Review/ question 4 Given the following statements, you are required to mark TRUE or FALSE and give yourspecific explanations?(i) It is acceptable to consolidate the subsidiary's financial statements where the year-end isdifferent from the parent by 3 months.(ii) It is unacceptable to make consolidation of financial statement where parent's individualfinancial statements have different accounting policies with its subsidiary's..(iii) Profit on all intra-group sales made throughout the year must be cancelled when makingconsolidated financial statements.*Note: Plagiarism and cheatings are prohibited.DELL

The question is related to the Consolidated Financial Statements. The question is related to True or…

Answered: lowing tements, you are required to…

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter14: Intercorporate Investments In Common Stock

Section: Chapter Questions

Problem 20E

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Which statement is incorrect concerning the preparation of consolidated financial statements? A. When the reporting dates of the parent and a subsidiary are different, the difference shall be no more than six months. B. The financial statements of the parent and its subsidiaries shall be consolidated on a line by line basis nu adding together like items of assets, liabilities, equity, income and expenses. C. Consolidated financial statements shall be prepared using uniform accounting policies for like transactions and other events in similar circumstances. D. Intragroup dividends shall be eliminated in full.
Which TWO of the following statements are correct when preparing consolidated financial statements?i) A subsidiary cannot be consolidated unless it prepares financial statements to the same reporting date as the parent.ii) A subsidiary with a different reporting date may prepare additional statements up to the group reporting date for consolidation purposesiii) A subsidiary’s financial statements can be included in the consolidation of the gap between the parent and the subsidiary reporting dates is five months or less.
A company has included in its consolidated financial statements this year a subsidiary acquired several years ago that was appropriately excluded from consolidation last year. This results in a. an accounting change that should be reported prospectively. b. an accounting change that should be reported by restating the financial statements of all prior periods presented. c. a correction of an error. d. neither an accounting change nor a correction of an error.
Problems 12 and 13 relate to the following:On May 1, Donovan Company reported the following account balances:On May 1, Beasley paid $400,000 in stock (fair value) for all of the assets and liabilities of Donovan, which will cease to exist as a separate entity. In connection with the merger, Beasley incurred $15,000 in accounts payable for legal and accounting fees.Beasley also agreed to pay $75,000 to the former owners of Donovan contingent on meeting certain revenue goals during the following year. Beasley estimated the present value of its probability adjusted expected payment for the contingency at $20,000. In determining its offer, Beasley noted the following:• Donovan holds a building with a fair value $30,000 more than its book value.• Donovan has developed unpatented technology appraised at $25,000, although is it not recorded in its financial records.• Donovan has a research and development activity in process with an appraised fair value of $45,000. The project has not yet…
Which is not a criterion for an operation to be classified as discontinued? *The operation should represent a separate major line of business or geographical areaThe operation is part of a single plan to dispose of a separate major line of business or geographical areaThe operation is a subsidiary acquired exclusively with a view to resaleThe operation must be sold within three months of the year-end
1- In a business combination resulting in a parent-subsidiary relationship, the identifiable net assets of the subsidiary must be reflected in the consolidated balance sheet at their current values on the date of the business combination. Does this require the subsidiary to enter the current fair values of the identifiable net assets in its accounting records? Explain. 2- The controller of Ahmed Corporation, which has just become the parent of Hassan Company in a business combination, inquires if a consolidated income statement is required for the year ended on the date of the business combination. What is your reply? Explain
Consolidated financial statements are typically prepared when one company has a controlling interest in another unless__________. Select one: a. the parent’s securities are not publicly traded b. the two companies are in unrelated industries, such as real estate and hospitality c. financial year-ends of the companies are more than three months apart d. the subsidiary is a finance company
A wholly owned subsidiary declared dividend and half remains unpaid bythe end of the year, which of the following is TRUE? a. Only half of the amount of the dividend will be used to reduce the profit ofthe parent for consolidation purposes. b. The total amount of the dividend will be eliminated in the working paperelimination entry by debiting “dividend revenue” account.c. The transaction will have an impact in the computation of the balance ofNCI at the end.d. The elimination entry will include a debit to non-controlling interest for theamount of dividend received by the non-controlling shareholders.
Archie Co. has a subsidiary, which is accounted for in its separate financial statements using the cost method. At the end of 2016, the company reports net income of $20,000 in its separate financial statements. Increase in fair value of investment $12,000 Share in net income of subsidiary $4,000 Cash dividends paid by subsidiary and received by the company $3,500 Assuming it has no other subsidiaries and other transactions affecting the net income at a consolidated level, compute the net income of the company at a consolidate level.
Nasty is a wholly owned subsidiary of Ugly. Inventories in their individual statements of financial position at the year end are shown as: Ugly $40,000 Nasty $20,000 Sales by Ugly to Nasty during the year were invoiced at $15,000 which included a profit by Ugly of 25% on cost. Two thirds of these goods were included in inventories at the year end. At what value should inventories appear in the consolidated statement of financial position?
A partially owned subsidiary declared dividend and half remains unpaid by the end of the year, which of the following is CORRECT? A. The total amount of the dividend will be eliminated in the working paper elimination entry by debiting “dividend” account. B. Half of the amount of the dividend will be used to reduce the profit of the parent for consolidation purposes. C. The elimination entry will include a debit to non-controlling interest for the amount of dividend received by the non-controlling shareholders. D. The transaction will increase the balance of NCI at the end.
Assume that both the Parent and Subsidiary adopt 31 December as their financial year-end. Further assume that the transactions were conducted on cash basis.For each of the following independent scenarios in each of the independent parts: (i)Prepare all the relevant journal entries in the separate financial statements of the respective companies. (ii)Prepare all the relevant consolidation journal entries for the preparation of the consolidated financial statements of the Parent. (iii)Compareandcontrastthe accounting treatment/principles that you had applied in the independent scenarios in each part in preparing the journal entries and consolidation journal entries. Scenario (b) On 20 December 20x1, a Parent paid interest of $200,000 to its 80%-owned Subsidiary. The Subsidiary recognised the interest as income whilst the Parent properly capitalised the interest paid as part of the cost of its construction work-in-progress in accordance with SFRS(I) 1- 23: Borrowing Costs.

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