ACCOUNTING
ADVANCE ACCOUNTING Multiple Choice
1. On December 1, 2006, Passey Corporation sold a machine with a carrying amount of $150,000 to its 80%-owned subsidiary, Scully Company, for $200,000. Scully adopted a four-year economic life, no residual value, and the sum-of-the-years'-digits method of depreciation for the machine. If correct working paper eliminations are prepared for Passey Corporation and subsidiary on November 30, 2007, the end of the fiscal year, Passey's net income to be included in consolidated net income is (disregarding income taxes): (Points : 1)
2. In the measurement of minority interest in net income of a partially owned subsidiary, the credit for Depreciation Expense¾Parent in the working paper elimination (in journal entry format) for intercompany gain in a depreciable plant asset is attributed to net income of: (Points : 1)
3. A material realized gain on a subsidiary's open-market acquisition of its parent company's outstanding bonds at a discount is displayed in the consolidated income statement as: (Points : 1)
4. The starting point for the computation of net cash provided by operating activities in a consolidated statement of cash flows (indirect method) for a parent company and its partially owned subsidiary is: (Points : 1)
5. The realized but unrecognized gain on extinguishment of debt resulting from a parent company's open-market acquisition of the subsidiary's outstanding bonds is recorded in subsequent journal entries by: (Points : 1)
6. In the preparation of a consolidated statement of cash flows, dividends declared and paid to minority shareholders of a subsidiary are: (Points : 1)
7. Included in a working paper elimination (in journal entry format) for intercompany sales of merchandise was a debit to Minority Interest in Net Assets of Subsidiary. This debit indicates that: (Points : 1)
8. Included in a working paper elimination (in journal entry format) for intercompany sales was a credit of $60,000 to Cost of Goods Sold¾Subsidiary. The credit indicates that, for the accounting period involved: (Points : 1)
9. In the installment acquisition of a controlling interest in a subsidiary, the Retained Earnings of Subsidiary/Investee ledger account is first credited in a journal entry of the parent company/investor to: (Points : 1)
10. Intercompany loans, operating leases of property, and rendering of services do not include an element of intercompany profit gain or loss for the consolidated entity because: (Points : 1)
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