Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 2, Problem 39APB
To determine
Identify the appropriate answer for the given statement from the given choices.
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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.
4. What method normally is used to account for the ownership of a subsidiary on the parent’s financial records?
a Cost model/methodb. Equity methodc. Consolidationd. Either cost model/method or equity method
If the entity is using the equity method to account for investment in subsidiary, the entry to recognize dividends received from the subsidiary will:
a.Be recognized in profit or loss
b.Increase the carrying amount of investment
c.Decrease the carrying amount of investment
d.Be recognized in other comprehensive income
Chapter 2 Solutions
Advanced Accounting
Ch. 2 - Prob. 1QCh. 2 - Describe the concept of a synergy. What are some...Ch. 2 - Prob. 3QCh. 2 - What does the term consolidated financial...Ch. 2 - Within the consolidation process, what is the...Ch. 2 - Prob. 6QCh. 2 - Prob. 7QCh. 2 - Prob. 8QCh. 2 - Prob. 9QCh. 2 - Prob. 10Q
Ch. 2 - Prob. 11QCh. 2 - Prob. 12QCh. 2 - Which of the following does not represent a...Ch. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - Prob. 6PCh. 2 - Prob. 7PCh. 2 - When does gain recognition accompany a business...Ch. 2 - Prob. 9PCh. 2 - Prob. 10PCh. 2 - Prob. 11PCh. 2 - On June 1, Cline Co. paid 800,000 cash for all of...Ch. 2 - On May 1, Donovan Company reported the following...Ch. 2 - Prob. 14PCh. 2 - Prob. 15PCh. 2 - Prob. 16PCh. 2 - Prob. 17PCh. 2 - On its acquisition-date consolidated balance...Ch. 2 - On its acquisition-date consolidated balance...Ch. 2 - Prob. 20PCh. 2 - Prob. 21PCh. 2 - Prob. 22PCh. 2 - The following book and fair values were available...Ch. 2 - Prob. 24PCh. 2 - Prob. 25PCh. 2 - Prob. 26PCh. 2 - Prob. 27PCh. 2 - Prob. 28PCh. 2 - SafeData Corporation has the following account...Ch. 2 - Prob. 34PCh. 2 - Prob. 35PCh. 2 - Prob. 39APBCh. 2 - Prob. 40APB
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- Which consolidation method should be used in preparing consolidated financial statements in accordance with IFRS? A. Proportionate consolidation method.B. Either identifiable net assets or fair value enterprise method.C. New entity method.D. Parent company method.arrow_forwardUnder the equity method of accounting for the operating results of a subsidiary, the dividends declared by the subsidiary to the parent company are accounted for by the parent company as A. Dividend revenue on the declaration date. B. A reduction of the Investment in Subsidiary account on the payment date. C. Dividend revenue on the payment date. D. A reduction of the Investment in Subsidiary account on the declaration date.arrow_forwardHow 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.arrow_forward
- 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.arrow_forwardIn 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.arrow_forwardThe 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.arrow_forward
- Which of the following regarding the preparation of Consolidated Financial Statement iscorrect?A. Once the parent company prepares Consolidated Financial Statements, it no longerneeds to prepare financial statements for its own activities.B. Only the subsidiaries are required to prepare Financial Statements.C. Consolidated Financial Statements are required by the Parent Company for reportingpurposes only; each company must continue to prepare its own FinancialStatements.D. Consolidated Financial Statements are required only when both companies arepublicly traded.arrow_forwardIn a business combination resulting in a parent company-subsidiary relationship, the parent company's Investment in Subsidiary Common Stock ledger account balance is: a. Eliminated with a working paper elimination for the working paper for consolidated balance sheet b. Allocated to individual asset and liability ledger accounts in a parent company journal entry c. Used as a basis for adjusting the subsidiary's asset and liability account balances in the subsidiary's ledger to current fair values Select one :- d. Displayed among noncurrent assets in the consolidated balance sheetarrow_forwardA) 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 salearrow_forward
- 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.arrow_forwardWhich of the following accounting treatments for costs related to business combination is incorrect? Group of answer choices The costs related to issuance of financial liability at fair value through profit or loss shall be recognized as expense while those related to issuance of financial liability at amortized cost shall be recognized as deduction from the book value of financial liability or treated as discount on financial liability to be amortized using effective interest method. The costs related to issuance of stock or equity securities shall be deducted/debited from any share premium from the issue and any excess is charged to “share issuance cost” reported as contract-equity account against either (1) share premium from other share issuances or (2) retained earnings Acquisition related costs such as finder’s fees; advisory, legal, accounting, valuation and other professional and consulting fees; and general administrative costs, including the costs of maintain an…arrow_forwardConsolidated net income for a parent company and its partially owned subsidiary is best defined as the parent company’sA. Recorded net income plus the subsidiary’s recorded net income after adjustment from any amortization of excess amount from book value compared to fair value.B. Recorded net incomeC. Income from independent operations plus subsidiary’s income resulting from transactions with outside parties after adjustment from any amortization of excess amount from book value compared to fair value.D. Recorded net income plus the subsidiary’s recorded net incomearrow_forward
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