S1: Current fair value of the investment adjusted for dividends received describes the amount at which a parent company reports its investment in a Subsidiary under the cost method for periods subsequent to the business combination. S2: Under the cost method of accounting for investment, depreciation and amortization of the allocated difference between the fair values and book values of acquired subsidiary’s identifiable net assets is debited to the Subsidiary’s expense accounts, in the working paper. Only S1 is correct Both statements are correct Both statements are incorrect Only S2 is correct

S1: Current fair value of the investment adjusted for dividends received describes the amount at which a parent company reports its investment in a Subsidiary under the cost method for periods subsequent to the business combination. S2: Under the cost method of accounting for investment, depreciation and amortization of the allocated difference between the fair values and book values of acquired subsidiary’s identifiable net assets is debited to the Subsidiary’s expense accounts, in the working paper. Only S1 is correct Both statements are correct Both statements are incorrect Only S2 is correct

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter6: Audit Evidence

Section: Chapter Questions

Problem 15CYBK

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Statement 1: Current fair value of the investment adjusted for dividends received describes the amount at which a parent company reports its investment in a Subsidiary under the cost method for periods subsequent to the business combination. Statement 2: Under the cost method of accounting for investment, depreciation and amortization of the allocated difference between the fair values and book values of acquired subsidiary’s identifiable net assets is debited to the Subsidiary’s expense accounts, in the working paper. a. Only Statement 2 is correct b. Both statements are incorrect c. Only Statement 1 is correct d. Both statements are correct
S1: Current fair value of the investment adjusted for dividends receiveddescribes the amount at which a parent company reports its investment in aSubsidiary under the cost method for periods subsequent to the businesscombination. S2: Under the cost method of accounting for investment,depreciation and amortization of the allocated difference between the fairvalues and book values of acquired subsidiary’s identifiable net assets is debitedto the Subsidiary’s expense accounts, in the working paper. A. Both statements are incorrectB. Only S2 is correctC. Only S1 is correctD. Both statements are correct
Which of the following is not typical of the journal entries prepared by a parentcompany to account for its subsidiary’s operations under the cost method ofaccounting A. A credit to the intercompany dividend income account B. Deprecation and amortization of differences between current fair values and book values of the subsidiary’s identifiable net assets on the date of the acquisition. C. None of the foregoing. D. Accrual of the parent company’s share of the subsidiary’s net income or loss
1. Which of the following entries appear on the parent company’s books to account for its investment in subsidiary? [a] Credit to intercompany dividends [b] Credit to the parent company’s share in the net income of the subsidiary [c] Amortization and depreciation of differences between fair values and book values of net assets of subsidiary at acquisition date [d] All of the above 2. Which is true regarding the Investment in Subsidiary Stock account? [a] It is accounted for in the parent’s books and is included as non – current assets in the parent’s balance sheet [b] It is not included in the consolidated balance sheet of parent and subsidiary [c] It is decreased and or increased by the difference between fair value and book value of net assets of the subsidiary for consolidation purposes. [d] All of the above
PLEASE ANSSWER ASAP. WILL DO THUMBS UP. 1. Assuming the Parent entity elects to measure the NCI at proportionate basis, the computation of non- controlling interest in net income of subsidiary is reduced by the following, except: O Amortization of undervalued assets O All of the above O Amortization of overvalued liabilities O Impairment loss of goodwill 2. Which of the following statements is correct? Statement 1: Any unrealized profit or loss made by the subsidiary should be eliminated from its profit. Statement 2: only the group portion of any unrealized profit need to be eliminated. a. both I and II b. I c. Neither 1 or 2 d. II
S1: In a working paper elimination (in journal entry format) for the consolidated balance sheet of a parent company and its wholly owned subsidiary on the date of a business combination, the subtotal of the credits to the subsidiary’s stockholders’ equity accounts equals the current fair value of the subsidiary’s identifiable net assets. S2: In a completed working paper elimination (in journal entry format) for a parent company and its wholly owned subsidiary on the date of business combination, the total of the credits generally equals the parent company’s total cost of its investment in the subsidiary. Only S1 is correct Only S2 is correct Both statements are correct Both statements are incorrect
In the separate financial statement of the parent company, which of the following statements concerning the different accounting treatment for investment in subsidiary is correct? a. Under equity method, cash or property dividend received shall be recognized as dividend income by the parent. b. Under cost method, the transaction cost directly attributable to acquisition of the investment shall be expensed as incurred. c. Under fair value model, the parent company shall recognize share in net income from the subsidiary. d. Regardless of the method, the investment in subsidiary account shall be presented as noncurrent asset in the parent’s separate statement of financial position.
Under the Cost Method A. The parent’s investment in the Subsidiary is recorded at cost and reduced by an excess dividends received from subsidiary. B. The parent’s investment in the subsidiary is recorded at cost, and never changed thereafter. C. The parent records its pro rata share of the subsidiary’s post-acquisition income as an increase to the investment account and reduces the investment account with its share of the dividends declared by the subsidiary. D. The parent records it pro rata share of the subsidiary’s cumulative earnings as an increase to the investment account and reduces the investment account with its share in the dividends declared by the subsidiary
Given the following information, how is goodwill from a business combination computed under PFRS (IFRS) 3? A = Consideration transferred; B = Non-controlling interest in net assets of subsidiary; C = Previously held equity interest; D = Fair value of net identifiable assets of subsidiary; % = Percentage of ownership acquired by the parent in the subsidiary a. A – (D x %) b. A+B+C-D c. (A+C) – (D x %) d. (A+B) – [(D x %) – B]
If the entity is using the equity method to account for investment in subsidiary, the entry to recognize dividends received from the subsidiary will: a.Be recognized in profit or loss b.Increase the carrying amount of investment c.Decrease the carrying amount of investment d.Be recognized in other comprehensive income
S1: Under the acquisition method, if the fair values of identifiable net assets exceed the value implied by the purchase price of the acquired company, the excess should be accounted for goodwill. S2: With an acquisition, direct and indirect expenses are considered a par of the total cost of the acquired company. Both statements are Only S1 is Only S2 is Both statements are 2. Following the completion of a business combination in the form of a statutory consolidation, what is the balance in the new corporation’s Retained earningsaccount? The acquirer retained earnings accountbalance Thesum of the acquirer and acquiree retained earnings account The acquiree retained earnings accountbalance Zero 3. S1: The acquisition-related costs in a business combination to be expensed immediately include cost of issuing debt securities. S2: In a business combination any “gain on bargain purchase” shall be recognized in other comprehensive income. Only S2 is Both statements are Both statements…
In a business combination resulting in a parent company-subsidiary relationship, the parent company's Investment in Subsidiary Common Stock ledger account balance is: a. Eliminated with a working paper elimination for the working paper for consolidated balance sheet b. Allocated to individual asset and liability ledger accounts in a parent company journal entry c. Used as a basis for adjusting the subsidiary's asset and liability account balances in the subsidiary's ledger to current fair values Select one :- d. Displayed among noncurrent assets in the consolidated balance sheet