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a parent company acquires a less-than-100 percent controlling interest in a subsidiary, what portion of that subsidiary’s financial d

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter14: Intercorporate Investments In Common Stock

Section: Chapter Questions

Problem 11Q

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

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When a parent company acquires a less-than-100 percent controlling interest in a subsidiary, what portion of that subsidiary’s financial data does the parent consolidate?

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When 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?
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.
Which of the following is incorrect regarding consolidated financial statements? a. Consolidation involves adding similar assets, liabilities, income and expenses of the parent and its subsidiaries. b. The subsidiary’s equity is eliminated and replaced with non-controlling interest. c. The consolidated profit pertains only to the parent. d. A parent is exempt from consolidation if it is in itself a subsidiary, its securities are not traded, and its parent produce PFRS (IFRS) consolidated financial statements.
Where are only a proportion of a subsidiary's shares owned by a parent entity? What proportion of the intragroup transactions between the parent entity and the subsidiary will need to be eliminated on consolidation?
In the consolidated statement of comprehensive income to be prepared by the parent corporation, which of the following items will affect both consolidated net income attributable to parent and non-controlling interest in net income? Impairment loss on goodwill recognized when the noncontrolling interest is measured at proportionate share of fair value of net assets of subsidiary. Amortization of difference between fair value and book value of liability of subsidiary. Realization of unrealized gain or (loss) from sale of parent company to subsidiary company. Recognition of gain on bargain purchase arising from business combination.
Which of the following statements about pushdown accountling is correct? Select one: a. Pushdown accounting occurs when a subsidiary incurs the parent company's transaction costs related to the acquisition of the subsidiary. O b. On the date a parent company obtains control of a subsidiary, pushdown accounting will result in a subsidiary's pre-consolidation individual net assets being reported at fair value, consistent with FASB ASC 805. C. When a subsidiary applies pushdown accounting, the parent company's Equity Investment account is pushed down and reported on the subsidiary's balance sheet. d. When a subsidiary applies pushdown accounting, the parent company is no longer required to issue consolidated financial statements.
How is non-controlling interest in the subsidiary’s net assets presented in the consolidated statement of financial position? a. Within equity but separately from the equity of the owners of the parents. b. Within equity as part of retained earnings. c. Any of these as a matter of accounting policy choice. d. As a mezzanine item between liabilities and equity.
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.
Do you think the FASB made the correct decision in requiring consolidated financial statements to recognize all subsidiary's assets and liabilities at fair value regardless of the percentage ownership acquired by the parent?
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?
General questions Under GAAP, a parent company should exclude a subsidiary from consolidation if: It measures income from the subsidiary under the equity method The subsidiary is in a regulated industry The subsidiary is a foreign entity whose books are recorded in a foreign currency The parent does not have control of the subsidiary The FASB’s primary motivation for requiring consolidation of all majority-owned subsidiaries was to: Ensure disclosure of all loss contingencies Prevent the use of off–balance sheet financing Improve comparability of the statements of cash flows Establish criteria for exclusion of finance and insurance subsidiaries from consolidation
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.