Advanced Accounting (Looseleaf)
12th Edition
ISBN: 9780077632595
Author: Hoyle
Publisher: MCG
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Chapter 7, Problem 1P
To determine
Identify the appropriate answer for the given statement from the given choices.
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In a father-son-grandson business combination, which of the following is true?a. The father company always must have its total accrual-based income computed first.b. The computation of a company’s accrual-based net income has no effect on the accrual-based net income of other companies within a business combination.c. A father-son-grandson configuration does not require consolidation unless one company owns shares in all of the other companies.d. All companies solely in subsidiary positions must have their accrual-based net income computed first within the consolidation process.
Which of the following is not true with regard to a business combination accomplished in the form of a stock acquisition?
a. Two companies remain in existence after the combination
b. A parent-subsidiary relationship is said to exist
c. Consolidated financial statements are normally required
d. All of the above statements are true
In many cases, EPS is computed based on the parent’s portion of consolidated net income and parent company shares and convertibles. However, a different process must be used for some business combinations. When is this alternative approach required?
Chapter 7 Solutions
Advanced Accounting (Looseleaf)
Ch. 7 - Prob. 1QCh. 7 - Prob. 2QCh. 7 - Prob. 3QCh. 7 - How does the presence of an indirect ownership...Ch. 7 - Prob. 5QCh. 7 - In accounting for mutual ownerships, what is the...Ch. 7 - Prob. 7QCh. 7 - Prob. 8QCh. 7 - Prob. 9QCh. 7 - Prob. 10Q
Ch. 7 - Prob. 11QCh. 7 - Jones acquires Wilson, in part because the new...Ch. 7 - Prob. 13QCh. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Which of the following is correct for two...Ch. 7 - Prob. 5PCh. 7 - Prob. 6PCh. 7 - Prob. 7PCh. 7 - Prob. 8PCh. 7 - Prob. 9PCh. 7 - Prob. 10PCh. 7 - Prob. 11PCh. 7 - Prob. 12PCh. 7 - Prob. 13PCh. 7 - Prob. 14PCh. 7 - Prob. 15PCh. 7 - Prob. 16PCh. 7 - Prob. 17PCh. 7 - Prob. 18PCh. 7 - Prob. 19PCh. 7 - Clarke has a controlling interest in Rogerss...Ch. 7 - Prob. 21PCh. 7 - Prob. 22PCh. 7 - Prob. 23PCh. 7 - Prob. 24PCh. 7 - Prob. 25PCh. 7 - Prob. 26PCh. 7 - Prob. 27PCh. 7 - Prob. 28PCh. 7 - Prob. 29PCh. 7 - Prob. 1DYSCh. 7 - Access The Coca-Cola Company’s 2012 financial...
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- Entity A and Entity B combined their businesses. The acquirer in the businesscombination is not clearly identifiable. Which of the following is not an indicator that Entity A is the acquirer? A. Entity A is the initiator of the business combination. B. Entity A’s former owners receive the largest portion of the voting rights in the combined entity. C. Entity A’s former management team dominates the management of the combined entity. D. Entity C, a new entity, is formed and Entity C transfers cash to Entity A and Entity Barrow_forwardWhen one company buys the assets and liabilities of another company, this is known as which of the following?Choose one answer.a. Limited liability company b. Merger c. Conventional corporation d. Acquisitionarrow_forwardPlease answer the following questions relating to unrealized profit in a business combination. 1) Intra entity transfers between the components of business combinations are quite common. Why do these intra company transactions occur frequently? 2) How are unrealized inventory gross profit created, and what are the necessary consolidation entries created to account for these gains? 3) How do intra entity profit present in any year affect the noncontrolling Interest calculation?arrow_forward
- a.Which of the following statement/s regarding the method of consolidation is true: (1) Subsidiaries are consolidated in full (2) Associates are equity accounted Select one: a. Neither statement b. Statement (1) only c. Both statements d. Statement (2) Q2. Which of the following is a characteristic of the cost method of accounting for subsidiary operations? Select one: a. Parent company net income equals consolidated net income. b. More working paper eliminations are required than for the equity method of accounting. c. Consolidated amounts differ from the comparable amounts under the equity method of accounting. d. None of the above Q3. How soon does goodwill acquired in a business combination need to be tested after an acquisition? Select one: a. The year after acquisition b. The year of acquisition c. Two years after acquisition d. None of the abovearrow_forwardWhich one of the following statements is incorrect with regards to non-controlling interests? 1. Non-controlling interests can be calculated using the analysis of owners’ equity of the subsidiary. 2. The retained earnings total in the consolidated statement of changes in equity does not include the non-controlling interests amount. 3. Non-controlling interests reduces the profit of the owners of the parent in the consolidated statement of profit or loss and other comprehensive income. 4.Non-controlling interests are presented as an asset in the consolidated statement of financial position.arrow_forwardAssuming the existence of two companies, A and B, which of the following is not a business combination? a. Company A acquires all assets and liabilities of Company B. Company B continues as a company, holding shares of Company A. b. Company C is formed to acquire all the assets and liabilities of Company A and Company B. Both Company A and Company B liquidate. c. Company A acquires all assets and liabilities of Company B, and Company B liquidates. d. Company A acquires a group of assets of Company B, the group of assets not constituting a business. Company B continues to operate as a company.arrow_forward
- Non-controlling interest in consolidated income is never affected by: a. Sale of Parent to unaffiliated company b. Non-controlling interest is affected by all sales c. Downstream sales d. Upstream Salesarrow_forwardAssuming the existence of two companies, A and B, which of the following is not a business combination? Company C is formed to acquire all the assets and liabilities of Company A and Company B. Both Company A and Company B liquidate. Company A acquires all assets and liabilities of Company B, and Company B liquidates. Company A acquires all assets and liabilities of Company B. Company B continues as a company, holding shares of Company A. Company A acquires a group of assets of Company B, the group of assets not constituting a business. Company B continues to operate as a company.arrow_forwardWhen a subsidiary sells inventory to a parent, the intra-entity profit is removed from the subsidiary’s net income for consolidation and reduces the income allocation to the noncontrolling interest. Is the profit permanently eliminated from the noncontrolling interest, or is it merely shifted from one period to the next? Explain.arrow_forward
- Consolidated Net Income is equal to: Multiple Choice the sum of the net incomes of both the parent and its subsidiaries less any inter-company dividends. the parent's net income excluding any income arising from its investment in the Subsidiary, plus the net income of the subsidiary less the amortization of the acquisition differential and the impairment of goodwill. the parent's net income excluding any income arising from its investment in the subsidiary. the sum of the net incomes of both the parent and its subsidiaries.arrow_forwardWhat does empirical evidence suggest about the distribution of gains from mergers? Shareholders of the acquired firm gain the most. Shareholders of the acquiring firm gain the most. Neither group of shareholders is likely to gain. Both groups of shareholders gain equally.arrow_forwardWhat is one of the primary objectives of accounting for business amalgamations? A) To recognize the fair value of the acquired assets and liabilities. B) To minimize tax liabilities for the acquiring company. C) To maintain separate accounting records for the acquiring and acquired entities. D) To increase shareholder dividends in the acquiring company.arrow_forward
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