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ACG 4201 Quiz 2 (Everest)

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ACG4201 Quiz 2 (Everest)

  1. On January 1, 20X1, Poe Corp. sold a machine for $900,000 to Saxe Corp., its wholly-owned subsidiary. Poe paid $1,100,000 for this machine. On the sale date, accumulated depreciation was $250,000. Poe estimated a $100,000 salvage value and depreciated the machine on the straight-line method over 20 years, a policy that Saxe continued. In Poe's December 31, 20X1, consolidated balance sheet, this machine should be included in cost and accumulated depreciation as
  2. Sally Corporation, an 80%-owned subsidiary of Reynolds Company, buys half of its raw materials from Reynolds. The transfer price is exactly the same price as Sally pays to buy identical raw materials from outside suppliers and the same price as Reynolds sells the materials to unrelated customers. In preparing consolidated statements for Reynolds Company and Subsidiary Sally Corporation, 
  3. On 1/1/X1 Peck sells a machine with a $20,000 book value to its subsidiary Shea for $30,000. Shea intends to use the machine for 4 years. On 12/31/X2 Shea sells the machine to an outside party for $14,000. What amount of gain or (loss) for the sale of assets is reported on the consolidated financial statements?
  4. Schiff Company owns 100% of the outstanding common stock of the Viel Company. During 20X1, Schiff sold merchandise to Viel that Viel, in turn, sold to unrelated firms. There were no such goods in Viel's ending inventory. However, some of the intercompany purchases from Schiff had not yet been paid. Which of the following amounts will be incorrect in the consolidated statements if no adjustments are made?
  5. Williard Corporation regularly sells inventory items to its subsidiary, Petty, Inc. If unrealized profits in Petty's 20X1 year-end inventory exceed the unrealized profits in its 20X2 year-end inventory, 20X2 combined
  6. Company S is a 100%-owned subsidiary of Company P. Company S has outstanding 6%, 10-year bonds sold to yield 7%. On January 1 of the current year, Company P purchased all of the Company S outstanding bonds at a price that reflected the current 6% effective interest rate. How should this event be reflected in the current year's consolidated statements?
  7. Company S is a 100%-owned subsidiary of Company P. Company P purchased all the outstanding bonds of Company S at a discount. The bonds had a remaining issuance premium at the time of Company P's purchase. The bonds have 5 years to maturity. At the end of 5 years, consolidated retained earnings
  8. The purchase of outstanding subsidiary bonds by the parent company has the same impact on consolidated statements as:
  9. Sun Company is a 100%-owned subsidiary of Peter Company. On January 1, 20X1, Sun Company has $500,000 of 8% face rate bonds outstanding, with an unamortized discount of $5,000 that is being amortized over a 5 year remaining life to maturity. On that date, Peter Company purchased the bonds for $497,000. The adjustment to the consolidated income of the two companies needed in the consolidation process for 20X2 (the following year) is ____.
  10. Company S is a 100%-owned subsidiary of Company P. Company P purchased, at a premium, Company S bonds that are outstanding and have a remaining discount. Consolidation theory takes the position that:

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