1. In years subsequent to the year a 90% owned subsidiary sells equipment to its parent company at a gain, the non-controlling interest in consolidated income is computed by multiplying the non-controlling interest percentage by the subsidiary's reported net income: (Points: 4)
        minus the net amount of unrealized gain on the intercompany sale.
        plus the net amount of unrealized gain on the intercompany sale.
        minus intercompany gain considered realized in the current period.
        plus intercompany gain considered realized in the current period.

2. Pratt Corporation owns 100% of Stone Company's common stock. On January 1, 2011, Pratt sold equipment with a book value of $210,000 to Stone for $300,000. Stone is depreciating the equipment over a ten-year life by the straight-line method. The net adjustments to compute 2011 and 2012 consolidated income would be an increase (decrease) of:
 (Points: 4)
        ($90,000) $0
        ($90,000) $9,000
        ($81,000) $0
        ($81,000) $9,000

3. In years subsequent to the upstream intercompany sale of non-depreciable assets, the necessary consolidated work paper entry under the cost method is to debit the (Points: 4)
        Non-controlling interest and Retained Earnings (Parent) accounts, and credit the non-depreciable asset.
        Retained Earnings (Parent) account and credit the non-depreciable asset.
        Non-depreciable asset, and credit the Non-controlling interest and Investment in Subsidiary accounts.
        No entries are necessary.

4. On January 1, 2010 S Corporation sold equipment that cost $120,000 and had a book value of $48,000 to P Corporation for $60,000. P Corporation owns 100% of S Corporation and the equipment has a 4-year remaining life. What is the effect of the sale on P Corporation's Equity from Subsidiary Income account for 2011? (Points: 4)
        no effect
        increase of $12,000.
        decrease of $12,000.
        increase of $3,000.

5. Parks Corporation owns 100% of Starr Company's common stock. On January 1, 2011, Parks sold equipment with a book value of $350,000 to Starr for $500,000. Starr is depreciating the equipment over a ten-year life by the straight-line method. The net adjustments to compute 2011 and 2012 consolidated income would be an increase (decrease) of
 (Points: 4)
        ($150,000) $0
        ($150,000) $15,000
        ($135,000) $0
        ($135,000) $15,000

6. In January 2008, S Company, an 80% owned subsidiary of P Company, sold equipment to P Company for $990,000. S Company's original cost for this equipment was $1,000,000 and had accumulated depreciation of $100,000. P Company continued to depreciate the equipment over its 9 year remaining life using the straight-line method. This equipment was sold to a third party on January 1, 2011 for $720,000. What amount of gain should P Company record on its books in 2011? (Points: 4)
        $30,000.
        $60,000.
        $120,000.
        $180,000.

7. In a troubled debt restructuring involving a modification of terms, the debtor's gain on restructuring: (Points: 4)
        will equal the creditor's gain on restructuring.
        will equal the creditor's loss on restructuring.
        may not equal the creditor's gain on restructuring.
        may not equal the creditor's loss on restructuring.

8. An involuntary petition filed by a firm's creditors whereby there are twelve or more creditors must be signed by at least: (Points: 4)
        two creditors.
        three creditors.
        five creditors.
        six creditors.

9. Which of the following items is not a specified priority for unsecured creditors in a bankruptcy petition? (Points: 4)
        Administration fees incurred in administering the bankrupt's estate.
        Unsecured claims for wages earned within 90 days and are less than $4,650 per employee.
        Unsecured claims of governmental units for unpaid taxes.
        Unsecured claims on credit card charges that do not exceed $3,000.

10. When a secured claim is not fully settled by the selling of the underlying collateral, the remaining portion: (Points: 4)
        of the claim cannot be collected by the creditor.
        remains as a secured claim.
        is classified as an unsecured priority claim.
        is classified as an unsecured non-priority claim.

11. Layne 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 Layne report as a gain on its income statement? (Points: 4)
        $0.
        $180,000.
        $225,000.
        $405,000.

12. The final settlement with unsecured creditors is computed by dividing: (Points: 4)
        total net realizable value by total unsecured creditor claims.
        net free assets by total secured creditor claims.
        total net realizable value by total secured creditor claims.
        net free assets by total unsecured creditor claims.

13. A discount or premium on a forward contract is deferred and included in the measurement of the related foreign currency transaction if the contract is classified as a: (Points: 4)
        hedge of a net investment in a foreign entity.
        hedge of an exposed asset or liability position.
        hedge of an identifiable foreign currency commitment.
        contract acquired to speculate in the movement of exchange rates.

14. On September 1, 2011, Swash Plating Company entered into two forward exchange contracts to purchase 250,000 Euros each in 90 days. The relevant exchange rates are as follows:
 
The first forward contract was to hedge a purchase of inventory on September 1, payable on December 1. On September 30, what amount of foreign currency transaction loss should Swash Plating report in income? (Points: 4)
        $0.
        $2,500.
        $5,000.
        $10,000.

15. Caldron Company purchased equipment for 375,000 British pounds from a supplier in London on July 3, 2011. Payment in British pounds is due on Sept. 3, 2011. The exchange rates to purchase one pound is as follows:
 
On its August 31, 2011, income statement, what amount should Caldron report as a foreign exchange transaction gain: (Points: 4)
        $18,750.
        $3,750.
        $11,250.
        $0.

16. The translation adjustment that results from translating the financial statements of a foreign subsidiary using the current rate method should be: (Points: 4)
        included as a separate item in the stockholders' equity section of the balance sheet.