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SWFT Corp Partner Estates Trusts

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter8: Consolidated Tax Returns

Section: Chapter Questions

Problem 16DQ

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In which circumstance does partial recognition of
intercompany profit occur? {financial accounting}
a) When parent owns 100% of subsidiary
b) When subsidiary sells to parent
c) When parent sells to partially-owned subsidiary
d) When both companies are wholly owned

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In the separate financial statement of the parent company, which of the following statements concerning the different accounting treatment for investment in subsidiary is correct? a. Under equity method, cash or property dividend received shall be recognized as dividend income by the parent. b. Under cost method, the transaction cost directly attributable to acquisition of the investment shall be expensed as incurred. c. Under fair value model, the parent company shall recognize share in net income from the subsidiary. d. Regardless of the method, the investment in subsidiary account shall be presented as noncurrent asset in the parent’s separate statement of financial position.
How is the non-controlling interest (NCI) in the subsidiary’s profit or loss presented in the consolidated statement of profit or loss? a. Any of these as a matter of accounting policy choice. b. The consolidated profit or loss pertains to the parent only, the NCI in profit is presented separately. c. Not presented but disclosed either as a footnote or in the notes. The consolidated profit or loss pertains to the parent only. d. As part of the group’s profit or loss. The group’s profit or loss is then attributed to both the owners of the parent and NCI.
When a subsidiary liquidates into the parent corporation, the subsidiary recognizes both gains and losses on distributions to a minority shareholder. Question 11 options: TrueFalse
TRUE OR FALSE: Indicate whether the statements are true or false. 1. Assuming the parent acquired 100 percent of the subsidiary’s stock and there are no purchase differentials, the investment income recorded by the parent in the current period will equal the subsidiary’s current net income recognized subsequent to the acquisition date. 2.
In the equity method of acquisition income is recognized only when the subsidiary declares dividends Select one: True False
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?
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.
Which of the following is true regarding consolidation of net income?A. Parent net income is decreased by the dividend income recognized due to declared bysubsidiary at full amount even if less than 100% ownership is acquired.B. Amortization of excess must be done to adjust net income of parent to arrive at parent netincome own operation.C. Adjusted net income of subsidiary is shared by Parent’s holding interest andnoncontrolling interest.D. Dividend declared by subsidiary is shared by Parent’s holding interest and noncontrollinginterest.
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 adjusting entries for unrealised profit arisen from trading of goods betweenparent and wholly owned subsidiary. give the journal : If the seller is parent If the seller is subsidiary
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.
Statement 1: In the separate Financial Statement of Parent Company, they recognized or account investment in subsidiary. Statement 2: If the parent company 100% acquired subsidiary company there will be no non - controlling interest and entity as well as the parent approach will be equal. a.True, True b.False, False c.False, True d.True, False

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