Goodwill occurs when a parent company:
A) pays less to acquire a subsidiary company than the market value of the subsidiary's net assets.
B) pays less to acquire a subsidiary company than the book value of the subsidiary's net assets.
C) pays more to acquire a subsidiary company than the market value of the subsidiary's net assets.
D) pays more to acquire a subsidiary company than the book value of the subsidiary's net assets.
12) Consolidated financial statements are prepared when a company owns ________ of the common stock of another company.
A) between 20% and 50%
B) 50% or more
C) more than 50%
D) more than 90%
13) A noncontrolling interest arises when:
A) a parent company excludes the subsidiary company from the consolidated financial statements.
B) a parent company owns less than 100% of the stock of a subsidiary.
C) a subsidiary company is not included in the consolidated financial statements.
D) a subsidiary company represents less than 20% of the value of the consolidated company.
14) A consolidated balance sheet excludes:
A) a subsidiary's stockholders' equity.
B) a parent company's Investment in Subsidiary account.
C) intercompany note receivable and note payable.
D) all of the above.
15) On a worksheet for a consolidated balance sheet, one elimination entry:
A) debits notes payable to supplier and credits notes receivable from vendor.
B) debits notes payable to customer and credits notes receivable from customer.
C) debits the subsidiary's stockholders' equity accounts and credits the parent company's Investment in Subsidiary account.
D) debits the parent company's Investment in Subsidiary account and credits the subsidiary's stockholders' equity accounts.
16) Clarke Company owns all of the stock of Patterson Corporation and 80% of the stock of Tyra Corporation. Clarke Company earned net income of $750,000; Patterson earned $200,000; and Tyra earned $100,000. Clarke Company's consolidated income statement would report net income of:
17) Desidero Corporation acquired 100% of the common stock of Basile Company for $170,000. On the date of acquisition, Basile Company's stockholders' equity consisted of: Common Stock, $100,000 and Retained Earnings, $70,000. On the date of the acquisition, Desidero Company's stockholders' equity consisted of: Common Stock $500,000 and Retained Earnings $1,000,000. On the acquisition date, the elimination entry to be made on a worksheet to prepare a consolidated balance sheet would include a:
A) debit to Common Stock for $100,000.
B) debit to Investment in Basile for $170,000.
C) credit to Common Stock for $100,000.
D) credit to Retained Earnings for $70,000.
18) A consolidated income statement will show:
A) only the parent's net income.
B) only the income from partially owned subsidiaries.
C) the parent's net income plus the parent's share of the subsidiary's net income.
D) the parent's net income plus the subsidiary's net income.
19) The balancing figure that brings the dollar amount of the total liabilities and stockholders' equity of the foreign subsidiary into agreement with the dollar amount of its total assets is the:
A) equity adjustment.
B) foreign-currency exchange rate.
C) foreign-currency translation adjustment.
D) foreign consolidation adjustment.
20) Big Company owns 100% of the outstanding common stock of Small Company. Small Company borrowed $10,000 from Big Company. What elimination entry is required for this transaction?
A) debit Note Payable for $10,000 and credit Note Receivable for $10,000
B) debit Note Receivable for $10,000 and credit Note Payable for $10,000
C) debit Common Stock for $10,000 and credit Note Receivable for $10,000
D) debit Note Payable for $10,000 and credit Investment in Subsidiary for $10,000
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