Question :
61. U.S. GAAP view investments of between 20 and 50 percent : 1230386
61. U.S. GAAP view investments of between 20 and 50 percent of the voting stock of another company (unless evidence indicates that significant influence cannot be exercised) as
A. minority, passive investments.
B. minority, active investments.
C. majority, passive investments.
D. majority, active investments.
E. marketable securities
62. An intercompany transaction is a transaction between
A. two subsidiary corporations only
B. the subsidiaries and the parent company only
C. any two members of a consolidated entity
D. any two members of a consolidated entity, conducted at arm’s-length
E. any three members of a consolidated entity
63. Dividends and interest from Minority, Passive Investments become income when the
A. dividends and interest are received.
B. dividends and interest are earned.
C. dividends are earned and the interest is declared.
D. dividends are declared and the interest is earned.
E. dividends are declared and the interest is received.
64. To avoid double counting P’s investment in S, P must eliminate
A. the investment in S and S’s separate company shareholders’ equity.
B. all debt on S’s separate company financial statements.
C. any dividends paid against the cash account.
D. all intercompany transactions.
E. all of the above.
65. Intercompany sales
A. do not need to be eliminated as long as the sales have been completed to an outside party.
B. must be eliminated from both the sales and cost of goods sold accounts.
C. do not need to be eliminated if made at arm’s length values.
D. must be eliminated only if not in the ordinary course of trade or business.
E. do not need to be eliminated.
66. Minority, passive investments are initially recorded at the
A. acquisition cost
B. fair market value of the net assets
C. lower of cost or market
D. present value of future cash flows
E. future value of present cash flows
67. When preparing consolidated financial statements, the result of the elimination process generally is the
A. restatement of the cash balance of each company due to intercompany transactions.
B. presentation of only the transactions between the consolidated entity and others outside the entity.
C. replacement of the investment account and the subsidiary’s shareholders’ equity with only the parent’s share of the individual assets and liabilities of the subsidiary.
D. posting the eliminations to both parent and subsidiary’s accounts.
E. posting the eliminations to the subsidiary’s accounts, only.
68. Which of the following investments in securities would require the preparation of consolidated financial statements by the investor corporation?
A. investments in securities for the purpose of exerting control over the investee’s day-to-day operations
B. investments in securities for the purpose of exerting significant influence over the investee’s dividend payout policy
C. investments in securities for the purpose of exerting significant influence over the investee’s licensing of a patent
D. investments in securities for the purpose of exerting significant influence over the investee’s licensing of day-to-day operations
E. none of the above
69. U.S. GAAP view investments of over 50 percent of the voting stock of another company (for the purpose of controlling the other company at the broad policy-making level and at the day-to-day operational level) as
A. minority, passive investments
B. minority, active investments
C. majority, passive investments
D. majority, active investments
E. marketable securities
