Advanced Accounting 2 (Chapter 9-11)

The classification of noncontrolling interest share as an expense and noncontrolling interest as a liability is preferred under:

• 1. Parent-company theory

• 1. Entity theory

• 1. Traditional theory

• 1. None of the above

2. Consolidated financial statement amounts and classifications should be identical under the entity and parent-company theories of consolidation if:

• 1. All subsidiaries are acquired at book value and there are no intercompany transactions

• 1.  All subsidiaries are acquired at book value

• 1. Only 100 percent–owned subsidiaries are consolidated

• 1. There are no intercompany transactions

2. The most consistent statement of assets in consolidated financial statements would result from applying:

• 1. Traditional theory

• 1. Parent-company theory

• 1. Entity theory

• 1. None of the above

1. Corporate joint ventures should be accounted for by the equity method, provided that the joint venturer:

• 1. Cannot exercise significant influence over the joint venture

• 1. Can participate in the overall management of the venture

• 1. Owns more than 50 percent of the joint venture

• 1. All of the above

1. An investor in a corporate joint venture would be least likely to:

• 1. Be active in the management of the venture

• 1. Have an ability to exercise significant influence

• 1. Consent to each significant venture decision

• 1. Hold title to a pro rata share of joint venture assets

1. Investors account for investments in corporate joint ventures under the equity method if their individual ownership percentages are at least:

• 1. 10 percent

• 1.  20 percent

• 1. 50 percent

• 1. None of the above

1. Far, Get, and Hog Corporations own 60 percent, 25 percent, and 15 percent, respectively, of the common stock of Pod Corporation, a joint venture that they organized for wholesaling fruits. Which of the corporations should report their joint venture interests under the equity method?

• 1. Far, Get, and Hog

• 1. Far and Get

• 1. Get and Hog

• 1. Far and Hog

Income taxes are currently due on intercompany profits when:

• 1. Profits originate from upstream sales

• 1. Separate-company tax returns are filed

• 1. Consolidated tax returns are filed

• 1. Affiliates are accounted for as consolidated subsidiaries

1. If the treasury stock approach is used, Pet’s income and controlling share of consolidated net income for 2016 will be computed:

• 1. a  $100,000 + (90% x $60,000)

• 1. $100,000 + (90% x $67,500)

• 1. $100,000 + (90% x $67,500) - (90% x $30,000)

• 1. ($100,000 + $60,000) - (10% x $67,500)

1. If the conventional approach is used, Pet’s income on a consolidated basis is denoted P = $100,000 + $0.9S and Sod’s income on a consolidated basis is denoted S = $60,000 + 0.15P. Given these equations, the controlling share of consolidated net income is equal to:

• 1. P

• 1. 0.85P

• 1. P - 0.1S

• 1. P + S - 0.15S