Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Question
Chapter 1, Problem 1.2.2E
To determine
Equity securities
An equity security is issued by a company to raise capital. This security represents the ownership stake in a company. Holders of this security have certain rights and are considered as owners of the company.
To choose:The correct option out of four given options.
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Which of the following is NOT included in the cost of an acquired company? (applying section 19 of IFRS for SMEs)
a. Contingent consideration determinable at the consummation date of the combination
b. Finder’s fee for arranging the combination
c. Cost of registering and issuing equity securities
d. None of the above
1
Which of the following is a characteristic of a business combination that should be accounted for as an acquisition?Â
Group of answer choices
a. The combination must involve the exchange of equity securities only.
b. The transaction may be considered to be uniting of the ownership interest of the companies involved.
c. The transaction establishes an acquisition fair value basis for the company being acquired
d. Two companies may be about the same size and it is difficult to determine the acquired company and acquiring company.
Statement 1: In the financial settlement of a contingent consideration classified as financial liability, the amount shall be remeasured at fair value with any gain or loss included in profit or loss.
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Statement 2: If a new entity is formed to issue equity interests to effect a business combination one of the combining entitites that existed before the combination shall be identified as the acquirer.Â
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Which statement/s is TRUE?
Chapter 1 Solutions
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. 1.7QCh. 1 - Prob. 1.8QCh. 1 - Prob. 1.9QCh. 1 - Prob. 1.10Q
Ch. 1 - Prob. 1.11QCh. 1 - Prob. 1.12QCh. 1 - Prob. 1.13QCh. 1 - Prob. 1.14QCh. 1 - Within the measurement period following a business...Ch. 1 - Prob. 1.16QCh. 1 - Prob. 1.1CCh. 1 - Prob. 1.2CCh. 1 - Prob. 1.3CCh. 1 - Prob. 1.4CCh. 1 - Risks Associated with Acquisitions Not all...Ch. 1 - Prob. 1.6CCh. 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 - Multiple-Choice Questions Involving Account...Ch. 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 - Balances Reported Following Combination Palm...Ch. 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 - Acquisition in Multiple Steps Peal Corporation...Ch. 1 - Prob. 1.28PCh. 1 - Prob. 1.29PCh. 1 - Prob. 1.30PCh. 1 - Prob. 1.31PCh. 1 - Computation of Account Balances Saspro Division is...Ch. 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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- 1. Shares issued in connection with business combination are recorded at: A discount A premium Fair value Par value 2. Indirect costs related to acquisition of another entity is treated as An expense An investment account Share capital Share premium 3. The cost of registering equity securities in a business combination should be capitalized debited to share premium expensedarrow_forwardQ1 According to IAS 28, Investments in Associates and Joint Ventures, an investment classified as a joint venture should be equity accounted in the consolidated financial statements of the investor company. Which statement below can be used to describe the Equity accounting method? Select one: a. It is an accounting method whereby an investment is initially recorded at cost and is subsequently adjusted for post-acquisition changes in the investor’s share of the net assets of the investee. b. It is an accounting method whereby an investment is initially recorded at cost and is subsequently adjusted for amortization over an agreed period of time. c. It is an accounting method whereby an investment is initially recorded at fair value and is subsequently adjusted for post-acquisition changes in the investor’s share of the net assets of the investee. d. It is an accounting method whereby an investment is initially recorded at fair value and is subsequently adjusted for amortization over…arrow_forwardWhichever of the below offers the most potential for allowing the investor to use off-balance-sheet financial support? Answer options in a group Method of equityWith special purpose entities, the equity technique is used.Accounting on a mark-to-market basisAccounting for consolidation.arrow_forward
- Which of the following statements is correct regarding working paper entries to facilitate the preparation of the consolidated financial statements? *  A. Debit Non-controlling Interest in Net Assets in the working paper to assign to the non-controlling stockholders their share in the gain on bargain purchase. b. Debit Share Premium relating to issuance of stocks in the working paper to record the cost of SEC registration and listing fees. c. Credit Investment in Subsidiary Company Stock in the working paper to record the purchase of outstanding shares from subsidiary company. d. Credit Equipment in the working paper to adjust a fair value differential of an overvalued equipment.arrow_forwardChoose the correct. A company acquires a subsidiary and will prepare consolidated financial statements for external reporting purposes. For internal reporting purposes, the company has decided to apply the equity method. Why might the company have made this decision?a. It is a relatively easy method to apply.b. Operating results appearing on the parent’s financial records reflect consolidated totals.c. GAAP now requires the use of this particular method for internal reporting purposes.d. Consolidation is not required when the parent uses the equity method.arrow_forwardDetermine which of following entities SHALL and SHALL NOT prepare consolidated financial statements in accordance with PFRS 10. Explain your answer. I. Entity LOL Ltd. that has an immaterial participation of 90% in equity interest of YIE Ltd. II. Entity V, an investment entity, acquired an investment in a subsidiary(entity Y). Entity Y provides services that is related to Entity V’s investmentactivities. III. Entity C Ltd. that has an interest of 20% in equity shares of ACV Ltd. IV. Entity B ABC Group presents consolidated financial statementswhich includes Entity B. Entity B is itself a parent because it has controlling interests in 8 other entities. Entity B does not have equity traded in a regulated market but is waiting for the approval of listing its debt in the Philippine Stock Exchange.arrow_forward
- IFRS 10 Consolidated Financial Statements outlines the requirements for identifying thecompany that is the acquirer in a business combination when it's not clear who that is. Whichis NOT a consideration in determining which company is the acquirer?A. If the means of payment is cash, which party is paying the cash.B. Relative holdings of voting shares in the combined entity.C. Voting rights of the respective parties after the combination of their businesses.D. Any by-laws or provisions of the incorporation acts of each company that details themanner in which a business combination will occur at law.arrow_forwardWhich will demonstrate an agreement to refinance (choose the incorrect one)? Group of answer choices  1.Equity security has in fact been issued before the issuance of the financial statements for the purpose of refinancing. 2.Preferred stock has in fact been issued before the issuance of financial statements for the purpose of obtaining working capital. 3.Before the issuance of the financial statements, the enterprise has in fact entered into a financing agreement that clearly permits the enterprise to refinance the currently maturing long-term debt on a long-term basis. 4.Long-term obligation has in fact been issued before the issuance of the financial statements for the purpose of refinancing.arrow_forwardWhich of the following statements is true?  Multiple Choice  The pooling of interests for business combinations is an alternative to the acquisition method.  The purchase method for business combinations is an alternative to the acquisition method.  Neither the purchase method nor the pooling of interests method is allowed for new business combinations.  Any previous business combination originally accounted for under purchase or pooling of interests accounting method will now be accounted for under the acquisition method of accounting for business combinations.  Companies previously using the purchase or pooling of interests accounting method must report a change in accounting principle when consolidating those subsidiaries with new acquisition combinations.arrow_forward
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