Concept explainers
Introduction: Multilevel ownership and control are where a corporate has multiple corporate levels using which they carry out diversified operations, i.e. a company may have a number of subsidiaries one of which is a retailer. When consolidated statements are prepared, for companies where parents have indirect investment along with direct ownership, the consolidation process will be complex because of additional ownership levels. All the intercompany transactions must be eliminated, at each level of ownership.
To explain: The reason why it is generally best to prepare consolidated financial statements by completing the consolidation entries for companies furthest from parent company ownership first and completing consolidation entries for those owned directly by parent when multilevel affiliations exist.
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Chapter 9 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
- Which of the following statements is not correct in relation to consolidation accounting key terms? Select one alternative: Consolidated financial statements are financial statements of a group of entities presented as if that group was acting as a single economic entity. A parent is an entity that has more than one subsidiary. A subsidiary is an entity that is controlled by another entity. A group comprises a parent and all of its subsidiaries.arrow_forwardDemonstrate the consolidation process when a corporate ownership structure is characterized by mutual ownership.arrow_forwardA "group" for consolidation purposes is Group of answer choices An entity, including an unincorporated entity such as partnership, that is controlled by another entity. An entity that obtains control over entities or businesses. An entity that has one or more subsidiaries. A parent and all of the subsidiaries.arrow_forward
- Demonstrate the consolidation procedures to eliminate intra-entity sales and purchases balances.arrow_forwardWhy do we need to pass the consolidation elimination entry everytime we prepare a consolidated financial statement?arrow_forwardExplain the impact that a net operating loss of an acquired affiliate has on consolidated figures.arrow_forward
- An entity shall determine whether a transaction or other event is a business combination by applying the definition in PFRS 3, which requires that: a. All of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination. b. All of the combining entities transfer their net assets, or the owners of those entities transfer their equity interests, to a newly formed entity. c. The assets acquired and the liabilities assumed constitute a business. d. All of the above.arrow_forwardBring out the difference between two methods of Accounting for Amalgamation.arrow_forwardIn an asset acquisition: a. A consolidation must be prepared whenever financial statements are issued. b. The acquiring company deals only with existing shareholders, not the company itself. c. The assets and liabilities are recorded by the acquiring company at their book values. d. Statements for the single combined entity are produced automatically and no consolidation process is needed.arrow_forward
- Define each of the following terms:d. Operating merger; financial mergerarrow_forwardDetermine the total assets of Parent Company immediately after the merger.arrow_forwardAnswer these questions about consolidation accounting:1. Define parent company. Define subsidiary company.2. How do consolidated financial statements differ from the financial statements of a singlecompany?3. Which company’s name appears on the consolidated financial statements? How much ofthe subsidiary’s shares must the parent own before using consolidated statements?arrow_forward
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage LearningEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
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