Select the correct answer for each of the following questions. 1. Upper Company holds 60 percent of
Question:
1. Upper Company holds 60 percent of Lower Company€™s voting shares. During the preparation of consolidated financial statements for 20X5, the following elimination entry was made:
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Which of the following statements is correct?
a. Upper Company purchased land from Lower Company during 20X5.
b. Upper Company purchased land from Lower Company before January 1, 20X5.
c. Lower Company purchased land from Upper Company during 20X5.
d. Lower Company purchased land from Upper Company before January 1, 20X5.
2. Middle Company holds 60 percent of Bottom Corporation's voting shares. Bottom has developed a new type of production equipment that appears to be quite marketable. It spent $40,000 in developing the equipment; however, Middle agreed to purchase the production rights for the machine for $100,000. If the intercompany sale occurred on January 1, 20X2, and the production rights are expected to have value for five years, at what amount should the rights be reported in the consolidated balance sheet for December 31, 20X2?
a. $0.
b. $32,000.
c. $80,000.
d. $100,000.
3. In the preparation of the 20X6 consolidated income statement, depreciation expense will be
a. Debited for $5,000 in the elimination entries.
b. Credited for $5,000 in the elimination entries.
c. Debited for $13,000 in the elimination entries.
d. Credited for $13,000 in the elimination entries.
4. In the preparation of the 20X6 consolidated balance sheet, computer equipment will be
a. Debited for $1,000.
b. Debited for $15,000.
c. Credited for $24,000.
d. Debited for $40,000.
5. Income assigned to the noncontrolling interest in the 20X6 consolidated income statement will be
a. $12,000.
b. $14,000.
c. $18,000.
d. $52,000.
6. Consolidated net income for 20X6 will be
a. $106,000.
b. $112,000.
c. $120,000.
d.$130,000.
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Step by Step Answer:
1d The land purchased from Upper Company had to be prior to 20X5 because the investment account is only debited in subsequent years after the year of purchase a Incorrect Since there is no debit to no...View the full answer
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
