Test bank advanced financial accounting 8th chap003

To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements Chapter 03 The Reporting Entity and Consolidated Financial Statements Multiple Choice Questions On January 3, 2009, Jane Company acquired 75 percent of Miller Company's outstanding common stock for cash The fair value of the noncontrolling interest was equal to a proportionate share of the book value of Miller Company's net assets at the date of acquisition Selected balance sheet data at December 31, 2009, are as follows: Based on the preceding information, what amount should be reported as noncontrolling interest in net assets in Jane Company's December 31, 2009, consolidated balance sheet? A $90,000 B $54,000 C $36,000 D $0 Based on the preceding information, what amount will Jane Company report as common stock outstanding in its consolidated balance sheet at December 31, 2009? A $120,000 B $180,000 C $156,000 D $264,000 3-1 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements Beta Company acquired 100 percent of the voting common shares of Standard Video Corporation, its bitter rival, by issuing bonds with a par value and fair value of $150,000 Immediately prior to the acquisition, Beta reported total assets of $500,000, liabilities of $280,000, and stockholders' equity of $220,000 At that date, Standard Video reported total assets of $400,000, liabilities of $250,000, and stockholders' equity of $150,000 Included in Standard's liabilities was an account payable to Beta in the amount of $20,000, which Beta included in its accounts receivable Based on the preceding information, what amount of total assets did Beta report in its balance sheet immediately after the acquisition? A $500,000 B $650,000 C $750,000 D $900,000 Based on the preceding information, what amount of total assets was reported in the consolidated balance sheet immediately after acquisition? A $650,000 B $880,000 C $920,000 D $750,000 Based on the preceding information, what amount of total liabilities was reported in the consolidated balance sheet immediately after acquisition? A $500,000 B $530,000 C $280,000 D $660,000 3-2 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements Based on the preceding information, what amount of stockholders' equity was reported in the consolidated balance sheet immediately after acquisition? A $220,000 B $150,000 C $370,000 D $350,000 Company Pea owns 90 percent of Company Essone which in turn owns 80 percent of Company Esstwo Company Esstwo owns 100 percent of Company Essthree Consolidated financial statements should be prepared to report the financial status and results of operations for: A Pea B Pea plus Essone C Pea plus Essone plus Esstwo D Pea plus Essone plus Esstwo plus Essthree Xing Corporation owns 80 percent of the voting common shares of Adams Corporation Noncontrolling interest was assigned $24,000 of income in the 2009 consolidated income statement What amount of net income did Adams Corporation report for the year? A $150,000 B $96,000 C $120,000 D $30,000 On December 31, 2009, Rudd Company acquired 80 percent of the common stock of Wilton Company At the time, Rudd held land with a book value of $100,000 and a fair value of $260,000; Wilton held land with a book value of $50,000 and fair value of $600,000 Using the parent company theory, at what amount would land be reported in a consolidated balance sheet prepared immediately after the combination? A $550,000 B $590,000 C $700,000 D $860,000 3-3 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 10 Princeton Company acquired 75 percent of the common stock of Sheffield Corporation on December 31, 2009 On the date of acquisition, Princeton held land with a book value of $150,000 and a fair value of $300,000; Sheffield held land with a book value of $100,000 and fair value of $500,000 Using the entity theory, at what amount would land be reported in a consolidated balance sheet prepared immediately after the combination? A $650,000 B $500,000 C $550,000 D $375,000 11 If Push Company owned 51 percent of the outstanding common stock of Shove Company, which reporting method would be appropriate? A Cost method B Consolidation C Equity method D Merger method 12 Under FASB 141R, consolidation follows largely which theory approach? A Proprietary B Parent company C Entity D Variable 3-4 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements On January 3, 2009, Redding Company acquired 80 percent of Frazer Corporation's common stock for $344,000 in cash At the acquisition date, the book values and fair values of Frazer's assets and liabilities were equal, and the fair value of the noncontrolling interest was equal to 20 percent of the total book value of Frazer The stockholders' equity accounts of the two companies at the acquisition date are: Noncontrolling interest was assigned income of $11,000 in Redding's consolidated income statement for 2009 13 Based on the preceding information, what amount will be assigned to the noncontrolling interest on January 3, 2009, in the consolidated balance sheet? A $86,000 B $44,000 C $68,800 D $50,000 14 Based on the preceding information, what will be the total stockholders' equity in the consolidated balance sheet as of January 3, 2009? A $1,580,000 B $1,064,000 C $1,150,000 D $1,236,000 3-5 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 15 Based on the preceding information, what will be the amount of net income reported by Frazer Corporation in 2009? A $44,000 B $55,000 C $66,000 D $36,000 16 Goodwill under the parent theory: A exceeds goodwill under the proprietary theory B exceeds goodwill under the entity theory C is less than goodwill under the entity theory D is less than goodwill under the proprietary theory Small-Town Retail owns 70 percent of Supplier Corporation's common stock For the current financial year, Small-Town and Supplier reported sales of $450,000 and $300,000 and expenses of $290,000 and $240,000, respectively 17 Based on the preceding information, what is the amount of net income to be reported in the consolidated income statement for the year under the parent company theory approach? A $220,000 B $202,000 C $160,000 D $200,000 18 Based on the preceding information, what is the amount of net income to be reported in the consolidated income statement for the year under the proprietary theory approach? A $210,000 B $202,000 C $160,000 D $200,000 3-6 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 19 Based on the preceding information, what is the amount of net income to be reported in the consolidated income statement for the year under the entity theory approach? A $210,000 B $202,000 C $160,000 D $220,000 20 Quid Corporation acquired 75 percent of Pro Company's common stock on December 31, 2006 Goodwill (attributable to Quid's acquisition of Pro shares) of $300,000 was reported in the consolidated financial statements at December 31, 2006 Parent company approach was used in determining this amount What is the amount of goodwill to be reported under proprietary theory approach? A $300,000 B $400,000 C $150,000 D $100,000 21 Quid Corporation acquired 60 percent of Pro Company's common stock on December 31, 2004 Goodwill (attributable to Quid's acquisition of Pro shares) of $150,000 was reported in the consolidated financial statements at December 31, 2004 Proprietary theory approach was used in determining this amount What is the amount of goodwill to be reported under entity theory approach? A $150,000 B $200,000 C $250,000 D $100,000 22 Blue Company owns 80 percent of the common stock of White Corporation During the year, Blue reported sales of $1,000,000, and White reported sales of $500,000, including sales to Blue of $80,000 The amount of sales that should be reported in the consolidated income statement for the year is: A $500,000 B $1,300,000 C $1,420,000 D $1,500,000 3-7 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 23 In which of the following cases would consolidation be inappropriate? A The subsidiary is in bankruptcy B Subsidiary's operations are dissimilar from those of the parent C The parent owns 90 percent of the subsidiary's common stock, but all of the subsidiary's nonvoting preferred stock is held by a single investor D Subsidiary is foreign 24 Consolidated financial statements tend to be most useful for: A Creditors of a consolidated subsidiary B Investors and long-term creditors of the parent company C Short-term creditors of the parent company D Stockholders of a consolidated subsidiary On January 1, 2009, Heathcliff Corporation acquired 80 percent of Garfield Corporation's voting common stock Garfield's buildings and equipment had a book value of $300,000 and a fair value of $350,000 at the time of acquisition 25 Based on the preceding information, what will be the amount at which Garfield's buildings and equipment will be reported in consolidated statements using the parent company approach? A $350,000 B $340,000 C $280,000 D $300,000 26 Based on the preceding information, what will be the amount at which Garfield's buildings and equipment will be reported in consolidated statements using the current accounting practice? A $350,000 B $340,000 C $280,000 D $300,000 3-8 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 27 On January 1, 2009, Gold Rush Company acquires 80 percent ownership in California Corporation for $200,000 The fair value of the noncontrolling interest at that time is determined to be $50,000 It reports net assets with a book value of $200,000 and fair value of $230,000 Gold Rush Company reports net assets with a book value of $600,000 and a fair value of $650,000 at that time, excluding its investment in California What will be the amount of goodwill that would be reported immediately after the combination under current accounting practice? A $50,000 B $30,000 C $40,000 D $20,000 28 Roland Company acquired 100 percent of Garros Company's voting shares in 2007 During 2008, Garros purchased tennis equipment for $30,000 and sold them to Roland for $55,000 Roland continues to hold the items in inventory on December 31, 2008 Sales for the two companies during 2008 totaled $655,000, and total cost of goods sold was $420,000 Which of the following observations will be true if no adjustment is made to eliminate the intercorporate sale when a consolidated income statement is prepared for 2008? A Sales would be overstated by $30,000 B Cost of goods sold will be understated by $25,000 C Net income will be overstated by $25,000 D Consolidated net income will be unaffected 29 Zeta Corporation and its subsidiary reported consolidated net income of $320,000 for the year ended December 31, 2008 Zeta owns 80 percent of the common shares of its subsidiary, acquired at book value Noncontrolling interest was assigned income of $30,000 in the consolidated income statement for 2008 What is the amount of separate operating income reported by Zeta for the year? A $170,000 B $150,000 C $120,000 D $200,000 3-9 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 30 Rohan Corporation holds assets with a fair value of $150,000 and a book value of $125,000 and liabilities with a book value and fair value of $50,000 What balance will be assigned to the noncontrolling interest in the consolidated balance sheet if Helms Company pays $90,000 to acquire 75 percent ownership in Rohan and goodwill of $20,000 is reported? A $50,000 B $30,000 C $40,000 D $20,000 Elbonia Corporation, a 100 percent subsidiary of Atomic Corporation, caters to its parent's entire inventory requirements In 2007, Elbonia produced inventory at a cost of $36,000 and sold it to Atomic for $75,000 Atomic held all the items in inventory on January 1, 2008 During 2008, Atomic sold all the units for $98,000 Assume that the companies had no other transactions during 2007 and 2008 31 Based on the preceding information, what amount would be reported in the consolidated financial statements for inventory on January 1, 2008? A $39,000 B $36,000 C $75,000 D $0 32 Based on the preceding information, what amount would be reported in the consolidated financial statements for cost of goods sold for 2007? A $39,000 B $36,000 C $75,000 D $0 3-10 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 16 Goodwill under the parent theory: A exceeds goodwill under the proprietary theory B exceeds goodwill under the entity theory C is less than goodwill under the entity theory D is less than goodwill under the proprietary theory AACSB: Reflective Thinking AICPA: Reporting Small-Town Retail owns 70 percent of Supplier Corporation's common stock For the current financial year, Small-Town and Supplier reported sales of $450,000 and $300,000 and expenses of $290,000 and $240,000, respectively 17 Based on the preceding information, what is the amount of net income to be reported in the consolidated income statement for the year under the parent company theory approach? A $220,000 B $202,000 C $160,000 D $200,000 AACSB: Analytic AICPA: Measurement 18 Based on the preceding information, what is the amount of net income to be reported in the consolidated income statement for the year under the proprietary theory approach? A $210,000 B $202,000 C $160,000 D $200,000 AACSB: Analytic AICPA: Measurement 3-23 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 19 Based on the preceding information, what is the amount of net income to be reported in the consolidated income statement for the year under the entity theory approach? A $210,000 B $202,000 C $160,000 D $220,000 AACSB: Analytic AICPA: Measurement 20 Quid Corporation acquired 75 percent of Pro Company's common stock on December 31, 2006 Goodwill (attributable to Quid's acquisition of Pro shares) of $300,000 was reported in the consolidated financial statements at December 31, 2006 Parent company approach was used in determining this amount What is the amount of goodwill to be reported under proprietary theory approach? A $300,000 B $400,000 C $150,000 D $100,000 AACSB: Analytic AICPA: Measurement 21 Quid Corporation acquired 60 percent of Pro Company's common stock on December 31, 2004 Goodwill (attributable to Quid's acquisition of Pro shares) of $150,000 was reported in the consolidated financial statements at December 31, 2004 Proprietary theory approach was used in determining this amount What is the amount of goodwill to be reported under entity theory approach? A $150,000 B $200,000 C $250,000 D $100,000 AACSB: Analytic AICPA: Measurement 3-24 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 22 Blue Company owns 80 percent of the common stock of White Corporation During the year, Blue reported sales of $1,000,000, and White reported sales of $500,000, including sales to Blue of $80,000 The amount of sales that should be reported in the consolidated income statement for the year is: A $500,000 B $1,300,000 C $1,420,000 D $1,500,000 AACSB: Analytic AICPA: Measurement 23 In which of the following cases would consolidation be inappropriate? A The subsidiary is in bankruptcy B Subsidiary's operations are dissimilar from those of the parent C The parent owns 90 percent of the subsidiary's common stock, but all of the subsidiary's nonvoting preferred stock is held by a single investor D Subsidiary is foreign AACSB: Reflective Thinking AICPA: Reporting 24 Consolidated financial statements tend to be most useful for: A Creditors of a consolidated subsidiary B Investors and long-term creditors of the parent company C Short-term creditors of the parent company D Stockholders of a consolidated subsidiary AACSB: Reflective Thinking AICPA: Reporting On January 1, 2009, Heathcliff Corporation acquired 80 percent of Garfield Corporation's voting common stock Garfield's buildings and equipment had a book value of $300,000 and a fair value of $350,000 at the time of acquisition 3-25 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 25 Based on the preceding information, what will be the amount at which Garfield's buildings and equipment will be reported in consolidated statements using the parent company approach? A $350,000 B $340,000 C $280,000 D $300,000 AACSB: Analytic AICPA: Measurement 26 Based on the preceding information, what will be the amount at which Garfield's buildings and equipment will be reported in consolidated statements using the current accounting practice? A $350,000 B $340,000 C $280,000 D $300,000 AACSB: Analytic AICPA: Measurement 27 On January 1, 2009, Gold Rush Company acquires 80 percent ownership in California Corporation for $200,000 The fair value of the noncontrolling interest at that time is determined to be $50,000 It reports net assets with a book value of $200,000 and fair value of $230,000 Gold Rush Company reports net assets with a book value of $600,000 and a fair value of $650,000 at that time, excluding its investment in California What will be the amount of goodwill that would be reported immediately after the combination under current accounting practice? A $50,000 B $30,000 C $40,000 D $20,000 AACSB: Analytic AICPA: Measurement 3-26 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 28 Roland Company acquired 100 percent of Garros Company's voting shares in 2007 During 2008, Garros purchased tennis equipment for $30,000 and sold them to Roland for $55,000 Roland continues to hold the items in inventory on December 31, 2008 Sales for the two companies during 2008 totaled $655,000, and total cost of goods sold was $420,000 Which of the following observations will be true if no adjustment is made to eliminate the intercorporate sale when a consolidated income statement is prepared for 2008? A Sales would be overstated by $30,000 B Cost of goods sold will be understated by $25,000 C Net income will be overstated by $25,000 D Consolidated net income will be unaffected AACSB: Analytic AICPA: Measurement 29 Zeta Corporation and its subsidiary reported consolidated net income of $320,000 for the year ended December 31, 2008 Zeta owns 80 percent of the common shares of its subsidiary, acquired at book value Noncontrolling interest was assigned income of $30,000 in the consolidated income statement for 2008 What is the amount of separate operating income reported by Zeta for the year? A $170,000 B $150,000 C $120,000 D $200,000 AACSB: Analytic AICPA: Measurement 30 Rohan Corporation holds assets with a fair value of $150,000 and a book value of $125,000 and liabilities with a book value and fair value of $50,000 What balance will be assigned to the noncontrolling interest in the consolidated balance sheet if Helms Company pays $90,000 to acquire 75 percent ownership in Rohan and goodwill of $20,000 is reported? A $50,000 B $30,000 C $40,000 D $20,000 AACSB: Analytic AICPA: Measurement 3-27 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements Elbonia Corporation, a 100 percent subsidiary of Atomic Corporation, caters to its parent's entire inventory requirements In 2007, Elbonia produced inventory at a cost of $36,000 and sold it to Atomic for $75,000 Atomic held all the items in inventory on January 1, 2008 During 2008, Atomic sold all the units for $98,000 Assume that the companies had no other transactions during 2007 and 2008 31 Based on the preceding information, what amount would be reported in the consolidated financial statements for inventory on January 1, 2008? A $39,000 B $36,000 C $75,000 D $0 AACSB: Analytic AICPA: Measurement 32 Based on the preceding information, what amount would be reported in the consolidated financial statements for cost of goods sold for 2007? A $39,000 B $36,000 C $75,000 D $0 AACSB: Analytic AICPA: Measurement 33 Based on the preceding information, what amount would be reported in the consolidated financial statements for cost of goods sold for 2008? A $0 B $39,000 C $36,000 D $98,000 AACSB: Analytic AICPA: Measurement 3-28 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 34 Based on the preceding information, what amount would be reported in the consolidated financial statements for sales for 2007? A $0 B $39,000 C $36,000 D $75,000 AACSB: Analytic AICPA: Measurement 35 When a primary beneficiary's consolidation of a variable interest entity (VIE) is appropriate, the amounts of the VIE to be consolidated are: I Book values for assets and liabilities transferred by the primary beneficiary II Fair values when the primary beneficiary relationship became established A I B II C Both I and II D Neither I nor II AACSB: Analytic AICPA: Reporting 36 Which of the following usually does not represent a variable interest? A Common stock, with no special features or provisions B Senior debt C Subordinated debt D Loan or asset guarantees AACSB: Reflective Thinking AICPA: Reporting Essay Questions 3-29 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 37 Consolidated financial statements are required by GAAP in certain circumstances This information can be very useful to stockholders and creditors Yet, there are limitations to these financial statements for which the users must be aware What are at least three (3) limitations of consolidated financial statements? Limitations to consolidated financial statements include: 1) The operating results and financial position of individual companies included in the consolidation are not disclosed Therefore, the poor performance or position of one or more companies may be hidden by the good performance and position of others 2) The consolidated statements include the subsidiary's assets, not all assets shown are available to dividend distributions of the parent company 3) Financial ratios are based upon the aggregated consolidated information; therefore, these ratios may not be representative of any single company in the consolidation, including the parent 4) Similar accounts of different companies that are consolidated may not be entirely comparable For example, the length of operating cycles of different subsidiaries may vary, causing receivables of similar length to be classified differently 5) Additional information about individual companies or groups of companies that have been consolidated may be necessary for fair presentation, resulting in voluminous footnote disclosures AACSB: Communication AICPA: Reporting 3-30 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 38 In reading a set of consolidated financial statements you are surprised to see the term noncontrolling interest not reported under the Stockholders' Equity section of the Balance Sheet a What is a non-controlling interest? b Why must it be reported in the financial statements as an element of equity rather than a liability? a Noncontrolling interest occurs when less than 100 percent equity is acquired in a subsidiary It represents the fact that the parent may control but not own the entire subsidiary The noncontrolling shareholders have a claim on the subsidiary's assets and earnings through their percentage ownership of the stock b Noncontrolling interest clearly does not meet the definition of a liability FASB 160 makes clear that the noncontrolling interest's claim on net assets is an element of equity, not a liability It requires reporting the noncontrolling interest in equity AACSB: Communication AICPA: Reporting 39 FASB issued Interpretation No 46 R related to the Consolidation of Variable Interest Entities Why does FASB have difficulty in prescribing when these entities are consolidated? A Variable Interest Entity (VIE) is a legal structure used for business purposes that either: Does not have equity investors that: a have voting rights or b doesn't share in all of the entity's profits or losses Has equity investors that not provide sufficient financial resources to support the entity's activities Therefore, FASB has been trying to define the Primary Beneficiary and from this lead to consolidation not just control as presumed under FASB 141 AACSB: Communication AICPA: Reporting 3-31 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 40 Dish Corporation acquired 100 percent of the common stock of Toll Company by issuing 10,000 shares of $10 par common stock with a market value of $60 per share Summarized balance sheet data for the two companies immediately preceding the acquisition are as follows: Required: Determine the dollar amounts to be presented in the consolidated balance sheet for (1) total assets, (2) total liabilities, and (3) total stockholders' equity Total assets = $2,550,000 ($1,200,000 + $1,300,000 + $50,000 GW) Total liabilities = $1,550,000 ($800,000 + $750,000) Total stockholders' equity = $1,000,000 [$400,000 + ($60 x 10,000 shares)] AACSB: Analytic AICPA: Measurement 3-32 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 41 The Hamilton Company acquired 100 percent of the stock of Hudson Company on January 1, 2010, for $308,000 cash Summarized balance sheet data for the companies on December 31, 2009, are as follows: The book values of Hudson's assets and liabilities are equal to their fair values, except as indicated On January 1, 2010, Hudson owed Hamilton $14,000 on account Required: Prepare a consolidated balance sheet immediately following the acquisition 3-33 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements AACSB: Analytic AICPA: Measurement 3-34 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 42 Barnes Company acquired 80 percent of the outstanding voting stock of Dean Company on January 1, 2008 During 2008 Dean Company sold inventory costing $50,000 to Barnes Company for $80,000 Barnes Company continued to hold the inventory at December 31, 2008 Also during 2008, Barnes Company sold merchandise costing $400,000 to nonaffiliates for $600,000, and on its separate balance sheet reported total inventory at year end of $140,000 In its separate financial statements, Dean Company reported total sales and cost of goods sold of $350,000 and $220,000, respectively, for 2008 and ending inventory of $150,000 Required: Based on the above information, compute the amounts that should appear in the consolidated financial statements prepared for Barnes Company and it subsidiary, Dean Company, at year end for the following items: 1) sales; 2) cost of goods sold; 3) gross profit on sales; 4) inventory 1) Sales = $870,000 ($600,000 + $350,000 - $80,000) 2) Cost of Goods Sold = $570,000 ($400,000 + $220,000 - $50,000) 3) Gross Profit on Sales = $300,000 ($870,000 - $570,000) 4) Inventory = $260,000 ($140,000 + $150,000 - $30,000) AACSB: Analytic AICPA: Measurement 3-35 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 43 On January 1, 2009, Field Corporation, a retail outlet chain, acquired 100 percent of the common stock of Palouse Company by issuing 14,000 shares of Field's $5 par value common stock The market price of Field's common stock was $20 per share on the eve of December 31, 2008 Summarized balance sheet data at December 31, 2008, are as follows: Additional Information: The book values of Palouse's assets approximated their respective fair values, except for inventory (included in current assets), which had a fair value $20,000 more than book value, and land, which had a market value of $200,000 on the date of combination At that date, Field owed Palouse $34,000 on account Required: Prepare a consolidated balance sheet immediately following the acquisition 3-36 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements AACSB: Analytic AICPA: Measurement 3-37 ... slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 37 Consolidated financial statements are required... solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements Chapter 03 The Reporting Entity and Consolidated Financial. .. slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 03 - The Reporting Entity and Consolidated Financial Statements 37 Consolidated financial statements are required