28. Assuming no impairment in value prior to transfer, assets transferred by a p
ID: 2596739 • Letter: 2
Question
28. Assuming no impairment in value prior to transfer, assets transferred by a parent company to another entity it has created should be recorded by the newly created entity at the assets':
a. cost to the parent company.
b. book value on the parent company's books at the date of transfer.
c. fair value at the date of transfer.
d. fair value of consideration exchanged by the newly created entity.
29. Ponderosa acquired 100% control of Sumac on January 1, 2009. The purchase differential included $30,000 attributable to undervaluation of Sumac's inventory. Both Ponderosa and Sumac account for inventory using LIFO. Sumac's December 31, 2009 inventory was greater than the beginning balance. Consolidated net income for 2009 will be:
a. $30,000 greater than if FIFO had been used.
b. $30,000 less than if FIFO had been used.
c. The same as if FIFO had been used.
d. Different under FIFO only if there had been a non-controlling interest
30. In 2009, Lobo Corp. reported for financial statement purposes the following revenue and expenses which were not included in taxable income:
Premiums on officer's life insurance under which the corporation is the beneficiary
$5,000
Interest revenue on qualified state or municipal bonds
10,000
Estimated future warranty costs to be paid in 2010 and 2011
60,000
Lobo's enacted tax rate for the current and future years is 30%. Lobo has never had any net operating losses (book or tax) and does not expect any in the future. There were no temporary differences in prior years. The deferred tax benefit to be applied against current income tax expense is
A: $18,000
B: $19,500
C: $21,000
D: $22,500
Premiums on officer's life insurance under which the corporation is the beneficiary
$5,000
Interest revenue on qualified state or municipal bonds
10,000
Estimated future warranty costs to be paid in 2010 and 2011
60,000
Explanation / Answer
28 . B. book value on the parent company's books at the date of transfer. 29 . b. $30,000 less than if FIFO had been used. 30 . A : $18000
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