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 7, Problem 7.6Q
To determine
Concept Introduction:
The intercompany transactions occur when the unit of legal entity is having transactions with another unit of the similar entity. This transaction can be divided into two categories such as direct and indirect intercompany transfer. The direct transfer occurs when there is transfer between the different units of the same entity and indirect transfer occurs when the unit of entity acquires debt or assets issued to unrelated entity through another unit of the same entity. This type of transfer will help the entity in improving the flow of finance and asset in efficient manner.
:
The realization of profit on intercompany sale when profit are not realized by the end of the current period.
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Students have asked these similar questions
a) The amount of the adjustment to the non-controlling interest in consolidated net assets is equal to the non-controlling interest’s percentage of the
A. Realized intercompany gain at the end of the period.
B. Unrealized intercompany gain at the beginning of the period
C. Realized intercompany gain at the beginning of the period
D. Unrealized intercompany gain at the end of the period
b) In years subsequent to the upstream intercompany sale of non-depreciable assets, the necessary consolidated workpaper entry is debit to the
A. Non-controlling interest and retained earnings (parent) accounts, and credit to the non-depreciable asset
B. No entries are necessary
C. Non-depreciable asset and credit to non-controlling interest and Investment in Subsidiary account.
D. Retained Earnings (parent) account and credit to non-depreciable asset.
In a business combination - stock acquisition, difference between current fair values and book values of subsidiary’s identifiable assets and liabilities on acquisition date is:
How should negative goodwill be shown on the consolidated financial statements of the acquirer?
Group of answer choices
As a liability on the statement of financial position
As a loss on the statement of comprehensive income
As a separate amount under shareholders' equity on the statement of financial position
As a gain on the statement of comprehensive income
Chapter 7 Solutions
Advanced Financial Accounting
Ch. 7 - Prob. 7.1QCh. 7 - Prob. 7.2QCh. 7 - Prob. 7.3QCh. 7 - Prob. 7.4QCh. 7 - Prob. 7.5QCh. 7 - Prob. 7.6QCh. 7 - Prob. 7.7QCh. 7 - Prob. 7.8QCh. 7 - Prob. 7.9QCh. 7 - Prob. 7.10Q
Ch. 7 - Prob. 7.11QCh. 7 - Prob. 7.12QCh. 7 - Prob. 7.13QCh. 7 - Prob. 7.14QCh. 7 - Prob. 7.15QCh. 7 - Prob. 7.16QCh. 7 - Prob. 7.17QCh. 7 - Prob. 7.18AQCh. 7 - Prob. 7.1CCh. 7 - Prob. 7.2CCh. 7 - Prob. 7.3CCh. 7 - Prob. 7.4CCh. 7 - Prob. 7.5CCh. 7 - Prob. 7.1.1ECh. 7 - Prob. 7.1.2ECh. 7 - Prob. 7.1.3ECh. 7 - Prob. 7.1.4ECh. 7 - Prob. 7.1.5ECh. 7 - Prob. 7.2.1ECh. 7 - Prob. 7.2.2ECh. 7 - Prob. 7.2.3ECh. 7 - Prob. 7.2.4ECh. 7 - Prob. 7.2.5ECh. 7 - Prob. 7.2.6ECh. 7 - Prob. 7.3ECh. 7 - Prob. 7.4ECh. 7 - Prob. 7.5ECh. 7 - Prob. 7.6ECh. 7 - Prob. 7.7ECh. 7 - Transfer of Depreciable Asset at Year-End Pitcher...Ch. 7 - Prob. 7.9ECh. 7 - Sale of Equipment to Subsidiary in Current Period...Ch. 7 - Prob. 7.11ECh. 7 - Prob. 7.12ECh. 7 - Prob. 7.13ECh. 7 - Prob. 7.14ECh. 7 - Prob. 7.15ECh. 7 - Prob. 7.16ECh. 7 - Prob. 7.17ECh. 7 - Prob. 7.18ECh. 7 - Prob. 7.19ECh. 7 - Prob. 7.20ECh. 7 - Prob. 7.21ECh. 7 - Prob. 7.22ECh. 7 - Prob. 7.23AECh. 7 - Prob. 7.24PCh. 7 - Prob. 7.25PCh. 7 - Prob. 7.26PCh. 7 - Prob. 7.27PCh. 7 - Prob. 7.28.1PCh. 7 - Prob. 7.28.2PCh. 7 - Prob. 7.28.3PCh. 7 - Prob. 7.28.4PCh. 7 - Prob. 7.29PCh. 7 - Prob. 7.30PCh. 7 - Prob. 7.31PCh. 7 - Prob. 7.32PCh. 7 - Prob. 7.33PCh. 7 - Prob. 7.34PCh. 7 - Prob. 7.35PCh. 7 - Prob. 7.37PCh. 7 - Prob. 7.38PCh. 7 - Prob. 7.41AP
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- At acquisition date the net assests of the acquired subsidairy are included in the consolidated financial statement at their acquisition date fair value. However most of the parent assets and liabilities are measured on an historical cost basis . Is this Consistent ? Explain.arrow_forwardHow is the amount assigned to the non-controlling interest normally determined when a consolidated balance sheet is prepared immediately after a business combination?arrow_forwardIn reference to the downstream or upstream sale of depreciable assets, which of the following statements is correct? A. Gains and losses appear in the parent-company accounts in the year of sale and must be eliminated by the parent company determining its investment income under equity method of accounting. B. The initial effect of unrealized gains and losses from downstream sales of depreciable asset is different from the sale of non-depreciable assets. C. Gains, but not losses, appear in the parent-company accounts in the year of sale and must be eliminated by the parent company in determining its investment income under the equity method of accounting. D. Upstream sales from the subsidiary to the parent company always result in unrealized gains or losses.arrow_forward
- Which 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_forwardHow shall an acquirer in a business combination account for the changes in fair value contingent consideration classified as equity instrument if the changes result from events after the acquisition date? a. The changes in fair value of contingent consideration classified as equity shall be recognized as gain or loss in profit or loss because they are not measurement period adjustments. b. Contingent consideration classified as equity shall not be re-measured and its subsequent settlement shall be accounted for within equity. c. The changes in fair value of contingent consideration classified as equity shell be retrospectively restated to beginning retained earnings because they are prior period error. d. The change in fair value of contingent consideration classified as equity shall be retroactively adjusted to goodwill/gain on bargain purchase because they are measurement period adjustments.arrow_forwardHow is the Non-Controlling Interest displayed in a consolidated balance sheet? a. As a separate item in the stockholder’s equity section b. By means of a note to consolidated financial statements c. As a separate item between the liabilities and stockholder’s equity d. As a deduction from goodwill, if any e. Non-controlling interest is never presented in consolidated balance sheet.arrow_forward
- For cash-settled share based payment transactions, until the liability is settled, the entity is required to re-measure the fair value of the liability at each reporting date and at the date of settlement and any changes in fair values are: a. Not recognized b. Included in earnings c. Included in accumulated profits d. Treated as a component of equityarrow_forwardHow is the portion of consolidated earnings to be assigned to the non-controlling interest in consolidated financial statements determined?A. The amount of the subsidiary’s earnings recognized for consolidation purposes is multiplied by the non-controlling interest percentage on the balance sheet date.B. The amount of consolidated earnings on the consolidated work papers is multiplied by the non-controlling interest percentage on the balance sheet date.C. The subsidiary’s net income is extended to the non-controlling interestD. The parent’s net income is subtracted from the subsidiary’s net income to determine the non-controlling interest.arrow_forwardGem Company classifies a portion of its retained earnings as appropriated for loss contingencies. Consequently, the company Group of answer choices A.) May transfer to income a part of said retained earnings so appropriated. B.)Should not identify said appropriation as an appropriation of retained earnings. C.) Should show the said appropriation of retained earnings within the stockholders' equity section of the balance sheet D.)Could charge costs or losses to the said appropriated retained earnings.arrow_forward
- for the following intercompany transaction state the principle to be used in accounting for intercompany gains on current and future consolidated income statements: Gains on the sale of depreciable fixed assetsarrow_forwardWhich of the following is not typical of the journal entries prepared by a parent company to account for its subsidiary’s operations under the cost method of accounting Accrual of the parent company’s share of the subsidiary’s net income or loss A credit to the intercompany dividend income account Deprecation and amortization of differences between current fair values and book values of the subsidiary’s identifiable net assets on the date of the acquisition. None of the foregoing.arrow_forwardA business combination resulting to a goodwill is accounted using acquisition method. In the consolidated balance sheet at the date of acquisition, which of the following statement about retained earnings (RE) is TRUE? A. RE is equal to RE of the acquirer plus unadjusted net income of the acquiree. B. RE is equal to RE of the acquirer only. C. RE is equal to the sum of the RE of the acquirer and acquiree. D. RE is equal to RE of the acquirer plus adjusted income of subsidiary net of minority interest in subsidiary’s net income.arrow_forward
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