Under the Cost Method 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. The parent’s investment in the subsidiary is recorded at cost, and never changed thereafter. The parent records it pro rat

Under the Cost Method 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. The parent’s investment in the subsidiary is recorded at cost, and never changed thereafter. The parent records it pro rat

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter14: Intercorporate Investments In Common Stock

Section: Chapter Questions

Problem 8Q

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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
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.
In determining controlling interest in consolidated income in the consolidated financial statements, unrealized intercompany profit on inventory acquired by a parent from its subsidiary should: a. Not be eliminated b. Be eliminated to the extent of the non-controlling interest in the subsidiary. c. Be eliminated to the extent of the parent company’s controlling interest in the subsidiary d. Be eliminated in full
The non-controlling interest in net assets of a partially owned subsidiary is: O Decreased by amortization of differences between fair values and carrying values of the subsidiary's net assets net assets when carrying values are greater than fair values. O Decreased by share in impairment loss in goodwill, if proportionate method of measuring NCI is used Increased by the NCI's share of subsidiary's dividends and decreased by the NCI's share of subsidiary's adjusted net income O Decreased by the NCI's share of subsidiary's dividends and increased by the NCI's share of subsidiary's adjusted net income
Which of the following is true regarding consolidation of net income?A. Parent net income is decreased by the dividend income recognized due to declared bysubsidiary at full amount even if less than 100% ownership is acquired.B. Amortization of excess must be done to adjust net income of parent to arrive at parent netincome own operation.C. Adjusted net income of subsidiary is shared by Parent’s holding interest andnoncontrolling interest.D. Dividend declared by subsidiary is shared by Parent’s holding interest and noncontrollinginterest.
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
Consolidated Net Income is equal to: Multiple Choice the sum of the net incomes of both the parent and its subsidiaries less any inter-company dividends. the parent's net income excluding any income arising from its investment in the Subsidiary, plus the net income of the subsidiary less the amortization of the acquisition differential and the impairment of goodwill. the parent's net income excluding any income arising from its investment in the subsidiary. the sum of the net incomes of both the parent and its subsidiaries.
The non-controlling interest in net assets of a partially owned subsidiary is: a. Decreased by amortization of differences between fair values and carrying values of the subsidiary’s net assets net assets when carrying values are greater than fair values. b. Decreased by share in impairment loss in goodwill if proportionate method of measuring NCI is used c. Increased by the NCI’s share of subsidiary’s dividends and decreased by the NCI’s share of subsidiary’s adjusted net income d. Decreased by the NCI’s share of subsidiary’s dividends and increased by the NCI’s share of subsidiary’s adjusted net income
Under the equity method of accounting for the operating results of a subsidiary, the dividends declared by the subsidiary to the parent company are accounted for by the parent company as A. Dividend revenue on the declaration date. B. A reduction of the Investment in Subsidiary account on the payment date. C. Dividend revenue on the payment date. D. A reduction of the Investment in Subsidiary account on the declaration date.
In the cost method of acquisition income is recognized only when the subsidiary declares dividends Select one: True False
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