Which of the following items would appear on the consolidated statement of financial position at the end of the firstfinancial year of the business combination? (i) Goodwill (ii) Equipment (iii) Loan from parent to subsidiary (iv) Investment in subsidiary Select one: a. (i) and (ii) only b. (i), (ii), (iii) and (iv) c. (iii) and (iv) only d. (i), (ii) and (iv) only

Which of the following items would appear on the consolidated statement of financial position at the end of the firstfinancial year of the business combination? (i) Goodwill (ii) Equipment (iii) Loan from parent to subsidiary (iv) Investment in subsidiary Select one: a. (i) and (ii) only b. (i), (ii), (iii) and (iv) c. (iii) and (iv) only d. (i), (ii) and (iv) only

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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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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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
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Statement 1: 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. Statement 2: 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. a. Only Statement 1 is correct b. Only Statement 2 is correct c. Both statements are incorrect d. Both statements are correct
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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. (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) Compare and contrast the accounting treatment/principles that you had applied in the independent scenarios in each part in preparing the journal entries and consolidation journal entries. (a) 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 recognised the interest paid as an expense.
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. (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) Compare and contrast the accounting treatment/principles that you had applied in the independent scenarios in each part in preparing the journal entries and consolidation journal entries. a)On 20 December 20x1, a 60%-owned Subsidiary paid rental of $200,000 to its Parent.The Parent recognised the rental as income whilst the Subsidiary company recognised the rental paid as an expense. The space area rented by the Subsidiary from the Parent comprises 2% of the building for which the Parent rented out to other external parties. In the separate financial statements of the Parent, the…
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. (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) Compare and contrast the accounting treatment/principles that you had applied in the independent scenarios in each part in preparing the journal entries and consolidation journal entries. (a) On 20 December 20x1, a 90%-owned Subsidiary sold a piece of inventory which it bought for $200,000 to its Parent for $300,000. As at 31 December 20x1, that piece of inventory was still with the Parent and the net realisable value of the inventory was $250,000 on this date. (b) On 20 December 20x1, a Parent paid management fee of $200,000 to its 90%-owned Subsidiary. The Subsidiary recognised…
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