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 08
Student: ___________________________________________________________________________

1. A Inc. owns 80% of B's outstanding voting shares. Under which of the following scenarios would A's
ownership percentage of B change?
A. B Inc. announces a 2-for-1 stock split to all its common shareholders.
B. B issues an additional 10,000 voting shares; A acquires 8,000 shares of the new issue.
C. B issues an additional 10,000 voting shares; A acquires 6,400 shares of the new issue.
D. B retires 20,000 voting share, and in doing so, buy back 16,000 shares from A.
2. Assume that X Corp. controls Y Corp., X constantly purchases and sells Y's voting shares on the open
market while always ensuring that it maintains a controlling interest over Y. Which of the following
statements pertaining to X buying and selling activity is correct?
A. X's activity has no effect on the non-controlling interest.
B. As X sells shares of Y, the non-controlling interest increases.
C. As X sells shares of Y, the non-controlling interest decreases.
D. As X buys shares of Y, the non-controlling interest increases.
3. ABC Inc. purchased 35,000 voting shares out of 123 Inc.'s 50,000 outstanding voting shares for $350,000
on January 1, 2012. On the date of acquisition, 123's common stock and retained earnings were valued at
$120,000 and $180,000, respectively. 123's book values approximated its fair values on the acquisition
date with the exception of a patent and a trademark, neither of which had been previously recorded.
The fair market values of the patent and trademark on the date of acquisition were $30,000 and $20,000
respectively.
On January 2, 2012, ABC sold 14,000 shares of 123 on the open market for $98,000.
ABC Inc. uses the equity method to account for its investment in 123 Inc.
What is the amount of goodwill arising from this business combination?
A. ($5,000).
B. Nil.
C. $5,000.
D. $150,000.
4. ABC Inc. purchased 35,000 voting shares out of 123 Inc.'s 50,000 outstanding voting shares for $350,000
on January 1, 2012. On the date of acquisition, 123's common stock and retained earnings were valued at
$120,000 and $180,000, respectively. 123's book values approximated its fair values on the acquisition
date with the exception of a patent and a trademark, neither of which had been previously recorded.
The fair market values of the patent and trademark on the date of acquisition were $30,000 and $20,000
respectively.
On January 2, 2012, ABC sold 14,000 shares of 123 on the open market for $98,000.
ABC Inc. uses the equity method to account for its investment in 123 Inc.
What percentage of its Investment in 123 was sold by ABC?
A. 14%
B. 21%
C. 28%
D. 40%
5. ABC Inc. purchased 35,000 voting shares out of 123 Inc.'s 50,000 outstanding voting shares for $350,000
on January 1, 2012. On the date of acquisition, 123's common stock and retained earnings were valued at
$120,000 and $180,000, respectively. 123's book values approximated its fair values on the acquisition
date with the exception of a patent and a trademark, neither of which had been previously recorded.
The fair market values of the patent and trademark on the date of acquisition were $30,000 and $20,000
respectively.
On January 2, 2012, ABC sold 14,000 shares of 123 on the open market for $98,000.
ABC Inc. uses the equity method to account for its investment in 123 Inc.
What is ABC's ownership interest in 123 after its sale?
A. 21%
B. 36%
C. 42%
D. 56%
6. ABC Inc. purchased 35,000 voting shares out of 123 Inc.'s 50,000 outstanding voting shares for $350,000
on January 1, 2012. On the date of acquisition, 123's common stock and retained earnings were valued at
$120,000 and $180,000, respectively. 123's book values approximated its fair values on the acquisition
date with the exception of a patent and a trademark, neither of which had been previously recorded.
The fair market values of the patent and trademark on the date of acquisition were $30,000 and $20,000
respectively.
On January 2, 2012, ABC sold 14,000 shares of 123 on the open market for $98,000.
ABC Inc. uses the equity method to account for its investment in 123 Inc.
What would be the balance in the investment in 123 Inc. accounts after the sale?
A. $100,000.
B. $150,000.
C. $210,000.
D. $225,000.
7. ABC Inc. purchased 35,000 voting shares out of 123 Inc.'s 50,000 outstanding voting shares for $350,000
on January 1, 2012. On the date of acquisition, 123's common stock and retained earnings were valued at
$120,000 and $180,000, respectively. 123's book values approximated its fair values on the acquisition
date with the exception of a patent and a trademark, neither of which had been previously recorded.
The fair market values of the patent and trademark on the date of acquisition were $30,000 and $20,000
respectively.
On January 2, 2012, ABC sold 14,000 shares of 123 on the open market for $98,000.
ABC Inc. uses the equity method to account for its investment in 123 Inc.
What would be the amount of the gain or loss on the sale of the 14,000 shares?
A. A loss of $42,000.
B. A loss of $4,000.
C. A gain of $4,000.
D. A gain of $54,000.
8. ABC Inc. purchased 35,000 voting shares out of 123 Inc.'s 50,000 outstanding voting shares for $350,000
on January 1, 2012. On the date of acquisition, 123's common stock and retained earnings were valued at
$120,000 and $180,000, respectively. 123's book values approximated its fair values on the acquisition
date with the exception of a patent and a trademark, neither of which had been previously recorded.
The fair market values of the patent and trademark on the date of acquisition were $30,000 and $20,000
respectively.
On January 2, 2012, ABC sold 14,000 shares of 123 on the open market for $98,000.
ABC Inc. uses the equity method to account for its investment in 123 Inc.
What is the amount of unamortized acquisition differential (including goodwill) after the sale?
A. $84,000.
B. $140,000.
C. $200,000.
D. $300,000.
9. ABC Inc. purchased 35,000 voting shares out of 123 Inc.'s 50,000 outstanding voting shares for $350,000
on January 1, 2012. On the date of acquisition, 123's common stock and retained earnings were valued at
$120,000 and $180,000, respectively. 123's book values approximated its fair values on the acquisition
date with the exception of a patent and a trademark, neither of which had been previously recorded.
The fair market values of the patent and trademark on the date of acquisition were $30,000 and $20,000
respectively.
On January 2, 2012, ABC sold 14,000 shares of 123 on the open market for $98,000.
ABC Inc. uses the equity method to account for its investment in 123 Inc.
What is the amount of the non-controlling interest at acquisition?
A. $8,400.
B. $18,000.
C. $50,000.
D. $150,000.
10. ABC Inc. purchased 35,000 voting shares out of 123 Inc.'s 50,000 outstanding voting shares for $350,000
on January 1, 2012. On the date of acquisition, 123's common stock and retained earnings were valued at
$120,000 and $180,000, respectively. 123's book values approximated its fair values on the acquisition
date with the exception of a patent and a trademark, neither of which had been previously recorded.
The fair market values of the patent and trademark on the date of acquisition were $30,000 and $20,000
respectively.
On January 2, 2012, ABC sold 14,000 shares of 123 on the open market for $98,000.
ABC Inc. uses the equity method to account for its investment in 123 Inc.
What is the carrying value of the trademark after the sale?
A. $12,600.
B. $18,000.
C. $20,000.
D. $30,000.
11. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000 outstanding
voting shares for $240,000. On that date, Marvin's common stock and retained earnings were valued at
$60,000 and $90,000, respectively. Marvin's book values approximated its fair values on the acquisition
date with the exception of the company's equipment, which was estimated to have a fair market value that
was $50,000 in excess of its recorded book value. The equipment was estimated to have a useful life of
eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market for
$45,000. On this date, Marvin's book values were equal to its fair market values with the exception of the
company's equipment, which is now thought to be undervalued by $60,000. Moreover, the equipment's
estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What is the amount of goodwill arising from Hanson's January 1, 2012 acquisition?

A. $50,000.
B. $60,000.
C. $80,000.
D. $200,000.
12. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000 outstanding
voting shares for $240,000. On that date, Marvin's common stock and retained earnings were valued at
$60,000 and $90,000, respectively. Marvin's book values approximated its fair values on the acquisition
date with the exception of the company's equipment, which was estimated to have a fair market value that
was $50,000 in excess of its recorded book value. The equipment was estimated to have a useful life of
eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market for
$45,000. On this date, Marvin's book values were equal to its fair market values with the exception of the
company's equipment, which is now thought to be undervalued by $60,000. Moreover, the equipment's
estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What percentage of Marvin's shares was purchased by Hanson on January 1, 2012?

A. 10%
B. 60%
C. 70%
D. 90%
13. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000 outstanding
voting shares for $240,000. On that date, Marvin's common stock and retained earnings were valued at
$60,000 and $90,000, respectively. Marvin's book values approximated its fair values on the acquisition
date with the exception of the company's equipment, which was estimated to have a fair market value that
was $50,000 in excess of its recorded book value. The equipment was estimated to have a useful life of
eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market for
$45,000. On this date, Marvin's book values were equal to its fair market values with the exception of the
company's equipment, which is now thought to be undervalued by $60,000. Moreover, the equipment's
estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
Assuming that Hanson had no recorded goodwill prior to January 1, 2012, what would be the amount of
goodwill appearing on Hanson's December 31, 2012 consolidated balance sheet?

A. $75,000.
B. $80,000.
C. $117,000.
D. $195,000.
14. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000 outstanding
voting shares for $240,000. On that date, Marvin's common stock and retained earnings were valued at
$60,000 and $90,000, respectively. Marvin's book values approximated its fair values on the acquisition
date with the exception of the company's equipment, which was estimated to have a fair market value that
was $50,000 in excess of its recorded book value. The equipment was estimated to have a useful life of
eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market for
$45,000. On this date, Marvin's book values were equal to its fair market values with the exception of the
company's equipment, which is now thought to be undervalued by $60,000. Moreover, the equipment's
estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
Assuming that Hanson had no recorded goodwill prior to January 1, 2012, what would be the amount of
goodwill appearing on Hanson' December 31, 2013 Consolidated Balance Sheet?

A. $75,000
B. $136,500
C. $195,000
D. $209,900
15. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000 outstanding
voting shares for $240,000. On that date, Marvin's common stock and retained earnings were valued at
$60,000 and $90,000, respectively. Marvin's book values approximated its fair values on the acquisition
date with the exception of the company's equipment, which was estimated to have a fair market value that
was $50,000 in excess of its recorded book value. The equipment was estimated to have a useful life of
eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market for
$45,000. On this date, Marvin's book values were equal to its fair market values with the exception of the
company's equipment, which is now thought to be undervalued by $60,000. Moreover, the equipment's
estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What is Hanson's ownership interest in Marvin after its January 1, 2013 purchase?

A. 60%
B. 70%
C. 80%
D. 90%
16. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000 outstanding
voting shares for $240,000. On that date, Marvin's common stock and retained earnings were valued at
$60,000 and $90,000, respectively. Marvin's book values approximated its fair values on the acquisition
date with the exception of the company's equipment, which was estimated to have a fair market value that
was $50,000 in excess of its recorded book value. The equipment was estimated to have a useful life of
eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market for
$45,000. On this date, Marvin's book values were equal to its fair market values with the exception of the
company's equipment, which is now thought to be undervalued by $60,000. Moreover, the equipment's
estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What is the amount of the acquisition differential amortization for 2012 (excluding goodwill impairment)?

A. $4,375
B. $5,625
C. $6,250
D. $12,000
17. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000 outstanding
voting shares for $240,000. On that date, Marvin's common stock and retained earnings were valued at
$60,000 and $90,000, respectively. Marvin's book values approximated its fair values on the acquisition
date with the exception of the company's equipment, which was estimated to have a fair market value that
was $50,000 in excess of its recorded book value. The equipment was estimated to have a useful life of
eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market for
$45,000. On this date, Marvin's book values were equal to its fair market values with the exception of the
company's equipment, which is now thought to be undervalued by $60,000. Moreover, the equipment's
estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What is the amount of the acquisition differential amortization (excluding goodwill impairment) for 2013?

A. $1,500.
B. $6,250.
C. $7,750.
D. $8,750.
18. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000 outstanding
voting shares for $240,000. On that date, Marvin's common stock and retained earnings were valued at
$60,000 and $90,000, respectively. Marvin's book values approximated its fair values on the acquisition
date with the exception of the company's equipment, which was estimated to have a fair market value that
was $50,000 in excess of its recorded book value. The equipment was estimated to have a useful life of
eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market for
$45,000. On this date, Marvin's book values were equal to its fair market values with the exception of the
company's equipment, which is now thought to be undervalued by $60,000. Moreover, the equipment's
estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What would be the amount of the unamortized acquisition differential (excluding goodwill) at the end of
2013?

A. Nil.
B. $35,000.
C. $37,500.
D. $42,000.
19. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000 outstanding
voting shares for $240,000. On that date, Marvin's common stock and retained earnings were valued at
$60,000 and $90,000, respectively. Marvin's book values approximated its fair values on the acquisition
date with the exception of the company's equipment, which was estimated to have a fair market value that
was $50,000 in excess of its recorded book value. The equipment was estimated to have a useful life of
eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market for
$45,000. On this date, Marvin's book values were equal to its fair market values with the exception of the
company's equipment, which is now thought to be undervalued by $60,000. Moreover, the equipment's
estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What effect (if any) would Hanson's January 1, 2013 purchase have on the company's consolidated cash
flows for the year?

A. There would be no effect.

B. There would be a decrease in cash of $45,000 to the consolidated entity.
C. There would be a decrease in cash of $200,000 to the consolidated entity.
D. There would be a decrease in cash of $236,000 to the consolidated entity.
20. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000 outstanding
voting shares for $240,000. On that date, Marvin's common stock and retained earnings were valued at
$60,000 and $90,000, respectively. Marvin's book values approximated its fair values on the acquisition
date with the exception of the company's equipment, which was estimated to have a fair market value that
was $50,000 in excess of its recorded book value. The equipment was estimated to have a useful life of
eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market for
$45,000. On this date, Marvin's book values were equal to its fair market values with the exception of the
company's equipment, which is now thought to be undervalued by $60,000. Moreover, the equipment's
estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
By how much would the non-controlling interest amount have changed as a result of the Hanson's second
purchase?

A. A decrease of $43,975.
B. A decrease of $37,857.
C. An increase of $37,857.
D. An increase of $43,975.
21. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000 outstanding
voting shares for $240,000. On that date, Marvin's common stock and retained earnings were valued at
$60,000 and $90,000, respectively. Marvin's book values approximated its fair values on the acquisition
date with the exception of the company's equipment, which was estimated to have a fair market value that
was $50,000 in excess of its recorded book value. The equipment was estimated to have a useful life of
eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market for
$45,000. On this date, Marvin's book values were equal to its fair market values with the exception of the
company's equipment, which is now thought to be undervalued by $60,000. Moreover, the equipment's
estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What effect would the purchase at January 1, 2013 have on the consolidated equity of Hanson?

A. There would be no effect.

B. There would be a reduction in consolidated retained earnings of $1,025.
C. There would be a reduction in consolidated contributed surplus of $1,025.
D. There would be an increase in consolidated retained earnings of $1,025.
22. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000 outstanding
voting shares for $240,000. On that date, Marvin's common stock and retained earnings were valued at
$60,000 and $90,000, respectively. Marvin's book values approximated its fair values on the acquisition
date with the exception of the company's equipment, which was estimated to have a fair market value that
was $50,000 in excess of its recorded book value. The equipment was estimated to have a useful life of
eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market for
$45,000. On this date, Marvin's book values were equal to its fair market values with the exception of the
company's equipment, which is now thought to be undervalued by $60,000. Moreover, the equipment's
estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What would be the balance in Hanson's investment in Marvin account on December 31, 2013?

A. $303,000.
B. $347,900.
C. $348,925.
D. $349,950.
23. Assuming that A acquired a controlling interest in B through numerous small acquisitions, what would be
appropriate accounting with respect to these acquisitions?
A. An acquisition differential must be computed following each purchase.
B. The equity method must be adopted retroactively once 20% ownership is obtained.
C. The purchases should all be grouped together and treated as a single block purchase.
D. The cost method should be used until a controlling interest is acquired.
24. A owns 80% of B, which in turn owns 55% of C. Which of the following statements is correct?
A. A has direct control over C.
B. A has indirect control over C.
C. A has no control over C.
D. A has contingent control over C.
25. X owns 70% of Y, which in turn owns 25% of Z. X, also owns 20% of Z. Which of the following
statements is correct?
A. X has direct control over Z.
B. X has indirect control over Z.
C. X has no control over Z.
D. X has contingent control over Z.
26. P Corp. owns 800 voting common shares out of Q Corp.'s 1,000 outstanding voting common shares,
which it accounts for using the equity method. On December 31, 2012, the shareholder's equity section of
Q Corp. was comprised of $15,000 in common stock and retained earnings with the amount of $450,000.
Q Corp. reported net Income and paid dividends of $120,000 and $20,000 respectively for the year ended
December 31, 2013.
On January 1, 2014, P Corp. sold 200 shares of its investment in Q Corp. for $125,000. On January 1,
2013, the investment account had a balance of $420,000. The acquisition differential was to be allocated
as follows:
60% to patents (6 year remaining life).
30% to equipment (9 year remaining life).
What is the gain or loss on P's sale of its shares on Q Corp.?
A. A $3,000 loss.
B. A $2,000 loss.
C. A $1,600 gain.
D. A $3,000 gain.
27. P Corp. owns 800 voting common shares out of Q Corp.'s 1,000 outstanding voting common shares,
which it accounts for using the equity method. On December 31, 2012, the shareholder's equity section of
Q Corp. was comprised of $15,000 in common stock and retained earnings with the amount of $450,000.
Q Corp. reported net Income and paid dividends of $120,000 and $20,000 respectively for the year ended
December 31, 2013.
On January 1, 2014, P Corp. sold 200 shares of its investment in Q Corp. for $125,000. On January 1,
2013, the investment account had a balance of $420,000. The acquisition differential was to be allocated
as follows:
60% to patents (6 year remaining life).
30% to equipment (9 year remaining life).
What is the balance in the investment in Q account immediately following the sale?
A. Nil.
B. $80,000.
C. $295,200.
D. $370,200.
28. P Corp. owns 800 voting common shares out of Q Corp.'s 1,000 outstanding voting common shares,
which it accounts for using the equity method. On December 31, 2012, the shareholder's equity section of
Q Corp. was comprised of $15,000 in common stock and retained earnings with the amount of $450,000.
Q Corp. reported net Income and paid dividends of $120,000 and $20,000 respectively for the year ended
December 31, 2013.
On January 1, 2014, P Corp. sold 200 shares of its investment in Q Corp. for $125,000. On January 1,
2013, the investment account had a balance of $420,000. The acquisition differential was to be allocated
as follows:
60% to patents (6 year remaining life).
30% to equipment (9 year remaining life).
What is the amount of Goodwill that arose from P's investment in Q?
A. Nil.
B. $6,000.
C. $18,000.
D. $36,000.
29. P Corp. owns 800 voting common shares out of Q Corp.'s 1,000 outstanding voting common shares,
which it accounts for using the equity method. On December 31, 2012, the shareholder's equity section of
Q Corp. was comprised of $15,000 in common stock and retained earnings with the amount of $450,000.
Q Corp. reported net Income and paid dividends of $120,000 and $20,000 respectively for the year ended
December 31, 2013.
On January 1, 2014, P Corp. sold 200 shares of its investment in Q Corp. for $125,000. On January 1,
2013, the investment account had a balance of $420,000. The acquisition differential was to be allocated
as follows:
60% to patents (6 year remaining life).
30% to equipment (9 year remaining life).
How much of the acquisition differential was allocated to patents?
A. Nil.
B. $6,000.
C. $18,000.
D. $36,000.
30. P Corp. owns 800 voting common shares out of Q Corp.'s 1,000 outstanding voting common shares,
which it accounts for using the equity method. On December 31, 2012, the shareholder's equity section of
Q Corp. was comprised of $15,000 in common stock and retained earnings with the amount of $450,000.
Q Corp. reported net Income and paid dividends of $120,000 and $20,000 respectively for the year ended
December 31, 2013.
On January 1, 2014, P Corp. sold 200 shares of its investment in Q Corp. for $125,000. On January 1,
2013, the investment account had a balance of $420,000. The acquisition differential was to be allocated
as follows:
60% to patents (6 year remaining life).
30% to equipment (9 year remaining life).
How much of the acquisition differential was allocated to equipment?
A. Nil.
B. $6,000.
C. $18,000.
D. $36,000.
31. P Corp. owns 800 voting common shares out of Q Corp.'s 1,000 outstanding voting common shares,
which it accounts for using the equity method. On December 31, 2012, the shareholder's equity section of
Q Corp. was comprised of $15,000 in common stock and retained earnings with the amount of $450,000.
Q Corp. reported net Income and paid dividends of $120,000 and $20,000 respectively for the year ended
December 31, 2013.
On January 1, 2014, P Corp. sold 200 shares of its investment in Q Corp. for $125,000. On January 1,
2013, the investment account had a balance of $420,000. The acquisition differential was to be allocated
as follows:
60% to patents (6 year remaining life).
30% to equipment (9 year remaining life).
What was the amount of acquisition differential amortization for 2013?
A. Nil.
B. $6,000.
C. $8,000.
D. $12,000.
32. The following information pertains to the shareholdings of an affiliated group of companies. The
respective ownership interest of each company is outlined below.

All intercompany investments are accounted for using the equity method.
The Net Incomes for these companies for the year ended December 31, 2012 were as follows:

Unrealized intercompany profits (pre-tax) earned by the various companies for the year ended December
31, 2012 are shown below:

All companies are subject to a 25% tax rate.

How much is A Inc.'s Consolidated Net Income for 2012?
A. $1,510,000.
B. $1,773,625.
C. $1,796,125.
D. $2,170,000.
33. The following information pertains to the shareholdings of an affiliated group of companies. The
respective ownership interest of each company is outlined below.

All intercompany investments are accounted for using the equity method.
The Net Incomes for these companies for the year ended December 31, 2012 were as follows:

Unrealized intercompany profits (pre-tax) earned by the various companies for the year ended December
31, 2012 are shown below:

All companies are subject to a 25% tax rate.

How much is the non-controlling interest in A Inc.'s Consolidated Net Income for 2012?
A. Nil.
B. $382,500.
C. $373,875.
D. $400,000.
34. The following information pertains to the shareholdings of an affiliated group of companies. The
respective ownership interest of each company is outlined below.

All intercompany investments are accounted for using the equity method.
The Net Incomes for these companies for the year ended December 31, 2012 were as follows:

Unrealized intercompany profits (pre-tax) earned by the various companies for the year ended December
31, 2012 are shown below:

All companies are subject to a 25% tax rate.

What is the Consolidated Net Income for the year attributable to the shareholders of A Inc.?
A. $1,510,000.
B. $1,796,125.
C. $1,817,500.
D. $2,170,000.
35. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The Balance
Sheets of both companies on that date are shown below (after Whine acquired the shares):

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc. As
a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000 shares it
currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
What would be the amount of cash appearing on Whine's December 31, 2012 Consolidated Balance Sheet
(after the issue of shares to Chompster)?

A. $450,000.
B. $610,000.
C. $850,000.
D. $810,000.
36. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The Balance
Sheets of both companies on that date are shown below (after Whine acquired the shares):

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc. As
a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000 shares it
currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
What would be the amount of the unamortized acquisition differential on December 31, 2012?
A. $40,000.
B. $50,000.
C. $80,000.
D. $125,000.
37. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The Balance
Sheets of both companies on that date are shown below (after Whine acquired the shares):

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc. As
a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000 shares it
currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
What would be Whine's ownership interest in Dine following Chompster's purchase of shares in Dine?

A. 60%
B. 64%
C. 75%
D. 80%
38. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The Balance
Sheets of both companies on that date are shown below (after Whine acquired the shares):

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc. As
a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000 shares it
currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
What would be the gain or loss arising from Dine's share issue to Chompster?
A. A loss of $4,000.
B. A loss of $2,400.
C. A gain of $2,400.
D. A gain of $4,000.
39. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The Balance
Sheets of both companies on that date are shown below (after Whine acquired the shares):

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc. As
a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000 shares it
currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
What would be the amount of the non-controlling interest appearing on Whine's Consolidated Balance
Sheet as at December 31, 2012 before the issue of shares to Chompster?

A. $125,000.
B. $160,000.
C. $222,000.
D. $264,000.
40. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The Balance
Sheets of both companies on that date are shown below (after Whine acquired the shares):

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc. As
a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000 shares it
currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
What would be the amount of the non-controlling interest appearing on Whine's Consolidated Balance
Sheet as at December 31, 2012 after the issue of shares to Chompster?

A. $125,000.
B. $222,000.
C. $264,000.
D. $282,600.
41. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The Balance
Sheets of both companies on that date are shown below (after Whine acquired the shares):

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc. As
a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000 shares it
currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
The amount of retained earnings appearing on the December 31, 2012 Consolidated Balance Sheet would
be:

A. $384,000.
B. $396,000.
C. $400,000.
D. $402,400.
42. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The Balance
Sheets of both companies on that date are shown below (after Whine acquired the shares):

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc. As
a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000 shares it
currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
The amount of goodwill appearing on the December 31, 2012 Consolidated Balance Sheet would be:
A. Nil.
B. $10,000.
C. $20,000.
D. $30,000.
43. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The Balance
Sheets of both companies on that date are shown below (after Whine acquired the shares):

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc. As
a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000 shares it
currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
The amount of common shares appearing on the December 31, 2012 Consolidated Balance Sheet would
be:

A. $500,000.
B. $660,000.
C. $770,000.
D. $860,000.
44. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The Balance
Sheets of both companies on that date are shown below (after Whine acquired the shares):

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc. As
a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000 shares it
currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
The amount appearing under equipment on the December 31, 2012 Consolidated Balance Sheet would be:

A. $690,000.
B. $710,000.
C. $772,500.
D. $785,000.
45. What is the correct method of treating an acquisition differential arising from a Preferred Share Issue?

A. It should be treated as an adjustment to goodwill.

B. It should be pro-rated across the subsidiary's identifiable assets and liabilities.
C. It should be expensed in the current year.
D. It should be adjusted to a contributed surplus or retained earnings account.
46. Which of the following statements pertaining to preferred shares is correct?
A. If the preferred shares are participating, only the current year's Net Income would be allocated to the
preferred shares.
BIf the preferred shares are non-cumulative, only the current year's Net Income would be allocated to
. preferred shares, since dividends are never in arrears with non-cumulative preferred shares.
C If the preferred shares are participating, the current year's Net Income would be allocated to the shares,
. only if the subsidiary is fully owned by the parent.
D. There can never be any dividends in arrears when preferred shares are participating.
47. Which of the following is not included in the amount of shareholders' equity allocated to the holders of
the preference shares on the consolidated balance sheet?
A. The stated or par value of the preference shares.
B. Cumulative dividends in arrears on the preference shares.
C. Contributed surplus arising from the issue of preference shares.
D. Redemption premium payable on redemption of preference shares.
48. If the shareholders' equity allocated to the subsidiary's preference shares amounts to $240,000 and the
parent company acquires 60% of the subsidiary's preference shares at a cost of $150,000, how much will
the non-controlling interest in the preferred shares amount to after the purchase by the parent?
A. $90,000.
B. $96,000.
C. $120,000.
D. $240,000.
49. If the shareholders' equity allocated to the subsidiary's preference shares amounts to $240,000 and the
parent company acquires 60% of the subsidiary's preference shares at a cost of $150,000, what effect will
the transaction have on consolidated shareholders' equity?
A. Non-controlling interest will decrease by $144,000 and retained earnings will decrease by $6,000.
B. Non-controlling interest will decrease by $144,000 and contributed surplus will increase by $6,000.
C. Non-controlling interest will increase by $144,000 and retained earnings will increase by $6,000.
D. There will be no change in consolidated shareholders' equity as a result of this transaction.
50. If the shareholders' equity allocated to the subsidiary's preference shares amounts to $240,000 and the
parent company acquires 60% of the subsidiary's preference shares at a cost of $150,000, how much will
the amount of cash on the consolidated balance sheet change as a result of this transaction?
A. It will not change.
B. It will increase by $150,000.
C. It will decrease by $144,000.
D. It will decrease by $150,000.
51. The financial statements of Lime Inc. and its subsidiary Stone Corp. on December 31, 2011 are shown
below:

Other Information:
On January 1, 2008 Stone's balance sheet showed the following shareholders' equity:

On this date, Lime acquired 80,000 common shares for $900,000.

* Stone's preferred share dividends were one year in arrears on that date.
Stone's Fair Values approximated its book values on that date with the following exceptions:
Inventory had a fair value that was $30,000 higher than its book value. Plant and equipment had a fair
value $10,000 lower than their book value.
The plant and equipment had an estimated remaining useful life of 10 years from the date of acquisition.
Intercompany sales of inventory for the year were as follows:

Unrealized intercompany profits in inventory for 2011 were as follows:

On January 1, 2009, Stone sold equipment to Lime for $30,000. The equipment had a carrying value of
$27,000 on that date and an estimated useful life of 3 years. The inventory on hand at the start of 2011
was sold to outsiders during the year. Both companies are subject to a tax rate of 40%. There were no
dividends in arrears on December 31, 2010. Lime uses the cost method to account for its investment in
Stone. Consolidated retained earnings on December 31, 2010 is $523,120.
Compute the Goodwill on the date of the acquisition.
52. The financial statements of Lime Inc. and its subsidiary Stone Corp. on December 31, 2011 are shown
below:

Other Information:
On January 1, 2008 Stone's balance sheet showed the following shareholders' equity:

On this date, Lime acquired 80,000 common shares for $900,000.

* Stone's preferred share dividends were one year in arrears on that date.
Stone's Fair Values approximated its book values on that date with the following exceptions:
Inventory had a fair value that was $30,000 higher than its book value. Plant and equipment had a fair
value $10,000 lower than their book value.
The plant and equipment had an estimated remaining useful life of 10 years from the date of acquisition.
Intercompany sales of inventory for the year were as follows:

Unrealized intercompany profits in inventory for 2011 were as follows:

On January 1, 2009, Stone sold equipment to Lime for $30,000. The equipment had a carrying value of
$27,000 on that date and an estimated useful life of 3 years. The inventory on hand at the start of 2011
was sold to outsiders during the year. Both companies are subject to a tax rate of 40%. There were no
dividends in arrears on December 31, 2010. Lime uses the cost method to account for its investment in
Stone. Consolidated retained earnings on December 31, 2010 is $523,120.
a) Prepare a schedule of intercompany profits as at December 31, 2011 for both companies.
b) Compute the amount of deferred taxes that should appear on the December 31, 2011 Consolidated
Balance Sheet.
53. The financial statements of Lime Inc. and its subsidiary Stone Corp. on December 31, 2011 are shown
below:

Other Information:
On January 1, 2008 Stone's balance sheet showed the following shareholders' equity:

On this date, Lime acquired 80,000 common shares for $900,000.

* Stone's preferred share dividends were one year in arrears on that date.
Stone's Fair Values approximated its book values on that date with the following exceptions:
Inventory had a fair value that was $30,000 higher than its book value. Plant and equipment had a fair
value $10,000 lower than their book value.
The plant and equipment had an estimated remaining useful life of 10 years from the date of acquisition.
Intercompany sales of inventory for the year were as follows:

Unrealized intercompany profits in inventory for 2011 were as follows:

On January 1, 2009, Stone sold equipment to Lime for $30,000. The equipment had a carrying value of
$27,000 on that date and an estimated useful life of 3 years. The inventory on hand at the start of 2011
was sold to outsiders during the year. Both companies are subject to a tax rate of 40%. There were no
dividends in arrears on December 31, 2010. Lime uses the cost method to account for its investment in
Stone. Consolidated retained earnings on December 31, 2010 is $523,120.
Compute the Consolidated Net Income for 2011 and show its allocation between the controlling and non-
controlling interests. Do not prepare an Income Statement.
54. The financial statements of Lime Inc. and its subsidiary Stone Corp. on December 31, 2011 are shown
below:

Other Information:
On January 1, 2008 Stone's balance sheet showed the following shareholders' equity:

On this date, Lime acquired 80,000 common shares for $900,000.

* Stone's preferred share dividends were one year in arrears on that date.
Stone's Fair Values approximated its book values on that date with the following exceptions:
Inventory had a fair value that was $30,000 higher than its book value. Plant and equipment had a fair
value $10,000 lower than their book value.
The plant and equipment had an estimated remaining useful life of 10 years from the date of acquisition.
Intercompany sales of inventory for the year were as follows:

Unrealized intercompany profits in inventory for 2011 were as follows:

On January 1, 2009, Stone sold equipment to Lime for $30,000. The equipment had a carrying value of
$27,000 on that date and an estimated useful life of 3 years. The inventory on hand at the start of 2011
was sold to outsiders during the year. Both companies are subject to a tax rate of 40%. There were no
dividends in arrears on December 31, 2010. Lime uses the cost method to account for its investment in
Stone. Consolidated retained earnings on December 31, 2010 is $523,120.
Prepare a calculation of non-controlling interest as at December 31, 2011.
55. The financial statements of Lime Inc. and its subsidiary Stone Corp. on December 31, 2011 are shown
below:

Other Information:
On January 1, 2008 Stone's balance sheet showed the following shareholders' equity:

On this date, Lime acquired 80,000 common shares for $900,000.

* Stone's preferred share dividends were one year in arrears on that date.
Stone's Fair Values approximated its book values on that date with the following exceptions:
Inventory had a fair value that was $30,000 higher than its book value. Plant and equipment had a fair
value $10,000 lower than their book value.
The plant and equipment had an estimated remaining useful life of 10 years from the date of acquisition.
Intercompany sales of inventory for the year were as follows:

Unrealized intercompany profits in inventory for 2011 were as follows:

On January 1, 2009, Stone sold equipment to Lime for $30,000. The equipment had a carrying value of
$27,000 on that date and an estimated useful life of 3 years. The inventory on hand at the start of 2011
was sold to outsiders during the year. Both companies are subject to a tax rate of 40%. There were no
dividends in arrears on December 31, 2010. Lime uses the cost method to account for its investment in
Stone. Consolidated retained earnings on December 31, 2010 is $523,120.
Prepare a calculation of Consolidated Retained Earnings at as December 31, 2012.
56. The financial statements of Lime Inc. and its subsidiary Stone Corp. on December 31, 2011 are shown
below:

Other Information:
On January 1, 2008 Stone's balance sheet showed the following shareholders' equity:

On this date, Lime acquired 80,000 common shares for $900,000.

* Stone's preferred share dividends were one year in arrears on that date.
Stone's Fair Values approximated its book values on that date with the following exceptions:
Inventory had a fair value that was $30,000 higher than its book value. Plant and equipment had a fair
value $10,000 lower than their book value.
The plant and equipment had an estimated remaining useful life of 10 years from the date of acquisition.
Intercompany sales of inventory for the year were as follows:

Unrealized intercompany profits in inventory for 2011 were as follows:

On January 1, 2009, Stone sold equipment to Lime for $30,000. The equipment had a carrying value of
$27,000 on that date and an estimated useful life of 3 years. The inventory on hand at the start of 2011
was sold to outsiders during the year. Both companies are subject to a tax rate of 40%. There were no
dividends in arrears on December 31, 2010. Lime uses the cost method to account for its investment in
Stone. Consolidated retained earnings on December 31, 2010 is $523,120.
Prepare Lime's December 31, 2011 Consolidated Balance Sheet.
57. Prepare the consolidated statement of cash flows for Lime Inc for the year ended December 31, 2011.
The following information was derived from the 2011 Consolidated Financial statements of X Inc., which
owns 80% of Y Inc. as well as 40% of Z Inc.:

Required:
58.

Cinder was incorporated on January 1, 2007. On that date, Cinder issued 100,000 voting shares. Any
difference between the cost and book value is attributable entirely to trademarks, which are to be
amortized over 5 years. The company has neither issued nor retired shares since the date of its
incorporation.
Ash sold depreciable assets to Cinder at a loss of $20,000 on January 1, 2011. These assets had a 10 year
remaining life.
Intercompany Sales of Inventory during 2012 amounted to $250,000. Unrealized inventory profits for
each company are shown below for 2012. The amounts indicate the amount of profit in each company's
inventory.

All inventories on hand at the start of 2012 were sold to outsiders during the year. The net Incomes of
both companies are evenly earned throughout the year. Both companies are subject to an effective
corporate tax rate of 20%.
What amount will be shown in the consolidated balance sheet of Ash as at December 31, 2012, for
trademarks?

The trial balances of Ash Inc. and its subsidiary Cinder Corp. on December 31, 2012 are shown below:

Other Information:
Ash acquired Cinder in three stages:
59.

Cinder was incorporated on January 1, 2007. On that date, Cinder issued 100,000 voting shares. Any
difference between the cost and book value is attributable entirely to trademarks, which are to be
amortized over 5 years. The company has neither issued nor retired shares since the date of its
incorporation.
Ash sold depreciable assets to Cinder at a loss of $20,000 on January 1, 2011. These assets had a 10 year
remaining life.
Intercompany Sales of Inventory during 2012 amounted to $250,000. Unrealized inventory profits for
each company are shown below for 2012. The amounts indicate the amount of profit in each company's
inventory.

All inventories on hand at the start of 2012 were sold to outsiders during the year. The net Incomes of
both companies are evenly earned throughout the year. Both companies are subject to an effective
corporate tax rate of 20%.
Compute consolidated inventory for Ash as at December 31, 2012.

The trial balances of Ash Inc. and its subsidiary Cinder Corp. on December 31, 2012 are shown below:

Other Information:
Ash acquired Cinder in three stages:
60.

Cinder was incorporated on January 1, 2007. On that date, Cinder issued 100,000 voting shares. Any
difference between the cost and book value is attributable entirely to trademarks, which are to be
amortized over 5 years. The company has neither issued nor retired shares since the date of its
incorporation.
Ash sold depreciable assets to Cinder at a loss of $20,000 on January 1, 2011. These assets had a 10 year
remaining life.
Intercompany Sales of Inventory during 2012 amounted to $250,000. Unrealized inventory profits for
each company are shown below for 2012. The amounts indicate the amount of profit in each company's
inventory.

All inventories on hand at the start of 2012 were sold to outsiders during the year. The net Incomes of
both companies are evenly earned throughout the year. Both companies are subject to an effective
corporate tax rate of 20%.
Compute the Consolidated Cost of Goods Sold for 2012.

The trial balances of Ash Inc. and its subsidiary Cinder Corp. on December 31, 2012 are shown below:

Other Information:
Ash acquired Cinder in three stages:
61. Prepare a Consolidated Statement of Cash Flows for Beta Corp. for 2013.
Beta purchased its interest in Gamma on January 1, 2009 for $360,000 when the company's net assets
were valued at $300,000. The acquisition differential was allocated equally between goodwill and
equipment, which was estimated to have a remaining useful life of ten years from the acquisition date.
Gamma reported a net Income of $75,000 and paid dividends of $5,000 during 2013.
Beta issued $300,000 in bonds during the year. Beta reported an equity method net Income of $300,000
and paid $70,000 in dividends to its shareholders.

Required:
Beta Corp. owns 80% of Gamma Corp. The Consolidated Financial Statements of Beta Corp. for 2012
and 2013 are shown below:

Other Information:
62. Parrot Company purchased 75% of the outstanding common shares and 50% of the outstanding
preference shares of Saltines Inc. on January 1, 2013, on which date the balance sheet and fair values of
Saltines' assets and liabilities were as follows:

Parrot paid $460,000 for the common shares and $105,000 for the preference shares. The contributed
surplus arose from the issue of the preferred shares at a price higher than their stated value. The preferred
shares paid cumulative dividends of 5% of their stated value but dividends for 2011 and 2012 were
unpaid. The shares were redeemable, at the option of the issuer, at a premium of 8%. The capital assets of
Saltines had a remaining useful life of ten years at January 1, 2003. Any unallocated purchase discrepancy
would be treated as goodwill, which is assessed annually for impairment. Parrot accounts for its interest in
Saltines using the cost method and accounts for the noncontrolling interest in its consolidated financial
statements based on the fair value of the subsidiary, proportionate to the price paid for the controlling
interest.
Parrot's net income for 2013 was $300,000 and Parrot paid dividends of $150,000 on December 31, 2013.
Saltines' net income for 2013 was $120,000 before a loss from discontinued operations of $60,000 (net of
tax). Saltines paid dividends of $75,000 in 2013. (Parrot included all dividends received in its income for
2013.)
Calculate the amount of the noncontrolling interest on the consolidated balance sheet of Parrot and its
subsidiary as at December 31, 2013.
63. Parrot Company purchased 75% of the outstanding common shares and 50% of the outstanding
preference shares of Saltines Inc. on January 1, 2013, on which date the balance sheet and fair values of
Saltines' assets and liabilities were as follows:

Parrot paid $460,000 for the common shares and $105,000 for the preference shares. The contributed
surplus arose from the issue of the preferred shares at a price higher than their stated value. The preferred
shares paid cumulative dividends of 5% of their stated value but dividends for 2011 and 2012 were
unpaid. The shares were redeemable, at the option of the issuer, at a premium of 8%. The capital assets of
Saltines had a remaining useful life of ten years at January 1, 2003. Any unallocated purchase discrepancy
would be treated as goodwill, which is assessed annually for impairment. Parrot accounts for its interest in
Saltines using the cost method and accounts for the noncontrolling interest in its consolidated financial
statements based on the fair value of the subsidiary, proportionate to the price paid for the controlling
interest.
Parrot's net income for 2013 was $300,000 and Parrot paid dividends of $150,000 on December 31, 2013.
Saltines' net income for 2013 was $120,000 before a loss from discontinued operations of $60,000 (net of
tax). Saltines paid dividends of $75,000 in 2013. (Parrot included all dividends received in its income for
2013.)
Calculate the consolidated net income of Parrot and its subsidiary as at December 31, 2013.
64. Parrot Company purchased 75% of the outstanding common shares and 50% of the outstanding
preference shares of Saltines Inc. on January 1, 2013, on which date the balance sheet and fair values of
Saltines' assets and liabilities were as follows:

Parrot paid $460,000 for the common shares and $105,000 for the preference shares. The contributed
surplus arose from the issue of the preferred shares at a price higher than their stated value. The preferred
shares paid cumulative dividends of 5% of their stated value but dividends for 2011 and 2012 were
unpaid. The shares were redeemable, at the option of the issuer, at a premium of 8%. The capital assets of
Saltines had a remaining useful life of ten years at January 1, 2003. Any unallocated purchase discrepancy
would be treated as goodwill, which is assessed annually for impairment. Parrot accounts for its interest in
Saltines using the cost method and accounts for the noncontrolling interest in its consolidated financial
statements based on the fair value of the subsidiary, proportionate to the price paid for the controlling
interest.
Parrot's net income for 2013 was $300,000 and Parrot paid dividends of $150,000 on December 31, 2013.
Saltines' net income for 2013 was $120,000 before a loss from discontinued operations of $60,000 (net of
tax). Saltines paid dividends of $75,000 in 2013. (Parrot included all dividends received in its income for
2013.)
Parrot has no contributed surplus on its own balance sheet as at the end of 2013. Calculate the amount of
the contributed surplus shown on the consolidated balance sheet of Parrot and its subsidiary as at
December 31, 2013.
65. What gain or loss will appear in the consolidated financial statements of Philcorp and its subsidiary
Anderco as a result of this transaction?
On January 1, 2012, Philcorp acquired 8,000 of the outstanding 10,000 shares of Anderco by issuing
its own shares with a market value of $400,000. On June 30, 2013, Anderco issued an additional 2,000
shares for cash consideration of $60 per share, none of which were acquired by Philcorp. Immediately
before the issue, the shareholders' equity of Anderco amounted to $500,000 and the unamortized purchase
discrepancy was $65,000. Philcorp uses the equity method to record its investment in Anderco.

Required:
 08 Key
1. A Inc. owns 80% of B's outstanding voting shares. Under which of the following scenarios would A's
(p. 427) ownership percentage of B change?
A. B Inc. announces a 2-for-1 stock split to all its common shareholders.
B. B issues an additional 10,000 voting shares; A acquires 8,000 shares of the new issue.
C. B issues an additional 10,000 voting shares; A acquires 6,400 shares of the new issue.
D. B retires 20,000 voting share, and in doing so, buy back 16,000 shares from A.
Blooms Level: Understand
Difficulty: Easy
Hilton - Chapter 08 #1
Learning Objective: 08-02 Prepare consolidated financial statements in situations where the parents ownership has increased (step purchase).
2. Assume that X Corp. controls Y Corp., X constantly purchases and sells Y's voting shares on the open
(p. 427) market while always ensuring that it maintains a controlling interest over Y. Which of the following
statements pertaining to X buying and selling activity is correct?
A. X's activity has no effect on the non-controlling interest.
B. As X sells shares of Y, the non-controlling interest increases.
C. As X sells shares of Y, the non-controlling interest decreases.
D. As X buys shares of Y, the non-controlling interest increases.
Blooms Level: Understand
Difficulty: Easy
Hilton - Chapter 08 #2
Learning Objective: 08-02 Prepare consolidated financial statements in situations where the parents ownership has increased (step purchase).
3. ABC Inc. purchased 35,000 voting shares out of 123 Inc.'s 50,000 outstanding voting shares for
(p. Previou $350,000 on January 1, 2012. On the date of acquisition, 123's common stock and retained earnings
s chapters)
were valued at $120,000 and $180,000, respectively. 123's book values approximated its fair values
on the acquisition date with the exception of a patent and a trademark, neither of which had been
previously recorded. The fair market values of the patent and trademark on the date of acquisition
were $30,000 and $20,000 respectively.
On January 2, 2012, ABC sold 14,000 shares of 123 on the open market for $98,000.
ABC Inc. uses the equity method to account for its investment in 123 Inc.
What is the amount of goodwill arising from this business combination?
A. ($5,000).
B. Nil.
C. $5,000.
D. $150,000.
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #3
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
4. ABC Inc. purchased 35,000 voting shares out of 123 Inc.'s 50,000 outstanding voting shares for
(p. 436) $350,000 on January 1, 2012. On the date of acquisition, 123's common stock and retained earnings
were valued at $120,000 and $180,000, respectively. 123's book values approximated its fair values
on the acquisition date with the exception of a patent and a trademark, neither of which had been
previously recorded. The fair market values of the patent and trademark on the date of acquisition
were $30,000 and $20,000 respectively.
On January 2, 2012, ABC sold 14,000 shares of 123 on the open market for $98,000.
ABC Inc. uses the equity method to account for its investment in 123 Inc.
What percentage of its Investment in 123 was sold by ABC?
A. 14%
B. 21%
C. 28%
D. 40%
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #4
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
5. ABC Inc. purchased 35,000 voting shares out of 123 Inc.'s 50,000 outstanding voting shares for
(p. 436) $350,000 on January 1, 2012. On the date of acquisition, 123's common stock and retained earnings
were valued at $120,000 and $180,000, respectively. 123's book values approximated its fair values
on the acquisition date with the exception of a patent and a trademark, neither of which had been
previously recorded. The fair market values of the patent and trademark on the date of acquisition
were $30,000 and $20,000 respectively.
On January 2, 2012, ABC sold 14,000 shares of 123 on the open market for $98,000.
ABC Inc. uses the equity method to account for its investment in 123 Inc.
What is ABC's ownership interest in 123 after its sale?
A. 21%
B. 36%
C. 42%
D. 56%
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #5
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
6. ABC Inc. purchased 35,000 voting shares out of 123 Inc.'s 50,000 outstanding voting shares for
(p. 436- $350,000 on January 1, 2012. On the date of acquisition, 123's common stock and retained earnings
442)
were valued at $120,000 and $180,000, respectively. 123's book values approximated its fair values
on the acquisition date with the exception of a patent and a trademark, neither of which had been
previously recorded. The fair market values of the patent and trademark on the date of acquisition
were $30,000 and $20,000 respectively.
On January 2, 2012, ABC sold 14,000 shares of 123 on the open market for $98,000.
ABC Inc. uses the equity method to account for its investment in 123 Inc.
What would be the balance in the investment in 123 Inc. accounts after the sale?
A. $100,000.
B. $150,000.
C. $210,000.
D. $225,000.
Blooms Level: Apply
Difficulty: Moderate
Hilton - Chapter 08 #6
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
7. ABC Inc. purchased 35,000 voting shares out of 123 Inc.'s 50,000 outstanding voting shares for
(p. 436- $350,000 on January 1, 2012. On the date of acquisition, 123's common stock and retained earnings
442)
were valued at $120,000 and $180,000, respectively. 123's book values approximated its fair values
on the acquisition date with the exception of a patent and a trademark, neither of which had been
previously recorded. The fair market values of the patent and trademark on the date of acquisition
were $30,000 and $20,000 respectively.
On January 2, 2012, ABC sold 14,000 shares of 123 on the open market for $98,000.
ABC Inc. uses the equity method to account for its investment in 123 Inc.
What would be the amount of the gain or loss on the sale of the 14,000 shares?
A. A loss of $42,000.
B. A loss of $4,000.
C. A gain of $4,000.
D. A gain of $54,000.
Blooms Level: Apply
Difficulty: Moderate
Hilton - Chapter 08 #7
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
8. ABC Inc. purchased 35,000 voting shares out of 123 Inc.'s 50,000 outstanding voting shares for
(p. 436- $350,000 on January 1, 2012. On the date of acquisition, 123's common stock and retained earnings
442)
were valued at $120,000 and $180,000, respectively. 123's book values approximated its fair values
on the acquisition date with the exception of a patent and a trademark, neither of which had been
previously recorded. The fair market values of the patent and trademark on the date of acquisition
were $30,000 and $20,000 respectively.
On January 2, 2012, ABC sold 14,000 shares of 123 on the open market for $98,000.
ABC Inc. uses the equity method to account for its investment in 123 Inc.
What is the amount of unamortized acquisition differential (including goodwill) after the sale?
A. $84,000.
B. $140,000.
C. $200,000.
D. $300,000.
Blooms Level: Understand
Difficulty: Moderate
Hilton - Chapter 08 #8
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
9. ABC Inc. purchased 35,000 voting shares out of 123 Inc.'s 50,000 outstanding voting shares for
(p. Previou $350,000 on January 1, 2012. On the date of acquisition, 123's common stock and retained earnings
s chapters)
were valued at $120,000 and $180,000, respectively. 123's book values approximated its fair values
on the acquisition date with the exception of a patent and a trademark, neither of which had been
previously recorded. The fair market values of the patent and trademark on the date of acquisition
were $30,000 and $20,000 respectively.
On January 2, 2012, ABC sold 14,000 shares of 123 on the open market for $98,000.
ABC Inc. uses the equity method to account for its investment in 123 Inc.
What is the amount of the non-controlling interest at acquisition?
A. $8,400.
B. $18,000.
C. $50,000.
D. $150,000.
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #9
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
10. ABC Inc. purchased 35,000 voting shares out of 123 Inc.'s 50,000 outstanding voting shares for
(p. 436- $350,000 on January 1, 2012. On the date of acquisition, 123's common stock and retained earnings
442)
were valued at $120,000 and $180,000, respectively. 123's book values approximated its fair values
on the acquisition date with the exception of a patent and a trademark, neither of which had been
previously recorded. The fair market values of the patent and trademark on the date of acquisition
were $30,000 and $20,000 respectively.
On January 2, 2012, ABC sold 14,000 shares of 123 on the open market for $98,000.
ABC Inc. uses the equity method to account for its investment in 123 Inc.
What is the carrying value of the trademark after the sale?
A. $12,600.
B. $18,000.
C. $20,000.
D. $30,000.
Blooms Level: Understand
Difficulty: Easy
Hilton - Chapter 08 #10
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
11. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000
(p. Previou outstanding voting shares for $240,000. On that date, Marvin's common stock and retained earnings
s chapters)
were valued at $60,000 and $90,000, respectively. Marvin's book values approximated its fair values
on the acquisition date with the exception of the company's equipment, which was estimated to have a
fair market value that was $50,000 in excess of its recorded book value. The equipment was estimated
to have a useful life of eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market
for $45,000. On this date, Marvin's book values were equal to its fair market values with the exception
of the company's equipment, which is now thought to be undervalued by $60,000. Moreover, the
equipment's estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What is the amount of goodwill arising from Hanson's January 1, 2012 acquisition?
A. $50,000.
B. $60,000.
C. $80,000.
D. $200,000.
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #11
Learning Objective: 08-02 Prepare consolidated financial statements in situations where the parents ownership has increased (step purchase).
12. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000
(p. 427- outstanding voting shares for $240,000. On that date, Marvin's common stock and retained earnings
436)
were valued at $60,000 and $90,000, respectively. Marvin's book values approximated its fair values
on the acquisition date with the exception of the company's equipment, which was estimated to have a
fair market value that was $50,000 in excess of its recorded book value. The equipment was estimated
to have a useful life of eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market
for $45,000. On this date, Marvin's book values were equal to its fair market values with the exception
of the company's equipment, which is now thought to be undervalued by $60,000. Moreover, the
equipment's estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What percentage of Marvin's shares was purchased by Hanson on January 1, 2012?
A. 10%
B. 60%
C. 70%
D. 90%
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #12
Learning Objective: 08-02 Prepare consolidated financial statements in situations where the parents ownership has increased (step purchase).
13. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000
(p. Previou outstanding voting shares for $240,000. On that date, Marvin's common stock and retained earnings
s chapters)
were valued at $60,000 and $90,000, respectively. Marvin's book values approximated its fair values
on the acquisition date with the exception of the company's equipment, which was estimated to have a
fair market value that was $50,000 in excess of its recorded book value. The equipment was estimated
to have a useful life of eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market
for $45,000. On this date, Marvin's book values were equal to its fair market values with the exception
of the company's equipment, which is now thought to be undervalued by $60,000. Moreover, the
equipment's estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
Assuming that Hanson had no recorded goodwill prior to January 1, 2012, what would be the amount
of goodwill appearing on Hanson's December 31, 2012 consolidated balance sheet?

A. $75,000.
B. $80,000.
C. $117,000.
D. $195,000.
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #13
Learning Objective: 08-02 Prepare consolidated financial statements in situations where the parents ownership has increased (step purchase).
14. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000
(p. 432- outstanding voting shares for $240,000. On that date, Marvin's common stock and retained earnings
434)
were valued at $60,000 and $90,000, respectively. Marvin's book values approximated its fair values
on the acquisition date with the exception of the company's equipment, which was estimated to have a
fair market value that was $50,000 in excess of its recorded book value. The equipment was estimated
to have a useful life of eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market
for $45,000. On this date, Marvin's book values were equal to its fair market values with the exception
of the company's equipment, which is now thought to be undervalued by $60,000. Moreover, the
equipment's estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
Assuming that Hanson had no recorded goodwill prior to January 1, 2012, what would be the amount
of goodwill appearing on Hanson' December 31, 2013 Consolidated Balance Sheet?

A. $75,000
B. $136,500
C. $195,000
D. $209,900
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #14
Learning Objective: 08-02 Prepare consolidated financial statements in situations where the parents ownership has increased (step purchase).
15. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000
(p. 432- outstanding voting shares for $240,000. On that date, Marvin's common stock and retained earnings
434)
were valued at $60,000 and $90,000, respectively. Marvin's book values approximated its fair values
on the acquisition date with the exception of the company's equipment, which was estimated to have a
fair market value that was $50,000 in excess of its recorded book value. The equipment was estimated
to have a useful life of eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market
for $45,000. On this date, Marvin's book values were equal to its fair market values with the exception
of the company's equipment, which is now thought to be undervalued by $60,000. Moreover, the
equipment's estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What is Hanson's ownership interest in Marvin after its January 1, 2013 purchase?
A. 60%
B. 70%
C. 80%
D. 90%
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #15
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
16. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000
(p. Previou outstanding voting shares for $240,000. On that date, Marvin's common stock and retained earnings
s chapters)
were valued at $60,000 and $90,000, respectively. Marvin's book values approximated its fair values
on the acquisition date with the exception of the company's equipment, which was estimated to have a
fair market value that was $50,000 in excess of its recorded book value. The equipment was estimated
to have a useful life of eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market
for $45,000. On this date, Marvin's book values were equal to its fair market values with the exception
of the company's equipment, which is now thought to be undervalued by $60,000. Moreover, the
equipment's estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What is the amount of the acquisition differential amortization for 2012 (excluding goodwill
impairment)?

A. $4,375
B. $5,625
C. $6,250
D. $12,000
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #16
Learning Objective: 08-02 Prepare consolidated financial statements in situations where the parents ownership has increased (step purchase).
17. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000
(p. Previou outstanding
voting shares for $240,000. On that date, Marvin's common stock and retained earnings
s chapters)
were valued at $60,000 and $90,000, respectively. Marvin's book values approximated its fair values
on the acquisition date with the exception of the company's equipment, which was estimated to have a
fair market value that was $50,000 in excess of its recorded book value. The equipment was estimated
to have a useful life of eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market
for $45,000. On this date, Marvin's book values were equal to its fair market values with the exception
of the company's equipment, which is now thought to be undervalued by $60,000. Moreover, the
equipment's estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What is the amount of the acquisition differential amortization (excluding goodwill impairment) for
2013?

A. $1,500.
B. $6,250.
C. $7,750.
D. $8,750.
Blooms Level: Apply
Difficulty: Moderate
Hilton - Chapter 08 #17
Learning Objective: 08-02 Prepare consolidated financial statements in situations where the parents ownership has increased (step purchase).
18. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000
(p. Previou outstanding
voting shares for $240,000. On that date, Marvin's common stock and retained earnings
s chapters)
were valued at $60,000 and $90,000, respectively. Marvin's book values approximated its fair values
on the acquisition date with the exception of the company's equipment, which was estimated to have a
fair market value that was $50,000 in excess of its recorded book value. The equipment was estimated
to have a useful life of eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market
for $45,000. On this date, Marvin's book values were equal to its fair market values with the exception
of the company's equipment, which is now thought to be undervalued by $60,000. Moreover, the
equipment's estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What would be the amount of the unamortized acquisition differential (excluding goodwill) at the end
of 2013?

A. Nil.
B. $35,000.
C. $37,500.
D. $42,000.
Blooms Level: Apply
Difficulty: Moderate
Hilton - Chapter 08 #18
Learning Objective: 08-02 Prepare consolidated financial statements in situations where the parents ownership has increased (step purchase).
19. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000
(p. 432- outstanding voting shares for $240,000. On that date, Marvin's common stock and retained earnings
434)
were valued at $60,000 and $90,000, respectively. Marvin's book values approximated its fair values
on the acquisition date with the exception of the company's equipment, which was estimated to have a
fair market value that was $50,000 in excess of its recorded book value. The equipment was estimated
to have a useful life of eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market
for $45,000. On this date, Marvin's book values were equal to its fair market values with the exception
of the company's equipment, which is now thought to be undervalued by $60,000. Moreover, the
equipment's estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What effect (if any) would Hanson's January 1, 2013 purchase have on the company's consolidated
cash flows for the year?

A. There would be no effect.

B. There would be a decrease in cash of $45,000 to the consolidated entity.
C. There would be a decrease in cash of $200,000 to the consolidated entity.
D. There would be a decrease in cash of $236,000 to the consolidated entity.
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #19
Learning Objective: 08-01 Prepare a consolidated cash flow statement by applying concepts learned in prior courses and unique consolidation concepts discussed
here.
Learning Objective: 08-02 Prepare consolidated financial statements in situations where the parents ownership has increased (step purchase).
20. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000
(p. 432- outstanding voting shares for $240,000. On that date, Marvin's common stock and retained earnings
434)
were valued at $60,000 and $90,000, respectively. Marvin's book values approximated its fair values
on the acquisition date with the exception of the company's equipment, which was estimated to have a
fair market value that was $50,000 in excess of its recorded book value. The equipment was estimated
to have a useful life of eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market
for $45,000. On this date, Marvin's book values were equal to its fair market values with the exception
of the company's equipment, which is now thought to be undervalued by $60,000. Moreover, the
equipment's estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
By how much would the non-controlling interest amount have changed as a result of the Hanson's
second purchase?

A. A decrease of $43,975.
B. A decrease of $37,857.
C. An increase of $37,857.
D. An increase of $43,975.
Blooms Level: Apply
Difficulty: Moderate
Hilton - Chapter 08 #20
Learning Objective: 08-02 Prepare consolidated financial statements in situations where the parents ownership has increased (step purchase).
21. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000
(p. 432- outstanding voting shares for $240,000. On that date, Marvin's common stock and retained earnings
434)
were valued at $60,000 and $90,000, respectively. Marvin's book values approximated its fair values
on the acquisition date with the exception of the company's equipment, which was estimated to have a
fair market value that was $50,000 in excess of its recorded book value. The equipment was estimated
to have a useful life of eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market
for $45,000. On this date, Marvin's book values were equal to its fair market values with the exception
of the company's equipment, which is now thought to be undervalued by $60,000. Moreover, the
equipment's estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What effect would the purchase at January 1, 2013 have on the consolidated equity of Hanson?
A. There would be no effect.
B. There would be a reduction in consolidated retained earnings of $1,025.
C. There would be a reduction in consolidated contributed surplus of $1,025.
D. There would be an increase in consolidated retained earnings of $1,025.
Blooms Level: Apply
Difficulty: Moderate
Hilton - Chapter 08 #21
Learning Objective: 08-02 Prepare consolidated financial statements in situations where the parents ownership has increased (step purchase).
22. On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000
(p. 432- outstanding voting shares for $240,000. On that date, Marvin's common stock and retained earnings
434)
were valued at $60,000 and $90,000, respectively. Marvin's book values approximated its fair values
on the acquisition date with the exception of the company's equipment, which was estimated to have a
fair market value that was $50,000 in excess of its recorded book value. The equipment was estimated
to have a useful life of eight years. Both companies use straight line amortization exclusively.
On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market
for $45,000. On this date, Marvin's book values were equal to its fair market values with the exception
of the company's equipment, which is now thought to be undervalued by $60,000. Moreover, the
equipment's estimated useful life was revised to 5 years on this date.
Marvin's net Income and dividends for 2012 and 2013 are as follows:

Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity
method to account for its investment in Marvin Inc.
What would be the balance in Hanson's investment in Marvin account on December 31, 2013?
A. $303,000.
B. $347,900.
C. $348,925.
D. $349,950.
Blooms Level: Apply
Difficulty: Hard
Hilton - Chapter 08 #22
Learning Objective: 08-02 Prepare consolidated financial statements in situations where the parents ownership has increased (step purchase).
23. Assuming that A acquired a controlling interest in B through numerous small acquisitions, what would
(p. 434) be appropriate accounting with respect to these acquisitions?
A. An acquisition differential must be computed following each purchase.
B. The equity method must be adopted retroactively once 20% ownership is obtained.
C. The purchases should all be grouped together and treated as a single block purchase.
D. The cost method should be used until a controlling interest is acquired.
Blooms Level: Remember
Difficulty: Easy
Hilton - Chapter 08 #23
Learning Objective: 08-02 Prepare consolidated financial statements in situations where the parents ownership has increased (step purchase).
24. A owns 80% of B, which in turn owns 55% of C. Which of the following statements is correct?
(p. 448- A. A has direct control over C.
449)
B. A has indirect control over C.
C. A has no control over C.
D. A has contingent control over C.
Blooms Level: Understand
Difficulty: Easy
Hilton - Chapter 08 #24
Learning Objective: 08-05 Calculate consolidated net income attributable to the shareholders of the parent and non-controlling interest in situations where a parent
has direct and indirect control over a number of subsidiary companies.
25. X owns 70% of Y, which in turn owns 25% of Z. X, also owns 20% of Z. Which of the following
(p. 448- statements is correct?
449)
A. X has direct control over Z.
B. X has indirect control over Z.
C. X has no control over Z.
D. X has contingent control over Z.
Blooms Level: Understand
Difficulty: Easy
Hilton - Chapter 08 #25
Learning Objective: 08-05 Calculate consolidated net income attributable to the shareholders of the parent and non-controlling interest in situations where a parent
has direct and indirect control over a number of subsidiary companies.
26. P Corp. owns 800 voting common shares out of Q Corp.'s 1,000 outstanding voting common shares,
(p. 436- which it accounts for using the equity method. On December 31, 2012, the shareholder's equity
439)
section of Q Corp. was comprised of $15,000 in common stock and retained earnings with the amount
of $450,000.
Q Corp. reported net Income and paid dividends of $120,000 and $20,000 respectively for the year
ended December 31, 2013.
On January 1, 2014, P Corp. sold 200 shares of its investment in Q Corp. for $125,000. On January
1, 2013, the investment account had a balance of $420,000. The acquisition differential was to be
allocated as follows:
60% to patents (6 year remaining life).
30% to equipment (9 year remaining life).
What is the gain or loss on P's sale of its shares on Q Corp.?
A. A $3,000 loss.
B. A $2,000 loss.
C. A $1,600 gain.
D. A $3,000 gain.
Blooms Level: Apply
Difficulty: Moderate
Hilton - Chapter 08 #26
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
27. P Corp. owns 800 voting common shares out of Q Corp.'s 1,000 outstanding voting common shares,
(p. 436- which it accounts for using the equity method. On December 31, 2012, the shareholder's equity
439)
section of Q Corp. was comprised of $15,000 in common stock and retained earnings with the amount
of $450,000.
Q Corp. reported net Income and paid dividends of $120,000 and $20,000 respectively for the year
ended December 31, 2013.
On January 1, 2014, P Corp. sold 200 shares of its investment in Q Corp. for $125,000. On January
1, 2013, the investment account had a balance of $420,000. The acquisition differential was to be
allocated as follows:
60% to patents (6 year remaining life).
30% to equipment (9 year remaining life).
What is the balance in the investment in Q account immediately following the sale?
A. Nil.
B. $80,000.
C. $295,200.
D. $370,200.
Blooms Level: Apply
Difficulty: Hard
Hilton - Chapter 08 #27
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
28. P Corp. owns 800 voting common shares out of Q Corp.'s 1,000 outstanding voting common shares,
(p. Previou which
it accounts for using the equity method. On December 31, 2012, the shareholder's equity
s chapters)
section of Q Corp. was comprised of $15,000 in common stock and retained earnings with the amount
of $450,000.
Q Corp. reported net Income and paid dividends of $120,000 and $20,000 respectively for the year
ended December 31, 2013.
On January 1, 2014, P Corp. sold 200 shares of its investment in Q Corp. for $125,000. On January
1, 2013, the investment account had a balance of $420,000. The acquisition differential was to be
allocated as follows:
60% to patents (6 year remaining life).
30% to equipment (9 year remaining life).
What is the amount of Goodwill that arose from P's investment in Q?
A. Nil.
B. $6,000.
C. $18,000.
D. $36,000.
Blooms Level: Apply
Difficulty: Moderate
Hilton - Chapter 08 #28
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
29. P Corp. owns 800 voting common shares out of Q Corp.'s 1,000 outstanding voting common shares,
(p. Previou which
it accounts for using the equity method. On December 31, 2012, the shareholder's equity
s chapters)
section of Q Corp. was comprised of $15,000 in common stock and retained earnings with the amount
of $450,000.
Q Corp. reported net Income and paid dividends of $120,000 and $20,000 respectively for the year
ended December 31, 2013.
On January 1, 2014, P Corp. sold 200 shares of its investment in Q Corp. for $125,000. On January
1, 2013, the investment account had a balance of $420,000. The acquisition differential was to be
allocated as follows:
60% to patents (6 year remaining life).
30% to equipment (9 year remaining life).
How much of the acquisition differential was allocated to patents?
A. Nil.
B. $6,000.
C. $18,000.
D. $36,000.
Blooms Level: Apply
Difficulty: Moderate
Hilton - Chapter 08 #29
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
30. P Corp. owns 800 voting common shares out of Q Corp.'s 1,000 outstanding voting common shares,
(p. Previou which
it accounts for using the equity method. On December 31, 2012, the shareholder's equity
s chapters)
section of Q Corp. was comprised of $15,000 in common stock and retained earnings with the amount
of $450,000.
Q Corp. reported net Income and paid dividends of $120,000 and $20,000 respectively for the year
ended December 31, 2013.
On January 1, 2014, P Corp. sold 200 shares of its investment in Q Corp. for $125,000. On January
1, 2013, the investment account had a balance of $420,000. The acquisition differential was to be
allocated as follows:
60% to patents (6 year remaining life).
30% to equipment (9 year remaining life).
How much of the acquisition differential was allocated to equipment?
A. Nil.
B. $6,000.
C. $18,000.
D. $36,000.
Blooms Level: Apply
Difficulty: Moderate
Hilton - Chapter 08 #30
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
31. P Corp. owns 800 voting common shares out of Q Corp.'s 1,000 outstanding voting common shares,
(p. Previou which
it accounts for using the equity method. On December 31, 2012, the shareholder's equity
s chapters)
section of Q Corp. was comprised of $15,000 in common stock and retained earnings with the amount
of $450,000.
Q Corp. reported net Income and paid dividends of $120,000 and $20,000 respectively for the year
ended December 31, 2013.
On January 1, 2014, P Corp. sold 200 shares of its investment in Q Corp. for $125,000. On January
1, 2013, the investment account had a balance of $420,000. The acquisition differential was to be
allocated as follows:
60% to patents (6 year remaining life).
30% to equipment (9 year remaining life).
What was the amount of acquisition differential amortization for 2013?
A. Nil.
B. $6,000.
C. $8,000.
D. $12,000.
Blooms Level: Apply
Difficulty: Moderate
Hilton - Chapter 08 #31
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
32. The following information pertains to the shareholdings of an affiliated group of companies. The
(p. 448- respective ownership interest of each company is outlined below.
453)

All intercompany investments are accounted for using the equity method.
The Net Incomes for these companies for the year ended December 31, 2012 were as follows:

Unrealized intercompany profits (pre-tax) earned by the various companies for the year ended
December 31, 2012 are shown below:

All companies are subject to a 25% tax rate.

How much is A Inc.'s Consolidated Net Income for 2012?
A. $1,510,000.
B. $1,773,625.
C. $1,796,125.
D. $2,170,000.
Blooms Level: Understand
Difficulty: Easy
Hilton - Chapter 08 #32
Learning Objective: 08-05 Calculate consolidated net income attributable to the shareholders of the parent and non-controlling interest in situations where a parent
has direct and indirect control over a number of subsidiary companies.
33. The following information pertains to the shareholdings of an affiliated group of companies. The
(p. 448- respective ownership interest of each company is outlined below.
453)

All intercompany investments are accounted for using the equity method.
The Net Incomes for these companies for the year ended December 31, 2012 were as follows:

Unrealized intercompany profits (pre-tax) earned by the various companies for the year ended
December 31, 2012 are shown below:

All companies are subject to a 25% tax rate.

How much is the non-controlling interest in A Inc.'s Consolidated Net Income for 2012?
A. Nil.
B. $382,500.
C. $373,875.
D. $400,000.
Blooms Level: Apply
Difficulty: Moderate
Hilton - Chapter 08 #33
Learning Objective: 08-05 Calculate consolidated net income attributable to the shareholders of the parent and non-controlling interest in situations where a parent
has direct and indirect control over a number of subsidiary companies.
34. The following information pertains to the shareholdings of an affiliated group of companies. The
(p. 448- respective ownership interest of each company is outlined below.
453)

All intercompany investments are accounted for using the equity method.
The Net Incomes for these companies for the year ended December 31, 2012 were as follows:

Unrealized intercompany profits (pre-tax) earned by the various companies for the year ended
December 31, 2012 are shown below:

All companies are subject to a 25% tax rate.

What is the Consolidated Net Income for the year attributable to the shareholders of A Inc.?
A. $1,510,000.
B. $1,796,125.
C. $1,817,500.
D. $2,170,000.
Blooms Level: Apply
Difficulty: Moderate
Hilton - Chapter 08 #34
Learning Objective: 08-05 Calculate consolidated net income attributable to the shareholders of the parent and non-controlling interest in situations where a parent
has direct and indirect control over a number of subsidiary companies.
35. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The
(p. 439- Balance Sheets of both companies on that date are shown below (after Whine acquired the shares):
442)

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc.
As a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000
shares it currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
What would be the amount of cash appearing on Whine's December 31, 2012 Consolidated Balance
Sheet (after the issue of shares to Chompster)?

A. $450,000.
B. $610,000.
C. $850,000.
D. $810,000.
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #35
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
36. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The
(p. Previou Balance
Sheets of both companies on that date are shown below (after Whine acquired the shares):
s chapters)

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc.
As a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000
shares it currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had
a remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
What would be the amount of the unamortized acquisition differential on December 31, 2012?
A. $40,000.
B. $50,000.
C. $80,000.
D. $125,000.
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #36
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
37. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The
(p. 439- Balance Sheets of both companies on that date are shown below (after Whine acquired the shares):
442)

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc.
As a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000
shares it currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
What would be Whine's ownership interest in Dine following Chompster's purchase of shares in Dine?

A. 60%
B. 64%
C. 75%
D. 80%
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #37
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
38. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The
(p. 439- Balance Sheets of both companies on that date are shown below (after Whine acquired the shares):
442)

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc.
As a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000
shares it currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had
a remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
What would be the gain or loss arising from Dine's share issue to Chompster?
A. A loss of $4,000.
B. A loss of $2,400.
C. A gain of $2,400.
D. A gain of $4,000.
Blooms Level: Apply
Difficulty: Moderate
Hilton - Chapter 08 #38
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
39. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The
(p. Previou Balance
Sheets of both companies on that date are shown below (after Whine acquired the shares):
s chapters)

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc.
As a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000
shares it currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
What would be the amount of the non-controlling interest appearing on Whine's Consolidated Balance
Sheet as at December 31, 2012 before the issue of shares to Chompster?

A. $125,000.
B. $160,000.
C. $222,000.
D. $264,000.
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #39
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
40. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The
(p. 439- Balance Sheets of both companies on that date are shown below (after Whine acquired the shares):
442)

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc.
As a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000
shares it currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
What would be the amount of the non-controlling interest appearing on Whine's Consolidated Balance
Sheet as at December 31, 2012 after the issue of shares to Chompster?

A. $125,000.
B. $222,000.
C. $264,000.
D. $282,600.
Blooms Level: Apply
Difficulty: Moderate
Hilton - Chapter 08 #40
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
41. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The
(p. 439- Balance Sheets of both companies on that date are shown below (after Whine acquired the shares):
442)

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc.
As a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000
shares it currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
The amount of retained earnings appearing on the December 31, 2012 Consolidated Balance Sheet
would be:

A. $384,000.
B. $396,000.
C. $400,000.
D. $402,400.
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #41
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
42. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The
(p. 439- Balance Sheets of both companies on that date are shown below (after Whine acquired the shares):
442)

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc.
As a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000
shares it currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
The amount of goodwill appearing on the December 31, 2012 Consolidated Balance Sheet would be:

A. Nil.
B. $10,000.
C. $20,000.
D. $30,000.
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #42
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
43. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The
(p. 439- Balance Sheets of both companies on that date are shown below (after Whine acquired the shares):
442)

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc.
As a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000
shares it currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
The amount of common shares appearing on the December 31, 2012 Consolidated Balance Sheet
would be:

A. $500,000.
B. $660,000.
C. $770,000.
D. $860,000.
Blooms Level: Understand
Difficulty: Easy
Hilton - Chapter 08 #43
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
44. Whine purchased 80% of the outstanding voting shares of Dine Inc. on December 31, 2012. The
(p. Previou Balance
Sheets of both companies on that date are shown below (after Whine acquired the shares):
s chapters)

Also on December 31, 2012 (after the financial statements appearing above had been prepared)
Chompster Inc., one of Whine's main competitors has agreed to acquire an equity interest in Dine Inc.
As a result of the agreement, Dine Inc. would issue another 8,000 shares (over and above the 32,000
shares it currently has outstanding) to Chompster for $20 per share.
The acquisition differential on the date of acquisition was attributed entirely to equipment, which had a
remaining useful life of ten years from the date of acquisition.
Whine Inc. uses the equity method to account for its investment in Dine Inc. There were no unrealized
intercompany profits on December 31, 2012.
The amount appearing under equipment on the December 31, 2012 Consolidated Balance Sheet would
be:

A. $690,000.
B. $710,000.
C. $772,500.
D. $785,000.
Blooms Level: Apply
Difficulty: Easy
Hilton - Chapter 08 #44
Learning Objective: 08-03 Prepare consolidated financial statements after the parents ownership has decreased.
45. What is the correct method of treating an acquisition differential arising from a Preferred Share Issue?
(p. 443-
448)
A. It should be treated as an adjustment to goodwill.
B. It should be pro-rated across the subsidiary's identifiable assets and liabilities.
C. It should be expensed in the current year.
D. It should be adjusted to a contributed surplus or retained earnings account.
Blooms Level: Remember
Difficulty: Easy
Hilton - Chapter 08 #45
Learning Objective: 08-04 Prepare consolidated financial statements in situations where the subsidiary has preferred shares in its capital structure.
46. Which of the following statements pertaining to preferred shares is correct?
(p. 443- A. If the preferred shares are participating, only the current year's Net Income would be allocated to
448)
the preferred shares.
BIf the preferred shares are non-cumulative, only the current year's Net Income would be allocated to
. preferred shares, since dividends are never in arrears with non-cumulative preferred shares.
C If the preferred shares are participating, the current year's Net Income would be allocated to the
. shares, only if the subsidiary is fully owned by the parent.
D. There can never be any dividends in arrears when preferred shares are participating.
Blooms Level: Understand
Difficulty: Easy
Hilton - Chapter 08 #46
Learning Objective: 08-04 Prepare consolidated financial statements in situations where the subsidiary has preferred shares in its capital structure.
47. Which of the following is not included in the amount of shareholders' equity allocated to the holders
(p. 443- of the preference shares on the consolidated balance sheet?
448)
A. The stated or par value of the preference shares.
B. Cumulative dividends in arrears on the preference shares.
C. Contributed surplus arising from the issue of preference shares.
D. Redemption premium payable on redemption of preference shares.
Blooms Level: Understand
Difficulty: Moderate
Hilton - Chapter 08 #47
Learning Objective: 08-04 Prepare consolidated financial statements in situations where the subsidiary has preferred shares in its capital structure.
48. If the shareholders' equity allocated to the subsidiary's preference shares amounts to $240,000 and the
(p. 443- parent company acquires 60% of the subsidiary's preference shares at a cost of $150,000, how much
448)
will the non-controlling interest in the preferred shares amount to after the purchase by the parent?
A. $90,000.
B. $96,000.
C. $120,000.
D. $240,000.
Blooms Level: Apply
Difficulty: Moderate
Hilton - Chapter 08 #48
Learning Objective: 08-04 Prepare consolidated financial statements in situations where the subsidiary has preferred shares in its capital structure.
49. If the shareholders' equity allocated to the subsidiary's preference shares amounts to $240,000 and the
(p. 443- parent company acquires 60% of the subsidiary's preference shares at a cost of $150,000, what effect
448)
will the transaction have on consolidated shareholders' equity?
A. Non-controlling interest will decrease by $144,000 and retained earnings will decrease by $6,000.
B. Non-controlling interest will decrease by $144,000 and contributed surplus will increase by $6,000.
C. Non-controlling interest will increase by $144,000 and retained earnings will increase by $6,000.
D. There will be no change in consolidated shareholders' equity as a result of this transaction.
Blooms Level: Apply
Difficulty: Moderate
Hilton - Chapter 08 #49
Learning Objective: 08-04 Prepare consolidated financial statements in situations where the subsidiary has preferred shares in its capital structure.
50. If the shareholders' equity allocated to the subsidiary's preference shares amounts to $240,000 and the
(p. 443- parent company acquires 60% of the subsidiary's preference shares at a cost of $150,000, how much
448)
will the amount of cash on the consolidated balance sheet change as a result of this transaction?
A. It will not change.
B. It will increase by $150,000.
C. It will decrease by $144,000.
D. It will decrease by $150,000.
Blooms Level: Understand
Difficulty: Easy
Hilton - Chapter 08 #50
Learning Objective: 08-04 Prepare consolidated financial statements in situations where the subsidiary has preferred shares in its capital structure.
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The Project Gutenberg eBook of Le joug: roman
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Title: Le joug: roman

Author: Marion Gilbert

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*** START OF THE PROJECT GUTENBERG EBOOK LE JOUG:

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 LE JOUG

DU MÊME AUTEUR
CHEZ LE MÊME ÉDITEUR:
L’amour de la Blonde. Celle qui s’en va.
La trop Aimée.
Celui qui reste.
CHEZ D’AUTRES ÉDITEURS:
Du Sang sur la Falaise.
[Illustration]
 PREMIERE PARTIE:
I
II, III,

DEUXIEME PARTIE:
I, II, III, IV, V, VI, VII, VIII, IX, X,

TROISIEME PARTIE:
I, II, III, IV, V, VI.
 MARION GILBERT

L E JOU G
Roman

PARIS
J. FERENCZI ET FILS, ÉDITEURS
9, Rue Antoine-Chantin, 9

IL A ÉTÉ TIRÉ DE CET OUVRAGE

Cinq exemplaires
sur papier pur fil des Papeteries Lafuma
numérotés de 1 à 5

Copyright 1925, by J. Ferenczi et Fils.

Tous droits de traduction, reproduction, adaptation, représentation
réservés pour tous pays, y compris la Russie.
A Celle qui sait
que ce livre est à Elle.
L E JOU G
 PREMIERE PARTIE

I
Dans la chambre qu’envahissait le crépuscule, on distinguait encore la
blancheur du grand lit, vaste et haut, entouré à l’ancienne de ses rideaux
empesés. Le reste du jour printanier traînait ici et là, s’accrochait aux vernis
luisants des vieux meubles d’acajou, piquait un point à la glace ternie de la
cheminée, au miroir à col de cygne de la toilette. Et, sur le lit, bien allongée
sous ses couvertures en ordre et sous son drap aux cassures intactes, la mère
Bernage achevait de mourir.
—Ouvre la fenêtre, Berthe, fit une voix douce.
Berthe se leva de la chaise qu’elle occupait au pied du lit. Sur la baie
encore claire se profila sa silhouette aux contours ronds de grande femme
bien faite. Elle tourna l’espagnolette qui résista, grinça et céda enfin pour
laisser entrer d’une seule bouffée le printemps tout entier. Cela sentait la
terre humide, la fumée de bois et, par-dessus tout, l’odeur douce et sucrée
des primevères d’avril qui couvre alors la terre normande d’un manteau
parfumé.
Fanny, qui avait parlé, respira fortement en levant la tête: le souffle frais
entrait dans la chambre déjà pleine des relents de maladie et de mort,
comme pour la purifier, et les vivants appellent inconsciemment la vie. Le
miroir auquel elle faisait face lui renvoya son image au fond d’une eau
trouble et verdie: sa pâle figure inquiète de vieille fille de vingt-neuf ans,
ses yeux incolores, ses cheveux bruns sans reflets, et cette bouche de
madone aux lèvres pures, aux dents parfaites, qui était sa seule beauté.
Et soudain parce qu’elle avait vraiment regardé sa figure, l’idée de la
maladie et de la mort prochaine de sa mère la quitta tout à fait, comme cela
arrive au milieu des préoccupations extrêmes. Au-dessus de son reflet, sa
sœur, qui s’était retournée, mit le sien, et sa grosse figure ronde, rose et
blanche sous une rude broussaille de cheveux blonds, éclaira le vieux miroir
terni. Les deux sœurs se contemplèrent un moment ainsi avec plus
d’intensité qu’elles n’en mettaient dans leurs regards quotidiens, puisque
l’habitude de la vie commune émousse cette curiosité d’âme traduite par un
regard qui appuie au lieu d’effleurer. Ce ne fut qu’un instant: un de ces
instants pathétiques, toujours méconnus, et la plus jeune sœur se retourna,
et Fanny se leva, car la mourante avait remué.
Penchée déjà sur le lit, l’aînée dit:
—Tu as appelé, maman?
La face décolorée se souleva un peu sur l’oreiller et les lèvres bougèrent.
Fanny approcha son oreille.
—Tu veux quelque chose?
Mais les syllabes sans suite chuchotées par la malade ne lui apprirent
rien. Berthe s’était penchée aussi.
Le masque de la vieille femme se détendit un peu tandis que sa plus
jeune fille s’approchait d’elle; pourtant, sa sèche main d’ivoire se leva pour
l’écarter et elle dit, presque nettement cette fois:
—Fanny!
Fanny interrogea avec passion la figure où la mort avait déjà si
clairement tracé ces signes mystérieux que nous reconnaissons sans les
avoir jamais vus, et elle recueillit à mesure ces mots, les derniers peut-être,
que la raison formerait derrière ce front impassible. La vieille femme
prononçait:
—Donne la lettre.
Alors Fanny dit vite:
—Quelle lettre? Quelle lettre, maman?
Mais les lèvres ne remuaient plus et semblaient rigides, comme scellées
à jamais.
Les deux sœurs se regardèrent avec cette surprise que donne l’inhabitude
—comment s’habituer à la mort?—Il y eut un moment de silence, et puis la
main déjà froide qui errait sur le drap rencontra la main de Fanny et la serra
convulsivement, les yeux déjà voilés se rouvrirent et Fanny entendit ces
mots distincts:
—Renvoie Berthe.
Fanny se releva. Quelque chose au fond de ses yeux montra qu’elle avait
compris une signification cachée. Mais le regard bleu de la cadette resta
perplexe:
—Va, Berthe, fit l’aînée, maman a quelque chose qui la tourmente.
 Un mouvement impatient des mains les plus patientes qui poussaient
Berthe vers la porte surprit celle-ci. Elle se retourna. Le pli habituel que le
bouleversement de l’heure solennelle avait effacé sur sa figure y
reparaissait. Et sa lèvre inférieure s’avançait, boudeuse:
—Pourquoi donc que je ne resterais pas aussi, moi?
Fanny dit avec douceur:
—Elle veut me parler. Il ne faut pas la contrarier. Elle veut.
Et l’ascendant de la mère impuissante et vaincue était si grand que
l’hostilité jalouse de la fille favorite céda et qu’elle sortit sans rien dire.
La nuit remplissait à présent presque toute la chambre. Mais le ciel
encore illuminé par le reste du couchant était comme une grande coupole
phosphorescente. Fanny, de nouveau penchée sur le lit, scrutait le visage
redoutable où elle n’avait jamais su lire, avec l’espoir désordonné
d’apprendre enfin quelque chose. Et la bouche pâle s’ouvrit encore.
—La lettre, dit la mourante, donne la lettre.
Cette fois, la parole était nette, et, sous les paupières relevées, les yeux
sombres commandaient, exigeaient dans la mort comme dans la vie.
—Oui, fit docilement Fanny, oui, maman. Quelle lettre?
—Une lettre, là, sous ma couronne.
Fanny se retourna. Elle avait compris. Sur la cheminée, un globe de
verre recouvrait, sur un coussin de velours rouge frangé d’or, la couronne
d’oranger que la mariée avait posée là, un soir, trente ans plut tôt. Au
moment d’enlever le globe, elle hésita: jamais elle n’y touchait. Dans les
rites ménagers de la maison, la mère seule nettoyait sa chambre et il n’y
avait que si peu de jours qu’elle était étendue là, privée de son activité!
Mais les impérieuses prunelles noires semblaient diriger ses mains et elle
enleva le globe avec précaution. Les grêles fleurs de cire tremblaient au
souffle frais de l’air. Fanny souleva le coussin à regret. Dessous, ses doigts
qui tâtonnaient dans l’ombre accrue à présent touchèrent une enveloppe.
Elle fit: «Ah!» et se retourna. Redressée sur ses oreillers, la malade
regardait. Le jour finissant, concentré sur sa figure, montra encore à Fanny
les sombres yeux brûlants qui attendaient une fois dernière l’obéissance
passive qu’ils avaient toujours exigée. Alors, elle mit l’enveloppe dans la
main ouverte qui se referma comme sur une proie.
 Des minutes coulèrent. La mère Bernage était retombée. Son long corps
mince creusait son lit à la façon des mourants. L’épuisement de l’effort
faisait ruisseler son front de fines gouttelettes que Fanny essuyait
doucement avec un linge soyeux. Tout à coup l’agonisante parla et sa voix
rauque heurtait les mots au passage de l’air:
—Avec moi, avec moi la lettre, tu promets, Fanny!
—Oui, maman, sois tranquille, oui.
Mais les terribles yeux noirs s’ouvrirent encore tout grands pour joindre
leur commandement à celui des mots.
Sans rien dire, Fanny prit la lettre aux doigts qui se raidissaient et la posa
sur la poitrine sèche de la vieille femme. Alors le regard s’éteignit comme
apaisé et, tandis que la dernière lueur quittait le ciel, le râle des agonisants
s’éleva dans la chambre obscure.
Maintenant, tout était silence. La nuit et la mort, entrées ensemble dans
la chambre, y régnaient seules. De la fenêtre toujours ouverte montait
l’haleine fraîche du jardin. La première lueur de la lune qui paraissait à
l’horizon entra doucement et posa un doigt de clarté sur les deux sœurs.
Agenouillées côte à côte, elles pleuraient sans bruit, la tête sur le drap. Et ce
fut comme si l’indécise lumière venait sécher leurs larmes. Elles se levèrent
ensemble. Berthe alla fermer les volets. Fanny alluma une bougie sur la
commode, et elles firent la toilette funèbre de la morte, selon le rite
millénaire qui veut qu’on lave, qu’on habille et qu’on regarde dormir les
morts comme si c’étaient encore des vivants.
Enfin, quand tout fut prêt et que le lit blanc fut encore plus blanc sous les
cassures plus nettes d’un drap plus frais et que, seul, le visage de la morte
dépassa le pli du suaire, les deux filles s’arrêtèrent et se regardèrent avec
incertitude, car il ne restait plus rien à faire.
—Quelle heure est-il? demanda Fanny.
Et Berthe répliqua:
—J’ai entendu sonner neuf heures, pas longtemps «après».
Fanny réfléchissait, sans rien dire, les yeux vagues; alors l’autre ajouta:
—Il faudrait aller manger quelque chose. On finirait par tomber. Depuis
midi...
Fanny regarda le lit et la chambre. Oui, tout était en ordre. Elle soupira et
se laissa emmener.
 A l’entrée des deux sœurs, un homme se leva dans la cuisine. C’était un
incroyable petit vieux, cassé, délavé, passé, ratatiné, sans âge. Sa figure
grise et ravinée ne portait pas la broussaille des vieillards, sauf au-dessus
des yeux, qui s’en trouvaient cachés.
Et il dit d’une voix râpeuse:
—Comment qu’ ça va là-haut?
Fanny cacha sa figure dans son mouchoir et Berthe fit un geste sans rien
dire. Alors le petit vieux leva le bras avec effort et retira l’espèce de
casquette moulée à sa tête qu’il ne quittait jamais. Et ce geste insolite saisit
les deux orphelines plus que beaucoup de paroles.
Sur la grande table, une chandelle, dans un chandelier de fer en spirale,
grésillait, éclairant mal la vaste pièce. Une casserole chantait sur le
fourneau.
Berthe dit:
—As-tu fait à souper, père Oursel? On est bien obligé de manger
quelque chose.
—La soupe est prête, répondit le vieux de sa voix parcimonieuse. Mais
j’ai pas mis la table dans la salle.
—Ça ne fait rien. Nous mangerons un morceau dans la cuisine, fit Fanny
avec lassitude.
Elle s’assit et, comme il arrive, la fatigue tomba sur elle d’un seul coup
et elle eut une envie forcenée de s’asseoir dans le coin de la cheminée, à sa
place d’enfant, et de s’y endormir, d’oublier, de dormir, de dormir sans
rêver.
Mais Berthe ne perdait jamais de vue tout à fait les réalités de ce qu’elle
appelait les «devoirs» de la vie. Elle n’eut de repos que lorsque sa sœur se
fut, comme elle, approchée de la table. La soupe campagnarde, mitonnée
par leur étrange cuisinier, de poireaux, de pommes de terre, de pain, de
beurre et de crème, livra sa douce chaleur onctueuse et les deux sœurs
mangèrent sans rien dire. Enfin Fanny posa sa cuillère et repoussa son
assiette:
—Pauv’ maman! Elle aimait tant sa soupe!
C’était la première fois qu’on parlait au passé de la mère Bernage. Le
vieux eut l’air de réfléchir avec difficulté. Puis il dit:
 —Même âge que moi qu’elle avait. De mil huit cent vingt-cinq qu’on
était tous les deux.
Il répéta plusieurs fois, comme étonné et flatté prodigieusement de cette
coïncidence:
—Tous les deux, tous les deux!
Et ils écoutèrent dans le silence et la pénombre résonner ces chiffres
évoquant tant de choses anciennes, oubliées, mortes comme la morte d’en
haut.
A ce moment, un coup de sonnette retentit qui fit tressaillir les deux
sœurs. Elles se regardèrent.
—Qui ça peut-il être à cette heure-là?
L’inutile question n’eut d’autre réponse que le bruit que fit le vieux
domestique en se levant. Il marchait un peu courbé, et la chandelle qu’il
portait lui traçait une ombre grotesque de gnome sur le mur. Il sortit suivit
un long corridor, et les sœurs, dans l’obscurité, l’entendirent déverrouiller et
débarrer la porte d’entrée. Alors elles dirent ensemble:
—C’est l’oncle Nathan!
Et, déjà, elles étaient dans le corridor quand, se rappelant tout à coup ce
que le deuil de la maison leur commandait, elles s’arrêtèrent sur le seuil. Au
fond du long corridor, le clair-obscur montrait l’arrivant, un grand homme
puissant qu’entourait l’ombre et le halo de la pauvre lumière rougeâtre
oscillant aux mains du bonhomme. Alors, vite, Fanny rentra dans la cuisine
pour allumer une seconde chandelle.
Quand ils furent tous dans la petite salle à manger, assis sur les chaises
alignées contre le mur de chaque côté de la table ronde, avec un petit rond
de sparterie sous les pieds, ils se regardèrent un moment. Rien d’autre
n’avait été échangé entre eux que le dur baiser d’arrivée, singulière
salutation d’autrefois donnée et reçue sans plaisir et sans intérêt. Et
maintenant, ils ne trouvaient pas les paroles qu’il fallait pour commencer.
La haute taille de l’oncle Nathan faisait un rectangle sombre sur le mur
ramagé de clair et sa surprenante figure de demi-paysan de la cité du val,
comme ciselée dans du granit rouge avec force et finesse à la fois,
s’achevait dans une charmante chevelure inattendue toute en petites boucles
d’argent.
Enfin, il soupira et dit:
 —Et, comme ça, la v’là partie, ma pauv’sœur. Et vous v’là toutes seules,
alors.
Sa grande bouche régulière et rasée souriait presque, mais sa voix était
plus grave que ses médiocres condoléances. Il avait l’air à la fois de les
plaindre et de se moquer un peu. Les demoiselles Bernage, qui
connaissaient le vieil oncle Le Brument, n’y firent pas attention. Et Berthe,
pénétrée de cette importance subite que la mort fait rejaillir autour d’elle,
répondit:
—Oui, elle a passé dans la soirée, vers les huit heures et demie.
Après cela, elle dit—un peu plus comme une fille qui vient de perdre sa
mère:
—Not’ pauv’ mère! Elle se repose à présent. Mais nous...
Et elle finit sa phrase dans son mouchoir.
Fanny, muette, croisait et décroisait ses mains sur ses genoux, d’un geste
inconscient. L’oncle Nathan reprit:
—Avez-vous vu le pasteur?
—Pas «depuis», dit Berthe, mais il était encore là hier.
La bouche ironique se plissa encore. Le vieillard regardait Fanny qui, les
yeux perdus dans le halo de la chandelle grésillante, semblait absente de la
scène. Et il dit, penché vers elle:
—Elle a-t-il dit quelque chose, ta mère?
Fanny le regarda en tressaillant violemment. Et, tout à coup, ramenée à
la réalité, elle écouta les paroles qui semblaient encore résonner et elle dit,
comme si elle comprenait leur sens caché:
—Non, rien.
Berthe avança entre eux sa grosse tête blonde.
—Qu’est-ce que tu dis, Fanny! Si, elle a parlé tu sais bien.
Mais son interruption tomba dans le vide sans toucher personne, et elle
recula en les regardant toujours.
Au bout d’un instant, l’oncle Nathan reprit:
—Y’ aura du monde à l’inhumation. Du temps du père Bernage, y’
aurait eu toute la ville. Mais à présent c’est plus la même chose: j’ suis
vieux, vous êtes restées filles. C’est des familles qui s’en vont.
 Il avait posé ses mains à plat sur ses genoux, et discourait, comme pour
lui-même, de sa voix mordante, en regardant la flamme. Il continua:
—Le grand-père Jean Bernage, avec sa fabrique, c’était un homme! Y en
a eu du monde ici, du temps que les mouchoirs de Beuzeboc étaient dans
leur beau! Le père Jean, i’ causait à Rouen, le vendredi, à tu et à toi avec
tous les messieurs des grosses fabriques. Tout ça est mort. Tout ça est fini.
Ça a commencé du temps de ton père, Alfred Bernage. L’argent s’en va
d’ici. Et pas seulement de chez vous, mais de toute la vallée. Ça s’en va,
comme c’est venu, sans qu’on «save» pourquoi. L’argent s’en va.
Il semblait répéter le mot avec complaisance, peut-être avec volupté. Et
il ne regardait toujours pas les affligées qu’il venait consoler, comme si son
discours était d’une portée générale, ou encore chargé d’un sens intelligible
à lui seul.
Berthe dit à mi-voix:
—T’aurais bien pu allumer une bougie, au lieu de c’te chandelle.
L’oncle Nathan reprenait:
—L’argent? Où qu’il est aujourd’hui? On ne sait pas. Il est toujours plus
là où qu’il était. Y en a qu’en ont. Peut-être. C’est pas ceux qu’on croit.
L’argent n’est pas...
Il s’interrompit pour écouter quelque bruit qui venait du corridor noir. Et
il dit d’une voix changée, moins âpre:
—Votre père était un bon homme. Mais il ne savait pas gagner de
l’argent. Il avait des idées à lui là-dessus, crainte de nuire au monde, ou
n’importe. Des bêtises! On ne va pas loin avec ça. Et ma sœur, qui le menait
dans tout, elle a pas pu l’ mener là-dessus. Ah! mais non!
Il regarda Fanny tout à coup:
—Tu lui ressembles à ton père, toi, Fanny, d’un sens... Et, si ton père
avait «vit», il y a des choses qui seraient pas arrivées. Pas que ça soit plus
mal comme ça, non, peut-être; on ne sait pas, on ne peut pas dire.
Il rêva un moment, comme s’il résumait des pensées profondes. En face
de lui, elles ne bougeaient pas: Fanny pâle et inerte, Berthe comme tendue
par une idée fixe, qui la faisait froncer les sourcils d’attention. Enfin, le
vieillard se leva:
—Faut que j’m’en retourne. Il est tard.
Fanny dit doucement:
 —Voulez-vous la voir?
—Ça peut pas se refuser.
Ils montèrent tous trois l’escalier. A la porte, ils pausèrent un instant,
pour rassembler ce courage qui se détourne devant le visage de la mort. Et
ils entrèrent.

Quand elles furent seules, et que le pas du vieillard eut décru jusqu’à
s’éteindre sur la route de Villebonne, sèche et sonore sous la lune, les deux
sœurs se regardèrent.
—Quelle heure est-il? demanda Fanny.
Et Berthe répondit, comme si elle attendait la question:
—Dix heures et demie.
Alors Fanny reprit:
—Nous allons la veiller chacune à notre tour. Veux-tu aller te reposer
d’abord?
—Non, dit vivement Berthe. On restera ensemble, c’est mieux.
Fanny fit un geste vague qui acquiesçait.
Quand elles revinrent, elles avaient changé leurs robes contre des
peignoirs et chacune s’était fait deux grosses tresses qui tombaient, brunes
et soyeuses, de chaque côté de la figure pâle de Fanny, blondes et rudes, sur
les épaules de Berthe. Elles ressemblaient ainsi à deux grandes
pensionnaires dans leur première robe longue, car les vingt-neuf ans sonnés
de Fanny gardaient, plus que les vingt-cinq de sa sœur, un air d’innocence
et d’ignorance.
Elles s’assirent, l’une au pied, l’autre à la tête du lit. Sur la commode,
une bougie brûlait avec un halo rouge. Fanny avait joint les mains et
semblait prier. Berthe la regardait fixement. Et le visage de la morte était
coupé de grandes ombres, qui bougeaient un peu lorsque la flamme
vacillait.
Les yeux de Fanny rencontrèrent les yeux de Berthe et ce fut comme si
le charme du silence se rompait entre elles. Quelque chose dans le regard de
sa sœur surprit l’aînée. Pourtant, elles n’avaient guère l’habitude de
s’analyser; leur milieu endormi leur vie engourdie, une sorte de fatalisme
provincial leur faisait accepter passivement choses, êtres et événements.
Etait-ce cette atmosphère de mort qui agitait autour d’elles l’eau morte de
leur âme? Fanny se replia un peu plus et attendit.
Ce fut assez long. Berthe ne semblait pas pouvoir formuler cette
question qui était si clairement inscrite dans ses dures prunelles bleues. On
devient malhabile à parler de certaines choses lorsque la parole n’a servi
jusque-là qu’à exprimer l’ordinaire de l’existence. Enfin elle dit:
—Fanny!
L’autre répondit en tremblant:
—Eh bien?
—Qu’est-ce qu’il peut y avoir dans cette lettre?
L’interpellée eut ce léger souffle exhalé qui marque la fin d’une
appréhension. Ce n’était pas là ce qu’elle avait craint. Et elle répéta:
—La lettre?
—Oui, la lettre qu’elle a demandée et que tu lui a mise dans les mains.
—Je ne sais pas, dit lentement Fanny.
Berthe resta saisie.
—Ce n’est pas possible! Où était-elle, d’abord?
Fanny indiqua le globe.
—Là? Et on ne le savait pas? Et d’où vient-elle? Et de qui?
Ses yeux s’aiguisaient, implacables. Fanny la sentit en proie à une de ces
crises de curiosité qui la possédaient parfois: et un découragement l’envahit
à l’idée de la lutte.
—C’est son affaire et pas la nôtre, dit-elle avec douceur.
—Mais c’est la nôtre aussi, puisque tout ce qui est à elle est à nous
maintenant.
Il y eut un silence dans lequel l’écho des mots se prolongea et sembla
leur donner toute leur valeur. Et Berthe reprit plus fermement:
—Il faut que nous sachions ce qu’il y a dans cette lettre.
Fanny se débattit encore.
—Non, Berthe, ce ne serait pas bien. Maman serait fâchée.
—Au contraire. Si c’est quelque chose d’important, nous devons le
savoir. Car, enfin, elle n’avait peut-être plus toute sa tête quand elle t’en a
parlé. Sans ça, elle ne t’aurait pas demandé de la détruire.
 Elle avançait des yeux éclairés en dedans par sa passion contre ceux de
sa sœur, comme pour forcer physiquement son consentement. Et elle ajouta:
—Il faut même que nous le sachions. C’est notre devoir.
Fanny eut un gémissement de défaite devant ce mot qu’elle ne savait
comment conjurer. Un mot dont elle avait tant souffert déjà quand sa mère
le dressait devant elle comme un obstacle infranchissable. Et elle se couvrit
la figure de ses mains pour ne pas voir Berthe qui soulevait le drap
mortuaire.
Quand elle les écarta, sa sœur tenait la lettre. Alors, elle gémit:
—Oh! Berthe, qu’est-ce que tu as fait? Dès que maman a été morte, tu
lui as désobéi!
L’autre avait pâli sous le rose cru qui fardait naturellement ses joues
pleines. Mais ses yeux triomphaient. Et elle parla si fermement que Fanny
sentit vaciller sa conviction intérieure.
—Non, dit-elle, il fallait le faire. Tu verras que j’avais raison.
Sa respiration était un peu courte. Elle sourit pourtant et ajouta:
—Nous la lui redonnerons, va!
Trop de choses se pressaient dans la tête de Fanny pour qu’elle pût
réfuter cette parole-ci qui lui paraissait monstrueuse comme l’acte et le
geste qu’elle venait de voir. Il lui semblait que tout cela était un rêve affreux
commençant avec la mort de sa mère, et elle ne s’étonna même plus quand
elle vit sa sœur tirer de l’enveloppe la lettre vouée au tombeau par la voix
de la mourante, en disant avec un frisson:
—Oh! qu’elle est froide!
Et puis, elle s’approcha de la bougie. Fanny la suivait des yeux,
hallucinée. Etait-ce vrai? était-ce arrivé? Oh! tout ceci aurait un châtiment:
le Ciel le voulait! Elle se leva à moitié de sa chaise. Alors, Berthe se
retourna.
—Comme ça, tu ne sais pas du tout ce que c’est? Du tout?
Fanny fit non, toujours comme en rêve, et elle étendit la main pour une
défense suprême du secret de la morte. Berthe détourna les yeux. Le
moment passa qui aurait pu changer le destin: la lettre dépliée livrait déjà un
peu du mystère qui ne pouvait plus, à présent, rester caché.
Berthe lut.