# Explain   why consolidated financial statements become increasingly important when the   differential is very large.

Q1.  Explain   why consolidated financial statements become increasingly important when the   differential is very large.

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Q2.  Road Corporation acquired all of Conger Corporation’s voting shares on January 1, 20X2, for \$470,000. At that time Conger reported common stock outstanding of \$80,000 and retained earnings of \$130,000. The book values of Conger’s assets and liabilities approximated fair values, except for land, which had a book value of \$80,000 and a fair value of \$100,000, and buildings, which had a book value of \$220,000 and a fair value of \$400,000. Land and buildings are the only noncurrent assets that Conger holds.

Required

1. Compute the amount of goodwill at the date of acquisition.

2. Give the eliminating entry or entries required immediately following the acquisition to prepare a consolidated balance sheet.

Q3. Given the following information:

a. Parent sells Sub inventory with a cost of \$48,000 for \$60,000. Sub then sells this inventory to outsiders for \$75,000.

1. Parent sells Sub inventory       with a cost of \$8,000 for \$10,000, which remains on hand in Sub’s ending       inventory.

a. Calculate unrealized profits .

b. Pass eliminating entry in both the cases:

i. Parent sells to Sub and Sub to Outsider

ii.  Parent sells to Sub, but Sub not yet to Outsider

c. How would it effect Parents gross profit and Sub’s inventory

Q4. Determination of exchange rates depends on factors causing fluctuations.

a. Explain why and its effect on US dollar

b. Distinguish between DER & IER.

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