Giant Company buys all outstanding shares of Little Company on October 1, Year 1 for $450,000. In Year 1, Little earned revenue of $15,000 per month and incurred expenses of $12,000 per month. On the date of the sale, Little had only one asset, a piece of land, with a book value of $350,000 and a fair value of $400,000. It had no liabilities. By the end of Year 1, the land had appreciated in value and was worth $410,000. Which of the following statements is true regarding the consolidated financial statements at the end of Year 1?

During Year 1, the James Company buys all outstanding shares of the Holmes company for $4 million even though Holmes has net assets with a fair value of only $3.5 million. One reason for this excess payment is that Homes owns land worth $1.5 million with a book value of only $800,000. Prior to the purchase of Holmes, James owned its own land with a book value of $400,000 and a fair value of $700,000. Two years later, both companies still own this land and both have acquired additional acreage. James reports land at a book value of $1 million and fair value of $1.1 million; Holmes reports land with a book value of $2 million and a fair value of $2.5 million. At what amount will land be reported at the end of Year 3 in the consolidated balance sheet?

Hope Company owns 100% of the outstanding shares of Howard Company. During the current year, Hope sold inventory costing $80,000 to Howard for $90,000. This inventory has since been sold to a third party and Howard has not paid Hope for the purchase. At the balance sheet date, Hope has total current assets of $850,000 and Howard has total current assets of $550,000. Assume that there were no allocations established at the date of acquisition. What is the total amount of current assets reported in the consolidated balance sheet?

Which of the following financial instruments is not considered a derivative financial instrument?

A derivative financial instrument is best described as:

Of the following hedge examples, which would likely be a fair value hedge?

On December 1, Year 1, the Fairfax Company signs a contract to receive 1 million Euros on January 31, Year 2 at a price of $1.1 million in a two month forward contract. On December 1, the spot rate for Euros is $1.1 in US dollars. Why would Fairfax enter into this contract?

A US company is in the process of consolidating a subsidiary operating in China. The two companies have different functional currencies, so the Chinese accounts are being translated into US dollars. Some accounts are translated at historical rates while others are translated at the current rate as of the balance sheet date. Which of the following is true about the subsidiary's accounts?

The Robinson Company produces a balance sheet that shows a large figure in accumulated other comprehensive income within stockholder's equity. Which of the following could not have led to this figure?

Consolidated financial statements are typically prepared when one company has a controlling financial interest in another unless: