Multiple-Choice Questions on Consolidated Balances [AICPA Adapted]
Select the correct answer for each of the following questions.
1. Par Corporation owns 60 percent of Sub Corporation’s outstanding capital stock. On May 1, 20X8, Par advanced Sub $70,000 in cash, which was still outstanding at December 31, 20X8. What portion of this advance should be eliminated in the preparation of the December 31, 20X8, consolidated balance sheet?
a. $70,000.
b. $42,000.
c. $28,000.
d. $0.
Items 2 and 3 are based on the following:
On January 2, 20X8, Pare Company acquired 75 percent of Kidd Company’s outstanding common stock. Selected balance sheet data at December 31, 20X8, are as follows:
| Pare Company | Kidd Company |
Total Assets | $420,000 | $180,000 |
Liabilities | $120,000 | $60,000 |
Common Stock | 100,000 | 50,000 |
Retained Earnings | 200,000 | 70,000 |
| $420,000 | $180,000 |
2. In Pare’s December 31, 20X8, consolidated balance sheet, what amount should be reported as minority interest in net assets?
a. $0.
b. $30,000.
c. $45,000.
d. $105,000.
3. In its consolidated balance sheet at December 31, 20X8, what amount should Pare report as
common stock outstanding?
a. $50,000.
b. $100,000.
c. $137,500.
d. $150,000.
4. At the time Hyman Corporation became a subsidiary of Duane Corporation, Hyman switched depreciation of its plant assets from the straight-line method to the sum-of-the-years’-digits method used by Duane. As to Hyman, this change was a
a. Change in an accounting estimate.
b. Correction of an error.
c. Change of accounting principle.
d. Change in the reporting entity.
5. Consolidated statements are proper for Neely Inc., Randle Inc., and Walker Inc., if
a. Neely owns 80 percent of the outstanding common stock of Randle and 40 percent of Walker; Randle owns 30 percent of Walker.
b. Neely owns 100 percent of the outstanding common stock of Randle and 90 percent of Walker; Neely bought the Walker stock one month before the foreign country in which Walker is based imposed restrictions preventing Walker from remitting profits to Neely.
c. Neely owns 100 percent of the outstanding common stock ofRandle and Walker; Walker is in legal reorganization.
d. Neely owns 80 percent of the outstanding common stock of Randle and 40 percent of Walker; Reeves Inc. owns 55 percent of Walker.
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