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Chapter 9 Test Bank

INDIRECT AND MUTUAL HOLDINGS

Multiple Choie !uestions

LO"

"# $allet Corporation o%ns &'( o) A*elt Corporation an* A*elt o%ns

+'( o) Ba,o In# -hih o) the )ollo%in. is orret/

a# Ba,o shoul* not 0e onsoli*ate* 0eause 1inorit2 interests

hol* 34(#

0# Ba,o shoul* 0e onsoli*ate* 0eause the +'( o) Ba,o stok

is hel* in the a))iliate struture#

# $allet has &( in*iret o%nership o) Ba,o#

*# $allet has &'( in*iret o%nership o) Ba,o#

LO"

4# $a.e Corporation a5uire* a +'( interest in Ae Corporation at

a prie 67'8''' in eess o) 0ook :alue an* )air :alue on

;anuar2 "8 4''3# On the sa1e *ate8 Ae a5uire* a

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LO"

=# Nonontrollin. interest epense )ro1 Ba*rak is

a# 698'''#

0# 6"'8'''#

# 64'8'''#

*# 67'8'''#

LO"

7# Nonontrollin. interest )ro1 Ahille is

a# 6"&8'''#

0# 64384''#

# 6=+84''#

*# 6='8'''?

Consoli*ate* net ino1e an* nonontrollin. interest >loss?8

respeti:el28 )or 4''3 are

a# 64""84'' an* >6"84''?#

0# 64""84'' an* >6=8+''?#

# 64"=8+'' an* >6"84''?#

*# 64"=8+'' an* >6=8+''?#

4''9 $earson E*uation8 In# pu0lishin. as $rentie Hall

94

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LO"

7'( F 6"3'8'''?#

*# >"'( F 647'8'''? >7+( F 6"3'8'''?#

LO"

9# The )or1ula )or onsoli*ate* net ino1e is alulate* as

a# 69='8''' >647'8''' F "'(?0# 69='8''' >647'8''' F "'(? >6"3'8''' F 7'(?

# 69='8''' >647'8''' F "'(? >6"3'8''' F 7+(?

*# 69='8''' >647'8''' F "'(? >6"3'8''' F 7'(?

>6"3'8''' F "'( F 3'(?


9=

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LO"

"'# $a.lia Corporation o%ns &'( o) A0urn Corporation an* has

separate ino1e o) 64''8''' )or 4''3# A0urn Corporation has

separate ino1e o) 6"''8''' an* o%ns

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Use the )ollo%in. in)or1ation )or !uestions "7 throu.h "

$ah1 Corporation o%ns &'( o) the outstan*in. :otin. o11on stok o)

A0ussi Corporation8 %hih %as purhase* )or 6+'8''' o:er A0ussis

0ook :alue# The eess purhase prie %as attri0uta0le to .oo*%ill#

A0ussi Corporation o%ns +'( o) the outstan*in. o11on stok o) Ba*okCorporation8 %hih %as purhase* at 0ook :alue# The separate ino1es

o) $ah18 A0ussi8 an* Ba*ok )or the 2ear are 64''8'''8 647'8'''8 an*

64+'8'''8 respeti:el2#

LO"

"7# Consoli*ate* net ino1e )or the urrent 2ear is

a# 63'78&''#

0# 63"+84''#

# 637384''#

*# 633

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Use the )ollo%in. in)or1ation )or !uestions "9 an* 4'#

$ai:a Corporation o%ns &'( o) Akro2* Corporations outstan*in.

o11on stok an* Akro2* o%ns &'( o) the outstan*in. o11on stok o)

Baile2 Corporation# Baile2 Corporation o%ns "'( o) the outstan*in.

o11on stok o) Akro2* Corporation# The separate ino1es )or thethree a))iliate* o1panies )or the 2ear en*e* Dee10er ="8 4''3

>elu*in. in:est1ent ino1e? are as )ollo%s@ $ai:a Corporation8

6"''8'''8 Akro2* Corporation8 63'8'''8 an* Baile2 Corporation8

6='8'''#

Notations )or 5uestion "9 are@

$ Ino1e o) $ai:a on a onsoli*ate* 0asis

A Ino1e o) Akro2* on a onsoli*ate* 0asis

B Ino1e o) Baile2 on a onsoli*ate* 0asis

LO4

"9# The e5uation8 in a set o) si1ultaneous e5uations8 that o1putes$ai:a Corporation is

a# $ 63'8''' #&B#

0# $ 6='8''' #4A#

# $ 6"''8''' #4A#

*# $ 6"''8''' #&A#

LO4

4'# Akro2*s nonontrollin. interest in the total onsoli*ate*

ino1e )or 4''3 is

a# 6

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LO"

Eerise "

$aie Corporation o%ns &'( o) the :otin. o11on stok o) Aar*i

Corporation an* +'( o) the :otin. o11on stok o) Ba*.er Corporation#

Aar*i o%ns 4'( o) the :otin. o11on stok o) Ba*.er# There are no

ost0ook *i))erentials to onsi*er# The separate ino1es o) thesea))iliate* o1panies )or 4''3 are@

$aie 6=''8'''

Aar*i "+'8'''

Ba*.er "4'8'''

Re5uire*@

Calulate onsoli*ate* net ino1e )or $aie Corporation an*

Su0si*iaries )or 4''3#


9

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LO"

Eerise 4

$aini Corporation o%ns an &'( interest in A0*oo Corporation8

a5uire* on ;anuar2 "8 4''7 )or 6

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LO"

Eerise =

$aik Corporation o%ns &'( o) A*ol Corporation an* +'( o) Ben

Corporation# A*ol Corporation o%ns "'( o) Ben Corporation# All

su0si*iar2 in:est1ents %ere a5uire* at 0ook :alue e5ual to )air

:alue# Separate ino1es >elu*in. in:est1ent ino1e? o) thea))iliate* o1panies )or 4''3 are@

$aik@ 6+''8''' %hih inlu*es 6+'8''' unrealie* losses on in:entor2

ite1s sol* to Ben

A*ol@ 6=+'8'''

Ben@ 6=7'8''' %hih inlu*es 6"''8''' unrealie* pro)it on lan*

sol* to A*ol

Re5uire*@

Deter1ine onsoli*ate* net ino1e an* nonontrollin. interest epense

)or $aik Corporation an* Su0si*iaries )or 4''3#

LO"

Eerise 7

$aker Corporation o%ns "''( o) A0el Corporation8 A0el Corporation

o%ns 93( o) Baon Corporation an* Baon Corporation o%ns &'( o) Ca0

Corporation# The separate ino1es o) $aker8 A0el8 Baon8 an* Ca0 are

6=''8'''8 6"''8'''8 64''8'''8 an* 6=''8'''8 respeti:el2# All o) the

in:est1ents %ere 1a*e at ti1es %hen the in:estees 0ook :alues %ere

e5ual to their )air :alues#

Re5uire*@

Deter1ine the onsoli*ate* net ino1e an* nonontrollin. interest

epense )or $aker Corporation an* Su0si*iaries )or the urrent 2ear#


99

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LO"

Eerise 3

On ;anuar2 "8 4''3 $aki In# 0ou.ht

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LO4

Eerise elu*in. in:est1ent ino1e?8 o)

$a*ua8 A0le8 an* Ba*en are 6=''8'''8 6"''8'''8 an* 6&'8'''8

respeti:el2#

Re5uire*@

Calulate the onsoli*ate* net ino1e )or $a*ua Corporation an* its

su0si*iaries8 A0le an* Ba*en# Use the treasur2 stok 1etho* )or 2our

solution#


9"4

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SOLUTIONS

Multiple Choie !uestions

" 0

4 0

$a.e Ae Ba*er

Separate ino1es 6 3''8''' 6 =''8''' 6 7''8'''

Alloate #"&?J6"''8''' >#&'?>63'8'''?K 6 4384''

3 a

Nonontrollin. interest epense@

ro1 Ba*rak@ #4' 63'8''' 6 "'8'''

ro1 Ahille@ >#"&?J6"''8''' >#&'?>63'8'''?K 6 4384''

Total 1inorit2 ino1e 6 =+84''

Co10ine* separate ino1es 6 4 =+84'' ?

Consoli*ate* net ino1e 6 4=78&''


9"=

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+ * Nonontrollin. interest net loss@ 6&87'' >6"48'''?

>6=8+''?

$a0ari Al*ers Ba0ao

Separate ino1es 6 "&'8''' 6 +'8''' ?

4'( to A0a.ia 4'8''' > 4'8''' ?

Alloate A0a.ias net ino1e

69'8''' +'( 378''' > 378''' ?

Consoli*ate* net ino1e 6 =778'''

Nonontrollin. interest

epense

6 =+8''' 6 4'8'''

& *

9


9"7

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"' a

$a.lia A0urn Ba*le2

Separate ino1es 6 4''8''' 6 "''8''' 6 &'8'''

Alloate Ba*le2s ino1e@

3+8''' ?Su0total 6 4''8''' 6 "3+8''' 6 478'''

Alloate A0urns ino1e@

&'( to $a.lia "478&'' > "478&'' ?

Consoli*ate* net ino1e 6 =478&''


epense

6 =484'' 6 478'''

""

$ae A0aa Ba0on

Separate ino1es 6 "''8''' 6 "9'8''' 6 "3'8'''$lus@ Unrealie* loss on

lan* sale to $ae "'8'''

Separate realie* ino1es 6 "''8''' 6 4''8''' 6 "3'8'''

Alloate Ba0ons ino1e@

+'( to $ae 9'8''' > 9'8''' ?

4'( to A0aa ='8''' > ='8''' ?

Su0total "9'8''' 4='8''' ='8'''

Alloate A0aas net ino1e

to $ae 64='8''' "+"8''' ?

Consoli*ate* net ino1e 6 =3"8'''


epense

6 +98''' 6 ='8'''

"4 * ro1 !uestion ""@ 6+98''' ='8''' 6998'''

"= *

"7 0 64''8''' >&'(?J647'8''' >+'(?>4+'8'''?K

63"+84''

"3 0 7'( 64+'8''' 6"'78'''

"+ * >4'( 647'8'''? >4'( 6"3+8'''? 6

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$ah1 A0ussi Ba*ok

Separate ino1es 6 4''8''' 6 47'8''' 6 4+'8'''

Alloate Ba*oks ino1e@

+'( to A0ussi "3+8''' > "3+8''' ?

Su0total 6 4''8''' 6 =9+8''' 6 "'78'''

Alloate A0ussis net ino1e

to $ah1 6=9+8''' &'( ="+8&'' > ="+8&'' ?

Consoli*ate* net ino1e 6 3"+8&''


epense

6 roun*e*?

Nonontrollin. interest epense

Akro2*@ 6&'87=3 "'( outsi*e interest 6 &8'77


9"+

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LO"

Eerise "

$aie Corporation an* Su0si*iaries

Ino1e Alloation She*ule

or the 2ear 4''3

$aie Aar*i Ba*.er

Separate earnin.s 6 =''8''' 6 "+'8''' 6 "4'8'''

Alloate Ba*.ers ino1e@

+'( to $aie 478''' ?

Su0total 6 =643'8''' +'(? 0ook :alue a5uire* ='8'''

A0*oos in:est1ent in Ca0o@

Goo*%ill at a5uisition@ 646=3'8''' 69'8''' +'(? 378'''

Ca0o@ >6='8'''

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LO"

Eerise =

$aik A*ol Ben

Separate ino1es 6 +''8''' 6 =+'8''' 6 =7'8'''

$lus@ Unrealie* loss on

in:entor2 sales to Ben +'8'''Less@ Unrealie* pro)its

on lan* sol* to A*ol > "''8''' ?

Separate realie* ino1es ++'8''' =+'8''' 47'8'''

Alloate Ben@

+'( to $aik "778''' > "778''' ?

"'( to A*ol 478''' > 478''' ?

Su0total 6 &'78''' 6 =&78''' 6 47'8'''

Su0total 677'8'''Alloate Baons ino1e@

93( to A0el

7"&8''' >7"&8'''?

Su0total 3"&8'''

Alloate A0els ino1e@

"'' to $aker

3"&8''' >3"&8'''?

Consoli*ate* net ino1e 6&"&8'''

Nonontrollin. interest 6' 6448''' 6+'8'''


9"&

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LO"

Eerise 3

Castle is not onsoli*ate* 0eause the o%nership perenta.e is lessthan 4'( an* no e:i*ene o) ontrol is .i:en

$aki A*a1 Bair*

Separate ino1es 6 7''8''' 6 >3'8''' ? 6 "''8'''

Alloate Bair* &'( &'8''' >&'8''' ?

Su0total 6 7''8''' 6 ='8''' 6 4'8'''

Alloate A*a1 4483'' > 4483'' ?

Consoli*ate* net

ino1e 6 74483''

Minorit2 ino1e 6

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LO4

Eerise +

E5uations@

$ Ino1e o) $ao on a onsoli*ate* 0asis

A Ino1e o) A0er on a onsoli*ate* 0asis

B Ino1e o) Bak on a onsoli*ate* 0asis

$ 6"''8''' #9'A

A 6 7'8''' #&3B

B 6 338''' #'3A

Co1putations@

A 67'8''' >#&3?>6338''' #'3A?

A 67'8''' 67+8#9?>69'8+'"?

$ 6"''8''' 6&"837"

$ 6"&"837"

LO4

Eerise #+? >6&'8'''?

A 6"''8''' 67&8'''

A 6"7&8'''

$ 6=''8''' >#&? >6"7&8'''?K

$ 6=''8''' 6""&87''

$ 67"&87''


944

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