江西财经大学高级财务会计国际学院题库chapter10.docx
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江西财经大学高级财务会计国际学院题库chapter10
AdvancedAccounting,11e（Beams/Anthony/Bettinghaus/Smith）
Chapter10SubsidiaryPreferredStock,ConsolidatedEarningsPerShare,andConsolidatedIncomeTaxation
MultipleChoiceQuestions
Usethefollowinginformationtoanswerthequestion（s）below.
OnDecember31,2010,ParminterCorporationownsan80%interestinthecommonstockofSanchezCorporationandan80%interestinSanchez'spreferredstock.OnDecember31,2010,Sanchez'sstockholders'equitywasasfollows:
10%preferredstock,cumulative,$10parvalue$50,000
Commonstock350,000
Retainedearnings100,000
Totalstockholders'equity$500,000
OnDecember31,2010,preferreddividendsarenotinarrears.Sanchezhad2011netincomeof$30,000andonlypreferreddividendsaredeclaredandpaidin2011.Therearenobookvalue/fairvaluedifferentialsassociatedwithParminter'sinvestments.
1）HowmuchshouldtheParminter'sInvestmentinSanchez—CommonStock,changeduring2011?
A）$5,000
B）$20,000
C）$25,000
D）$30,000
Answer:
B
Explanation:
B）（$30,000-$5,000）×80%
Objective:
LO1
Difficulty:
Moderate
2）Whatshouldbethenoncontrollinginterestshare,commonintheconsolidatedfinancialstatementsofParminterfortheyearendingDecember31,2011?
A）$5,000
B）$20,000
C）$25,000
D）$30,000
Answer:
A
Explanation:
A）（$25,000×20%）
Objective:
LO1
Difficulty:
Moderate
3）Whatshouldbethenoncontrollinginterestshare,preferredintheconsolidatedfinancialstatementsofParminterfortheyearendingDecember31,2011?
A）$1,000
B）$2,000
C）$4,000
D）$5,000
Answer:
A
Explanation:
A）（$5,000×20%）
Objective:
LO1
Difficulty:
Moderate
4）Asubsidiaryhasdilutivesecuritiesoutstandingthatincludeconvertiblebondspayable.Thebondsareconvertibleintotheparent'scommonstock.Whencalculatingconsolidateddilutedearningspershare,theconvertiblebondswillaffect
A）thenumeratorofconsolidateddilutedEPSonly.
B）thedenominatorofconsolidateddilutedEPSonly.
C）thenumeratoranddenominatorofconsolidateddilutedEPS.
D）Noneoftheabovewillbeaffected.
Answer:
C
Objective:
LO2
Difficulty:
Moderate
Usethefollowinginformationtoanswerthequestion（s）below.
OnJanuary1,2011,PardyCorporationacquireda70%interestinthecommonstockofSalterCorporationfor$7,000,000whenSalter'sstockholders'equitywasasfollows:
10%cumulative,nonparticipatingpreferredstock,
$100par,witha$105liquidationpreference,
callableat$110$1,000,000
Commonstock,$10parvalue6,000,000
Additionalpaid-incapital1,500,000
Retainedearnings2,500,000
Totalstockholders'equity$11,000,000
TherewerenopreferreddividendsinarrearsonJanuary1,2011.Therearenobookvalue/fairvaluedifferentials.
5）WhatistheimpliedgoodwillforSalterbasedonPardy'spurchasepriceforSalteronJanuary1,2011?
A）$0
B）$35,000
C）$70,000
D）$100,000
Answer:
D
Explanation:
D）
Stockholders'equity$11,000,000
Less:
Preferredstockholders'equity（10,000×$110）1,100,000
Commonstockholders'equity9,900,000
Costof70%interestacquired$7,000,000
Impliedfairvalueofinvestment（$7,000,000/0.7）10,000,000
Commonstockholders'equity9,900,000
Goodwill$100,000
Objective:
LO1
Difficulty:
Moderate
6）Salterhasa2011netlossof$200,000.Nodividendsaredeclaredorpaidin2011.WhatisthechangeinPardy'sInvestmentinSalterfortheyearendingDecember31,2011?
A）$50,000
B）$70,000
C）$140,000
D）$210,000
Answer:
D
Explanation:
D）
Salter'snetloss$（200,000）
Preferreddividend10%×$1,000,000（100,000）
TotalLosstocommonstockholders（300,000）
Pardy'sownershippercentage70%
Pardy'sshareofthelossoninvestment$（210,000）
Objective:
LO1
Difficulty:
Moderate
7）AssumeSalter'snetincomefor2011is$220,000.Nodividendsaredeclaredorpaidin2011.WhatisthechangeinPardy'sInvestmentinSalterfortheyearendingDecember31,2011?
A）$84,000
B）$119,000
C）$154,000
D）$189,000
Answer:
A
Explanation:
A）Salter'snetincome$220,000
Less:
Incometothepreferredstockholders（100,000）
Incometothecommonstockholders120,000
Pardy'sownershippercentage70%
Pardy'sshareoftheincome$84,000
Objective:
LO1
Difficulty:
Moderate
Usethefollowinginformationtoanswerthequestion（s）below.
OnJanuary1,2011,PamplinCorporationstockholders'equityconsistedof$1,000,000of$10parvalueCommonStock,$750,000ofAdditionalPaid-inCapital,and$3,000,000ofRetainedEarnings.OnJanuary1,2011,Pamplinpurchased90%oftheoutstandingcommonstockofSageCorporationfor$1,500,000withallexcesspurchasecostassignedtogoodwill.Thestockholders'equityofSageonthisdateconsistedof$800,000of$100parvalue,8%cumulative,preferredstockcallableat$105,$900,000of$10parvaluecommonstockand$500,000ofRetainedEarnings.Sage'snetincomefor2011was$100,000.
OnJanuary1,2011,nopreferreddividendsareinarrears.Nodividendsaredeclaredorpaidin2011.InaseparatetransactiononJanuary1,2011,Pamplinpurchased70%ofSage'spreferredstockfor$600,000.
8）FortheyearendingDecember31,2011,theamountofPamplin'sincomefromSage（associatedwiththecommonstockinvestmentinSage）is
A）$32,400.
B）$36,000.
C）$60,000.
D）$90,000.
Answer:
A
Explanation:
A）
Preliminarycomputations:
Totalstockholders'equity（Sage）$2,200,000
Less:
Preferredstockholders'equity
（$800,000×1.05）840,000
Equals:
Commonstockholders'equity$1,360,000
Netincomeasgiven$100,000
Less:
Preferreddividends（$800,000×8%）64,000
Incomeavailabletothecommonstockholders$36,000
Ownershippercentage90%
IncomefromSage$32,400
Objective:
LO1
Difficulty:
Moderate
9）WhatisthegoodwillontheconsolidatedbalancesheetforPamplinandSubsidiariesonDecember31,2011basedonPamplin'spurchaseofSage'scommonstock?
A）$140,000
B）$240,000
C）$290,000
D）$306,667
Answer:
D
Explanation:
D）
Impliedfairvalue（$1,500,000/0.90）$1,666,667
Less:
Commonstockholders'equity1,360,000
Goodwill$306,667
Objective:
LO1
Difficulty:
Moderate
10）PanCorporationhastotalstockholders'equityof$5,000,000consistingof$1,000,000of$10parvalueCommonStock,$1,000,000ofAdditionalPaid-inCapital,and$3,000,000ofRetainedEarnings.Panowns80%ofSailorCorporation'scommonstockpurchasedatbookvalue,whichequalsfairvalue.Sailorhas$900,000of10%cumulativepreferredstockoutstanding,withnopreferreddividendsinarrears.Thepreferredstockhasnocallprice,redemptionpriceorliquidationprice.Panacquired60%ofthepreferredstockofSailorfor$500,000.AfterthistransactionthebalancesinPan'sRetainedEarningsandAdditionalPaid-inCapitalaccounts,respectively,are
A）$2,960,000and$1,000,000.
B）$3,000,000and$960,000.
C）$3,000,000and$1,040,000.
D）$3,040,000and$1,000,000.
Answer:
C
Explanation:
C）Ifthebookvalue（$900,000×60%）ofpreferredstockisgreaterthanthepricepaid（$500,000）forthepreferredstock,thenthedifferenceisaddedtotheparent'sadditionalpaid-incapital.
Objective:
LO1
Difficulty:
Moderate
11）Assumeacompany'spreferredstockiscumulativewithacallprovisionandhasdividendsinarrears.Theamountofstockholders'equityallocatedtopreferredstockholdersisequaltothenumberofsharesoutstandingtimesthe
A）sumoftheparvaluepershareplusanyliquidationpremiumpershare,plusthesumofanypreferreddividendsinarrears,plusthecurrentyear'sdividendrequirement,butonlyifdividendshavebeendeclared.
B）sumoftheparvaluepershare,plusanyliquidationpremiumpershare,plusthesumofanypreferreddividendsinarrears,plusthecurrentyear'sdividendrequirement,regardlessofwhetherdividendshavebeendeclared.
C）callpriceplusthesumofanypreferreddividendsinarrears,plusthecurrentyear'sdividendrequirement,butonlyifdividendshavebeendeclared.
D）callpriceplusthesumofanypreferreddividendsinarrears,plusthecurrentyear'sdividendrequirement,regardlessofwhetherdividendshavebeendeclared.
Answer:
D
Objective:
LO1
Difficulty:
Moderate
12）Whenaparentacquiresthepreferredstockofasubsidiary,therewillbeaconstructiveretirementand
A）anydifferencepaidabovethebookvalueofthepreferredstockreducestheparent'sadditionalpaid-incapital.
B）anydifferencepaidabovethebookvalueofthepreferredstockreducesthesubsidiary'sretainedearnings.
C）anydifferencepaidabovethebookvalueofthepreferredstockincreasestheparent'sadditionalpaid-incapital.
D）anydifferencepaidabovethebookvalueofthepreferredstockincreasestheparent'sretainedearnings.
Answer:
A
Objective:
LO1
Difficulty:
Moderate
13）Ifaparentcompanyhascontrollinginterestinasubsidiarywhichhasnopotentiallydilutivesecuritiesoutstanding,theninthecalculationofconsolidateddilutedEPS,itwillbenecessaryto
A）onlymakeanadjustmentofsubsidiary'sbasicearnings.
B）replacetheparent'sequityinsubsidiaryearningswiththeparent'sequityinsubsidiary'sdilutedEPS.
C）makeareplacementcalculationintheparent'sbasicearningsfortheEPS.
D）onlyusetheparent'scommonsharesandsharesrepresentedbytheparent'spotentiallydilutivesecurities.
Answer:
D
Objective:
LO2
Difficulty:
Moderate
14）Parnabyhas25,000commonstocksharesoutstandingandits100%-ownedsubsidiarySandalhas5,000commonstocksharesoutstanding.ParnabyandSandaldonothaveanypotentiallydilutivesecuritiesoutstanding.TheseparatenetincomesforParnabyandSandalis$150,000and$75,000respectively.DilutedEPSfortheconsolidatedcompanyis
A）$5.00.
B）$6.00.
C）$7.50.
D）$9.00.
Answer:
D
Explanati
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