Question : 130.Highland Company buys 70 percent of the stock of Danner : 1244282

130.Highland Company buys 70 percent of the stock of Danner Company of $91,000. Danner Company has contributed capital of $70,000 and retained earnings of $60,000. The consolidated financial statements would contain

 

a.

minority interest but not goodwill.

b.

minority interest and goodwill.

c.

goodwill but not minority interest.

d.

neither minority interest nor goodwill.

 

 

 

 

 

131.On January 1, 20×7, Walker Corporation has the following stockholders’ equity accounts:

 

Common Stock, $10 par

$300,000

Retained Earnings

  900,000

 

The fair market value of Walker’s net identifiable assets on this date was equal to their book value. On January 1, 20×7, Rau Corporation acquired 100 percent of the common stock of Walker Corporation for $1,320,000 cash. The elimination entry necessary to prepare a consolidated balance sheet for this date would include a

 

a.

credit to Goodwill from Consolidation for $120,000.

b.

credit to Revenue from Consolidation for $120,000.

c.

debit to Goodwill from Consolidation for $120,000.

d.

debit to Loss from Consolidation for $120,000.

 

 

 

132.James Company buys 100 percent of the outstanding stock of Maier Company for $650,000. Maier Company has contributed capital of $420,000 and retained earnings of $180,000. The fair market value of Maier’s identifiable net assets was equal to their book value on the date of acquisition. The consolidated financial statements would contain

 

a.

neither minority interest nor goodwill.

b.

minority interest but not goodwill.

c.

goodwill but not minority interest.

d.

minority interest and goodwill.

 

 

 

133.Perri Company buys 80 percent of the stock of McGrath Company for $150,000. McGrath Company has contributed capital of $100,000 and retained earnings of $60,000. The consolidated financial statements would contain

 

a.

minority interest but not goodwill.

b.

neither minority interest nor goodwill.

c.

minority interest and goodwill.

d.

goodwill but not minority interest.

 

 

 

134.In preparing consolidated financial statements, all of the following commonly require elimination entries except a(n)

 

a.

intercompany sale.

b.

intercompany loan.

c.

purchase from a nonaffiliate.

d.

intercompany investment.

 

 

 

135.Wyfker Company and Mularkey Company have separate incomes of $35,500 and $42,500, respectively. They had intercompany purchases and sales of $15,000 and intercompany interest of $1,500. Consolidated net income would be

 

a.

$20,500.

b.

$61,500.

c.

$34,000.

d.

$78,000.

 

 

 

136.Which of the following would not be an elimination entry on a work sheet for a consolidated income statement or balance sheet?

 

a.

Debit Sales and credit Cost of Goods Sold

b.

Debit Cost of Goods Sold and credit Sales

c.

Debit Common Stock and Retained Earnings and credit Investment in Subsidiary

d.

Debit Interest Income and credit Interest Expense

 

 

 

137.Coll Company (the parent company) manufactured a product at a cost of $150 and sold it to Obman Company, a subsidiary of Coll, for $200. Obman Company sold the product to its customer for $292. As a result of these transactions, how much gross profit will appear on a consolidated income statement?

 

a.

$142

b.

$0

c.

$92

d.

$242

 

 

 

138.Ensley Company and Bac Company have separate incomes of $140,000 and $205,000, respectively. They had intercompany purchases and sales of $40,000 and intercompany interest of $2,000. Consolidated net income is

 

a.

$303,000.

b.

$107,000.

c.

$345,000.

d.

$387,000.

 

 

 

139.The work sheet entry to eliminate an intercompany investment could not contain

 

a.

a debit to the Investment account.

b.

a credit to Minority Interest.

c.

a debit to Retained Earnings.

d.

a debit to Common Stock.