ADVANCED ACCOUNTING(LL) W/CONNECT
13th Edition
ISBN: 9781260282382
Author: Hoyle
Publisher: MCG
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Chapter 6, Problem 9Q
To determine
Determine the entity to which the gain of $45,000 should be allocated.
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The motivation of a parent company to purchase the outstanding bonds of a subsidiary could be to:
a.
replace the existing debt with new debt at a lower interest rate.
b.
reduce the parent company's acquisition price for the subsidiary.
c.
increase the parent company's ownership percentage in the subsidiary.
d.
create interest revenue to offset interest expense in future income statements.
A parent company acquires from a third party bonds that had been issued originally by one of its subsidiaries. Why is the consolidation process simpler if the bonds had been acquired directly from the subsidiary than from a third party?
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.
Chapter 6 Solutions
ADVANCED ACCOUNTING(LL) W/CONNECT
Ch. 6 - Prob. 1QCh. 6 - Prob. 2QCh. 6 - When is a firm required to consolidate the...Ch. 6 - Prob. 4QCh. 6 - Prob. 5QCh. 6 - Prob. 6QCh. 6 - Prob. 7QCh. 6 - Prob. 8QCh. 6 - Prob. 9QCh. 6 - Prob. 10Q
Ch. 6 - Prob. 11QCh. 6 - How do noncontrolling interest balances affect the...Ch. 6 - Prob. 13QCh. 6 - Prob. 14QCh. 6 - Prob. 15QCh. 6 - Prob. 16QCh. 6 - Prob. 17QCh. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Prob. 3PCh. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Problems 7 and 8 are based on the following...Ch. 6 - Prob. 8PCh. 6 - Bens man Corporation is computing EPS. One of its...Ch. 6 - Prob. 10PCh. 6 - Prob. 11PCh. 6 - Prob. 12PCh. 6 - Prob. 13PCh. 6 - Prob. 14PCh. 6 - Prob. 15PCh. 6 - Prob. 16PCh. 6 - On January 1, Coldwater Company has a net book...Ch. 6 - Prob. 18PCh. 6 - Prob. 19PCh. 6 - Prob. 20PCh. 6 - On January 1, 2018, Stamford issues 10,000...Ch. 6 - On January 1, 2018, Stamford reacquires 8,000 of...Ch. 6 - Prob. 23PCh. 6 - Prob. 24PCh. 6 - On December 31, 2017. PanTech Company invests...Ch. 6 - Prob. 26PCh. 6 - Prob. 27PCh. 6 - Prob. 28PCh. 6 - Prob. 29PCh. 6 - Prob. 30PCh. 6 - Prob. 31PCh. 6 - Prob. 32PCh. 6 - Prob. 33PCh. 6 - Prob. 34PCh. 6 - Prob. 35PCh. 6 - Alford Company and its 80 percentowned subsidiary,...Ch. 6 - Prob. 37PCh. 6 - Prob. 38PCh. 6 - Prob. 39PCh. 6 - Prob. 40PCh. 6 - Prob. 41PCh. 6 - Prob. 42PCh. 6 - Prob. 43PCh. 6 - Prob. 44PCh. 6 - Fred, Inc., and Herman Corporation formed a...Ch. 6 - Prob. 46PCh. 6 - Prob. 47PCh. 6 - Prob. 48PCh. 6 - Prob. 49PCh. 6 - Prob. 50PCh. 6 - Prob. 1DYSCh. 6 - Prob. 2DYSCh. 6 - The FASB ASC Subtopic Variable Interest Entities...
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Similar questions
- What is the answer of following question? (a) Where the parent company does not hold 100 percent equity of the subsidiary company, what portion of theintra-group transactions between the parent entity and the subsidiary entity will need to be eliminated on consolidation? (b) What is a non-controlling interest, and how should it be disclosed? (c) How are non-controlling interests affected by intra-group transactions? (d) What are the three steps we use to calculate total non-controlling interest?arrow_forward(a) Where the parent company does not hold 100 percent equity of the subsidiary company, what portion of the intra-group transactions between the parent entity and the subsidiary entity will need to be eliminated on consolidation? (b) What is a non-controlling interest, and how should it be disclosed? (c) How are non-controlling interests affected by intra-group transactions? (d) What are the three steps we use to calculate total non-controlling interest? Show workingarrow_forwardWhich 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.arrow_forward
- Q1) When a company owns 50% or more of another company, accounting standards require that the owner (parent) consolidates its financial statements with the subsidiary. Explain the rationale and the reasons behind that requirement.arrow_forwardMorgan Company acquires all of the outstanding shares of Jennings, Inc., for cash. Morgan transfers consideration more than the fair value of the company’s net assets. How should the payment in excess of fair value be accounted for in the consolidation process?arrow_forwardWhen a parent company uses the equity method to account for an investment in a subsidiary, why do both the parent’s Net Income and Retained Earnings account balances agree with the consolidated totals?arrow_forward
- Which 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_forwardFrom 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_forwardChoose 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 subsidiaryarrow_forward
- What is the correct method for treating a vesting differential linked to the acquisition of shares? privileged rights of the subsidiary by the parent company? Select an answer: a. It must be allocated to identifiable net assets or goodwill. b. It must be distributed in proportion to the identifiable assets and liabilities of the subsidiary. c. It must be charged to consolidated retained earnings or credited to contributed surplus. d. It must be taken care of in the current year.arrow_forwardKindly Answer it.arrow_forwardQuestion 1 Which of the following accounts do not appear in the consolidated financial statements at consolidation? A) Goodwill. B) Equipment. C) Investment in Subsidiary. D) Common Stock. E) Additional Paid-In Capital. Question 2 Which of the following internal record-keeping methods can a parent choose to account for a subsidiary acquired in a business combination? A) initial value or book value. B) initial value, lower-of-cost-or-market-value, or equity. C) initial value, equity, or partial equity. D) initial value, equity, or book value. E) initial value, lower-of-cost-or-market-value, or partial equity.arrow_forward
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