Grade Details 1. Question : (TCO 1) On January 1, 2007, Jordan Inc. acquired 30% of Nico Corp .

Jordan used the equity method to account for the investment. On January 1, 200 8, Jordan sold 2/3 of its investment in Nico. It no longer had the ability to ex ercise significant influence over the operations of Nico. How should Jordan have accounted for this change? Student Answer: Jordan should continue to use the equity method to maintain consistency in its financial statements Jordan should restate the prior years' financial statements and change the balance in the investment account as if the fair-value method had been used sinc e 2007 Jordan has the option of using either the equity method or the fair-value m ethod for 2007 and future years Jordan should report the effect of the change from the equity to the fair-v alue method as a retrospective change in accounting principle Jordan should use the fair-value method for 2008 and future years but shou ld not make a retrospective adjustment to the investment account Points Received: 2 of 2 Comments:

2. Question : (TCO 1) After allocating cost in excess of book value, which asse t or liability would not be amortized over a useful life? Student Answer: Cost of goods sold Property, plant, & equipment Patents Goodwill Bonds payable Points Received: 2 of 2 Comments:

3. Question : (TCO 1) Club Co. appropriately uses the equity method to account for its investment in Chip Corp. As of the end of 2008, Chip's common stock had suffered a significant decline in fair value, which is expected to be recovered over the next several months. How should Club account for the decline in value? Student Answer: Club should switch to the fair-value method No accounting because the decline in fair value is temporary Club should decrease the balance in the investment account to the current v alue and recognize a loss on the income statement Club should not record its share of Chip's 2008 earnings until the decline in the fair value of the stock has been recovered Club should decrease the balance in the investment account to the current v alue and recognize an unrealized loss on the balance sheet Points Received: 2 of 2

Comments:

4. Question : (TCO 1) Tower Inc. owns 30% of Yale Co. and applies the equity me thod. During the current year, Tower bought inventory costing $66,000 and then s old it to Yale for $120,000. At year-end, only $24,000 of merchandise was still being held by Yale. What amount of inter-company inventory profit must be deferr ed by Tower? Student Answer: $3,240 $10,800 $16,200 $6,610 $6,480

Points Received: 0 of 2 Comments:

5. Question : (TCO 1) According to FAS 159 Student Answer: all entities my elect the fair value option (159 pg 2) The statement permits all entities to choose to measure eligible items at f air value at specified dates (159 pg 2) the fair value option may be applied instrument by instrument with a few ex ceptions (159 pg 2) FAS 159 is similar to IAS 39 but it is not identical (pg 2) All of the above Points Received: 2 of 2 Comments:

* Times are displayed in (GMT-07:00) Mountain Time (US & Canada) Grade Details 1. Question : (TCO 2) Which one of the following is a characteristic of a busin ess combination that should be accounted for as a purchase? Student Answer: The combination must involve the exchange of equity securiti es only The transaction clearly establishes an acquisition price for the company b eing acquired The two companies may be about the same size and it is difficult to determi ne the acquired company and the acquiring company The transaction may be considered to be the uniting of the ownership intere sts of the companies involved The acquired subsidiary must be smaller in size than the acquiring parent Points Received: 2 of 2 Comments:

2. Question : (TCO 2) Lisa Co. paid cash for all of the voting common stock of Victoria Corp. Victoria will continue to exist as a separate corporation. Entrie s for the consolidation of Lisa and Victoria would be recorded in Student Answer: A worksheet Lisa's general journal Victoria's general journal Victoria's secret consolidation journal The general journals of both companies Points Received: 2 of 2 Comments:

3. Question : (TCO 2) In a transaction accounted for using the purchase method where cost exceeds book value, which statement is true for the acquiring company with regard to its investment? Student Answer: Net assets of the acquired company are revalued to their fa ir values and any excess of cost over fair value is allocated to goodwill Net assets of the acquired company are maintained at book value and any exc ess of cost over book value is allocated to goodwill Assets are revalued to their fair values. Liabilities are maintained at bo ok values. Any excess is allocated to goodwill Long-term assets are revalued to their fair values. Any excess is allocated to goodwill Points Received: 0 of 2 Comments:

4. Question : (TCO 2) Which of the following statements is true regarding a sta tutory consolidation? Student Answer: The original companies dissolve while remaining as separate divisions of a newly created company Both companies remain in existence as legal corporations with one corporati on now a subsidiary of the acquiring company The acquired company dissolves as a separate corporation and becomes a divi sion of the acquiring company The acquiring company acquires the stock of the acquired company as an inve stment A statutory consolidation is no longer a legal option Points Received: 2 of 2 Comments:

5. Question : (TCO 2) The purchase method and Pooling of Interest Method Student Answer: 08 both required when consolidating financial statements are used with the equity method when ownership is between 20 and 50% are two former ways to account for business combinations when consolidatio n is required. none of the above Instructor Explanation: Lecture notes -Acquisition method Points Received: 0 of 2 Comments: can no longer be used in consolidations beginning Dec 15, 20

* Times are displayed in (GMT-07:00) Mountain Time (US & Canada) 1 1 Grade Details 1. Question : (TCO 2) One company acquires another company in a combination acc ounted for as an acquisition. The acquiring company decides to apply the equity method in accounting for the combination. What is one reason the acquiring compa ny might have made this decision? Student Answer: It is the only method allowed by the SEC It is relatively easy to apply It is the only internal reporting method allowed by generally accepted acco unting principles Operating results on the parent's financial records reflect consolidated t otals When the equity method is used, no worksheet entries are required in the co nsolidation process Points Received: 0 of 2 Comments:

2. Question : (TCO 3) Melvin Company applies the equity method to account for i ts investment in Lang Company. Lang reports income in excess of an extraordinary loss in 2009. Melvin acknowledges that it must separately disclose the extraord inary loss in consolidated financial statements. What entry would be made by Mel vin Company to record Lang's results?

Student Answer: B above C above D above E above

A above

Points Received: 0 of 2 Comments:

3. Question : (TCO 3) Parrett Corp. bought one hundred percent of Jones Inc. on January 1, 2009, at a price in excess of the subsidiary's fair value. On that d ate, 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 $24 0,000 and a fair value of $350,000. Parrett used the partial equity method to re cord its investment in Jones. On December 31, 2011, 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 b alance for the Equipment account as of December 31, 2011? Student Answer: $580,000 $474,000 $497,000 $565,000 $710,000

Points Received: 2 of 2 Comments:

4. Question : (TCO 3) Which one of the following accounts would not appear on t he consolidated financial statements at the end of the first fiscal period of th e combination? Student Answer: Goodwill Equipment Investment in Subsidiary Common Stock Additional Paid-In Capital Points Received: 2 of 2 Comments:

5. Question : (TCO 3) Match the entry type with the description Student Answer: : Entry S 4 : Eliminate the sub s equity balances as of the beginning of the period. Plug the difference to Investment in Sub. : Entry A 2 : Adjust sub s assets and liabilities to FMV. Set up the Goodw ill account and the other intangible assets. The difference is a reduction of th e Investment in Subsidiary account : Entry D 3 : Eliminate sub s Dividends. Plug the difference to Investment in Sub. : Entry I 1 : Eliminate the Equity in Sub Income account. Plug the dif ference to Investment in Sub. : Entry E 5 : Record amortization expense for the period associated wi th the FMV adjustments and the other intangible assets identified during the com

bination. Remember to never amortize land or goodwill! : Entry P 6 : Intercompany payables and receivables are offset Instructor Explanation: Lady Saide and Sometimes Pa lecture Points Received: 2 of 2 Comments:

* Times are displayed in (GMT-07:00) Mountain Time (US & Canada) Grade Details Page: 1 2 1. Question : (TCO 3) When a parent uses the acquisition method for business co mbinations and sells shares of its subsidiary, which of the following statements is false? Student Answer: If majority control is still maintained, consolidated finan cial statements are still required (Find the answer in Chapter 4) If majority control is not maintained but significant influence exists, the equity method to account for the investment is still used but consolidated fina ncial statements are not required (Find the answer in Chapter 4) If majority control is not maintained but significant influence exists, th e equity method is still used to account for the investment and consolidated fin ancial statements are still required If majority control is not maintained and significant influence no longer e xists, a prospective change in accounting principle to the fair value method is required (Find the answer in Chapter 4) A gain or loss calculation must be prepared if control is lost (Find the an swer in Chapter 4) Points Received: 0 of 3 Comments:

2. Question : (TCO 3) Keefe, Inc., a calendar-year corporation, acquires 70% of George Company on September 1, 2009 and an additional 10% on April 1, 2010. Tot al annual amortization of $6,000 relates to the first acquisition. George report s the following figures for 2010: Without regard for this investment, Keefe earns $300,000 in net income during 20 10. All net income is earned evenly throughout the year. What is the controlling interest in consolidated net income for 2010? Student Answer: $373,300 (Find the answer in Chapter 4) $372,850 $371,500 (Find the answer in Chapter 4) $376,000 (Find the answer in Chapter 4) $372,805 (Find the answer in Chapter 4) Points Received: 0 of 3 Comments:

3. Question : (TCO 3) According to SFAS 160, Non-controlling Interests and Cons olidated Financial Statements, a non-controlling interest is most likely to be s hown as part of equity under the Student Answer: Partial equity concept (Find the answer in Chapter 4) Proportionate consolidation concept (Find the answer in Chapter 4) Economic unit concept Parent company concept (Find the answer in Chapter 4) Proprietary concept (Find the answer in Chapter 4) Points Received: 3 of 3 Comments:

4. Question : (TCO 3) All of the following statements regarding the sale of sub sidiary shares are true except which of the following? Student Answer: The use of specific identification based on serial number i s acceptable (Find the answer in Chapter 4) The use of the FIFO assumption is acceptable (Find the answer in Chapter 4) The use of the averaging assumption is acceptable (Find the answer in Chapt er 4) The use of specific LIFO assumption is acceptable The parent company must determine whether consolidation is still appropriat e for the remaining shares owned (Find the answer in Chapter 4) Points Received: 0 of 3 Comments:

5. Question : (TCO 1) After allocating cost in excess of book value, which asse t or liability would not be amortized over a useful life? Student Answer: Cost of goods sold (Find the answer in Chapter 1) Property, plant, & equipment (Find the answer in Chapter 1) Patents (Find the answer in Chapter 1) Goodwill Bonds payable (Find the answer in Chapter 1) Points Received: 3 of 3 Comments:

6. Question : (TCO 1) In a situation where the investor exercises significant i nfluence over the investee, which of the following entries is not actually poste d to the books of the investor? 1) Debit to the Investment account and a Credit to the Equity in Investee Income

account. 2) Debit to Cash (for dividends received from the investee) and a Credit to Divi dend Revenue. 3) Debit to Cash (for dividends received from the investee) and a Credit to the Investment account. Student Answer: Entries 1 and 2 (Find the answer in Chapter 1) Entries 2 and 3 (Find the answer in Chapter 1) Entry 1 only (Find the answer in Chapter 1) Entry 2 only Entry 3 only (Find the answer in Chapter 1) Points Received: 3 of 3 Comments:

7. Question : (TCO 1) Yaro Company owns 30% of the common stock of Dew Co. and uses the equity method to account for the investment. During 2008, Dew reported income of $250,000 and paid dividends of $80,000. There is no amortization assoc iated with the investment. During 2008, how much income should Yaro recognize re lated to this investment? Student Answer: $75,000 $99,000 (Find $51,000 (Find $80,000 (Find $24,000 (Find the answer in Chapter 1) the answer in Chapter 1) the answer in Chapter 1) the answer in Chapter 1)

Points Received: 3 of 3 Comments:

8. Question : (TCO 1) A company should always use the equity method to account for an investment if Student Answer: It has the ability to exercise significant influence over t he operating policies of the investee It owns 30% of another company's stock (Find the answer in Chapter 1) It has a controlling interest (more than 50%) of another company's stock (F ind the answer in Chapter 1) The investment was made primarily to earn a return on excess cash (Find the answer in Chapter 1) It does not have the ability to exercise significant influence over the ope rating policies of the investee (Find the answer in Chapter 1) Points Received: 3 of 3 Comments:

9. Question : (TCO 2) According to SFAS No. 141, the pooling of interest method for business combinations

Student Answer: Is preferred to the purchase method (Find the answer in Cha pter 2) Is allowed for all new acquisitions (Find the answer in Chapter 2) Is no longer allowed for business combinations after June 30, 2001 Is no longer allowed for business combinations after December 31, 2001 (Fin d the answer in Chapter 2) Is only allowed for large corporate mergers like Exxon and Mobil (Find the answer in Chapter 2) Points Received: 0 of 3 Comments:

10. Question : (TCO 2) Chapel Hill Company had common stock of $350,000 and ret ained earnings of $490,000. Blue Town Inc. had common stock of $700,000 and reta ined earnings of $980,000. On January 1, 2009, Blue Town issued 34,000 shares of common stock with a $12 par value and a $35 fair value for all of Chapel Hill C ompany's outstanding common stock. This combination was accounted for as an acqu isition. Immediately after the combination, what was the consolidated net assets ? Student Answer: $2,520,000 (Find the answer in Chapter 2) $1,190,000 (Find the answer in Chapter 2) $1,680,000 (Find the answer in Chapter 2) $2,870,000 $2,030,000 (Find the answer in Chapter 2) Points Received: 3 of 3 Comments:

11. Question : (TCO 2) Which one of the following is a characteristic of a busi ness combination that should be accounted for as an acquisition? Student Answer: The combination must involve the exchange of equity securit ies only (Find the answer in Chapter 2) The transaction establishes an acquisition fair value basis for the compan y being acquired The two companies may be about the same size and it is difficult to determi ne the acquired company and the acquiring company (Find the answer in Chapter 2) The transaction may be considered to be the uniting of the ownership intere sts of the companies involved (Find the answer in Chapter 2) The acquired subsidiary must be smaller in size than the acquiring parent ( Find the answer in Chapter 2) Points Received: 0 of 3 Comments:

12. Question : (TCO 2) In a transaction accounted for using the purchase method where cost exceeds book value, which statement is true for the acquiring compan y with regard to its investment? Student Answer: Net assets of the acquired company are revalued to their fa ir values and any excess of cost over fair value is allocated to goodwill Net assets of the acquired company are maintained at book value and any exc ess of cost over book value is allocated to goodwill (Find the answer in Chapter 2) Assets are revalued to their fair values. Liabilities are maintained at boo k values. Any excess is allocated to goodwill (Find the answer in Chapter 2) Long-term assets are revalued to their fair values. Any excess is allocated to goodwill (Find the answer in Chapter 2) Points Received: 3 of 3 Comments:

13. Question : (TCO 2) Which of the following internal record-keeping methods c an a parent choose to account for a subsidiary acquired in a business combinatio n? Student Answer: Initial value or book value (Find the answer in Chapter 3) Initial value, lower-of-cost-or-market-value or equity (Find the answer in Chapter 3) Initial value, equity or partial equity Initial value, equity or book value (Find the answer in Chapter 3) Initial value, lower-of-cost-or-market-value or partial equity (Find the an swer in Chapter 3) Points Received: 3 of 3 Comments:

14. Question : (TCO 3) One company acquires another company in a combination ac counted for as an acquisition. The acquiring company decides to apply the initia l value method in accounting for the combination. What is one reason the acquiri ng company might have made this decision? Student Answer: It is the only method allowed by the SEC (Find the answer in Chapter 3) It is relatively easy to apply It is the only internal reporting method allowed by generally accepted acco unting principles (Find the answer in Chapter 3) Operating results on the parent's financial records reflect consolidated to tals (Find the answer in Chapter 3) When the initial method is used, no worksheet entries are required in the c onsolidation process (Find the answer in Chapter 3) Points Received: 3 of 3 Comments:

15. Question : (TCO 3) Which one of the following accounts would not appear on the consolidated financial statements at the end of the first fiscal period of t he combination? Student Answer: Goodwill (Find the answer in Chapter 3) Equipment (Find the answer in Chapter 3) Investment in Subsidiary Common Stock (Find the answer in Chapter 3) Additional Paid-In Capital (Find the answer in Chapter 3) Points Received: 3 of 3 Comments:

16. Question : (TCO 3) Under the partial equity method, the parent recognizes i ncome when Student Answer: Dividends are received from the investee (Find the answer in Chapter 3) Dividends are declared by the investee (Find the answer in Chapter 3) The related expense has been incurred (Find the answer in Chapter 3) The related contract is signed by the subsidiary (Find the answer in Chapte r 3) It is earned by the subsidiary Points Received: 3 of 3 Comments: Grade Details Page: 1 2 1. Question : (TCO 1) Jager Inc. holds 30% of the outstanding voting shares of Kinson Co. and appropriately applies the equity method of accounting. Amortizati on associated with this investment equals $11,000 per year. For 2008, Kinson rep orted earnings of $100,000 and paid cash dividends of $40,000. During 2008, Kins on acquired inventory for $62,400, which was then sold to Jager for $96,000. At the end of 2008, Jager still held some of this inventory at its transfer price o f $50,000. Required: Determine the amount of Equity in Investee Income Jager should have re ported for 2008. Show all of your work. Showing only the answer will result in z ero points. Student Answer: Equity in investee income: Equity income acccrual($100,000 X 30%) $30,000 Deferral of intercompany unrealized gain below (5,250) amortizatio n (given) (11,000) Equity in investee income total $13,750 Deferral if unrealize d intercompany investory profit: remaining inventory end year $50,000 Gross prof it% ($33,600/$96,000) X35% profit w/in remaininy inventory $17,500 ownership % X 30% intercompany unrealized profit $5,250 Instructor Explanation: Points Received: 14 of 14 Comments:

2. Question : (TCO 2) Fine Co. issued its common stock in exchange for the comm on stock of Dandy Corp. in a business combination that was neither a pooling of interests nor a bargain purchase. At the date of the combination, Fine had land with a book value of $480,000 and a fair value of $620,000. Dandy had land with a book value of $170,000 and a fair value of $190,000. Required: If a consolidated balance sheet was prepared at the date of the combination, wha t was the consolidated balance for Land? Show all of your work. Showing only the answer will result in zero points. Student Answer: Instructor Explanation: Points Received: 0 of 14 Comments:

3. Question : (TCO 3) Pennant Corp. owns 70% of the common stock of Scarvens Co . Scarvens' revenues for 2009 totaled $200,000. Required: What amount of Scarvens' revenues would be included in the consolidate d total under the economic unit concept?

Student Answer: Instructor Explanation: Scarvens' revenues $200,000 ------------ Scarvens' con solidated portion of revenues $200,000 Points Received: 0 of 7 Comments:

4. Question : (TCO 3) Avery Company acquires Billings Company in a combination accounted for as an acquisition and adopts the equity method to account for Inve stment in Billings. At the end of four years, the Investment in Billings account on Avery's books is $198,984. What type of items constitute this balance? Be Sp ecific Student Answer: Instructor Explanation: Since the equity method has been applied by Avery, the $198,984 is composed of four items: (a.) The acquisition value of consideration transferred by the parent; (b.) The annual accruals made by Avery to recognize income as it is earned by th e subsidiary; (c.) The reductions that are created by the subsidiary's payment of dividends; (d.) The periodic amortization recognized by Avery in connection with the excess fair value allocations identified with its acquisition. Points Received: 0 of 7 Comments:

Grade Details 1. Question : (TCO 4) The translation adjustment from translating a foreign sub sidiary's financial statements should be shown as Student Answer: An asset or liability (depending on the balance) on the cons olidated balance sheet A revenue or expense (depending on the balance) on the consolidated income statement A component of stockholders' equity on the consolidated balance sheet A component of cash flows from financing activities on the consolidated sta tement of cash flows An element of the notes which accompany the consolidated financial statemen ts Points Received: 2 of 2 Comments:

2. Question : (TCO 4) Which method of translating a foreign subsidiary's financ ial statements is correct? Student Answer: Historical rate method Working capital method Current rate method Re-measurement Temporal method Points Received: 2 of 2 Comments:

3. Question : (TCO 4) In the interactive lecture this week, you were required t o work the example and arrive at a final answer per the problem. The correct ans wer for the Interactive Foreign Exchange Tutorial is: Student Answer: 2,450,730 2,480,037 2,175,653 2,406,594 none of the above Points Received: 0 of 2 Comments:

4. Question : (TCO 4) The forward rate may be defined as Student Answer: The price a foreign currency can be purchased or sold today

The price today at which a foreign currency can be purchased or sold in th e future The forecasted future value of a foreign currency The U.S. dollar value of a foreign currency The Euro value of a foreign currency Points Received: 2 of 2 Comments:

5. Question : (TCO 4) What is a company's functional currency? Student Answer: The currency of the primary economic environment in which i t operates The currency of the country where it has its headquarters The currency in which it prepares its financial statements The reporting currency of its parent for a subsidiary The currency it chooses to designate as such Points Received: 2 of 2 Comments: Grade Details 1. Question : (TCO 5) The partnership of Clapton, Seidel and Thomas was insolve nt and will be unable to pay $30,000 in liabilities currently due. What recourse was available to the partnership's creditors? Student Answer: They must present equal claims to the three partners as indi viduals They must try obtaining a payment from the partner with the largest capital account balance They cannot seek remuneration from the partners as individuals They may seek remuneration from any partner they choose They must present their claims to the three partners in the order of the pa rtners' capital account balances Points Received: 2 of 2 Comments:

2. Question : (TCO 5) The advantages of the partnership form of business organi zation, compared to corporations, include Student Answer: Single taxation Ease of raising capital Mutual agency Limited liability Difficulty of formation Points Received: 2 of 2 Comments:

3. Question : (TCO 5) Which of the following statements is correct regarding th e admission of a new partner? Student Answer: A new partner must purchase a partnership interest directly from the business The right of co-ownership in the business property can be transferred to a new partner without the consent of other existing partners The right to participate in management of the business cannot be conveyed without the consent of other existing partners The right to share in profits and losses can be sold to a new partner witho ut the consent of other existing partners A new partner always pays book value Points Received: 0 of 2 Comments:

4. Question : (TCO 5) Which of the following is not a characteristic of a partn ership? Student Answer: The partnership itself pays no income taxes It is easy to form a partnership Any partner can be held personally liable for all debts of the business A partnership requires written Articles of Partnership Each partner has the power to obligate the partnership for liabilities Points Received: 2 of 2 Comments:

5. Question : (TCO 5) Max, Jones and Waters shared profits and losses 20%, 40% and 40% respectively and their partnership capital balance is $10,000, $30,000 a nd $50,000 respectively. Max has decided to withdraw from the partnership. An ap praisal of the business and its property estimates the fair value to be $200,000 . Land with a book value of $30,000 has a fair value of $45,000. Max has agreed to receive $20,000 in exchange for her partnership interest. What amount should land be recorded on the partnership books? Student Answer: $30,000 $45,000 $50,000 $200,000 $20,000

Points Received: 2 of 2 Comments: