Balance Sheet and Net Income

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On January 4, 2010, Harley, Inc. acquired 40% of the outstanding common stock of Bike Co. for $2,400,000. This investment gave Harley the ability to exercise significant influence over Bike. Bike's assets on that date were recorded at $10,500,000 with liabilities of $4,500,000. There were no other differences between book and fair values. During 2010, Bike reported net income of $500,000. For 2011, Bike reported net income of $800,000. Dividends of $300,000 were paid in each of these two years.  49. How much income did Harley report from Bike for 2010? 
A. $120,000.
B. $200,000.
C. $300,000.
D. $320,000.
E. $500,000.

26. Under the equity method, when the company's share of cumulative losses equals its investment and the company has no obligation or intention to fund such additional losses, which of the following statements is true? 


A. The investor should change to the fair-value method to account for its investment.
 B. The investor should suspend applying the equity method until the investee reports income.
 C. The investor should suspend applying the equity method and not record any equity in income of investee until its share of future profits is sufficient to recover losses that have not previously been recorded.
 D. The cumulative losses should be reported as a prior period adjustment.
 E. The investor should report these losses as extraordinary items.

7. What is the primary accounting difference between accounting for when the subsidiary is dissolved and when the subsidiary retains its incorporation?

A.If the subsidiary is dissolved, it will not be operated as a separate division B.If the subsidiary is dissolved, assets and liabilities are consolidated at their book values C. If the subsidiary retains its incorporation, there will be no goodwill associated with the acquisition D.If the subsidiary retains its incorporation, assets and liabilities are consolidated at their book values E.If the subsidiary retains its incorporation, the consolidation is not formally recorded in the accounting records of the acquiring company

Which one of the following accounts would not appear on the consolidated financial statements at the end of the first fiscal period of the combination? Goodwill
Equipment
Investment in Subsidiary
Common Stock
Additional Paid-In Capital

4. Jansen Inc. acquired all of the outstanding common stock of Merriam Co. on January 1, 2009, for $257,000. Annual amortization of $19,000 resulted from this acquisition. Jansen reported net income of $70,000 in 2009 and $50,000 in 2010 and paid $22,000 in dividends each year. Merriam reported net income of $40,000 in 2009 and $47,000 in 2010 and paid $10,000 in dividends each year. What is the Investment in Merriam Co. balance on Jansen's books as of  December 31, 2010, if the equity method has been applied?

A.$286,000
B.$296,000
C.$276,000
D.$344,000
E.$300,000

Webb Co. acquired 100% of Rand Inc. on January 5, 20011. During 2011, Webb sold goods to Rand for $2,400,000 that cost Webb $1,800,000. Rand still owned 40% of the goods at the end of the year. Cost of goods sold was $10,800,000 for Webb and $6,400,000 for Rand. What was consolidated cost of goods sold?

A) $14,800,000.
B) $14,560,000.
C) $15,040,000.
D) $16,960,000.
E) $17,200,000.

Clemente Co. owned all of the voting common stock of Snider Co. On January 2, 2010, Clemente sold equipment to Snider for $125,000. The equipment had cost Clemente $140,000. At the time of the sale, the balance in accumulated depreciation was $40,000. The equipment had a remaining useful life of five years and a $0 salvage value. Straight-line depreciation is used by both Clemente and Snider. At what amount should the equipment (net of depreciation) be included in the consolidated balance sheet dated December 31, 2011?

A) $110,000.
B) $105,000.
C) $90,000.
D) $60,000.
E) $100,000.

Dalton Corp. owned 70% of the outstanding common stock of Shrugs Inc. On January 1, 2009,...
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