When a parent uses the equity method throughout the year to

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Reference no: EM13481890

1.Parrett Corp. bought one hundred percent of Jones Inc. on January 1, 2009, at a price in excess of the subsidiary's fair value. On that date, Parrett's equipment (ten-year life) had a book value of $360,000 but a fair value of $480,000. Jones had equipment (ten-year life) with a book value of $240,000 and a fair value of $350,000. Parrett used the partial equity method to record its investment in Jones. On December 31, 2011, Parrett had equipment with a book value of $250,000 and a fair value of $400,000. Jones had equipment with a book value of $170,000 and a fair value of $320,000. What is the consolidated balance for the Equipment account as of December 31, 2011?

$710,000
$580,000
$474,000
$497,000
$565,000

2.Which of the following statements is true?

Pooling of interests is acceptable provided the twelve criteria required by the APB are met
Pooling of interests is no longer acceptable for new combinations as stated in SFAS No. 141, "Business Combinations"
Companies that used pooling of interests method in the past must make a retrospective accounting change in accounting principle
Companies that used pooling of interests method in the past must make a cumulative effect accounting change in accounting principle
Companies that used pooling of interests in the past must make a prospective change in accounting principle

3.When a parent uses the equity method throughout the year to account for investment in a subsidiary, which of the following statements is false before making adjustments on the consolidated worksheet?

Parent company net income equals controlling interest in consolidated net income
Parent company retained earnings equals consolidated retained earnings
Parent company total assets equals consolidated total assets
Parent company dividends equals consolidated dividends
Goodwill may need to be recorded

Reference no: EM13481890

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