21 on january 1 20×3 dwayne ltd formed carlos co a 100 owned subsidiary during 20×6 4309953

21) On January 1, 20X3, Dwayne Ltd. formed Carlos Co., a 100% owned subsidiary. During 20X6, Dwayne sold Carlos $100,000 in goods. The unrealized profit in Carlos' inventories was $20,000 at December 31, 20X5 and $25,000 at December 31, 20X6. Ignoring income taxes, what adjustment should be made to the consolidated financial statements for the year ended December 31, 20X6 to reflect the unrealized profit in Carlos' ending inventory?

A) Inventory at December 31, 20X6 will be increased by $25,000.

B) Cost of goods sold for 20X6 will be decreased by $25,000.

C) Retained earnings at the end of 20X6 will be decreased by $25,000.

D) Retained earnings at the end of 20X6 will be decreased by $5,000.

22) In 20X1, a parent company sold a tract of land to its subsidiary for $100,000, resulting in a $30,000 loss. The subsidiary's plans for the land did not materialize and it still owned the land at the end of 20X4. At the end of 20X4, what consolidating journal entry should be made with respect to the loss associated with the sale of land?

A)

DR Loss on the sale of land	30,000
CR Land	30,000

B)

DR Land	30,000
CR Loss on the sale of land	30,000

C)

DR Retained earnings	30,000
CR Land	30,000

D)

DR Land	30,000
CR Retained earnings	30,000

23) Franklin Ltd., a subsidiary of Frayer Ltd., sold $500,000 of goods to its parent company in 20X1. At the end of 20X1, some of the goods were not sold and there was $90,000 of unrealized profit associated with these goods. The goods were sold in 20X2. At the end of 20X2, which of the following consolidating entries should be made with respect to the unrealized profits?

A)

DR Cost of sales	90,000
CR Inventory	90,000

B)

DR Inventory	90,000
CR Cost of sales	90,000

C)

DR Cost of sales	90,000
CR Retained earnings	90,000

D)

DR Retained earnings	90,000
CR Cost of sales	90,000

24) In consolidating parent-founded subsidiaries, what account is used to offset the parent company's “Investment in Subsidiary” account?

A) Retained earnings

B) Goodwill

C) Paid-in-capital accounts

D) No off-set is necessary

25) Which of the following consolidation adjustments will be required for a subsidiary that was acquired as a going concern, but will not be applicable for a parent-founded subsidiary?

A) Amortization of fair value increments on plant and equipment

B) Unrealized profits in ending inventory

C) Unrealized profits in beginning inventory

D) Future income tax on unrealized profits

26) In consolidating a wholly-owned parent-founded subsidiary, which of the following adjustments or eliminations is not required?

A) Eliminating any unrealized profits or losses

B) Eliminating intercompany payables and receivables

C) Adjusting for intercompany transactions

D) Adjusting for goodwill impairment

27) On the date that a company acquires a subsidiary, which consolidated financial statement(s) must be prepared?

A) Consolidated statement of financial position

B) Consolidated statement of financial position and consolidated statement of

comprehensive income

C) Complete set of consolidated financial statements

D) No consolidated financial statements are required at the acquisition date