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