During Year 1, Abaco Co., the 100% owned subsidiary of Walker Inc., sold merchandise to Walker at a 25% markup over its cost. Intercompany sales to Walker totaled USD800,000 during Year 1. On December 31, Year 1, Walker held USD200,000 of the inventory purchased from Abaco in its ending inventory. In Walker's December 31, Year 1 elimination of the intercompany sales transaction, the intercompany profit that must be eliminated from ending inventory is:

1 .Sun Co. is a wholly-owned subsidiary of Star Co. Both companies have separate general ledgers, and prepare separate financial statements. Sun requires stand-alone financial statements. Which of the following statements is correct?

A Consolidated financial statements should be prepared for both Star and Sun. B After consolidation, the accounts of both Star and Sun should be changed to reflect the consolidated totals for future ease in reporting. C Consolidated financial statements should only be prepared by Star and not by Sun...

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2 .On January 1, Year 1, Mega Corp. acquired 10% of the outstanding voting stock of Penny, Inc. On January 2, Year 2, Mega gained the ability to exercise significant influence over financial and operating control of Penny by acquiring an additional 20% of Penny's outstanding stock. The two purchases were made at prices proportionate to the value assigned to Penny's net assets, which equaled their carrying amounts. For the years ended December 31, Year 1 and Year 2, Penny reported the following:Year 1Year 2Dividends paid$200,000$300,000Net income600,000650,000In Year 2, what amounts should Mega report as current year investment income and as an adjustment, before income taxes, to Year 1 investment income?

A Year 2 Investment income $195,000; Adjustment Year 1 investment income $40,000 B Year 2 Investment income $195,000; Adjustment Year 1 investment income $160,000 C Year 2 Investment income $195,000; Adjustment Year 1 investment income $100,000 D Year 2 Investment income $105,000; Adjustment Year 1 ...

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3 .On January 2 of the current year, Otto Co. purchased 40% of Penn Co.'s outstanding common stock. The carrying amount of Penn's depreciable assets was USD1,000,000 on January 2. Penn's depreciable assets had an original useful life of 10 years, and a remaining useful life of five years. Otto recognized USD8,000 amortization for the current year ending December 31 related to its investment in Penn due to the excess of fair value over book value on these assets. What was the fair value of Penn's depreciable assets on January 2 of the current year?

A USD1,100,000 B USD1,000,000 C USD900,000 D USD100,000

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4 .On January 1, Year 1, Paul Corporation acquired 80% of Saul Corporation's 200,000 shares of the outstanding common stock for USD5,000,000. On the date of acquisition, the USD6,000,000 book value of Saul's net assets equaled the fair value of Saul's net assets. During Year 1, Saul reported net income of USD550,000 and paid dividends of USD165,000. What is the noncontrolling interest that will be reported on Paul Corporation's December 31, Year 1 consolidated balance sheet?

A USD1,277,000 B USD1,200,000 C USD1,327,000 D USD1,250,000

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5 .Selected information from the separate and consolidated balance sheets and income statements of Pard, Inc. and its subsidiary, Spin Co., as of December 31, Year 1, and for the year then ended is as follows:PardSpinConsolidatedBalance sheet accountsAccounts receivableUSDUSD26,000USDUSD19,000USDUSD39,000Inventory30,00025,00052,000Investment in Spin67,000--Goodwill--30,000Noncontrolling interest--10,000Stockholders, equity154,00050,000154,000Income statement accountsRevenuesUSD200,000USD140,000USD308,000Cost of goods sold150,000110,000231,000Gross profit50,00030,00077,000Equity in earnings of Spin11,000--Net income36,00020,00040,000Additional information:During Year 1, Pard sold goods to Spin at the same markup on cost that Pard uses for all sales. At December 31, Year 1, Spin had not paid for all of these goods and still held 37.5% of them in inventory.At December 31, Year 1, what was the amount of Spin's payable to Pard for intercompany sales?

A USD29,000 B USD3,000 C USD32,000 D USD6,000

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7 .On December 31, Year 1, Largo, Inc. had a USD750,000 note payable outstanding, due July 31, Year 2. Largo borrowed the money to finance construction of a new plant. Largo planned to refinance the note by issuing long-term bonds. Because Largo temporarily had excess cash, it prepaid USD250,000 of the note on January 12, Year 2. In February Year 2, Largo completed a USD1,500,000 bond offering. Largo will use the bond offering proceeds to repay the note payable at its maturity and to pay construction costs during Year 2. On March 3, Year 2, Largo issued its Year 1 financial statements. What amount of the note payable should Largo include in the current liabilities section of its December 31, Year 1, balance sheet?

A USD250,000 B USD0 C USD750,000 D USD500,000

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8 .On April 1, Aloe, Inc. factored USD80,000 of its accounts receivable without recourse. The factor retained 10% of the accounts receivable as an allowance for sales returns and charged a 5% commission on the gross amount of the factored receivables. What amount of cash did Aloe receive from the factored receivables?

A USD72,000 B USD68,000 C USD68,400 D USD76,000

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9 .On December 1, 1992, Alt Department Store received 505 sweaters on consignment from Todd. Todd's cost for the sweaters was USD80 each, and they were priced to sell at USD100. Alt's commission on consigned goods is 10%. At December 31, 1992, 5 sweaters remained. In its December 31, 1992, balance sheet, what amount should Alt report as payable for consigned goods?

A USD49,000 B USD45,000 C USD45,400 D USD40,400

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10 .Based on a physical inventory taken on December 31, Chewy Co. determined its chocolate inventory on a FIFO basis at USD26,000 with a replacement cost of USD20,000. Chewy estimated that, after further processing costs of USD12,000, the chocolate could be sold as finished candy bars for USD40,000. Chewy's normal profit margin is 10% of sales. Under the IFRS lower of cost or net realizable value rule, what amount should Chewy report as chocolate inventory in its December 31 balance sheet?

A USD26,000 B USD20,000 C USD28,000 D USD24,000

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