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Study Resources (Accounting)

LO6 Exercise 8 Bower Corporation paid $5,000 for a 60% interest in Fig Inc. on January 1, 2005 when Fig’s stockholders’ equity consisted of $5,000 Capital Stock and $2,500 Retained Earnings. Fig’s assets and liabilities were fairly valued on this date. Two years later, on December 31, 2006, the balance sheets of.
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LO5 Exercise 3 Dotterel Corporation paid $200,000 cash for 40% of the voting common stock of Swamp Land Inc. on January 1, 2005. Book value and fair value information for Swamp on this date is as follows: Assets Book Values Fair Values Cash $  60,000 $  60,000 Accounts receivable 120,000 120,000 Inventories 80,000 100,000 Equipment 340,000 400,000 $ 600,000 $ 680,000 Liabilities & Equities Accounts payable $ 200,000 $ 200,000 Note payable 120,000 100,000 Capital stock 200,000 Retained earnings 80,000 $ 600,000 $ 300,000 Required: Prepare.
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Multiple Choice Questions LO1 1. Which of the following is a reason why a company would expand through a combination, rather than by building new facilities? a. A combination might provide cost advantages. b. A combination might provide fewer operating delays. c. A combination might provide easier access to intangible assets. d. All of the above are possible reasons that.
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71.The executor of Danny Mack's estate has listed the following properties at fair value: Cash $200,000, Life Insurance Receivable $500,000, Investment in Stocks and Bonds $50,000, Rental Property $100,000, and Personal Property $80,000. Additionally, the executor found $100,000 of various debts incurred before the decedent's death. The cost of Danny.
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LO5 Exercise 5 Zoo Inc paid $268,000 to purchase 80% of the outstanding stock of Bird Corporation, on December 31, 2005. The following year-end information was available just before the purchase: Zoo Book Value Bird  Book Value Bird Fair Value Cash $ 378,000 $ 40,000 $ 40,000 Accounts Receivable 130,000 76,000 76,000 Inventory 240,000 50,000 55,000 Land 220,000 80,000 55,000 Plant and equipment-net 660,000 200,000 215,000 $ 1,628,000 $ 446,000 $ Accounts Payable $ 440,000 $ 11,000 $ 11,000 Bonds Payable 468,000 100,000 95,000 Capital stock, $10 par value 200,000 Capital stock, $15 par value 225,000 Additional paid-in capital 200,000 80,000 Retained earnings 320,000 30,000 $ 1,628,000 $ 446,000 Required: 1. Prepare.
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Multiple Choice Questions LO1 1. What method must be used if FASB 94 prohibits full consolidation of a 70% owned subsidiary? a. The cost method. b. The Liquidation value. c. Market value. d. Equity method. LO1 2. From the standpoint of accounting theory, which of the following statements is the best justification for the preparation of consolidated financial statements? a. In substance the companies are separate,.
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Balance sheet information for Sphinx Company at January 1, 2005, is summarized as follows: Current assets     $ 230,000 Liabilities         $ 300,000 Plant assets 450,000 Capital stock $10 par 200,000 Retained earnings 180,000                    $ 680,000                     $ 680,000 Sphinx’s assets and liabilities are fairly valued except for plant assets that are undervalued by $50,000. On January 2, 2005, Pyramid Corporation issues 20,000 shares of its.
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69.During the current year, an estate generates the following income amounts: Rental income $10,000, Interest income 4,000, Dividend income 6,000. The rental income is conveyed immediately to the beneficiary stated in the decedent's will. Dividends of $2,000 are donated to the decedent's church. What amount of federal income tax must.
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LO2 Exercise 2 On January 2, 2005 Altamira Company issued 80,000 new shares of its $2 par value common stock valued at $12 a share for all of Lascaux Corporation’s outstanding common shares. Altamira paid $5,000 for the direct combination costs of the accountants. Altamira paid $10,000 to register and issue shares..
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75.The executor of Danny Mack's estate has listed the following properties at fair value: Cash $200,000, Life Insurance Receivable $500,000, Investment in Stocks and Bonds $50,000, Rental Property $100,000, and Personal Property $80,000. Additionally, the executor found $100,000 of various debts incurred before the decedent's death. The cost of Danny.
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76.The executor of Danny Mack's estate has listed the following properties at fair value: Cash $200,000, Life Insurance Receivable $500,000, Investment in Stocks and Bonds $50,000, Rental Property $100,000, and Personal Property $80,000. Additionally, the executor found $100,000 of various debts incurred before the decedent's death. The cost of Danny.
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LO5 11. On January 1, 2005, Tern purchased 90% of Costal Corporation’s outstanding shares for $1,400,000 when the fair value of Costal’s assets were equal to the book values.  The balance sheets of Tern and Costal Corporations at year-end 2004 are summarized as follows: Tern Costal Assets $ 5,900,000 $ 1,450,000 Liabilities $ 700,000 $ 250,000 Capital stock 3,600,000 1,000,000 Retained earnings 1,600,000 200,000 If a consolidated balance sheet was.
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Exercise 4 The balance sheets of Palisade Company and Salisbury Corporation were as follows on December 31, 2004:                                  Palisade         Salisbury Current Assets $  260,000 $  120,000 Equipment-net    440,000    480,000 Buildings-net    600,000    200,000 Land    100,000    200,000 Total Assets $1,400,000 $1,000,000 Current Liabilities    100,000    120,000 Common Stock, $5 par 1,000,000    400,000 Paid-in Capital    100,000    280,000 Retained Earnings    200,000    200,000 Total Liabilities and Stockholders' equity $1,400,000 $1,000,000 On January 1, 2005.
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73.The executor of Danny Mack's estate has listed the following properties at fair value: Cash $200,000, Life Insurance Receivable $500,000, Investment in Stocks and Bonds $50,000, Rental Property $100,000, and Personal Property $80,000. Additionally, the executor found $100,000 of various debts incurred before the decedent's death. The cost of Danny.
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72.The executor of Danny Mack's estate has listed the following properties at fair value: Cash $200,000, Life Insurance Receivable $500,000, Investment in Stocks and Bonds $50,000, Rental Property $100,000, and Personal Property $80,000. Additionally, the executor found $100,000 of various debts incurred before the decedent's death. The cost of Danny.
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LO5 Exercise 8 For 2003, 2004, and 2005, Squid Corporation earned net incomes of $40,000, $70,000, and $100,000, respectively, and paid dividends of $24,000, $32,000, and $44,000, respectively. At the beginning of 2003, Squid had $500,000 of $10 par value common stock outstanding and $100,000 of retained earnings. On January 1 of each.
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70.The executor of Danny Mack's estate has listed the following properties at fair value: Cash $200,000, Life Insurance Receivable $500,000, Investment in Stocks and Bonds $50,000, Rental Property $100,000, and Personal Property $80,000. Additionally, the executor found $100,000 of various debts incurred before the decedent's death. The cost of Danny.
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LO5 Exercise 3 The consolidated balance sheet of Treecreeper Corporation and Ants Farm, its 90% owned subsidiary, as of December 31, 2005, contains the following accounts and balances: Treecreeper Corporation and Subsidiary Consolidated Balance Sheet at December 31, 2005 Balances Cash $ 19,000 Accounts receivable-net 70,000 Inventories 110,000 Other current assets 85,000 Plant assets-net 290,000 Goodwill from consolidation 39,000 $ 613,000 Accounts payable $ 73,000 Other liabilities 70,000 Capital stock 350,000 Retained earnings 80,000 Minority interest 40,000 $ 613,000 Treecreeper Corporation acquired its 90%.
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Exercises LO2 Exercise 1 On January 2, 2005 Bison Corporation issued 100,000 new shares of its $5 par value common stock valued at $19 a share for all of Deer Corporation’s outstanding common shares. Bison paid $15,000 to register and issue shares. Bison also paid $10,000 for the direct combination costs of the.
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Multiple Choice Questions LO1 1. Which of the following will be debited to the Investment account when the equity method is used? a. b. Investee net losses. Investee net profits. c. d. Investee declaration of dividends. Depreciation of excess purchase cost attributable to investee equipment. LO1 2. A parent company uses the equity method to account for its wholly-owned subsidiary. The.
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77.The executor of Danny Mack's estate has listed the following properties at fair value: Cash $200,000, Life Insurance Receivable $500,000, Investment in Stocks and Bonds $50,000, Rental Property $100,000, and Personal Property $80,000. Additionally, the executor found $100,000 of various debts incurred before the decedent's death. The cost of Danny.
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Exercises LO4 Exercise 1 Alarm Bird Inc. acquired an 85% interest in Clock Corporation on January 2, 2005 for $38,000 cash when Clock had Capital Stock of $15,000 and Retained Earnings of $25,000. Clock’s assets and liabilities had book values equal to their fair values except for inventory that was undervalued by $2,000..
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78.The executor of Danny Mack's estate has listed the following properties at fair value: Cash $200,000, Life Insurance Receivable $500,000, Investment in Stocks and Bonds $50,000, Rental Property $100,000, and Personal Property $80,000. Additionally, the executor found $100,000 of various debts incurred before the decedent's death. The cost of Danny.
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LO5 Exercise 6 Curlew Corporation paid $50,000 on January 1, 2005 for a 20% interest in Waterway Inc. On January 1, 2005, Waterway’s stockholders’ equity consisted of $100,000 of common stock and $100,000 of retained earnings. All the excess purchase cost over book value was attributable to a patent with an estimated.
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LO3 Exercise 2 Wader’s Corporation paid $120,000 for a 25% interest in Shell Company on July 1, 2005. No information is available on the fair value of Shell’s assets and liabilities.  Assume the equity method.  Shell’s trail balances were as follows: Debits December 31 July 1 Current assets $  100,000 $  50,000 Noncurrent assets 300,000 310,000 Expenses 160,000 120,000 Dividends (paid in June) 40,000 40,000   Total $ 600,000 $.
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LO4 Exercise 2 On January 1, 2005, Myna Corporation issued 10,000 shares of its own $10 par value common stock for 9,000 shares of the outstanding stock of Berry Corporation in an acquisition. Myna common stock at January 1, 2005 was selling at $70 per share. Just before the business combination, balance.
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80.The executor of Danny Mack's estate has listed the following properties at fair value: Cash $200,000, Life Insurance Receivable $500,000, Investment in Stocks and Bonds $50,000, Rental Property $100,000, and Personal Property $80,000. Additionally, the executor found $100,000 of various debts incurred before the decedent's death. The cost of Danny.
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LO5 Exercise 7 Lowtide Corporation had $300,000 of $10 par value common stock outstanding on January 1, 2004, and retained earnings of $100,000 on the same date. During 2004, 2005, and 2006, Lowtide earned net incomes of $40,000, $70,000, and $30,000, respectively, and paid dividends of $30,000, $55,000, and $10,000, respectively. On.
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LO4 Exercise 6 On January 2, 2005 Tennessee Corporation issued 100,000 new shares of its $5 par value common stock valued at $19 a share for all of Alaska Company’s outstanding common shares in an acquisition. Tennessee paid $15,000 for registering and issuing securities and $10,000 for other direct costs of the.
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79.The executor of Danny Mack's estate has listed the following properties at fair value: Cash $200,000, Life Insurance Receivable $500,000, Investment in Stocks and Bonds $50,000, Rental Property $100,000, and Personal Property $80,000. Additionally, the executor found $100,000 of various debts incurred before the decedent's death. The cost of Danny.
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Exercises LO3 Exercise 1 Crake Corporation paid $50,000 for a 10% interest in Lagoon Corp. on January 1, 2004, when Lagoon’s stockholders’ equity consisted of $400,000 of $10 par value common stock and $100,000 retained earnings.  On December 31, 2005, Crake paid $96,000 for an additional 20% interest in Lagoon Corp. Both of.
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LO5 Exercise 7 Manucode Corporation paid $279,000 for 70% of Trumpet Corporation?s $10 par common stock on December 31, 2005, when Trumpet Corporation?s stockholders? equity was made up of $200,000 of Common Stock, $60,000 Additional Paid-in Capital and $40,000 of Retained Earnings. Trumpet?s identifiable assets and liabilities reflected their fair values on.
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74.The executor of Danny Mack's estate has listed the following properties at fair value: Cash $200,000, Life Insurance Receivable $500,000, Investment in Stocks and Bonds $50,000, Rental Property $100,000, and Personal Property $80,000. Additionally, the executor found $100,000 of various debts incurred before the decedent's death. The cost of Danny.
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LO7&8 Exercise 9 Currawong Corporation paid $500,000 for 80% of the outstanding voting common stock of Lizard Corporation on January 2, 2005 when the book value of Lizard’s net assets was $460,000. The fair values of Lizard’s identifiable net assets were equal to their book values except as indicated below. Lizard reported net.
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67.The executor of the Estate of Kate Tweed discovered the following assets (at fair value): The will of Kate Tweed had the following provisions: • $195,000 in cash went to Victor Vickery. • All shares of PepsiCo went to Duchess Doyle. • The residence went to Louis Tweed. • All other estate assets were to.
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LO5 Exercise 9 On January 1, 2005, Petrel, Inc. purchased 70% of the outstanding voting common stock of Ocean, Inc., for $2,600,000. The book value of Ocean’s net equity on that date was $3,100,000. Book values were equal to fair values except as follows: Assets & Liabilities Book Values Fair Values Equipment $ 250,000 $ 190,000 Building 600,000 700,000 Note payable 270,000 240,000 Required: Prepare a schedule to.
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LO5 Exercise 5 Stilt Corporation purchased a 40% interest in the common stock of Shallow Company for $2,660,000 on January 1, 2005, when the book value of Shallow’s net equity was $6,000,000. Shallow’s book values equaled their fair values except for the following items: Book Value Fair Value Difference Inventories $ 450,000 $ 500,000 $ 50,000 Land 100,000 450,000 350,000 Building-net 400,000 200,000 ( 200,000 ) Equipment-net 350,000 400,000 50,000 Required: Prepare a schedule to allocate any excess purchase.
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LO5 Exercise 10 On January 1, 2005, Shearwater, Co. purchased 60% of the outstanding voting common stock of Colony, Inc., for $1,800,000. The book value of Colony’s net equity on that date was $3,000,000. Book values were equal to fair values except as follows: Assets & Liabilities Book Values Fair Values Inventory $ 200,000 $ 225,000 Building 850,000 750,000 Note payable 300,000 320,000 Required: Prepare a schedule to.
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LO5 Exercise 4 Monarch Corporation paid $180,000 for a 75% interest in Stem Co.’s outstanding Capital Stock on January 1, 2005, when Stem’s stockholders’ equity consisted of $150,000 of Capital Stock and $50,000 of Retained Earnings. Book values of Stem’s net assets were equal to their fair values on this date. The.
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Use the following information in answering questions 10 and 11. On January 1, 2005, Coot Company acquired a 15% interest in Roost Corporation for $120,000 when Roost’s stockholder’s equity consisted of $600,000 capital stock and $200,000 retained earnings. Book values of Roost’s net assets equaled their fair values on this date..
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LO5 Exercise 6 On July 1, 2005, Magpie Corporation issued 23,000 shares of its own $2 par value common stock for 35,000 shares of the outstanding stock of Insect Inc. in an acquisition. Magpie common stock at July 1, 2005 was selling at $14 per share. Just before the business combination, balance.
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Exercise 5 Paradise Inc purchased the net assets of Sublime Company on January 2, 2005 for $320,000 and also paid $5,000 in direct acquisition costs. Sublime's balance sheet on January 2, 2005 was as follows: Accounts receivable-net   $180,000    Current liabilities    $ 25,000 Inventory                  180,000    Long term debt           90,000 Land                        30,000    Common stock ($1 par)   .
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