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.

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.

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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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
During a fiscal year, the balance of a parent company's Investment in Subsidiary ledger account for a wholly owned subsidiary, for which the parent company uses the equity method of accounting, increases the amount of the sibsidiary's A. Adjusted net income. B. Dividends. C. Adjusted net income plus dividends. D. Undistributed earnings.
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
What is push-down accounting?a. A requirement that a subsidiary must use the same accounting principles as a parent company.b. Inventory transfers made from a parent company to a subsidiary.c. A subsidiary’s recording of the fair-value allocations as well as subsequent amortization.d. The adjustments required for consolidation when a parent has applied the equity method of accounting for internal reporting purposes.
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 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 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 The parent’s investment in the Subsidiary is recorded at cost and reduced by an excess dividends received from subsidiary.
Choose the correct. What is push-down accounting?a. A requirement that a subsidiary must use the same accounting principles as a parent company.b. Inventory transfers made from a parent company to a subsidiary.c. A subsidiary’s recording of the fair-value allocations as well as subsequent amortization.d. The adjustments required for consolidation when a parent has applied the equity method of accounting for internal reporting purposes.
How is the portion of consolidated earnings to be assigned to the non-controlling interest in consolidated financial statements determined?A. The amount of the subsidiary’s earnings recognized for consolidation purposes is multiplied by the non-controlling interest percentage on the balance sheet date.B. The amount of consolidated earnings on the consolidated work papers is multiplied by the non-controlling interest percentage on the balance sheet date.C. The subsidiary’s net income is extended to the non-controlling interestD. The parent’s net income is subtracted from the subsidiary’s net income to determine the non-controlling interest.
Consolidated net income for a parent company and its partially owned subsidiary is best defined as the parent company’sA. Recorded net income plus the subsidiary’s recorded net income after adjustment from any amortization of excess amount from book value compared to fair value.B. Recorded net incomeC. Income from independent operations plus subsidiary’s income resulting from transactions with outside parties after adjustment from any amortization of excess amount from book value compared to fair value.D. Recorded net income plus the subsidiary’s recorded net income
In consolidated financial statements, it is expected that: A. Retained earnings equals to the sum of controlling interest separate retained earnings and non-controlling interest separate retained earnings. B. Ordinary share equals to the sum of parent’s ordinary share and subsidiary’s ordinary share. C. Net income equals to the sum of the income distributed to the controlling interest and distributed to non-controlling interest. D. Dividends declared equals the sum of the total parent company’s declared dividends and the total subsidiary’s declared dividends.
Dividends declared by a subsidiary subsequent to the date of a business combination are displayed in a consolidated statement of retained earnings True False
1. When preparing the consolidated financial statements, which of the followingshould be deducted from the group reserves?a) Share in associate profit b) Value of the loan from subsidiary to associate c) Group’s share of sub-subsidiary’s profit d) Value of goodwill impairment expense