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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
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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'(?
4''9 $earson E*uation8 In# pu0lishin. as $rentie Hall
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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#
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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#
4''9 $earson E*uation8 In# pu0lishin. as $rentie Hall
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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#
4''9 $earson E*uation8 In# pu0lishin. as $rentie Hall
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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&''
4''9 $earson E*uation8 In# pu0lishin. as $rentie Hall
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
4''9 $earson E*uation8 In# pu0lishin. as $rentie Hall
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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&''
Nonontrollin. interest
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 $ae 64='8''' "+"8''' ?
Consoli*ate* net ino1e 6 =3"8'''
Nonontrollin. interest
epense
6 +98''' 6 ='8'''
"4 * ro1 !uestion ""@ 6+98''' ='8''' 6998'''
"= *
"7 0 64''8''' >&'(?J647'8''' >+'(?>4+'8'''?K
63"+84''
"3 0 7'( 64+'8''' 6"'78'''
"+ * >4'( 647'8'''? >4'( 6"3+8'''? 6
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$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&''
Nonontrollin. interest
epense
6 roun*e*?
Nonontrollin. interest epense
Akro2*@ 6&'87=3 "'( outsi*e interest 6 &8'77
4''9 $earson E*uation8 In# pu0lishin. as $rentie Hall
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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'''
4''9 $earson E*uation8 In# pu0lishin. as $rentie Hall
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''
4''9 $earson E*uation8 In# pu0lishin. as $rentie Hall
944