LOOSE-LEAF ADVANCED FINANCIAL ACCOUNTING
11th Edition
ISBN: 9780077722166
Author: Theodore E. Christensen, David M Cottrell
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 1, Problem 1.1.4E
Multiple-Choice Questions on Complex Organizations
Select the correct answer for each of the following questions.
4. When an existing company creates a new subsidiary and transfers a portion of its assets andliabilities to the new entity
a. The new entity records both the assets and liabilities it received at fair values.
b. The new entity records both the assets and liabilities it received at the carrying values of theoriginal company.
c. The original company records a gain or loss on the difference between its carrying valuesand the fair values of the assets transferred to the new entity.
d. The original company records the difference between the carrying values and the fair valuesof the assets transferred Lo the new entity as
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Which of the following accounting treatments for costs related to business combination is incorrect?
Group of answer choices
a. Acquisition related costs such as finder’s fees; advisory, legal, accounting, valuation and other professional and consulting fees; and general administrative costs, including the costs of maintain an internal acquisitions department shall be recognized as expense in the Profit/Loss in the periods in which the costs are incurred.
b. The costs related to issuance of financial liability at fair value through profit or loss shall be recognized as expense while those related to issuance of financial liability at amortized cost shall be recognized as deduction from the book value of financial liability or treated as discount on financial liability to be amortized using effective interest method.
c. The costs related to the organization of the newly formed corporation also known as pre-incorporation costs shall be capitalized as goodwill or deduction from…
This distinguishes a business combination from other types of investment transactions.
Obtaining of control
Acquisition of stocks
Acquisition of assets
All of these
The entity that obtains control over another business in a business combination called the
Controller
Acquiree
Acquirer
Controllee
Entity A obtained control of Entity B in a business combination. When computing for goodwill, Entity A would least likely account for which of the following?
Entity B’s research and development projects that were already charged as expenses, but have a fair value as at the acquisition date.
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Operating lease between Entity A and Entity B, wherein Entity B is the lessee.
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In a business combination, an acquirer's interest in the fair value of the net assets acquired exceeds the consideration transferred in the combination. Under PFRS 3 Business Combinations, the acquirer should
A. recognize the excess immediately in profit or los
B. recognize the excess immediately in other comprehensive income
C. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in other comprehensive income
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Chapter 1 Solutions
LOOSE-LEAF ADVANCED FINANCIAL ACCOUNTING
Ch. 1 - What types of circumstances would encourage...Ch. 1 - How would the decision to dispose of a segment of...Ch. 1 - Prob. 1.3QCh. 1 - Prob. 1.4QCh. 1 - Prob. 1.5QCh. 1 - Prob. 1.6QCh. 1 - Prob. 1.8QCh. 1 - Prob. 1.9QCh. 1 - Prob. 1.10QCh. 1 - Prob. 1.11Q
Ch. 1 - Prob. 1.12QCh. 1 - Prob. 1.13QCh. 1 - Prob. 1.14QCh. 1 - Prob. 1.15QCh. 1 - Within the measurement period following a business...Ch. 1 - Prob. 1.17QCh. 1 - Prob. 1.1CCh. 1 - Prob. 1.3CCh. 1 - Prob. 1.4CCh. 1 - Risks Associated with Acquisitions Not all...Ch. 1 - Prob. 1.8CCh. 1 - Prob. 1.1.1ECh. 1 - Prob. 1.1.2ECh. 1 - Prob. 1.1.3ECh. 1 - Multiple-Choice Questions on Complex Organizations...Ch. 1 - Prob. 1.1.5ECh. 1 - Prob. 1.2.1ECh. 1 - Prob. 1.2.2ECh. 1 - Multiple-Choice Questions on Recording Business...Ch. 1 - Prob. 1.2.4ECh. 1 - Multiple-Choice Questions on Recording Business...Ch. 1 - Multiple-Choice Questions on Reported Balances...Ch. 1 - Multiple-Choice Questions on Reported Balances...Ch. 1 - Prob. 1.3.3ECh. 1 - Prob. 1.3.4ECh. 1 - Prob. 1.4.1ECh. 1 - Prob. 1.4.2ECh. 1 - Prob. 1.4.3ECh. 1 - Prob. 1.4.4ECh. 1 - Prob. 1.4.5ECh. 1 - Prob. 1.5ECh. 1 - Prob. 1.6ECh. 1 - Prob. 1.7ECh. 1 - Prob. 1.8ECh. 1 - Prob. 1.9ECh. 1 - Prob. 1.10ECh. 1 - Prob. 1.11ECh. 1 - Goodwill Recognition Spur Corporation reported the...Ch. 1 - Acquisition Using Debentures Planter Corporation...Ch. 1 - Bargain Purchase Using the data resented in E1-13,...Ch. 1 - Prob. 1.15ECh. 1 - Prob. 1.16ECh. 1 - Prob. 1.17ECh. 1 - Prob. 1.18ECh. 1 - Prob. 1.19ECh. 1 - Prob. 1.20ECh. 1 - Prob. 1.21ECh. 1 - Prob. 1.22ECh. 1 - Prob. 1.23ECh. 1 - Prob. 1.24PCh. 1 - Prob. 1.25PCh. 1 - Prob. 1.26PCh. 1 - Prob. 1.27PCh. 1 - Prob. 1.28PCh. 1 - Prob. 1.29PCh. 1 - Prob. 1.30PCh. 1 - Prob. 1.31PCh. 1 - Prob. 1.32PCh. 1 - Prob. 1.33PCh. 1 - Prob. 1.34PCh. 1 - Prob. 1.35PCh. 1 - Business Combination Following are the balance...Ch. 1 - Prob. 1.37PCh. 1 - Prob. 1.38PCh. 1 - Prob. 1.39PCh. 1 - Prob. 1.40P
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- In a business combination, an acquirer's interest in the fair value of the net assetsacquired exceeds the consideration transferred in the combination. Under PFRS3 Business Combinations, the acquirer should A. reassess the recognition and measurement of the net assets acquired and theconsideration transferred, then recognize any excess immediately in othercomprehensive income B. recognize the excess immediately in other comprehensive income C. recognize the excess immediately in profit or loss D. reassess the recognition and measurement of the net assets acquired and theconsideration transferred, then recognize any excess immediately in profit or lossarrow_forwardThe meaning of goodwill in accounting is: Multiple Choice The amount by which a company's value exceeds the value of its individual assets and liabilities. Long term assets held as investment. The support of the board of directors for the operating decisions of management. The cost of developing, maintaining, or enhancing the value of a trademark. Rights granted to an entity to deliver a product or service under specified conditions.arrow_forwardChoose 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.arrow_forward
- Consolidation financial statements are prepared when a parent-subsidiary relationship exists in recognition of the accounting principle concept of: a. Reliability b. Entity c. Materiality d. Going Concernarrow_forwardThe identifiable assets acquired and liabilities assumed in a business combination are generally measured at: a. Acquisition-date fair values b. Previous carrying amounts c. Fair value less cost to sell d. Costarrow_forwardIn a business combination, an acquirer's interest in the fair value of the net assets acquired exceeds the consideration transferred in the combination. Under IFRS 3 Business Combinations, the acquirer should a. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in profit or loss b. recognize the excess immediately in other comprehensive income c. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in other comprehensive income d. recognize the excess immediately in profit or lossarrow_forward
- Choose the correct.Which of the following does not indicate an investor company’s ability to significantly influence an investee?a. Material intra-entity transactions.b. The investor owns 30 percent of the investee but another owner holds the remaining 70 percent.c. Interchange of personnel.d. Technological dependency.arrow_forwardPLEASE 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. IIarrow_forwardConsolidated financial statements are required in which ofthe following situations?a. Only when a company can exert significant influenceover another company.b. Only when a company has a passive investment inanother company.c. Only when a parent company can exercise control overits subsidiary.d. None of the above.arrow_forward
- Choose the correct. When does gain recognition accompany a business combination?a. When a bargain purchase occurs.b. In a combination created in the middle of a fiscal year.c. In an acquisition when the value of all assets and liabilities cannot be determined.d. When the amount of a bargain purchase exceeds the value of the applicable noncurrent assets (other than certain exceptions) held by the acquired company.arrow_forwardWhat are 2 specific criteria essential to determine whether to recognize an intangible asset in a business combination? What are some reasons that a business combination take place? Goodwill is often acquired as part of a business combination. Why, when separate incorporation is maintained, then goodwill does not appear on parent’s company trial balance as a separate account?arrow_forwardScenario Many companies transfer inventories from one subsidiary to another. Often the companies have integrated operations in which one subsidiary provides raw materials, another manufacture finished products, and another distributes, and perhaps another sells the product at retail. Required: Discuss how intercompany transfers should be treated for consolidation purposes, in both the statement of financial position and the statement of comprehensive income. Also, make reference to the related IFRS’s an IAS’s.arrow_forward
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