Fundamentals of Advanced Accounting 5Th Edition Hoyle Test Bank Full Chapter PDF

Fundamentals of Advanced Accounting
5th Edition Hoyle Test Bank

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Chapter 06
Variable Interest Entities, Intra-Entity Debt, Consolidated Cash

Flows, and Other Issues
Multiple Choice Questions
1. On January 1, 2011, Riley Corp. acquired some of the outstanding bonds of

one of its subsidiaries. The bonds had a carrying value of $421,620, and Riley
paid $401,937 for them. How should you account for the difference between
the carrying value and the purchase price in the consolidated financial
statements for 2011?
A. The difference is added to the carrying value of the debt.
B. The difference is deducted from the carrying value of the debt.
C. The difference is treated as a loss from the extinguishment of the debt.
D. The difference is treated as a gain from the extinguishment of the debt.
E. The difference does not influence the consolidated financial statements.

2. Regency Corp. recently acquired $500,000 of the bonds of Safire Co., one of
its subsidiaries, paying more than the carrying value of the bonds. According
to the most practical view of this intra-entity transaction, to whom would the
loss be attributed?
A. To Safire because the bonds were issued by Safire.
B. The loss should be allocated between Safire and Regency based on the
purchase price and the original face value of the debt.
C. The loss should be amortized over the life of the bonds and need not be
attributed to either party.
D. The loss should be deferred until it can be determined to whom the

attribution can be made.
E. To Regency because Regency is the controlling party in the business

combination.
3. Which one of the following characteristics of preferred stock would make the
stock a dilutive security for earnings per share?
A. The preferred stock is callable.
B. The preferred stock is convertible.
C. The preferred stock is cumulative.
D. The preferred stock is noncumulative.
E. The preferred stock is participating.

4. Where do dividends paid to the non-controlling interest of a subsidiary appear
on a consolidated statement of cash flows?
A. Cash flows from operating activities.
B. Cash flows from investing activities.
C. Cash flows from financing activities.
D. Supplemental schedule of noncash investing and financing activities.
E. They do not appear in the consolidated statement of cash flows.
5. Where do dividends paid by a subsidiary to the parent company appear in a

consolidated statement of cash flows?
A. Cash flows from operating activities.
B. Cash flows from investing activities.
C. Cash flows from financing activities.
D. Supplemental schedule of noncash investing and financing activities.
E. They do not appear in the consolidated statement of cash flows.

6. Where do intra-entity sales of inventory appear in a consolidated statement
of cash flows?
A. They do not appear in the consolidated statement of cash flows.
B. Supplemental schedule of noncash investing and financing activities.
C. Cash flows from operating activities.
D. Cash flows from investing activities.
E. Cash flows from financing activities.
7. How do intra-entity sales of inventory affect the preparation of a consolidated

statement of cash flows?
A. They must be added in calculating cash flows from investing activities.
B. They must be deducted in calculating cash flows from investing activities.
C. They must be added in calculating cash flows from operating activities.
D. Because the consolidated balance sheet and income statement are used in
preparing the consolidated statement of cash flows, no special elimination
is required.
E. They must be deducted in calculating cash flows from operating activities.

8. How would consolidated earnings per share be calculated if the subsidiary
has no convertible securities or warrants?
A. Parent's earnings per share plus subsidiary's earnings per share.
B. Parent's net income divided by parent's number of shares outstanding.
C. Consolidated net income divided by parent's number of shares outstanding.
D. Average of parent's earnings per share and subsidiary's earnings per share.
E. Consolidated income divided by total number of shares outstanding for the

parent and subsidiary.
9. On January 1, 2011, Riney Co. owned 80% of the common stock of Garvin Co.
On that date, Garvin's stockholders' equity accounts had the following
balances:
The balance in Riney's Investment in Garvin Co. account was $552,000, and
the non-controlling interest was $138,000. On January 1, 2011, Garvin Co. sold
10,000 shares of previously unissued common stock for $15 per share. Riney
did not acquire any of these shares.
What is the balance in Investment in Garvin Co. after the sale of the 10,000
shares of common stock?
A. $552,000.
B. $560,000.
C. $460,000.
D. $404,000.
E. $672,000.
10. On January 1, 2011, Riney Co. owned 80% of the common stock of Garvin Co.
On that date, Garvin's stockholders' equity accounts had the following
balances:
The balance in Riney's Investment in Garvin Co. account was $552,000, and
the non-controlling interest was $138,000. On January 1, 2011, Garvin Co. sold
10,000 shares of previously unissued common stock for $15 per share. Riney
did not acquire any of these shares.
What is the balance in Non-controlling Interest in Garvin Co. after the sale of
the 10,000 shares of common stock?
A. $138,000.
B. $101,000.
C. $280,000.
D. $230,000.
E. $168,000.
11. Rojas Co. owned 7,000 shares (70%) of the outstanding 10%, $100 par
preferred stock and 60% of the outstanding common stock of Brett Co. When
Brett reported net income of $780,000, what was the non-controlling interest
in the subsidiary's income?
A. $234,000.
B. $273,000.
C. $302,000.
D. $312,000.
E. $284,000.
12. Knight Co. owned 80% of the common stock of Stoop Co. Stoop had 50,000
shares of $5 par value common stock and 2,000 shares of preferred stock
outstanding. Each preferred share received an annual per share dividend of
$10 and is convertible into four shares of common stock. Knight did not own
any of Stoop's preferred stock. Stoop also had 600 bonds outstanding, each of
which is convertible into ten shares of common stock. Stoop's annual after-
tax interest expense for the bonds was $22,000. Knight did not own any of
Stoop's bonds. Stoop reported income of $300,000 for 2011.
What was the amount of Stoop's earnings that should be included in

calculating consolidated diluted earnings per share?
A. $300,000.
B. $240,000.
C. $257,600.
D. $322,000.
E. $201,250.
13. Knight Co. owned 80% of the common stock of Stoop Co. Stoop had 50,000
shares of $5 par value common stock and 2,000 shares of preferred stock
outstanding. Each preferred share received an annual per share dividend of
$10 and is convertible into four shares of common stock. Knight did not own
any of Stoop's preferred stock. Stoop also had 600 bonds outstanding, each of
which is convertible into ten shares of common stock. Stoop's annual after-
tax interest expense for the bonds was $22,000. Knight did not own any of
Stoop's bonds. Stoop reported income of $300,000 for 2011.
Stoop's diluted earnings per share (rounded) is calculated to be
A. $5.62.
B. $3.26.
C. $3.11.
D. $5.03.
E. $4.28.
14. Campbell Inc. owned all of Gordon Corp. For 2011, Campbell reported net
income (without consideration of its investment in Gordon) of $280,000 while
the subsidiary reported $112,000. The subsidiary had bonds payable
outstanding on January 1, 2011, with a book value of $297,000. The parent
acquired the bonds on that date for $281,000. During 2011, Campbell reported
interest income of $31,000 while Gordon reported interest expense of
$29,000. What is consolidated net income for 2011?
A. $406,000.
B. $374,000.
C. $378,000.
D. $410,000.
E. $394,000.
15. Vontkins Inc. owned all of Quasimota Co. The subsidiary had bonds payable
outstanding on January 1, 2010, with a book value of $265,000. The parent
acquired the bonds on that date for $288,000. Subsequently, Vontkins
reported interest income of $25,000 in 2010 while Quasimota reported
interest expense of $29,000. Consolidated financial statements were prepared
for 2011. What adjustment would have been required for the retained
earnings balance as of January 1, 2011?
A. reduction of $27,000.
B. reduction of $4,000.
C. reduction of $19,000.
D. reduction of $30,000.
E. reduction of $20,000.
16. Tray Co. reported current earnings of $560,000 while paying $56,000 in cash
dividends. Sparrish Co. earned $140,000 in net income and distributed
$14,000 in dividends. Tray held a 70% interest in Sparrish for several years, an
investment that it originally acquired by transferring consideration equal to
the book value of the underlying net assets. Tray used the initial value
method to account for these shares.
On January 1, 2011, Sparrish acquired in the open market $70,000 of Tray's
8% bonds. The bonds had originally been issued several years ago at 92,
reflecting a 10% effective interest rate. On the date of the bond purchase, the
book value of the bonds payable was $67,600. Sparrish paid $65,200 based on
a 12% effective interest rate over the remaining life of the bonds.
What is the non-controlling interest's share of the subsidiary's net income?
A. $42,000.
B. $37,800.
C. $39,600.
D. $40,070.
E. $44,080.
17. A company had common stock with a total par value of $18,000,000 and fair
value of $62,000,000; and 7% preferred stock with a total par value of
$6,000,000 and a fair value of $8,000,000. The book value of the company was
$85,000,000. If 90% of this company's total equity was acquired by another,
what portion of the value would be assigned to the non-controlling interest?
A. $8,500,000.
B. $7,000,000.
C. $6,200,000.
D. $2,400,000.
E. $6,929,400.
18. Cadion Co. owned a controlling interest in Knieval Inc. Cadion reported sales
of $420,000 during 2011 while Knieval reported $280,000. Inventory costing
$28,000 was transferred from Knieval to Cadion (upstream) during the year
for $56,000. Of this amount, twenty-five percent was still in ending inventory
at year's end. Total receivables on the consolidated balance sheet were
$112,000 at the first of the year and $154,000 at year-end. No intra-entity
debt existed at the beginning or ending of the year. Using the direct approach,
what is the consolidated amount of cash collected by the business
combination from its customers?
A. $602,000.
B. $644,000.
C. $686,000.
D. $714,000.
E. $592,000.
19. Parker owned all of Odom Inc. Although the Investment in Odom Inc. account
had a balance of $834,000, the subsidiary's 12,000 shares had an underlying
book value of only $56 per share. On January 1, 2011, Odom issued 3,000 new
shares to the public for $70 per share. How does this transaction affect the
Investment in Odom Inc. account?
A. It should be decreased by $141,120.
B. It should be increased by $176,400.
C. It should be increased by $48,000.
D. It should be decreased by $128,400.
E. It is not affected since the shares were sold to outside parties.

20. These questions are based on the following information and should be viewed
as independent situations.
Popper Co. acquired 80% of the common stock of Cocker Co. on January 1,
2009, when Cocker had the following stockholders' equity accounts.
To acquire this interest in Cocker, Popper paid a total of $682,000 with any
excess acquisition date fair value over book value being allocated to goodwill,
which has been measured for impairment annually and has not been
determined to be impaired as of January 1, 2012.
On January 1, 2012, Cocker reported a net book value of $1,113,000 before
the following transactions were conducted. Popper uses the equity method to
account for its investment in Cocker, thereby reflecting the change in book
value of Cocker.
On January 1, 2012, Cocker issued 10,000 additional shares of common stock

for $35 per share. Popper acquired 8,000 of these shares. How would this
transaction affect the additional paid-in capital of the parent company?
A. increase it by $28,700.
B. increase it by $16,800.
C. $0.
D. increase it by $280,000.
E. increase it by $593,600.
value of Cocker.
On January 1, 2012, Cocker issued 10,000 additional shares of common stock
for $21 per share. Popper did not acquire any of this newly issued stock. How
would this transaction affect the additional paid-in capital of the parent
company?
A. $0.
B. decrease it by $23,240.
C. decrease it by $68,250.
D. decrease it by $45,060.
E. decrease it by $43,680.
value of Cocker.
On January 1, 2012, Cocker reacquired 8,000 of the outstanding shares of its

own common stock for $34 per share. None of these shares belonged to
Popper. How would this transaction have affected the additional paid-in
capital of the parent company?
A. $0.
B. decrease it by $32,900.
C. decrease it by $45,700.
D. decrease it by $49,400.
E. decrease it by $50,500.
23. If newly issued debt is issued from a parent to its subsidiary, which of the
following statements is false?
A. Any premium or discount on bonds payable is exactly offset by a premium

or discount on bond investment.
B. There will be $0 net gain or loss on the bond transaction.
C. Interest expense needs to be eliminated on the consolidated income

statement.
D. Interest revenue needs to be eliminated on the consolidated income

statement.
E. A net gain or loss on the bond transaction will be reported.

24. The accounting problems encountered in consolidated intra-entity debt
transactions when the debt is acquired by an affiliate from an outside party
include all of the following except:
A. Both the investment and debt accounts have to be eliminated now and for
each future consolidated financial statement despite containing differing
balances.
B. Subsequent interest revenue/expense must be removed although these

balances fail to agree in amount.
C. A gain or loss must be recognized by both parent and subsidiary

companies.
D. Changes in the investment, debt, interest revenue, and interest expense

accounts occur constantly because of the amortization process.
E. The gain or loss on the retirement of the debt must be recognized by the
business combination in the year the debt is acquired, even though this
balance does not appear on the financial records of either company.
25. Which of the following statements is true concerning the acquisition of
existing debt of a consolidated affiliate in the year of the debt acquisition?
A. Any gain or loss is deferred on a consolidated income statement.
B. Any gain or loss is recognized on a consolidated income statement.
C. Interest revenue on the affiliated debt is recognized on a consolidated

income statement.
D. Interest expense on the affiliated debt is recognized on a consolidated

income statement.
E. Consolidated retained earnings is adjusted for the difference between the

purchase price and the carrying value of the bonds.
26. Which of the following statements is false regarding the assignment of a gain
or loss on intercompany bond transfer?
A. Subsidiary net income is not affected by a gain on bond transaction.
B. Subsidiary net income is not affected by a loss on bond transaction.
C. Parent Company net income is not affected by a gain on bond transaction.
D. Parent Company net income is not affected by a loss on bond transaction.
E. Consolidated net income is not affected by a gain or loss on bond

transaction.
27. What would differ between a statement of cash flows for a consolidated
company and an unconsolidated company using the indirect method?
A. Parent's dividends would be subtracted as a financing activity.
B. Gain on sale of land would be deducted from net income.
C. Non-controlling interest in net income of subsidiary would be added to net

income.
D. Proceeds from the sale of long-term investments would be added to

investing activities.
E. Loss on sale of equipment would be added to net income.
28. Which of the following statements is true for a consolidated statement of

cash flows?
A. Parent's dividends and subsidiary's dividends are deducted as a financing

activity.
B. Only parent's dividends are deducted as a financing activity.
C. Parent's dividends and its share of subsidiary's dividends are deducted as

a financing activity.
D. All of parent's dividends and non-controlling interest of subsidiary's

dividends are deducted as a financing activity.
E. Neither parent's or subsidiary's dividends are deducted as a financing

activity.
29. In reporting consolidated earnings per share when there is a wholly owned
subsidiary, which of the following statements is true?
A. Parent company earnings per share equals consolidated earnings per share
when the equity method is used.
B. Parent company earnings per share is equal to consolidated earnings per

share when the initial value method is used.
C. Parent company earnings per share is equal to consolidated earnings per

share when the partial equity method is used and acquisition-date fair
value exceeds book value.
D. Parent company earnings per share is equal to consolidated earnings per

share when the partial equity method is used and acquisition-date fair
value is less than book value.
E. Preferred dividends are not deducted from net income for consolidated
earnings per share.
30. A subsidiary issues new shares of common stock at an amount below book
value. Outsiders buy all of these shares. Which of the following statements is
true?
A. The parent's additional paid-in capital will be increased.
B. The parent's investment in subsidiary will be increased.
C. The parent's retained earnings will be increased.
D. The parent's additional paid-in capital will be decreased.
E. The parent's retained earnings will be decreased.

31. A subsidiary issues new shares of common stock. If the parent acquires all of
these shares at an amount greater than book value, which of the following
statements is true?
A. The investment in subsidiary will decrease.
B. Additional paid-in capital will decrease.
C. Retained earnings will increase.
D. The investment in subsidiary will increase.
E. No adjustment will be necessary.
32. If a subsidiary reacquires its outstanding shares from outside ownership for
more than book value, which of the following statements is true?
A. Additional paid-in capital on the parent company's books will decrease.
B. Investment in subsidiary will increase.
C. Treasury stock on the parent's books will increase.
D. Treasury stock on the parent's books will decrease.
E. No adjustment is necessary.
33. If a subsidiary issues a stock dividend, which of the following statements is
true?
A. Investment in subsidiary on the parent's books will increase.
B. Investment in subsidiary on the parent's books will decrease.
C. Additional paid-in capital on the parent's books will increase.
D. Additional paid-in capital on the parent's books will decrease.
34. Stevens Company has had bonds payable of $10,000 outstanding for several
years. On January 1, 2011, when there was an unamortized discount of $2,000
and a remaining life of 5 years, its 80% owned subsidiary, Matthews
Company, purchased the bonds in the open market for $11,000. The bonds
pay 6% interest annually on December 31. The companies use the straight-
line method to amortize interest revenue and expense. Compute the
consolidated gain or loss on a consolidated income statement for 2011.
A. $1,000 gain.
B. $1,000 loss.
C. $2,000 loss.
D. $3,000 loss.
E. $3,000 gain.
35. Keenan Company has had bonds payable of $20,000 outstanding for several
years. On January 1, 2011, there was an unamortized premium of $2,000 with
a remaining life of 10 years, Keenan's parent, Ross, Inc., purchased the bonds
in the open market for $19,000. Keenan is a 90% owned subsidiary of Ross.
The bonds pay 8% interest annually on December 31. The companies use the
straight-line method to amortize interest revenue and expense. Compute the
consolidated gain or loss on a consolidated income statement for 2011.
A. $3,000 gain.
B. $3,000 loss.
C. $1,000 gain.
D. $1,000 loss.
E. $2,000 gain.
36. On January 1, 2009, Nichols Company acquired 80% of Smith Company's
common stock and 40% of its non-voting, cumulative preferred stock. The
consideration transferred by Nichols was $1,200,000 for the common and
$124,000 for the preferred. Any excess acquisition-date fair value over book
value is considered goodwill. The capital structure of Smith immediately prior
to the acquisition is:
Determine the amount and account to be recorded for Nichols' investment in

Smith.
A. $1,324,000 for Investment in Smith.
B. $1,200,000 for Investment in Smith.
C. $1,200,000 for Investment in Smith's Common Stock and $124,000 for

Investment in Smith's Preferred Stock.
D. $1,200,000 for Investment in Smith's Common Stock and $120,000 for

Investment in Smith's Preferred Stock.
E. $1,448,000 for Investment in Smith's Common Stock.

Compute the goodwill recognized in consolidation.
A. $800,000.
B. $310,000.
C. $124,000.
D. $0.
E. $(196,000.)
Compute the non-controlling interest in Smith at date of acquisition.
A. $486,000.
B. $480,000.
C. $300,000.
D. $150,000.
E. $120,000.
The consolidation entry at date of acquisition will include (referring to

Smith):
A. Debit Common stock $500,000 and debit Preferred stock $120,000.
B. Debit Common stock $400,000 and debit Additional paid-in capital

$160,000.
C. Debit Common stock $500,000 and debit Preferred stock $300,000.
D. Debit Common stock $500,000, debit Preferred stock $120,000, and debit
Additional paid-in capital $200,000.
E. Debit Common stock $400,000, debit Preferred stock $300,000, debit

Additional paid-in capital $200,000, and debit Retained earnings $500,000.
If Smith's net income is $100,000 in the year following the acquisition,
A. the portion allocated to the common stock (residual amount) is $92,800.
B. $10,800 preferred stock dividend will be subtracted from net income

attributed to common stock in arriving at non-controlling interest in
subsidiary income.
C. the non-controlling interest balance will be $27,200.
D. the preferred stock dividend will be ignored in non-controlling interest in

subsidiary net income because Nichols owns the non-controlling interest
of preferred stock.
E. the non-controlling interest in subsidiary net income is $30,800.

41. The following information has been taken from the consolidation worksheet
of Graham Company and its 80% owned subsidiary, Stage Company.
(1.) Graham reports a loss on sale of land of $5,000. The land cost Graham
$20,000.
(2.) Non-controlling interest in Stage's net income was $30,000.
(3.) Graham paid dividends of $15,000.
(4.) Stage paid dividends of $10,000.
(5.) Excess acquisition-date fair value over book value was expensed by
$6,000.
(6.) Consolidated accounts receivable decreased by $8,000.
(7.) Consolidated accounts payable decreased by $7,000.
How is the loss on sale of land reported on the consolidated statement of

cash flows?
A. $20,000 added to net income as an operating activity.
B. $20,000 deducted from net income as an operating activity.
C. $15,000 deducted from net income as an operating activity.
D. $5,000 added to net income as an operating activity.
E. $5,000 deducted from net income as an operating activity.

$20,000.
$6,000.
Where does the non-controlling interest in Stage's net income appear on a

consolidated statement of cash flows?
A. $30,000 added to net income as an operating activity on the consolidated

statement of cash flows.
B. $30,000 deducted from net income as an operating activity on the

consolidated statement of cash flows.
C. $30,000 increase as an investing activity on the consolidated statement of

cash flows.
D. $30,000 decrease as an investing activity on the consolidated statement of

cash flows.
E. Non-controlling interest in Stage's net income does not appear on a

consolidated statement of cash flows.
$20,000.
$6,000.
How will dividends be reported in consolidated statement of cash flows?
A. $15,000 decrease as a financing activity.
B. $25,000 decrease as a financing activity.
C. $10,000 decrease as a financing activity.
D. $23,000 decrease as a financing activity.
E. $17,000 decrease as a financing activity.

$20,000.
$6,000.
How is the amount of excess acquisition-date fair value over book value
recognized in a consolidated statement of cash flows assuming the indirect
method is used?
A. It is ignored.
B. $6,000 subtracted from net income.
C. $4,800 subtracted from net income.
D. $6,000 added to net income.
E. $4,800 added to net income.

$20,000.
$6,000.
Using the indirect method, where does the decrease in accounts receivable
appear in a consolidated statement of cash flows?
A. $8,000 increase to net income as an operating activity.
B. $8,000 decrease to net income as an operating activity.
C. $6,400 increase to net income as an operating activity.
D. $6,400 decrease to net income as an operating activity.
E. $8,000 increase as an investing activity.

$20,000.
$6,000.
Using the indirect method, where does the decrease in accounts payable
appear in a consolidated statement of cash flows?
A. $7,000 increase to net income as an operating activity.
B. $7,000 decrease to net income as an operating activity.
C. $5,600 increase to net income as an operating activity.
D. $5,600 decrease to net income as an operating activity.
E. $7,000 increase as a financing activity.

47. Webb Company owns 90% of Jones Company. The original balances
presented for Jones and Webb as of January 1, 2011, are as follows:
Jones sells 20,000 shares of previously unissued shares of its common stock
to outside parties for $10 per share.
What is the adjusted book value of Jones after the sale of the shares?
A. $200,000.
B. $1,400,000.
C. $1,280,000.
D. $1,050,000.
E. $1,440,000.
What is the new percent ownership of Webb in Jones after the stock
issuance?
A. 75%.
B. 90%.
C. 80%.
D. 64%.
E. 60%.
What adjustment is needed for Webb's investment in Jones account?
A. $180,000 increase.
B. $180,000 decrease.
C. $30,000 increase.
D. $30,000 decrease.
presented for Jones and Webb as of January 1, 2011 are as follows:
Assume Jones issues 20,000 new shares of its common stock for $15 per
share. Of this total, Webb acquires 18,000 shares to maintain its 90% interest
in Jones.
What is the adjusted book value of Jones after the stock issuance?
A. $1,500,000.
B. $1,200,000.
C. $1,350,000.
D. $1,080,000.
E. $1,335,000.
presented for Jones and Webb as of January 1, 2011 are as follows:
Assume Jones issues 20,000 new shares of its common stock for $15 per
share. Of this total, Webb acquires 18,000 shares to maintain its 90% interest
in Jones.
After acquiring the additional shares, what adjustment is needed for Webb's
investment in Jones account?
A. $270,000 increase.
B. $270,000 decrease.
C. $27,000 increase.
D. $27,000 decrease.
52. Ryan Company owns 80% of Chase Company. The original balances
presented for Ryan and Chase as of January 1, 2011, are as follows:
Assume Chase issues 30,000 additional shares common stock solely to Ryan
for $12 per share.
What is the new percent ownership Ryan owns in Chase?
A. 80.0%.
B. 87.5%.
C. 90.0%.
D. 75.0%.
E. 82.5%.
53. Ryan Company owns 80% of Chase Company. The original balances
presented for Ryan and Chase as of January 1, 2011, are as follows:
Assume Chase issues 30,000 additional shares common stock solely to Ryan
for $12 per share.
What is the adjusted book value of Chase Company after the issuance of the
shares?
A. $608,000.
B. $720,000.
C. $680,000.
D. $760,000.
E. $400,000.
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Fundamentals of Advanced Accounting

5th Edition Hoyle Test Bank

Variable Interest Entities, Intra-Entity Debt, Consolidated Cash

Multiple Choice Questions

1. On January 1, 2011, Riley Corp. acquired some of the outstanding bonds of

A. The difference is added to the carrying value of the debt.

B. The difference is deducted from the carrying value of the debt.

C. The difference is treated as a loss from the extinguishment of the debt.

D. The difference is treated as a gain from the extinguishment of the debt.

E. The difference does not influence the consolidated financial statements.

A. To Safire because the bonds were issued by Safire.

D. The loss should be deferred until it can be determined to whom the

E. To Regency because Regency is the controlling party in the business

A. The preferred stock is callable.

B. The preferred stock is convertible.

C. The preferred stock is cumulative.

D. The preferred stock is noncumulative.

E. The preferred stock is participating.

A. Cash flows from operating activities.

B. Cash flows from investing activities.

C. Cash flows from financing activities.

D. Supplemental schedule of noncash investing and financing activities.

E. They do not appear in the consolidated statement of cash flows.

5. Where do dividends paid by a subsidiary to the parent company appear in a

A. Cash flows from operating activities.

B. Cash flows from investing activities.

C. Cash flows from financing activities.

D. Supplemental schedule of noncash investing and financing activities.

E. They do not appear in the consolidated statement of cash flows.

A. They do not appear in the consolidated statement of cash flows.

B. Supplemental schedule of noncash investing and financing activities.

C. Cash flows from operating activities.

D. Cash flows from investing activities.

E. Cash flows from financing activities.

7. How do intra-entity sales of inventory affect the preparation of a consolidated

A. They must be added in calculating cash flows from investing activities.

B. They must be deducted in calculating cash flows from investing activities.

C. They must be added in calculating cash flows from operating activities.

E. They must be deducted in calculating cash flows from operating activities.

A. Parent's earnings per share plus subsidiary's earnings per share.

B. Parent's net income divided by parent's number of shares outstanding.

C. Consolidated net income divided by parent's number of shares outstanding.

E. Consolidated income divided by total number of shares outstanding for the

What was the amount of Stoop's earnings that should be included in

Stoop's diluted earnings per share (rounded) is calculated to be

A. It should be decreased by $141,120.

B. It should be increased by $176,400.

C. It should be increased by $48,000.

D. It should be decreased by $128,400.

E. It is not affected since the shares were sold to outside parties.

On January 1, 2012, Cocker issued 10,000 additional shares of common stock

On January 1, 2012, Cocker reacquired 8,000 of the outstanding shares of its

A. Any premium or discount on bonds payable is exactly offset by a premium

B. There will be $0 net gain or loss on the bond transaction.

C. Interest expense needs to be eliminated on the consolidated income

D. Interest revenue needs to be eliminated on the consolidated income

E. A net gain or loss on the bond transaction will be reported.