Problem 1: A Company sells inventory to C Corporation. Several months after the sale, C Corporation gains control of A Company in a purchase transaction. C still holds the inventory purchased from A. After examination of the transaction, it is determined that it was the result of arms'-length bargaining. For purposes of preparing consolidated statements, the transaction should be:
a. Eliminated from the consolidated entity's balances
b. Eliminated from A's reported balances but not from C's
c. Eliminated from C's reported balances but not from A's
d. Viewed as an arms'-length transaction and not eliminated
e. None of the above
Problem 2: Which of the following is an adjustment to consolidated net income in computing diluted consolidated earnings per share (EPS)?
a. Shares of parent to be issued if dilutive securities are converted and options exercised
b. Shares held by parent times subsidiary diluted EPS
c. Weighted average of parent company shares outstanding
d. Percent ownership held by noncontrolling interest times income available to common shareholders of subsidiary
e. None of the above
Problem 3: Which of the following is NOT an adjustment to consolidated net income in arriving at net cash provided by operating activities under the indirect method?
a. Dividend payments to noncontrolling shareholders
b. Depreciation expense resulting from the write-off of a purchase differential
c. Income assigned to noncontrolling interest
d. Gain on sale of land to a nonaffiliated
e. None of the above
Problem 4: Which of the following is a characteristic of a remeasurement exchange gain or loss?
a. It is generally the result of an increase or decrease in net monetary assets that were remeasured from the exchange rate at the beginning of the period, or on the date of the generating transaction, to the current exchange rate at the end of the period
b. It is recognized as an exchange gain or loss in the current period
c. It causes debits and credits in the trial balance to be equal, but it can also be proven
d. All of the above
e. None of the above