Question :
41.A controlling interest in another company:
a.exists whenever the relationship between : 1253685
41.A controlling interest in another company:
a.exists whenever the relationship between the investor and investee gives the investor significant influence.
b.requires the parent to prepare consolidated financial statements.
c.is evidence that a merger will soon occur.
d.can be as low as 20 percent.
42.Why might chief executives react very positively to current goodwill accounting?
a.Goodwill increases in value.
b.Goodwill is amortized creating expenses that reduce net income, enabling a company to pay less income tax.
Its amortization increases earnings per share.
Goodwill is no longer amortized so income is greater than prior accounting requirements.
43.James Corporation purchased 100% of the common stock of Rashaad Corporation for $50 million. James must account for this investment as:
a.an available-for-sale security.
b.an acquisition that requires consolidation accounting.
c.a trading security.
d.an equity security investment.
44.Decuzzi, Inc. paid $10,000 for a stock investment and classified it as available-for-sale. On December 31, 2011, the company appropriately recognized an unrealized increase of $3,000. The stock is reported on Decuzzi’s balance sheet at December 31, 2011 at:
a.$10,000.
b.$13,000.
c.$7,000.
d.Not enough information to determine.
45. Which one of the following investments would most likely be held the shortest period of time?
a.Available-for-sale debt securities
b.Available-for-sale equity securities
c.Trading securities
d.An investment as a result of a merger
46.Multinational US companies usually have a number of foreign subsidiaries with financial statements expressed in foreign currency. When the consolidated financial statements are prepared, to combine the financial statements of the US parent and all of its subsidiaries, the consolidation process involves multiple steps. Which of the following statements about the combining process and the resultant consolidated financial statements is always true for multinational US companies?
The foreign subsidiaries are separated into three categories, each of which receives different treatment.
The foreign entity’s financial statements are converted into dollars.
Foreign currency translation adjustments have no effect on cash flows.
The foreign currency translation adjustments are included in consolidated income.
47.Which of the following statements about Special Purpose Entities (SPEs) is not true?
SPEs can take on various legal forms, like corporations or partnerships.
It can be difficult to determine who actually controls an SPE.
Management can structure a transaction using an SPE in such a manner that the accounting treatment fails to reflect the economic substance of the transaction.
SPEs have been used to mislead investors.
48.Carmen Corporation purchased a 40% interest in Sahara Inc. on January 1, 2010, paying $200,000 for 40% of the outstanding voting stock of Sahara Inc. For its year ended December 31, 2010, Sahara Inc. reported net income of $40,000. On December 31, 2010, Carmen received a dividend payment from Sahara in the amount of $1,000. As a result of its ownership interest in Sahara, the financial statements for Carmen Corporation for the year ended December 31, 2010 will reflect which of the following:
An asset in the amount of $200,000.
Revenue of $1,000.
Cash flows from operations of $1,000.
Revenue of $16,000.
49.Before adjusting its current investments in equity securities, Caldwell Company has total current assets and current liabilities of $45,000 and $15,000, respectively. During the current year, Caldwell has net income of $243,750 with 75,000 shares of common stock outstanding. This amount excludes the effects of yearend adjustments related to the investments. Included in current assets are trading securities recorded at their original cost of $13,000. However, the current market value of those securities is $4,000 at yearend. If Caldwell properly accounts for trading securities, what is Caldwell’s current ratio before and after the investment adjustment?
3.0 and 2.1
3.0 and 3.3
3.0 and 3.6
3.0 and 2.4
50.Before adjusting its current investments in equity securities, Caldwell Company has total current assets and current liabilities of $45,000 and $15,000, respectively. During the current year, Caldwell has net income of $243,750 with 75,000 shares of common stock outstanding. This amount excludes the effects of yearend adjustments related to the investments. Included in current assets are trading securities recorded at their original cost of $13,000. However, the current market value of those securities is $4,000 at yearend. If Caldwell properly accounts for trading securities, what is Caldwell’s earnings per share amount before and after the investment adjustment, respectively?
$3.25 and $3.00
$3.25 and $3.13
$3.25 and $3.37
$3.25 and $2.77
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