Exercises 1) Penguin Corporation acquired a 60% interest in Squid Corporation on January 1, 2012, at a cost equal to 60% of the book value of Squid's net assets.  At the time of the acquisition, the book values of Squid's assets and liabilities were equal to the fair values. Squid reports net income of $880,000 for 2012. Penguin regularly sells merchandise to Squid at 120% of Penguin's cost. The intercompany sales information for 2012 is as follows: Intercompany sales at selling price $672,000 Sales value of merchandise unsold by Squid$132,000 Required: 1.  Determine the unrealized profit in Squid's inventory at […]

Multiple Choice Questions 1) The material sale of inventory items by a parent company to an affiliated company A) enters the consolidated revenue computation only if the transfer was the result of arm's length bargaining. B) affects consolidated net income under a periodic inventory system but not under a perpetual inventory system. C) does not result in consolidated income until the merchandise is sold to outside parties. D) does not require a working paper adjustment if the merchandise was transferred at cost. 2) Phast Corporation owns a 80% interest in Stechno Company, acquired several years ago at a cost equal […]

Exercises 1) At December 31, 2010, the stockholders' equity of Gost Corporation and its 80%-owned subsidiary, Tree Corporation, are as follows:     Gost       Tree  Common stock, $10 par value$20,000$12,000 Retained earnings8,0006,000 Totals$28,000$18,000 Gost's Investment in Tree is equal to 80 percent of Tree's book value. Tree Corporation issued 225 additional shares of common stock directly to Gost on January 1, 2011 at $18 per share. Required: 1. Compute the balance in Gost's Investment in Tree account on January 1, 2011 after the new investment is recorded. 2. Determine the increase or decrease in goodwill from Gost's new investment in […]

13) Separate income statements of Plantation Corporation and its 90%-owned subsidiary, Savannah Corporation, for 2011 are as follows, prior to Plantation recording any income related to its subsidiary: PlantationSavannah Sales Revenue$870,000 $230,000 Gain on equipment35,000 Gain on land20,000 Cost of sales(470,000)(90,000) Other expenses(265,000)(60,000) Separate incomes$170,000 $100,000 Additional information: 1.Plantation acquired its 90% interest in Savannah Corporation when the book values were equal to the fair values. 2.The gain on equipment relates to equipment with a book value of $95,000 and a 7-year remaining useful life that Plantation sold to Savannah for $130,000 on January 1, 2011. The straight-line depreciation method […]

Multiple Choice Questions 29.Which of the following statements is correct? A. Revenue is recognized at the time of shipment when goods are shipped FOB destination. B. Sales returns and allowances are reported as operating expenses on an income statement. C. A seller records revenue when title and risks of ownership transfer to the buyer. D. Sales discounts are reported as cost of sales on an income statement. 30.Which of the following would be included in Latimer Company's sales in 2016? A. Goods shipped from a supplier in 2016 with terms of FOB shipping point. Latimer received the goods in 2016. […]