ADVANCED FINANCIAL ACCOUNTING IA
12th Edition
ISBN: 9781260545081
Author: Christensen
Publisher: MCG
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Question
Chapter 5, Problem 5.1.2E
To determine
Concept Introduction:
Consolidation of accounts: When a company acquires significant influence in another company, then that company is known as holding company. The holding company needs to consolidate its accounts with the subsidiary.
To choose: The correct option.
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Students have asked these similar questions
If a revaluation of the subsidiary’s assets is performed on consolidation, the subsidiary’s assets are carried into the consolidated statement of financial position at:
Select one:
a. Net present value.
b. Historical cost.
c. Fair value.
d. Current replacement cost.
Choose the letter of the correct answer:
1. What amount of allocated excess/purchase differential amortization is recognized in the consolidated financial statements 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 subsidiary
2. What amount of allocated excess/purchase differential amortization is recognized in the consolidated financial statements subsequent to the subsidiary’s acquisition?
A. Allocated excess/purchase differentials are not amortized
B. The parent percentage ownership in the subsidiary
C. The noncontrolling interest percentage ownership in the subsidiary
D. 100 percent of the purchase differential amortization
Which of the following statements is true regarding the acquisition method of accounting for a
business combination? a. Assets of the acquired company are recorded at book values. b. Assets of the
acquired company are recorded at fair value, but only if the acquisition cost equals or exceeds fair
value of the subsidiary's net assets. c. Assets of the acquired company are recorded at fair values
regardless of the acquisition cost. d. Consulting costs related to the combination reduce additional
paid-in capital.
Chapter 5 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
Ch. 5 - Where is the balance assigned to the...Ch. 5 - Why must a noncontrolling interest be reported in...Ch. 5 - Prob. 5.3QCh. 5 - Prob. 5.4QCh. 5 - Prob. 5.5QCh. 5 - Prob. 5.6QCh. 5 - Prob. 5.7QCh. 5 - Prob. 5.8QCh. 5 - Prob. 5.9QCh. 5 - Prob. 5.10Q
Ch. 5 - Under what Circumstances would a parent company...Ch. 5 - Prob. 5.12QCh. 5 - Prob. 5.13QCh. 5 - Prob. 5.14AQCh. 5 - Prob. 5.15AQCh. 5 - Consolidation Worksheet Preparation The newest...Ch. 5 - Prob. 5.2CCh. 5 - Prob. 5.3CCh. 5 - Prob. 5.4CCh. 5 - Prob. 5.5CCh. 5 - Prob. 5.1.1ECh. 5 - Prob. 5.1.2ECh. 5 - Prob. 5.1.3ECh. 5 - Prob. 5.1.4ECh. 5 - Prob. 5.2.1ECh. 5 - Prob. 5.2.2ECh. 5 - Prob. 5.2.3ECh. 5 - Prob. 5.2.4ECh. 5 - Prob. 5.2.5ECh. 5 - Prob. 5.3ECh. 5 - Prob. 5.4ECh. 5 - Balance Sheet Worksheet Problem Company owns 90...Ch. 5 - Prob. 5.6ECh. 5 - Prob. 5.7ECh. 5 - Prob. 5.8.1ECh. 5 - Prob. 5.8.2ECh. 5 - Prob. 5.8.3ECh. 5 - Prob. 5.8.4ECh. 5 - Prob. 5.8.5ECh. 5 - Prob. 5.8.6ECh. 5 - Prob. 5.8.7ECh. 5 - Prob. 5.9ECh. 5 - Prob. 5.10ECh. 5 - Prob. 5.11ECh. 5 - Prob. 5.12ECh. 5 - Prob. 5.13ECh. 5 - Prob. 5.14ECh. 5 - Prob. 5.15ECh. 5 - Prob. 5.16ECh. 5 - Prob. 5.17AECh. 5 - Prob. 5.18AECh. 5 - Prob. 5.19PCh. 5 - Prob. 5.20PCh. 5 - Prob. 5.21.1PCh. 5 - Multiple-Choice Questions on Applying the Equity...Ch. 5 - Prob. 5.21.3PCh. 5 - Prob. 5.21.4PCh. 5 - Prob. 5.22PCh. 5 - Computation of Account Balances Pencil Company...Ch. 5 - Prob. 5.24PCh. 5 - Equity Entries with Differential On January 1,...Ch. 5 - Equity Entries with Differential Plug Corporation...Ch. 5 - Prob. 5.27PCh. 5 - Prob. 5.28PCh. 5 - Prob. 5.29P
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- Question (10) 1- Elimination of intra-entity profit or loss may be allocated between the parent and noncontrolling interest. True or False 2- Consolidating entries to eliminate intra-entity transfers of property need to be made only in the year of transfer. True or False 3- In consolidations, downstream sales (from parent to subsidiary) are eliminated, and the intra-entity gain needs to be allocated between the parent and subsidiary. True or False 4- Intra-entity transactions transferring assets subject to depreciation or amortization are handled in the same manner as land transactions each year. True or False 5- Reporting financial statements values reflecting the single entity perspective is the primary objective of consolidating entries. True or Falsearrow_forwardWhich of the following is true regarding consolidation of net income?A. Parent net income is decreased by the dividend income recognized due to declared bysubsidiary at full amount even if less than 100% ownership is acquired.B. Amortization of excess must be done to adjust net income of parent to arrive at parent netincome own operation.C. Adjusted net income of subsidiary is shared by Parent’s holding interest andnoncontrolling interest.D. Dividend declared by subsidiary is shared by Parent’s holding interest and noncontrollinginterest.arrow_forwardChoose the correct. In computing the noncontrolling interest’s share of consolidated net income, how should the subsidiary’s net income be adjusted for intra-entity transfers? a. The subsidiary’s reported net income is adjusted for the impact of upstream transfers prior to computing the noncontrolling interest’s allocation. b. The subsidiary’s reported netincome is adjusted for the impact of all transfers prior to computing the noncontrolling interest’s allocation. c. The subsidiary’s reported net income is not adjusted for the impact of transfers prior to computing the noncontrolling interest’s allocation. d. The subsidiary’s reported net income is adjusted for the impact of downstream transfers prior to computing the noncontrolling interest’s allocation.arrow_forward
- From a consolidated point of view, the intercompany gain or loss on a parent’s sale of a non-depreciable asset to subsidiary is realized when: a. The parent company sells the asset to the subsidiary b. The subsidiary start to use the asset c. The subsidiary resells the asset to the parent d. The subsidiary resells the asset to the outsiderarrow_forwardWhich of the following income items may affect both Consolidated Net Income attributable to Parent and Non-Controlling Interest in Profit? * A. Gain on bargain purchase arising from business combination. B. Gain (loss) arising from intercompany sale of fixed assets from parent to subsidiary. C. Answer not given D. Amortization of excess in merchandise inventory of the acquired company. E. Impairment of a goodwill recognized using the proportionate or relevant share.arrow_forwardChoose the correct. What is a basic premise of the acquisition method regarding accounting for noncontrolling interest?a. Consolidated financial statements should be primarily for the benefit of the parent company’s stockholders.b. Consolidated financial statements should be produced only if both the parent and the subsidiary are in the same basic industry.c. A subsidiary is an indivisible part of a business combination and should be included in its entirety regardless of the degree of ownership.d. Consolidated financial statements should not report a noncontrolling interest balance because these outside owners do not hold stock in the parent company.arrow_forward
- In computing the noncontrolling interest’s share of consolidated net income, how should the subsidiary’s net income be adjusted for intra-entity transfers?a. The subsidiary’s reported net income is adjusted for the impact of upstream transfers prior to computing the noncontrolling interest’s allocation.b. The subsidiary’s reported net income is adjusted for the impact of all transfers prior to computing the noncontrolling interest’s allocation.c. The subsidiary’s reported net income is not adjusted for the impact of transfers prior to computing the noncontrolling interest’s allocation.d. The subsidiary’s reported net income is adjusted for the impact of downstream transfers prior to computing the noncontrolling interest’s allocation.arrow_forwardAt the date of purchase, business combination resulting in a parent-subsidiary relationship, the difference between current fair values and carrying amounts of the subsidiary’s net asset is: A. Recorded in the applicable asset and liability accounts of the parent company B. Reflected in a consolidation elimination C. Recorded in the applicable asset and liability accounts of the subsidiary D. Accounted for in some other manner.arrow_forwardWhich of the following statements about pushdown accountling is correct? Select one: a. Pushdown accounting occurs when a subsidiary incurs the parent company's transaction costs related to the acquisition of the subsidiary. O b. On the date a parent company obtains control of a subsidiary, pushdown accounting will result in a subsidiary's pre-consolidation individual net assets being reported at fair value, consistent with FASB ASC 805. C. When a subsidiary applies pushdown accounting, the parent company's Equity Investment account is pushed down and reported on the subsidiary's balance sheet. d. When a subsidiary applies pushdown accounting, the parent company is no longer required to issue consolidated financial statements.arrow_forward
- The following independent statements may be true or false. Discuss the circumstances whereby the statement is true and the circumstances whereby it is false. (a) Goodwill on consolidation in the Consolidated Statement of Financial Position is the difference between consideration paid by the Parent and the Parent's share of fair value of identifiable net assets of a partially-owned Subsidiary.arrow_forwardWhich of the following is correct? A. The noncontrolling shareholders' claim on the subsidiary's net asset is based on the book value of the subsidiary's net assets. B. Only the parent's portion of the differences between book value and fair value of the subsidiary's assets is assigned to those assets. C. Goodwill represents the difference between the book value of the subsidiary's net assets and the amount paid by the parent to buy ownership. D. Total assets reported by the parent generally will be less than the total assets reported on the consolidated balance sheet.arrow_forwardWhen an entity sells a non-current asset at a profit to another entity within the same group, which of the following adjustments is necessary on consolidation? Select one: a. Dr Asset, DR Gain on sale b. Dr Gain on sale, CR Asset c. Dr Gain on sale, CR Cash d. Dr Asset, CR Casharrow_forward
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