University of Luzon

Dagupan City

1

ADVANCED ACCOUNTING II
QUIZ
Name: Schedule: Score:
1. Global Corporation acquired 85 percent of Local Company's voting shares of stock in 2007. During 2008,
Global purchased 50,000 picture tubes for P15 each and sold 28,000 of them to Local for P20 each. Local
sold all of the units to unrelated entities prior to December 31, 2008, for P30 each. Both companies use
perpetual inventory systems.

Which workpaper eliminating entry is needed in preparing consolidated financial statements for 2008 to
remove all effects of the intercompany sale?

A. Option A
B. Option B
C. Option C
D. Option D
For items 2 and 3.
On January 1, 2008, Parent Company acquired 90 percent ownership of Subsidiary Corporation, at
underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to
10 percent of the book value of Subsidiary Corporation. On Mar 17, 2008, Subsidiary purchased inventory
from Parent for 90,000. Subsidiary sold the entire inventory to an unaffiliated company for 120,000 on
November 21, 2008. Parent had produced the inventory sold to Subsidiary for 62,000. The companies had
no other transactions during 2008.
2. Based on the information given above, what amount of sales will be reported in the 2008 consolidated
income statement?
A. 62,000
B. 120,000
C. 90,000
D. 58,000

3. Based on the information given above, what amount of cost of goods sold will be reported in the 2008
consolidated income statement?
A. 60,900
B. 90,000
C. 46,900
D. 67,000
University of Luzon
Dagupan City

2

For items 4, 5 and 6.
Sub Company sells all its output at 20 percent above cost (or 16 2/3 % gross profit rate) to Par Corporation.
Par purchases all its inventory from Sub. The incomes reported by the companies over the past three years
are as follows:


Sub Companys Par Corporations
Year Net Income Operating Income

2006 150, 000 225, 000
2007 135, 000 360, 000

Sub Company sold inventory for 300,000, and 262,500 in the years 2006, and 2007 respectively. Par
Company reported ending inventory of 105,000 and 157,500 for 2006 and 2007. Par acquired 70 percent of
the ownership of Sub on January 1, 2006, at underlying book value. The fair value of the noncontrolling
interest at the date of acquisition was equal to 60,000.

4. Based on the information given above, what will be the consolidated net income for 2006?
A. 357,500
B. 375,000
C. 490,000
D. 317,750
5. Based on the information given above, what will be the consolidated net income for 2007?
A. 495,000
B. 317,750
C. 486,250
D. 690,000
6. Based on the information given above, what will be the consolidated net income attributable to Par
Corporation for 2007?
A. 397,875
B. 422,375
C. 317,750
D. 425,590

For items 7, 8 and 9.
Sky Corporation owns 75 percent of Earth Company's stock. On July 1, 2008, Sky sold a building to Earth
for 33,000. Sky had purchased this building on January 1, 2006, for 36,000. The building's original eight-
year estimated total economic life remains unchanged. Both companies use straight-line depreciation. The
equipment's residual value is considered negligible.
7. Based on the information provided, in the preparation of the 2008 consolidated financial statements,
building will be _____ in the eliminating entries.
A. debited for 33,000
B. debited for 36,000
C. credited for 36,000
D. debited for 3,000

University of Luzon
Dagupan City

3

8. Based on the information provided, the gain on sale of the building eliminated in the consolidated
financial statements for 2008 is:
A. 8,250.
B. 10,500.
C. 6,000.
D. 11,250.
9. Based on the information provided, while preparing the 2008 consolidated income statement,
depreciation expense will be:
A. debited for 750 in the eliminating entries.
B. credited for 750 in the eliminating entries.
C. credited for 1500 in the eliminating entries.
D. debited for 1500 in the eliminating entries.
10. On January 1, 2007, Servant Company purchased a machine with an expected economic life of five
years. On January 1, 2009, Servant sold the machine to Master Corporation and recorded the following
entry:



Master Corporation holds 75 percent of Servant's voting shares. Servant reported net income of $50,000,
and Master reported income from its own operations of 100,000 for 2009. There is no change in the
estimated economic life of the equipment as a result of the intercorporate transfer.
Based on the preceding information, income assigned to the noncontrolling interest in the 2009
consolidated income statement will be:
A. 12,000.
B. 14,000.
C. 12,500.
D. 48,000.