Question: PLEASE HELP WITH THE MULTIPLE CHOICE PROBLEMS!!! On 1/1/2014, P Company acquires 100% of the voting stock of S, Inc. for $18,000,000 in cash. Some
PLEASE HELP WITH THE MULTIPLE CHOICE PROBLEMS!!!
On 1/1/2014, P Company acquires 100% of the voting stock of S, Inc. for $18,000,000 in cash. Some of S assets had fair values that differed from their book values, as follows:
BOOK VALUE FAIR VALUE
Property & Equipment, net (20 remaining life, SL) $11,000,000 $3,000,000
Identifiable intangible assets (5 years, SL) $ 000 $10,000,000
S total stockholders equity at 1/1/2014 was $5,000,000. Now we are at 12/31/2017, four years later. Ss retained earnings, January 1, 2017 reflect the accumulation of net income less dividends. S does not report any AOCI. Cumulative goodwill impairment to the beginning of 2017 is $1,000,000. Additional goodwill impairment of $500,000 was incurred in 2017. P uses the complete equity method to record its investment in S. The trial balance at 12/31/2017 for S appears below.
| S, Inc | Debit (Credit) |
| Current assets | $ 3,500,000 |
| Property & equipment | 28,000,000 |
| Current liabilities | (1,500,000) |
| Noncurrent liabilities | (9,000,000) |
| Common stock and additional paid-in capital | (2,000,000) |
| Retained earnings, 1/1/17 | (16,500,000) |
| Sales revenues | (14,500,000) |
| COGS | 8,500,000 |
| Operating expenses | 3,500,000 |
|
|
|
QUESTION 1:
On the 2017 consolidation work paper, eliminating entry (R) reduces Investment in S by
| a. | $13,000,000 |
| b. | $5,100,000 |
| c. | $8,400,000 |
| d. | $7,200,000 |
QUESTION 2:
Goodwill on Ps books as of 12/31/17 is
| a. | $9,500,000 |
| b. | $1,500,000 |
| c. | $13,000,000 |
| d. | Zero |
QUESTION 3:
On the 2017 consolidation work paper, eliminating entry (E) reduces Investment in S by
| a. | $5,000,000 |
| b. | $18,900,000 |
| c. | $16,500,000 |
| d. | $18,500,000 |
QUESTION 4:
On the 2017 consolidation work paper, eliminating entry (O) increases consolidated operating expenses by
| a. | $2,500,000 |
| b. | $2,100,000 |
| c. | $2,900,000 |
| d. | There is none |
QUESTION 5:
What is the 2017 equity in net income of S, reported on Ps books using the complete equity method?
| a. | $400,000 |
| b. | $2,500,000 |
| c. | $900,000 |
| d. | None |
QUESTION 6:
On Ps December 31, 2017 trial balance, what is the balance of its investment in S account, using the complete equity method?
| a. | $26,100,000 |
| b. | $26,600,000 |
| c. | $25,700,000 |
| d. | $31,600,000 |
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
Study Help