatement of accounts receivable. - AnswerAn overstatement of sales.
/.During 200X, Papa Company sold inventory, which cost it $18,000, to its subsidiary,
Sonnyco, for $27,000. At the end of 200X, Sonnyco had $9,000 of the intercompany
goods still on its books. The balance had been resold to unaffiliated customers for
$24,000. Which one of the following is the amount of ending inventory that should be
eliminated for consolidated statements?
$3,000
$6,000
$9,000
$15,000 - Answer3000
/.Which of the following can be overstated on consolidated financial statements if
intercompany inventory balances on-hand at the end of a period are not eliminated?
Consolidated Income
Consolidated Loss
Yes
Yes
Yes
No
No
Yes
No
No - AnswerYes
Yes
,/.Pine Company acquired goods for resale from its manufacturing subsidiary, Strawco,
at Strawco's cost to manufacture of $12,000. Pine subsequently resold the goods to a
nonaffiliate for $18,000. Which one of the following is the amount of the elimination that
will be needed as a result of the intercompany inventory transaction?
$-0-
$6,000
$12,000
$18,000 - Answer12000
/.Tulip Co. owns 100% of Daisy Co.'s outstanding common stock. Tulip's cost of goods
sold for the year totals $600,000, and Daisy's cost of goods sold totals $400,000. During
the year, Tulip sold inventory costing $60,000 to Daisy for $100,000. By the end of the
year, all transferred inventory was sold to third parties. What amount should be reported
as cost of goods sold in the consolidated statement of income?
$900,000
$940,000
$960,000
$1,000,000 - Answer900000
/.In which of the following legal forms of business combination does at least one
preexisting entity cease to exist?
Merger
Consolidation
Acquisition
Yes
Yes
Yes
Yes
Yes
No
Yes
No
No
No
No
Yes - AnswerYes
Yes
No
/.In which of the following legal forms of business combination are the assets and
liabilities of an acquired entity or entities recorded on the books of the acquiring entity?
Merger
Acquisition
Consolidation
Yes
Yes
,Yes
Yes
Yes
No
Yes
No
Yes
No
Yes
No - AnswerYes
No
Yes
/.On December 1, 200X, Betaco agreed to be acquired 100% by Alphaco at a cost
equal to Betaco's book value. The combination was initiated at that time, and the closing
date for the acquisition was December 31, 200X. Both firms have December 31 fiscal
year-ends. There were no other transactions between the firms during 200X or 200Y.
Each firm had the following net incomes for the periods shown:
Alphaco Betaco
1/1/0X-11/30/0X $20,000 $5,000
12/1/0X-12/31/0X 4,000 1,000
1/1/0Y-1/31/0Y 2,000 3,000
Which one of the following is the consolidated net income that Alphaco should
recognize for 200X?
$24,000
$25,000
$29,000
$30,000 - Answer24000
/.In which of the legal forms of business combination does more than one entity
survive?
Merger
Consolidation
Acquisition
Yes
Yes
Yes
Yes
Yes
No
Yes
No
No
No
, No
Yes - AnswerNo
No
Yes
/.In which of the following legal forms of business combination are two or more entities
combined into one new entity?
Merger
Consolidation
Acquisition
Yes
Yes
Yes
Yes
Yes
No
No
Yes
No
No
No
Yes - AnswerNo
Yes
No
/.Topco owns 60% of the voting common stock of Midco and 40% of the voting common
stock of Botco. Topco wishes to gain control of Botco by having Midco buy shares of
Botco's voting stock. Which one of the following minimum levels of ownership of Botco
must Midco additionally need to obtain in order for Topco to have controlling interest of
Botco's voting stock?
11%
17%
26%
50+% - Answer11
/.On December 1, 200X, Betaco agreed to be acquired 100% by Alphaco at a cost
equal to Betaco's book value. The combination was initiated at that time, and the closing
date for the acquisition was December 31, 200X. Both firms have December 31 fiscal
year-ends. There were no other transactions between the firms during 200X or 200Y.
Each firm had the following net incomes for the periods shown:
Alphaco Betaco
1/1/0X-11/30/0X $20,000 $5,000
12/1/0X-12/31/0X 4,000 1,000
1/1/0Y-1/31/0Y 2,000 3,000
solutions
During 200X, Papa Company sold inventory, which cost it $18,000, to its subsidiary,
Sonnyco, for $27,000. At the end of 200X, Sonnyco had $9,000 of the intercompany
goods still on its books. The balance had been resold to unaffiliated customers for
$24,000. Which one of the following is the amount of intercompany sales that should be
eliminated for 200X consolidated statements?
$27,000
$24,000
$18,000
$12,000 - Answer27000
/.Which one of the following will occur on consolidated financial statements if an
intercompany inventory transaction is not eliminated?
An understatement of sales.
An overstatement of sales.
An understatement of purchases.
An overstatement of accounts receivable. - AnswerAn overstatement of sales.
/.During 200X, Papa Company sold inventory, which cost it $18,000, to its subsidiary,
Sonnyco, for $27,000. At the end of 200X, Sonnyco had $9,000 of the intercompany
goods still on its books. The balance had been resold to unaffiliated customers for
$24,000. Which one of the following is the amount of ending inventory that should be
eliminated for consolidated statements?
$3,000
$6,000
$9,000
$15,000 - Answer3000
/.Which of the following can be overstated on consolidated financial statements if
intercompany inventory balances on-hand at the end of a period are not eliminated?
Consolidated Income
Consolidated Loss
Yes
Yes
Yes
No
No
Yes
No
No - AnswerYes
Yes
,/.Pine Company acquired goods for resale from its manufacturing subsidiary, Strawco,
at Strawco's cost to manufacture of $12,000. Pine subsequently resold the goods to a
nonaffiliate for $18,000. Which one of the following is the amount of the elimination that
will be needed as a result of the intercompany inventory transaction?
$-0-
$6,000
$12,000
$18,000 - Answer12000
/.Tulip Co. owns 100% of Daisy Co.'s outstanding common stock. Tulip's cost of goods
sold for the year totals $600,000, and Daisy's cost of goods sold totals $400,000. During
the year, Tulip sold inventory costing $60,000 to Daisy for $100,000. By the end of the
year, all transferred inventory was sold to third parties. What amount should be reported
as cost of goods sold in the consolidated statement of income?
$900,000
$940,000
$960,000
$1,000,000 - Answer900000
/.In which of the following legal forms of business combination does at least one
preexisting entity cease to exist?
Merger
Consolidation
Acquisition
Yes
Yes
Yes
Yes
Yes
No
Yes
No
No
No
No
Yes - AnswerYes
Yes
No
/.In which of the following legal forms of business combination are the assets and
liabilities of an acquired entity or entities recorded on the books of the acquiring entity?
Merger
Acquisition
Consolidation
Yes
Yes
,Yes
Yes
Yes
No
Yes
No
Yes
No
Yes
No - AnswerYes
No
Yes
/.On December 1, 200X, Betaco agreed to be acquired 100% by Alphaco at a cost
equal to Betaco's book value. The combination was initiated at that time, and the closing
date for the acquisition was December 31, 200X. Both firms have December 31 fiscal
year-ends. There were no other transactions between the firms during 200X or 200Y.
Each firm had the following net incomes for the periods shown:
Alphaco Betaco
1/1/0X-11/30/0X $20,000 $5,000
12/1/0X-12/31/0X 4,000 1,000
1/1/0Y-1/31/0Y 2,000 3,000
Which one of the following is the consolidated net income that Alphaco should
recognize for 200X?
$24,000
$25,000
$29,000
$30,000 - Answer24000
/.In which of the legal forms of business combination does more than one entity
survive?
Merger
Consolidation
Acquisition
Yes
Yes
Yes
Yes
Yes
No
Yes
No
No
No
, No
Yes - AnswerNo
No
Yes
/.In which of the following legal forms of business combination are two or more entities
combined into one new entity?
Merger
Consolidation
Acquisition
Yes
Yes
Yes
Yes
Yes
No
No
Yes
No
No
No
Yes - AnswerNo
Yes
No
/.Topco owns 60% of the voting common stock of Midco and 40% of the voting common
stock of Botco. Topco wishes to gain control of Botco by having Midco buy shares of
Botco's voting stock. Which one of the following minimum levels of ownership of Botco
must Midco additionally need to obtain in order for Topco to have controlling interest of
Botco's voting stock?
11%
17%
26%
50+% - Answer11
/.On December 1, 200X, Betaco agreed to be acquired 100% by Alphaco at a cost
equal to Betaco's book value. The combination was initiated at that time, and the closing
date for the acquisition was December 31, 200X. Both firms have December 31 fiscal
year-ends. There were no other transactions between the firms during 200X or 200Y.
Each firm had the following net incomes for the periods shown:
Alphaco Betaco
1/1/0X-11/30/0X $20,000 $5,000
12/1/0X-12/31/0X 4,000 1,000
1/1/0Y-1/31/0Y 2,000 3,000
