Chapter 1, Problem 1Q

a.

To determine

Mention that the reporting of an equity investment will yield stockholder's equity to the

parent company of the same  that arises from a consolidation, and also state how it is

different.

Explanation of Solution

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock An acquisition is when one company acquires most or all of the shares of another company to gain control over that company. A business is an incorporated set of operations and assets that are able to conduct and maintaining directly to investors or other owners, members or participants in order to provide a yield in the form of dividends, lower costs or other economic advantages. A business combination is defined as a transaction or other event where an acquirer (an investor entity) gains control of one or more companies. Consolidation means combining two or more entities assets, liabilities, and other financial items into one frame. The concept of consolidation in financial accounting often pertains to the consolidation of financial statements in which all subsidiaries report under the one framework of a parent company.

An investment in equity is money which is invested in a company by buying that company's shares in the stock market. Typically, those shares are traded on a stock exchange. When the investor purchased 100% of the investor at book value, the Equity Investment account is equal to the investment firm's Stockholders ' Equity. Hence, it involves the investment company's assets and liabilities in one account. Consequently, the balance sheet of the investor involves the investment company's stockholders ' equity and, implicitly, its assets and liabilities. The balance sheets of the investor and the investment firm are decided to bring together in the consolidation process. Consolidated stockholders ' equity will be the same as that currently reported by the investor; only total assets will change and total liabilities.

b.

To determine

Mention that the reporting of an equity income will represent a consolidation, and also

state how it is different.

Explanation of Solution

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock An acquisition is when one company acquires most or all of the shares of another company to gain control over that company. A business is an incorporated set of operations and assets that are able to conduct and maintaining directly to investors or other owners, members or participants in order to provide a yield in the form of dividends, lower costs or other economic advantages. A business combination is defined as a transaction or other event where an acquirer (an investor entity) gains control of one or more companies. Consolidation means combining two or more entities assets, liabilities, and other financial items into one frame. The concept of consolidation in financial accounting often pertains to the consolidation of financial statements in which all subsidiaries report under the one framework of a parent company.

Equity income is money earned from stock dividends that investors can obtain through buying stocks that have declared dividends, or through buying funds that invest in dividend-paying stocks. If the investor owns 100 percent of the investee, the equity income reported by the investor is equal to the investee's net income, including its revenues and expenses impliedly. Substituting the equity income in the consolidation process with the investment firm's revenues and expenses will yield the same net income.