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Required information

Use the following information to answer questions 10-12 (LO 3-3a)

On January 1, 2016, Phoenix Co. acquired 100 percent of the outstanding voting shares of Sedona Inc. for $694,000 cash. At January 1, 2016, Sedona’s net assets had a total carrying amount of $485,800. Equipment (eight-year remaining life) was undervalued on Sedona’s financial records by $102,000. Any remaining excess fair over book value was attributed to a customer list developed by Sedona (four-year remaining life), but not recorded on its books. Phoenix applies the equity method to account for its investment in Sedona. Each year since the acquisition, Sedona has declared a $25,000 dividend. Sedona recorded net income of $84,500 in 2016 and $99,100 in 2017.

Selected account balances from the two companies’ individual records were as follows:

	Phoenix	Sedona
2018 Revenues	$	636,000	$	372,200
2018 Expenses		405,000		277,000
2018 Income from Sedona		55,900
Retained earnings 12/31/18		337,700		208,100

rev: 06_21_2019_QC_CS-171358

Multiple Choice

Top of Form

$321,900

$231,000

$286,900

$311,900

Bottom of Form

Use the following information to answer questions 10-12 (LO 3-3a)

Selected account balances from the two companies’ individual records were as follows:

	Phoenix	Sedona
2018 Revenues	$	636,000	$	372,200
2018 Expenses		405,000		277,000
2018 Income from Sedona		55,900
Retained earnings 12/31/18		337,700		208,100

rev: 06_21_2019_QC_CS-171358

Problem 3-11 (LO 3-3a)

What is Phoenix’s consolidated retained earnings balance at December 31, 2018?

Multiple Choice

Top of Form

$321,900

$337,700

$231,000

Bottom of Form

Required information

Use the following information to answer questions 10-12 (LO 3-3a)

Selected account balances from the two companies’ individual records were as follows:

	Phoenix	Sedona
2018 Revenues	$	636,000	$	372,200
2018 Expenses		405,000		277,000
2018 Income from Sedona		55,900
Retained earnings 12/31/18		337,700		208,100

rev: 06_21_2019_QC_CS-171358

Problem 3-12 (LO 3-3a)

On its December 31, 2018, consolidated balance sheet, what amount should Phoenix report for Sedona’s customer list?

Multiple Choice

Top of Form

$53,100

$21,240

$26,550

$10,620

Bottom of Form

Dosmann, Inc., bought all outstanding shares of Lizzi Corporation on January 1, 2016, for $816,000 in cash. This portion of the consideration transferred results in a fair-value allocation of $64,800 to equipment and goodwill of $102,000. At the acquisition date, Dosmann also agrees to pay Lizzi’s previous owners an additional $137,000 on January 1, 2018, if Lizzi earns a 10 percent return on the fair value of its assets in 2016 and 2017. Lizzi’s profits exceed this threshold in both years. Which of the following is true?

Multiple Choice

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The $137,000 is recorded as an expense in 2018.

The additional $137,000 payment is a reduction in consolidated retained earnings.

Consolidated goodwill as of January 1, 2018, increases by $137,000.

The fair value of the expected contingent payment increases goodwill at the acquisition date.

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MC Qu. 23 Red Co. acquired 100% of Green, Inc. on...

Red Co. acquired 100% of Green, Inc. on January 1, 2017. On that date, Green had land with a book value of $42,000 and a fair value of $52,000. Also, on the date of acquisition, Green had a building with a book value of $200,000 and a fair value of $390,000. Green had equipment with a book value of $350,000 and a fair value of $280,000. The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life. In Red's December 31, 2017 consolidated worksheet, what total amount of excess fair over book value amortization expense adjustments should Red recognize resulting from its 100% acquisition of Green?

rev: 06_20_2019_QC_CS-171156

Multiple Choice

Top of Form

$33,000.

$0.

$15,000.

$43,000.

$5,000.

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Problem 3-3 (LO 3-4)

On January 1, 2018, Jay Company acquired all the outstanding ownership shares of Zee Company. In assessing Zee’s acquisition-date fair values, Jay concluded that the carrying value of Zee’s long-term debt (8-year remaining life) was less than its fair value by $26,400. At December 31, 2018, Zee Company’s accounts show interest expense of $14,080 and long-term debt of $440,000. What amounts of interest expense and long-term debt should appear on the December 31, 2018, consolidated financial statements of Jay and its subsidiary Zee?

	Interest expense	Long-term debt
a.	$17,380	$466,400
b.	$17,380	$463,100
c.	$10,780	$466,400
d.	$10,780	$463,100

Multiple Choice

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Option B

Option A

Option D

Option C

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Required information

SB Cashen Co. paid $2,400,000 to acquire all of...

Cashen Co. paid $2,400,000 to acquire all of the common stock of Janex Corp. on January 1, 2017. Janex's reported earnings for 2017 totaled $432,000, and it paid $120,000 in dividends during the year. The amortization of allocations related to the investment was $24,000. Cashen's net income, not including the investment, was $3,180,000, and it paid dividends of $900,000.

MC Qu. 18 On the consolidated financial statements...

On the consolidated financial statements for 2017, what amount should have been shown for Equity in Subsidiary Earnings?

Multiple Choice

Top of Form

$120,000.

$432,000.

$408,000.

$-0-

$288,000.

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Required information

SB Cashen Co. paid $2,400,000 to acquire all of...

MC Qu. 19 On the consolidated financial statements...

On the consolidated financial statements for 2017, what amount should have been shown for consolidated dividends?

Multiple Choice

Top of Form

$996,000.

$948,000.

$1,020,000.

$876,000.

$900,000.

Bottom of Form

Required information

SB Cashen Co. paid $2,400,000 to acquire all of...

MC Qu. 20 What is the amount of consolidated net income...

Multiple Choice

Top of Form

$3,612,000.

$3,420,000.

$3,588,000.

$3,180,000.

$3,300,000.

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Q10

Problem 3-5 (LO 3-1)

Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2015. On that date, Paar’s equipment (10-year life) has a book value of $445,000 but a fair value of $631,000. Kimmel has equipment (10-year life) with a book value of $282,000 but a fair value of $468,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2017, Paar has equipment with a book value of $311,500 but a fair value of $531,200. Kimmel has equipment with a book value of $197,400 but a fair value of $431,600. What is the consolidated balance for the Equipment account as of December 31, 2017?

Multiple Choice

Top of Form

$962,800.

$694,900.

$639,100.

$508,900.

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