In an acquisition where control is achieved and the fair value of the consideration transferred is less the fair value of the net assets of the acquired entity, Assuming both entities continue to operate separately, the investment account will be: Select one: O a. Debited by the fair value of the net assets of the acquired entity on acquisition date O b. Debited by the fair value of the consideration transferred minus the stock issuance costs O c. Debited by the fair value of the consideration transferred on acquisition date O d. Debited by the book value of net assets of the acquired entity on acquisition date

In an acquisition where control is achieved and the fair value of the consideration transferred is less the fair value of the net assets of the acquired entity, Assuming both entities continue to operate separately, the investment account will be: Select one: O a. Debited by the fair value of the net assets of the acquired entity on acquisition date O b. Debited by the fair value of the consideration transferred minus the stock issuance costs O c. Debited by the fair value of the consideration transferred on acquisition date O d. Debited by the book value of net assets of the acquired entity on acquisition date

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The consolidated balance of fixed assets will be affected by working paper entries involving all of the following, except: A. Excess of fixed asset FV over BV of the parent at the date of acquisition B. Amortization of the excess of fixed asset FV over BV of the subsidiary at the date of acquisition C. Realized gain or loss on intercompany sale of fixed asset D. Unrealized gain or loss on intercompany sale of fixed asset
25. A parent company’s investment account would include an element which is representative of : Multiple Choice the unrecorded difference between fair value and book value of the investee’s assets. the unrecorded book value of the investor’s assets. the goodwill accrued since the purchase of the investee. the recorded current value of the investee’s assets.
Fair value as a method of asset measurement is defined as: Multiple Choice O O the cost of an asset adjusted for the depreciation or amortization accumulated over its lifetime. price that would be received to sell assets in an orderly transaction between market participants on a given date. the net amount of cash into which an asset could be converted in the ordinary course of business. the value of what is given in exchange for the asset at its initial acquisition.
Statement 1: Acquisition of premiums increases the total asset account of the entity. Statement 2: Premiums are classified as current asset instead of a current liability. Only the first statement is correct. Neither of the statement is correct. Only the second statement is correct. Both statements are correct.
Under which type of investment classification is directly attributable cost of acquisition is not included in the initial measurement basis? financial assets at fair value through profit or loss financial assets at fair value through other comprehensive income financial assets at amortized cost O investment in associate
Reporting an investment at its fair value means adjusting its carrying amount for changes in fair value afterits acquisition (or since the last reporting date if it was held at that time). Such changes are called unrealizedholding gains and losses because they haven’t yet been realized through the sale of the security. If the security isclassified as available-for-sale, how are unrealized holding gains and losses typically reported?
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.
Explain the adjustments made in the equity method when the fair value of the net assets underlying an investment exceeds their book value at acquisition.
How is an available-for-sale investment recorded on the financial statements? At fair market value on the balance sheet As an expense on the income statement At cost plus any acquisition costs on the balance sheet