64.Which of the following statements about contingent liabilities is incorrect? A. A disclosure note is required when the loss is reasonably possible and the amount cannot be reasonably estimated. B. A disclosure note is required when the loss is probable and the amount can be reasonably estimated. C. A disclosure note is required when the loss is reasonably possible and the amount can be reasonably estimated. D. A disclosure note is required when the loss is remote and the amount can be reasonably estimated. 65.Rice Corporation's attorney has provided the following summaries of three lawsuits against Rice: • Lawsuit A: […]

8) Separate income statements of Pingair Corporation and its 90%-owned subsidiary, Staunch Inc., for 2011 were as follows: Pingair Staunch Sales Revenue$2,200,000 $1,000,000 Cost of sales(1,400,000)(600,000) Other expenses(400,000)(200,000) Gain on equipment80,000 Income from Staunch128,000           Net income$608,000 $200,000 Additional information: 1.Pingair acquired its 90% interest in Staunch Inc. when the book values were equal to the fair values. 2.The gain on equipment relates to equipment with a book value of $120,000 and a 4-year remaining useful life that Pingair sold to Staunch for $200,000 on January 2, 2011. The straight-line depreciation method is used.  The equipment has no salvage value. […]

Multiple Choice Questions 1) If the price paid by a parent company to acquire the debt of a subsidiary is greater than the book value of the liability, a ________ occurs. A) realized loss on the retirement of debt from the viewpoint of the subsidiary B) realized gain on the retirement of debt from the viewpoint of the subsidiary C) constructive loss on the retirement of debt from the viewpoint of the consolidated entity D) constructive gain on the retirement of debt from the viewpoint of the consolidated entity 2) If an affiliate purchases bonds in the open market, the […]

Learning Objective 1.2 Questions 1) A liability that results from a purchase of goods or services on open account is referred to as a(n) A) accounts receivable. B) notes payable. C) accounts payable. D) notes receivable. E) capital stock. 2) Which of the following statements is true? A) Owners' equities are economic sacrifices after deducting liabilities. B) Assets are expected to benefit no one. C) Liabilities are future cash inflows. D) Assets are always the sum of liabilities and owners' equities. E) Owners' equities have priority over liabilities for assets upon liquidation. 3) The accounting equation can be stated as […]

5) Pfeifer Corporation acquired an 80% interest in Stern Corporation several years ago when the book values and fair values of Stern's assets and liabilities were equal.  At the time of acquisition, the cost of the 80% interest was equal to 80% of the book value of Stern's net assets. Separate company income statements for Pfeifer and Stern for the year ended December 31, 2011 are summarized as follows: PfeiferStern Sales Revenue$1,000,000 $600,000 Investment income from Stern85,000 Cost of Goods Sold(600,000)(300,000) Expenses(200,000)(200,000) Net Income$285,000 $100,000 During 2010, Pfeifer sold merchandise that cost $120,000 to Stern for $180,000. Half of this […]