Sunday, July 18, 2010

Advanced Accounting: Chapter 3 E3-1 General Questions

BA 459

Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 3

Exercise 3-1 (E3-1)
General problems
1. A 75%-owned subsidiary should not be consolidated under the provisions of FASB Statement No. 94, “Consolidation of All Majority-Owned Subsidiaries,” when:

2. Under the provisions of FASB Statement No. 94, an 80% owned subsidiary that cannot be consolidated must be accounted for:

3. Consolidated statements for Porter Corporation and its 60%-owned investee, Spinelli Company, will not be prepared under the provisions of FASB Statement No. 94 if:

4. Armor Industries owns 7,000,000 shares of Babbitt Corporation’s outstanding common stock (a 70% interest). The remaining 3,000,000 outstanding common shares of Babbitt are held by Ottman Insurance Company. On Armor Industries’ consolidated financial statements, Ottman Insurance Company is considered:

5. Pella Corporation owns a 60% interest in Sanico Company and an 80% interest in Talbert Company. Pella consolidates its investment in Sanico, but Talbert, which is currently under protection of the bankruptcy court, is not consolidated, and Pella accounts for this investment by the equity method. Which statement is correct?

6. On January 1, 2006, Paxton Company purchased 75% of the outstanding shares of Salem Company at a cost exceeding the book value and fair value of Salem’s net assets. Using the following notations, describe the amount at which the plant assets will appear in a consolidated balance sheet of Paxton Company and Subsidiary prepared immediately after the acquisition:
Pbv = book value of Paxton’s plant assets
Pfv = fair value of Paxton’s plant assets
Sbv = book value of Salem’s plant assets
Sfv = fair value of Salem’s plant assets

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