The Following Information Has Been Taken from the Consolidation Worksheet

question 64

Multiple Choice

The following information has been taken from the consolidation worksheet of Graham Company and its 80% owned subsidiary, Stage Company.(1.) Graham reports a loss on sale of land (to an outside party) of $5,000. The land cost Graham $20,000.(2.) Noncontrolling interest in Stage's net income was $30,000.(3.) Graham paid dividends of $15,000.(4.) Stage paid dividends of $10,000.(5.) Excess acquisition-date fair value over book value amortization was $6,000.(6.) Consolidated accounts receivable decreased by $8,000.(7.) Consolidated accounts payable decreased by $7,000.How is the amount of excess acquisition-date fair value over book value recognized in a consolidated statement of cash flows assuming the indirect method is used?

• A) It is ignored.
• B) $6,000 subtracted from net income.
• C) $4,800 subtracted from net income.
• D) $6,000 added to net income.
• E) $4,800 added to net income.

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Definitions:

Negligence

The failure to exercise the care that a reasonably prudent person would exercise in like circumstances.

Misrepresentations

False or misleading statements that can lead someone to enter into an agreement or make a decision under false pretenses.

Vicarious Liability

A legal principle where one party is held responsible for the actions or omissions of another party.

Vicariously Liable

The legal responsibility of one party for the actions of another, based on a special relationship, such as an employer being liable for the actions of an employee.