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CMPC Quiz 2

The document contains multiple choice questions and answers related to consolidation procedures. Specifically, it addresses topics like eliminating intercompany transactions, inventory valuation, unrealized profits, and calculating consolidated financial statement amounts.

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Mae-shane Sagayo
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© © All Rights Reserved
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1K views

CMPC Quiz 2

The document contains multiple choice questions and answers related to consolidation procedures. Specifically, it addresses topics like eliminating intercompany transactions, inventory valuation, unrealized profits, and calculating consolidated financial statement amounts.

Uploaded by

Mae-shane Sagayo
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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790,000

 800,000
810,000
792,000

Parent and its 80% owned Subsidiary report the following at December 31 of the current year:

146,000
148,000
 156,000
138,000

Parent Company sells land with a book value of P5,000 to Subsidiary Company for P6,000 in
2010. Subsidiary Company holds the land during 2011. Subsidiary Company sells the land for
P8,000 to an outside entity in 2012. In 2010, the unrealized gain:

A. To be eliminated is affected by the non-controlling interest percentage.


B. Is initially included in the subsidiary’s accounts and must be eliminated from Parent
Company’s income from Subsidiary Company under the cost method.
 C. Is eliminated from consolidated net income by a working paper entry that
includes a credit to the land account for P1,000.
D. Is eliminated from consolidated net income by a working paper entry that includes a
credit to the land account for P6,000.
Parent Company owns 75% of Subsidiary Company. For the current year, Parent and
Subsidiary each report sales of P800,000 and P700,000 each, respectively. Also in the current
year, Parent sold goods to Subsidiary costing P80,000 for P100,000. 40% of the goods
purchased by the Subsidiary still remain unsold by the end of the year. Parent and Subsidiary
also report ending inventory of P75,000 and P60,000, each respectively. Determine the
consolidated inventory at year-end.

52,000
 127,000
68,000
135,000

When an 80% owned subsidiary records a gain on sale to a parent during the current period
and the land is not resold before the end of the period,

 full amount of the gain will be excluded from the consolidated net income.
consolidated net income will be increased by the full amount of the gain.
proportionate share of the unrealized gain will be excluded from income assigned to
non-controlling interest.
full amount of the unrealized gain will be excluded from income assigned to non-
controlling interest.

A parent’s beginning inventory containing merchandise purchased above cost from its 80
percent owned subsidiary, was sold during the current year. The elimination entry in the
working papers recognizing this intercompany profit includes a debit to the subsidiary’s
beginning accumulated profits of:

 20 percent of the intercompany profit


B. 80 percent of the intercompany profit
C. 100 percent of the intercompany profit
D. The subsidiary’s beginning accumulated profits is not affected in this case

What percentage of the intercompany loss on sale of property, plant and equipment should be
eliminated in the consolidation working papers?

 100% on both downstream and upstream sales.


B. Parent’s percentage of ownership in subsidiary on both downstream and upstream
sales.
C. 100% on downstream and parent’s percentage of ownership in subsidiary on
upstream sales.
D. Parent’s percentage of ownership in subsidiary on downstream and 100% on
upstream sales.
Parent Company buys merchandise from its 90% owned subsidiary above cost and does not
resell it before year-end. What percent of the unrealized profit in the parent’s ending inventory
should be removed from the consolidated net income?

A. 90 percent
B. 100 percent
C. 10 percent
 D. 0 percent

If an intercompany sale of a depreciable asset occurs on December 31, the year-end of a


company, and results in a gain to the seller,

the asset must be shown on the consolidated balance at its original book value.
the parent’s proportional share of an upstream gain must be removed from the equity
holders of parent net income and the remainder remove from the non-controlling
interest net income.
100% of a downstream gain must be removed from the consolidated net income.
 All of the above are true.

On January 1, 2012, Panda Company sold equipment to Sretty Company, a 70% owned
subsidiary, for a price that resulted in a gain on the sale. The equipment has a remaining life of
5 years and Sretty Company will use the straight line depreciation. The December 31, 2012
consolidated statement of financial position should carry the equipment at:

 its original cost less the January 1, 2012 balance of accumulated depreciation.
its original cost less accumulated depreciation for year 2012 only.
subsidiary’s purchase price less the depreciation expense for year 2012 based on
subsidiary’s purchase price.
fair market value at December 31, 2011 less zero accumulated depreciation.
Parent and its 80% owned Subsidiary report the following at December 31 of the current year:

16,000
8,000
 14,000
10,000

Parent Company owns 75% of Subsidiary Company. For the current year, Parent and
Subsidiary each report sales of P800,000 and P700,000 each, respectively. Also in the current
year, Parent sold goods to Subsidiary costing P80,000 for P100,000. 40% of the goods
purchased by the Subsidiary still remain unsold by the end of the year. Parent and Subsidiary
also report ending inventory of P75,000 and P60,000, each respectively. Determine the
consolidated sales.

 1,400,000
1,500,000
600,000
700,000

A parent and its 80 percent owned subsidiary regularly sells merchandise to each other above
cost. What percent of intercompany sales and purchases should be eliminated in the
consolidated working papers?
A. 80% of both downstream and upstream sales and purchases
 B. 100% of both downstream and upstream sales and purchases
C. 80% of downstream and 100 percent of upstream and downstream
D. 100% of downstream and 90 percent of upstream and downstream

Perez, Inc. owns 80% of Senior, Inc. During 2012, Perez sold goods with a 40% gross profit to
Senior. Senior sold all of these goods in 2012. For 2012 consolidated financial statements, how
should the summation of Perez and Senior Income Statement items be adjusted?

A. Sales and cost of goods sold should be reduced by the intercompany sales.
B. Sales and cost of goods sold should be reduced by 80% of the intercompany sales.
C. Net income should be reduced by 80% of the gross profit on intercompany sales.
 D. No adjustment is necessary.

A parent company regularly sells inventory items to its subsidiary above cost. The amount of
unrealized profit in the ending inventory is obtained by multiplying the:

A. Subsidiary’s ending inventory by the parent’s gross profit rate on sales.


B. Subsidiary’s ending inventory by the subsidiary’s gross profit rate on sales.
C. Parent’s ending inventory by the subsidiary’s gross profit rate on sales.
 D. Parent’s ending inventory by the parent’s gross profit rate on sales.

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