Quiz 4

In preparing a consolidated financial position, what shareholder’s equity account balances of subsidiary are eliminated? I. Ordinary Share II.Share Premium III. Retained Earnings Group of answer choices II and III I, II and III I only I and II

A) When preparing consolidated financial statement workpapers, unrealized intercompany gains, as a result of equipment or inventory sales by affiliates, are allocated proportionately by percent of ownership between parent and subsidiary only when selling affiliate is a. The parent, and the subsidiary is less than wholly owned. b. The subsidiary, and the subsidiary are less than wholly owned c. A wholly owned subsidiary d. The parent of a wholly owned subsidiary. B) Gain or loss returning from an intercompany sale of equipment between a parent and a subsidiary is a. Considered to be realized over the remaining useful life of the equipment as an adjustment to depreciation in the consolidation statements. b. Considered to be unrealized in the consolidated statements until the equipment is sold to a third party c. Amortized over a period not less than 2 years and not greater than 40 years. d. Recognized in the consolidated statements in the year of the sale

Do not use negative signs with your answers below. Reconciliation of Cost to Equity Method Parent's pre-consolidation net income 401000 v Dividend Income 81000 v P% x Net income of subsidiary P% x AAP amortization 0 x Net income attributable to controlling interest $ 0 x b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement Sales $ 12200000 v Cost of goods sold 8120000 v Gross profit 4080000 v Operating expenses 0 x Net income Net income attributable to noncontrolling interests 0 x Net income 0 x

S1: Elimination entries for intercompany profit in the consolidation working papers for business combinations are prepared to nullify the effect of intercompany transactions. S2: If a parent company uses the cost method of accounting for a partially owned subsidiary and there are no intercompany profits or losses eliminated for the computation of consolidated net income, consolidated retained earnings attributable to parent is equal to the balance of the parent company's retained earnings plus the balance of the subsidiary's retained earnings. False; FalsE False; True True; False True; True

Describe how, despite the fact they include different accounts, conceptually, the [C] entry under the equity method of pre-consolidation bookkeeping is the same as the [C] entry under the cost method of pre-consolidation bookkeeping.

25 S1: Elimination entries for intercompany profit in the consolidation working papers for business combinations are prepared to nullify the effect of intercompany transactions.S2: If a parent company uses the cost method of accounting for a partially owned subsidiary and there are no intercompany profits or losses eliminated for the computation of consolidated net income, consolidated retained earnings attributable to parent is equal to the balance of the parent company’s retained earnings plus the balance of the subsidiary’s retained earnings.   Group of answer choices False; True False; False True; True True; False

Please answer requirement 1 - 9

Gardner Corp. owns 80% of the voting common stock of Lockhart Co. Lockhart owns 70% of Canning Co. Gardner and Lockhart both use the initial value method to account for their investments. The following information is available from the financial statements and records of the three companies: Separate company net income before investment income Dividend income from investment in subsidiary Deferral of intra-entity gains Amortization expense related to excess fair value over book value of investment Gardner Lockhart Canning Co. Co. $900,000 $650,000 $150,000 Corp. 250,000 120,000 110,000 80,000 20,000 40,000 25,000 Separate company net income includes Intra-entity gains before the consolidating deferral but does not include dividend income from investment in subsidiary. What amount of dividends should Gardner Corp. recognize in its consolidated net income with respect to dividends received from Canning Co.?

Parent subsidiary ancillary parentsubsidiarymultinational

Which most accurately describes what happens to consolidation worksheet entries, assuming there is no push down accounting     Worksheet entries are posted only to the ledgers of the subsidiary as post closing entries     Worksheet entries are posted to the ledgers of the company owning the noncontrolling interest     Worksheet entries are posted to the ledgers of both the parent and subsidiary as post closing entries     Worksheet entries are posted only to the ledgers of the parent as post closing entries     Worksheet entries are not posted to either the books of the parent or the subsidiary

TRUE  OR FALSE 1. Subsequent to the date of acquisition worksheet elimination number 1 will not completely remove the Investment in Subsidiary account from the consolidated balance sheet.  2. The consolidation worksheet will only eliminate all of the Investment in Subsidiary account when the parent owns 100 percent of the subsidiary’s stock.  3.

Question 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.

The absorption of one firm by another such that the acquired firm no longer exists as a separate entity is called a: Question 1Select one: a. acquisition of stock. b. tender offer. c. shared agreement. d. consolidation. e. merger.

K Consolidation accounting *** O A. reports the receivables and payables of the parent company only. OB. eliminates all liabilities. C. combines the accounts of the parent company and those of its subsidiary companies. D. all of the above.

On January 1, Year 5, Pic Company acquired 7,500 ordinary shares of Sic Company for $708,000. On January 1, Year 6, Pic Company acquired an additional 2,000 ordinary shares of Sic Company for $212,000. On January 1, Year 5, the shareholders' equity of Sic was as follows: Ordinary shares (10,000 no par value shares issued) Retained earnings $200,000 303,000 $503,000 The following are the statements of retained earnings for the two companies for Years 5 and 6: Pic Year 5 Year 5 Retained earnings, beginning of year Profit Dividends Retained earnings, end of year $ 506,000 165,000 (100,000) $ 571,000 Year 6 $ 571,000 160,500 (120,000) $ 611,500 $ 303,000 118,500 (90,000) $ 331,500 Sic Year 6 $ 331,500 156,500 (90,000) $ 398,000

Which of the following is NOT included in the cost of an acquired company? (applying section 19 of IFRS for SMEs) a. Contingent consideration determinable at the consummation date of the combination b. Finder’s fee for arranging the combination c. Cost of registering and issuing equity securities d. None of the above

The following must be eliminated in the consolidation process except:   1. Sales between parent and subsidiary 2. Sales between subsidiary and parent 3. Intercompany dividends (under cost method) 4. Sales made to unaffiliated parties

The goal of the consolidation process for A. The assets of the non-controlling interest to be predominantly displayed on the balance sheet. B. Asset acquisitions and 100% stock acquisition to result in the same balance sheet. C. Goodwill to appear on the balance sheet of the consolidated entity D. The investment in the subsidiary to be properly valued on the consolidated balance sheet.

When a parent company uses the equity method to account for investment in a subsidiary, the amortization expense entry recorded during the year is eliminated on a consolidation worksheet as a component of Entry

On January 1, Year 5, Pic Company acquired 7,500 ordinary shares of Sic Company for $726,000. On January 1, Year 6, Pic Company acquired an additional 2,000 ordinary shares of Sic Company for $260,000. On January 1, Year 5, the shareholders' equity of Sic was as follows: Ordinary shares (10,000 no par value shares issued) Retained earnings $200,000 324,000 pok $524,000 Int ences The following are the statements of retained earnings for the two companies for Years 5 and 6: Pic Sic Year 5 Year 6 Year 5 Year 6 Retained earnings, beginning of year $ 548,000 178,000 (100,000) $ 626,000 $ 626,000 159,000 (120,000) $ 665,000 $ 324,000 $ 380,500 159,500 Profit 146,500 (90,000) $ 380,500 Dividends (90,000) $ 450,000 Retained earnings, end of year Additional Information • Pic uses the cost method to account for its investment in Sic. Any acquisition differential is allocated to customer contracts, which are expected to provide future benefits until December 31, Year 7. Neither company has any…

A partially owned subsidiary declared dividend and half remains unpaid by the end of the year, which of the following is CORRECT? A. The total amount of the dividend will be eliminated in the working paper elimination entry by debiting “dividend” account. B. Half of the amount of the dividend will be used to reduce the profit of the parent for consolidation purposes. C. The elimination entry will include a debit to non-controlling interest for the amount of dividend received by the non-controlling shareholders. D. The transaction will increase the balance of NCI at the end.