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ACC 401 WEEK 4 QUIZ 3

ACC 401 WEEK 4 QUIZ 3

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Author: Christine Farr
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In years subsequent to the year of acquisition, an entry to establish reciprocity is made under the

Pall, Inc., owns 40% of the outstanding stock of Sibil Company. During 2014, Pall received a $4,000 cash dividend from Sibil. What effect did this dividend have on Pall’s 2014 financial statements?

Consolidated net income for a parent company and its partially owned subsidiary is best defined as the parent company’s

P Company purchased 80% of the outstanding common stock of S Company on May 1, 2014, for a cash payment of $318,000. S Company’s December 31, 2013 balance sheet reported common stock of $200,000 and retained earnings of $180,000. During the calendar year 2014, S Company earned $210,000 evenly throughout the year and declared a dividend of $75,000 on November 1. What is the amount needed to establish reciprocity under the cost method in the preparation of a consolidated workpaper on December 31, 2014?

Pine, Inc. owns 40% of Supra Corporation. During the year, Supra had net earnings of $200,000 and paid dividends of $50,000. Masters used the cost method of accounting. What effect would this have on the investment account, net earnings, and retained earnings, respectively?


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