Great Corporation acquired a 90% interest in SOS Corporation at its $810,000 book value on December 31, 2010. A summary of the stockholders' equity for SOS at the end of 2010 and 2011 is as follows:
Capital stock, $10 par$600,000$600,000
Additional paid-in capital30,00030,000
Total stockholders' equity$900,000$1,050,000
On January 1, 2012, SOS sold 10,000 new shares of its $10 par value common stock for $45 per share.
11) If SOS sold the additional shares directly to Great, Great's Investment in SOS account after the sale would be
12) Consider a sale of stock by a subsidiary to parties outside the consolidated entity. This transaction requires an adjustment of the parent's investment and additional paid-in capital accounts except when
A) the shares are sold below book value per share.
B) the shares are sold above book value per share.
C) the shares are sold at book value per share.
D) All of the above are correct.
13) If a parent company and outside investors purchase shares of a subsidiary in relation to existing stock ownership (ratably), then
A) there will be an adjustment to additional paid-in capital if the stock is sold above book value.
B) there will be no adjustment to additional paid-in capital regardless whether the stock is sold above or below book value.
C) there will be an adjustment to additional paid-in capital if the stock is sold below book value.
D) there will be the elimination of a gain.
14) A subsidiary split its stock 2 for 1. Which of the following statements is false?
A) A stock split does not affect the amount of net assets of the subsidiary.
B) A stock split does not affect parent and noncontrolling interest ownership percentages.
C) A stock split does not affect consolidation procedures.
D) A 2 for 1 stock split decreases the number of shares outstanding.
Use the following information to answer the question(s) below.
Bower Corporation purchased a 70% interest in Stage Corporation on June 1, 2010 at a purchase price of $350,000. On June 1, 2010, the book values of Stage's assets and liabilities were equal to fair values. On June 1, 2010, Stage's stockholders' equity consisted of $290,000 of Common Stock and $210,000 of Retained Earnings. All cost-book differentials were attributed to goodwill.
During 2010, Stage earned $120,000 of net income, earned uniformly throughout the year and paid $6,000 of dividends on March 1 and another $6,000 on September 1.
15) Noncontrolling interest share for 2010 is
16) Preacquisition income for 2010 is
17) Anthony Company declared and paid $20,000 of dividends during 2011. The schedule of dividends follows:
Date Dividend Declared & Paid Amount Paid
March 31, 2011$5,000
June 30, 2011$5,000
September 30, 2011$5,000
December 31, 2011$5,000
Anthony Company was acquired on June 1, 2011 by Google Company. Google acquired 100 percent of Anthony Company. Both companies have a December 31 fiscal year end. What is the amount of preacquisition dividends in 2011?
18) On April 1, 2011, Paramount Company acquires 100% of the outstanding stock of Yester Company on the open market. Paramount and Yester have December 31 fiscal year ends. Under GAAP, a consolidated income statement for the year ending December 31, 2011, will include
A) 100 percent of the revenues and expenses in 2011 of Yester Company after January 1, 2011.
B) no revenues and expenses in 2011 of Yester Company.
C) 80 percent of the revenues and expenses in 2011 of Yester Company.
D) 100 percent of the revenues and expenses in 2011 of Yester Company after April 1, 2011.
19) The acquisition of treasury stock by a subsidiary from noncontrolling shareholders at a price above book value
A) decreases the parent's share of subsidiary book value and decreases the parent's ownership percentage.
B) decreases the parent's share of subsidiary book value and increases the parent's ownership percentage.
C) increases the parent's share of subsidiary book value and decreases the parent's ownership percentage.
D) increases the parent's share of subsidiary book value and increases the parent's ownership percentage.
20) A 15% stock dividend by a subsidiary causes
A) the parent company investment account to decrease.
B) the parent company investment account to remain the same.
C) the parent company investment account to increase.
D) the noncontrolling interest equity to increase.
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