ACC 410 QUIZ 5 (5)

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1.

On January 1 2013, Pounder Company purchased 75% of SludgeSmile Company for

$500,000. SludgeSmile Companys stockholders equity on that date was equal to $600,000
and SludgeSmile Company had 60,000 shares issued and outstanding on that date.
SludgeSmile Company Corporation sold an additional 15,000 shares of previously unissued
stock on December 31, 2013.
Assume SludgeSmile Company sold the 15,000 shares to outside interests, Pounder
Companys percent ownership would be:

2.

If a portion of an investment is sold, the value of the shares sold is determined by using the:

3.

On January 1, 2013, P Corporation purchased 75% of S Corporation for $500,000. Ss

stockholders equity on that date was equal to $600,000 and S had 40,000 shares issued and
outstanding on that date. S Corporation sold an additional 8,000 shares of previously unissued
stock on December 31, 2013.

Assume S sold the 8,000 shares to outside interests, Ps percent ownership would be:
4.
On January 1 2013, Paulus Company purchased 75% of Sweet Corporation for $500,000.
Sweet stockholders equity on that date was equal to $600,000 and Sweet had 60,000 shares
issued and outstanding on that date. Sweet Corporation sold an additional 15,000 shares of
previously unissued stock on December 31, 2013.
AssumeAssuming that Paulus Company purchased the additional shares, what would be their
current percentage ownership on December 31, 2013?
5.
On January 1, 2013, P Corporation purchased 75% of S Corporation for $500,000. Ss
stockholders equity on that date was equal to $600,000 and S had 40,000 shares issued and
outstanding on that date. S Corporation sold an additional 8,000 shares of previously unissued
stock on December 31, 2013.
Assume that P Corporation purchased the additional shares what would be their current
percentage ownership on December 31, 2013?
6.
When the parent company sells a portion of its investment in a subsidiary, the workpaper
entry to adjust for the current years income sold to noncontrolling stockholders includes a
7.

Under the partial equity method, the workpaper entry that reverses the effect of subsidiary
income for the year includes a:

8.

Which one of the following statements regarding IFRS and accounting for step acquisitions is
most correct?

9.

If a parent company acquires additional shares of its subsidiarys stock directly from the
subsidiary for a price less than their book value:

10.

The computation of noncontrolling interest in net assets is made by multiplying the

noncontrolling interest percentage at the

11.

P Corporation purchased an 80% interest in S Corporation on January 1, 2013, at book

value for $300,000. Ss net income for 2013 was $90,000 and no dividends were declared. On
May 1, 2013, P reduced its interest in S by selling a 20% interest, or one-fourth of its investment
for $90,000. What would be the balance in the Investment of S Corporation account on
December 31, 2013?

12.

Parr Company owned 24,000 of the 30,000 outstanding common shares of Solomon
Company on January 1, 2013. Parrs shares were purchased at book value when the fair values
of Solomons assets and liabilities were equal to their book values. The stockholders equity of
Solomon Company on January 1, 2013, consisted of the following:

13.

If a subsidiary issues new shares of its stock to noncontrolling stockholders, the book value
of the parents interest in the subsidiary may

14.

The purchase by a subsidiary of some of its shares from the noncontrolling stockholders
results in an increase in the parents percentage interest in the subsidiary. The parent
companys share of the subsidiarys net assets will increase if the shares are purchased:

15.

The purchase by a subsidiary of some of its shares from noncontrolling stockholders results
in the parent companys share of the subsidiarys net assets

16.

A composition agreement is an agreement between the debtor and its creditors whereby the
creditors agree to:

17.

Which of the following items is not a specified priority for unsecured creditors in a bankruptcy
petition?

18.

An involuntary petition filed by a firms creditors whereby there are twelve or more creditors
must be signed by at least:

19.

The duties of the trustee include:

20.

A bankruptcy petition filed by a firm is a:

21.

Ford Corporation entered into a troubled debt restructuring agreement with their local bank.
The bank agreed to accept land with a carrying value of $200,000 and a fair value of $300,000
in exchange for a note with a carrying amount of $425,000. Ignoring income taxes, what amount
should Ford report as a gain on its income statement?

22.

When a business becomes insolvent, it generally has three possible courses of action.
Which of the following is not one of the three possible courses of action?

23.

Dobby Corporation was forced into bankruptcy and is in the process of liquidating assets and
paying claims. Unsecured claims will be paid at the rate of thirty cents on the dollar. Carson
holds a note receivable from Dobby for $75,000 collateralized by an asset with a book value of
$50,000 and a liquidation value of $25,000. The amount to be realized by Carson on this note
is:

24.

In a troubled debt restructuring involving a modification of terms, the debtors gain on

restructuring:

25.

When a bankruptcy court enters an order for relief it has:

26.

Which statement with respect to gains and losses on troubled debt restructuring is correct?

27.

A Statement of Affairs is a report designed to show:

28.

The final settlement with unsecured creditors is computed by dividing:

29.

Target Corporation was forced into bankruptcy and is in the process of liquidating assets and
paying claims. Unsecured claims will be paid at the rate of thirty cents on the dollar. Arrow holds
a note receivable from Target for $90,000 collateralized by an asset with a book value of
$60,000 and a liquidation value of $30,000. The amount to be realized by Arrow on this note is:

30.

Lyme Corporation entered into a troubled debt restructuring agreement with their local bank.
The bank agreed to accept land with a carrying amount of $360,000 and a fair value of
$540,000 in exchange for a note with a carrying amount of $765,000. Ignoring income taxes,
what amount should Lyme report as a gain on its income statement?

1.