Exam (elaborations) TEST BANK FOR Advanced Accounting Joe Ben Hoyle 13th Edition

Exam (elaborations) TEST BANK FOR Advanced Accounting Joe Ben Hoyle 13th Edition Advanced Accounting Joe Ben Hoyle 13e – Test Bank To purchase this Test Bank with answers, click the link below Description Advanced Accounting Joe Ben Hoyle 13e – Test Bank Instant Download With Answers Sample Question File: Chapter 03 – Consolidations – Subsequent to the Date of Acquisition Multiple Choice: [QUESTION] 1. Which one of the following accounts would not appear in the consolidated financial statements at the end of the first fiscal period of the combination? 2. A) Goodwill. 3. B) Equipment. 4. C) Investment in Subsidiary. 5. D) Common Stock. 6. E) Additional Paid-In Capital. Answer: C Learning Objective: 03-01 Topic: Consolidation―Overall effects Difficulty: 2 Medium Blooms: Understand AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement [QUESTION] 2. Which of the following internal record-keeping methods can a parent choose to account for a subsidiary acquired in a business combination? 3. A) Initial value or book value. 4. B) Initial value, lower-of-cost-or-market-value, or equity. 5. C) Initial value, equity, or partial equity. 6. D) Initial value, equity, or book value. 7. E) Initial value, lower-of-cost-or-market-value, or partial equity. Answer: C Learning Objective: 03-02 Topic: Investment methods―Identify and differentiate Difficulty: 1 Easy Blooms: Remember AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement [QUESTION] 3. Which one of the following varies between the equity, initial value, and partial equity methods of accounting for an investment? 4. A) The amount of consolidated net income. 5. B) Total assets on the consolidated balance sheet. 6. C) Total liabilities on the consolidated balance sheet. 7. D) The balance in the investment account on the parent’s books. 8. E) The amount of consolidated cost of goods sold. Answer: D Learning Objective: 03-02 Topic: Investment methods―Identify and differentiate Difficulty: 2 Medium Blooms: Understand AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement [QUESTION] 4. Under the partial equity method, the parent recognizes income when 5. A) Dividends are received from the investee. 6. B) Dividends are declared by the investee. 7. C) The related expense has been incurred. 8. D) The related contract is signed by the subsidiary. 9. E) It is earned by the subsidiary. Answer: E Learning Objective: 03-02 Learning Objective: 03-03c Topic: Investment methods―Identify and differentiate Topic: Investment and income―Partial equity method Difficulty: 1 Easy Blooms: Remember AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement [QUESTION] 5. An impairment model is used 6. A) To assess whether asset write-downs are appropriate for indefinite-lived assets. 7. B) To calculate the fair value of intangible assets. 8. C) To calculate the amortization of indefinite-lived assets over their useful lives. 9. D) To determine whether the fair value of assets should be recognized. 10. E) To determine the likelihood that the fair value of an assumed liability will increase. Answer: A Learning Objective: 03-05 Learning Objective: 03-07 Topic: Impairment―Goodwill―Rationale Topic: Impairment―Intangibles other than goodwill Difficulty: 2 Medium Blooms: Remember AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement [QUESTION] 6. Racer Corp. acquired all of the common stock of Tangiers Co. in 2016. Tangiers maintained its incorporation. Which of Racer’s account balances would vary between the equity method and the initial value method? 7. A) Goodwill, Investment in Tangiers , and Retained Earnings. 8. B) Expenses, Investment in Tangiers , and Equity in Subsidiary Earnings. 9. C) Investment in Tangiers Co., Equity in Subsidiary Earnings, and Retained Earnings. 10. D) Common Stock, Goodwill, and Investment in Tangiers Co. 11. E) Expenses, Goodwill, and Investment in Tangiers Co. Answer: C Learning Objective: 03-02 Learning Objective: 03-03a Learning Objective: 03-03b Topic: Investment methods―Identify and differentiate Difficulty: 3 Hard Blooms: Understand AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement [QUESTION] 7. How does the partial equity method differ from the equity method? 8. A) In the total assets reported on the consolidated balance sheet. 9. B) In the treatment of dividends. 10. C) In the total liabilities reported on the consolidated balance sheet. 11. D) Under the partial equity method, subsidiary income does not increase the balance in the parent’s investment account. 12. E) Under the partial equity method, the balance in the investment account is not decreased by amortization on allocations made in the acquisition of the subsidiary. Answer: E Learning Objective: 03-02 Learning Objective: 03-03a Learning Objective: 03-03c Topic: Investment methods―Identify and differentiate Difficulty: 2 Medium Blooms: Remember AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement [QUESTION] 8. Jansen Inc. acquired all of the outstanding common stock of Merriam Co. on January 1, 2017, for $257,000. Annual amortization of $19,000 resulted from this acquisition. Jansen reported net income of $70,000 in 2017 and $50,000 in 2018 and paid $22,000 in dividends each year. Merriam reported net income of $40,000 in 2017 and $47,000 in 2018 and paid $10,000 in dividends each year. What is the Investment in Merriam Co. balance on Jansen’s books as of December 31, 2018, if the equity method has been applied? 9. A) $286,000. 10. B) $295,000. 11. C) $276,000. 12. D) $344,000. 13. E) $324,000. Answer: A Learning Objective: 03-03a Topic: Investment and income―Equity method Difficulty: 2 Medium Blooms: Apply AACSB: Knowledge Application AICPA BB: Critical Thinking AICPA FN: Measurement Feedback: $257,000 + $40,000 + $47,000 – $10,000 – $19,000 – $10,000 – $19,000 = $286,000 [QUESTION] 9. Which of the following is not an example of an intangible asset? 10. A) Customer list 11. B) Database 12. C) Lease agreement 13. D) Broken equipment 14. E) Trademark Answer: D Learning Objective: 03-07 Topic: Impairment―Intangibles other than goodwill Difficulty: 1 Easy Blooms: Understand AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement [QUESTION] 10. Parrett Corp. acquired one hundred percent of Jones Inc. on January 1, 2016, at a price in excess of the subsidiary’s fair value. On that date, Parrett’s equipment (ten-year life) had a book value of $360,000 but a fair value of $480,000. Jones had equipment (ten-year life) with a book value of $240,000 and a fair value of $350,000. Parrett used the partial equity method to record its investment in Jones. On December 31, 2018, Parrett had equipment with a book value of $250,000 and a fair value of $400,000. Jones had equipment with a book value of $170,000 and a fair value of $320,000. What is the consolidated balance for the Equipment account as of December 31, 2018? 11. A) $387,000. 12. B) $497,000. 13. C) $508.000. 14. D) $537,000. 15. E) $570,000. Answer: B Learning Objective: 03-03 Learning Objective: 03-03c Topic: Amortization calculations Topic: Investment and income―Partial equity method Topic: Consolidation balances―Calculate Difficulty: 3 Hard Blooms: Apply AACSB: Knowledge Application AICPA BB: Critical Thinking AICPA FN: Measurement Feedback: Excess of Sub’s FV = $110,000 + Parent’s BV $250,000 + Sub’s BV $170,000 – Excess Amortization ($11,000 × 3yrs) = $497,000 REFERENCE: 03-01 On January 1, 2017, Cale Corp. paid $1,020,000 to acquire Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to account for the investment. The following information is available for Kaltop’s assets, liabilities, and stockholders’ equity accounts on January 1, 2017: Kaltop earned net income for 2017 of $126,000 and paid dividends of $48,000 during the year. [QUESTION] REFER TO: 03-01 11. The 2017 total excess amortization of fair-value allocations is calculated to be 12. A) $4,000. 13. B) $6,400. 14. C) ($2,400). 15. D) ($1,000). 16. E) $3,800. Answer: D Learning Objective: 03-03 Learning Objective: 03-03a Topic: Amortization calculations Difficulty: 2 Medium Blooms: Apply AACSB: Knowledge Application AICPA BB: Critical Thinking AICPA FN: Measurement Feedback: Building = FV $268,000 – BV $240,000 = $28,000 / 20 yrs = $1,400 Equipment = FV $516,000 – BV $540,000 = ($24,000) / 10 yrs = ($2,400) ($2,400) + $1,400 = ($1,000) [QUESTION] REFER TO: 03-01 12. In Cale’s accounting records, what amount would appear on December 31, 2017 for equity in subsidiary earnings? 13. A) $77,000. 14. B) $79,000. 15. C) $125,000. 16. D) $127,000. 17. E) $81,800. Answer: D Learning Objective: 03-03a Topic: Investment and income―Equity method Difficulty: 2 Medium Blooms: Apply AACSB: Knowledge Application AICPA BB: Critical Thinking AICPA FN: Measurement Feedback: $126,000 + $1,000 = $127,000 [QUESTION] REFER TO: 03-01 13. What is the balance in Cale’s investment in subsidiary account at the end of 2017? 14. A) $1,099,000. 15. B) $1,020,000. 16. C) $1,096,200. 17. D) $1,098,000. 18. E) $1,144,400. Answer: A Learning Objective: 03-03a Topic: Investment and income―Equity method Difficulty: 2 Medium Blooms: Apply AACSB: Knowledge Application AICPA BB: Critical Thinking AICPA FN: Measurement Feedback: $1,020,000 + ($126,000 + $1,000) – $48,000 = $1,099,000 [QUESTION] REFER TO: 03-01 14. At the end of 2017, the consolidation entry to eliminate Cale’s accrual of Kaltop’s earnings would include a credit to Investment in Kaltop Co. for 15. A) $124,400. 16. B) $126,000. 17. C) $127,000. 18. D) $ 76,400. 19. E) $ 0. Answer: C Learning Objective: 03-03a Topic: Consolidation entries―Equity Difficulty: 2 Medium Blooms: Apply AACSB: Knowledge Application AICPA BB: Critical Thinking AICPA FN: Measurement Feedback: $126,000 + $1,000 = $127,000 [QUESTION] REFER TO: 03-01 15. If Cale Corp. had net income of $444,000 in 2017, exclusive of the investment, what is the amount of consolidated net income? 16. A) $569,000. 17. B) $570,000. 18. C) $571,000. 19. D) $566,400. 20. E) $444,000. Answer: C Learning Objective: 03-03 Learning Objective: 03-03a Learning Objective: 03-04 Topic: Consolidation entries―Equity Topic: Consolidation balances―Calculate Topic: Consolidation balances―Understand by any method Difficulty: 2 Medium Blooms: Apply AACSB: Knowledge Application AICPA BB: Critical Thinking AICPA FN: Measurement Feedback: $444,000 + ($126,000 + $1,000) = $571,000 REFERENCE: 03-02 On January 1, 2017, Franel Co. acquired all of the common stock of Hurlem Corp. For 2017, Hurlem earned net income of $360,000 and paid dividends of $190,000. Amortization of the patent allocation that was included in the acquisition was $6,000. [QUESTION] REFER TO: 03-02 16. How much difference would there have been in Franel’s income with regard to the effect of the investment, between using the equity method or using the initial value method of internal recordkeeping? 17. A) $190,000. 18. B) $360,000. 19. C) $164,000. 20. D) $354,000. 21. E) $150,000. Answer: C Learning Objective: 03-02 Learning Objective: 03-03a Learning Objective: 03-03b Topic: Investment methods―Identify and differentiate Topic: Investment and income―Equity method Topic: Investment and income―Initial value method Difficulty: 2 Medium Blooms: Apply AACSB: Knowledge Application AICPA BB: Critical Thinking AICPA FN: Measurement Feedback: Initial Value Method = $190,000 Recognized from Sub Income (only dividend income) Equity Method = $360,000 – $6,000=$354,000 (Sub income less amortizations). $354,000 – $190,000 = $164,000 difference in equity method and initial value [QUESTION] REFER TO: 03-02 17. How much difference would there have been in Franel’s income with regard to the effect of the investment, between using the equity method or using the partial equity method of internal recordkeeping? 18. A) $170,000. 19. B) $354,000. 20. C) $164,000. 21. D) $ 6,000. 22. E) $174,000. Answer: D Learning Objective: 03-02 Learning Objective: 03-03a Learning Objective: 03-03c Topic: Investment methods―Identify and differentiate Topic: Investment and income―Equity method Topic: Investment and income―Partial equity method Difficulty: 1 Easy Blooms: Apply AACSB: Knowledge Application AICPA BB: Critical Thinking AICPA FN: Measurement Feedback: Equity Method = $360,000 – $6,000 = $354,000 Equity income Partial Equity Method = $360,000 – $0 (amortizations not recorded under partial equity method); $354,000 – $360,000 = $6,000 difference REFERENCE: 03-03 Cashen Co. paid $2,400,000 to acquire all of the common stock of Janex Corp. on January 1, 2017. Janex’s reported earnings for 2017 totaled $432,000, and it paid $120,000 in dividends during the year. The amortization of allocations related to the investment was $24,000. Cashen’s net income, not including the investment, was $3,180,000, and it paid dividends of $900,000. [QUESTION] REFER TO: 03-03 18. On the consolidated financial statements for 2017, what amount should have been shown for Equity in Subsidiary Earnings? 19. A) $432,000. 20. B) $ -0- 21. C) $408,000. 22. D) $120,000. 23. E) $288,000. Answer: B Learning Objective: 03-03 Learning Objective: 03-04 Topic: Consolidation balances―Calculate Topic: Consolidation balances―Understand by any method Difficulty: 2 Medium Blooms: Apply AACSB: Knowledge Application AICPA BB: