Worksheet elimination 1 will include only the subsidiary’s stock (par value and additional paid-in capital), Retained Earnings, and the parent’s Investment in Subsidiary account when the parent has acquired 100 percent of the subsidiary’s stock at book value at the beginning of the period.
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TRUE OR FALSE: Indicate whether the statements are true or false.
1. Worksheet elimination 1 will include only the subsidiary’s stock (par value and additional paid-in capital),
2.
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- TRUE OR FALSE: Indicate whether the statements are true or false. 1. Assuming the parent acquired 100 percent of the subsidiary’s stock and there are no purchase differentials, the investment income recorded by the parent in the current period will equal the subsidiary’s current net income recognized subsequent to the acquisition date. 2.Choose the letter of the correct answer. 1. Which of the following is not correct with regard to a parent’s ownership of 100 percent of a subsidiary’s stock subsequent to a book value acquisition? A. Consolidated Investment in Subsidiary balance equals the parent’s Investment in Subsidiary balance B. Consolidated Retained Earnings equals the parent’s Retained Earnings C. Consolidated dividends equal the parent’s dividends D. Consolidated net income equals the parent’s net income 2. What amount of allocated excess/purchase differential amortization is recognized in the parent’s financial records subsequent to the subsidiary’s acquisition? A. The noncontrolling interest percentage ownership in the subsidiary B. 100 percent of the purchase differential amortization C. Allocated excess/purchase differentials are not amortized D. The parent percentage ownership in the subsidiary1. 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
- 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 subsidiaryUnder 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.Computing the noncontrolling interests equity balance Assume the following facts relating to an 90% owned subsidiary company: BOY stockholders’ equity $1,300,000 BOY AAP assets 169,000 Net income of subsidiary (not including [A] asset depreciation and amortization) 312,000 AAP assets depreciation and amortization expense 52,000 Dividends declared and paid by subsidiary 26,000 a. Compute the net income attributable to noncontrolling interests for the year. b. Compute the amount reported as noncontrolling equity at the end of the year.
- How should preferred stock of a subsidiary be shown in a consolidated balance sheet in each case? a. If it is held 100 percent by the parent. b. If it is held 50 percent by the parent and 50 percent by outside interests c. If it is held 100 percent by outside interests.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.The following information pertains to the following 2 Questions. Assume the following facts relating to an 80% owned subsidiary company: BOY Stockholders’ Equity $1,000,000 BOY unamortized AAP 125,000 Net income of subsidiary (not including AAP amortization) 210,000 AAP amortization expense 40,000 Dividends declared and paid to noncontrolling shareholders 10,000 22. What is the net income attributable to noncontrolling interests for the year? a. $128,000 b. $136,000 c. $160,000 d. $168,000 23. What is the amount reported as noncontrolling equity at the end of the year? a. $895,200 b. $996,000 c. $1,026,000 d. $1,028,000
- Computing the noncontrolling interests equity balance Assume the following facts relating to an 90% owned subsidiary company: BOY stockholders’ equity $900,000 BOY AAP assets 117,000 Net income of subsidiary (not including [A] asset depreciation and amortization) 216,000 AAP assets depreciation and amortization expense 36,000 Dividends declared and paid by subsidiary 18,000 b. Compute the amount reported as noncontrolling equity at the end of the year. $AnswerChoose the correct. A subsidiary owns shares of its parent company. Which of the following is true concerning the treasury stock approach?a. It is one of several options to account for mutual holdings available under current accounting standards.b. The original cost of the subsidiary’s investment is a reduction in consolidated stockholders’ equity.c. The subsidiary accrues income on its investment by using the equity method.d. The treasury stock approach eliminates these shares entirely within the consolidation process.Which one of the following statements is correct with regards to a 70%-owned subsidiary? 100% of the parent’s retained earnings will be added to 100% of the subsidiary’s retained earnings at consolidation, in the statement of changes in equity. 100% of the parent’s assets will be added to 70% of the subsidiary’s assets at consolidation, in the statement of financial position. 100% of the parent’s retained earnings will be added to 70% of the subsidiary’s retained earnings at consolidation, in the statement of changes in equity. The retained earnings of the subsidiary will be allocated to the non-controlling interests in total.