Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 4, Problem 1P
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.
Which of the following pertaining to Consolidated Financial Statements is correct?A. The preparation of Consolidated Financial Statements means that the companiesinvolved cease to operate as separate legal entities.B. The preparation of Consolidated Financial Statements is at the Parent Company'sdiscretion.C. When one company has control over another, Consolidated Financial Statementsmust be prepared for the combined entity.D. Before preparing Consolidated Financial Statements, a subsidiary's FinancialStatements prior to the date of acquisition must be restated.
The following independent statements may be true or false. Discuss the circumstances whereby
the statement is true and the circumstances whereby it is false.
(a) Goodwill on consolidation in the Consolidated Statement of Financial Position is the
difference between consideration paid by the Parent and the Parent's share of fair value of
identifiable net assets of a partially-owned Subsidiary.
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- Non-controlling interest in consolidated income is never affected by: a. Sale of Parent to unaffiliated company b. Non-controlling interest is affected by all sales c. Downstream sales d. Upstream Salesarrow_forwardAccording to AASb 10/IFRS 10, an investment in a subsidiary is not consolidated and must be measured at fair value through profit or loss if: a. all of the above b. the parent elects to treat the investment in the subsidiary as a short-term investment c. the main purpose of the subsidiary is to provide services that relate to the investment activities of an investment entity. d. the parent determines that it is an investment entity.arrow_forwardIf a parent company has controlling interest in a subsidiary which has no potentially dilutive securities outstanding, then in the calculation of consolidated diluted EPS, it will be necessary to Select one: a. only make an adjustment of subsidiary's basic earnings. b. replace the parent's equity in subsidiary earnings with the parent's equity in subsidiary's diluted EPS. c. make a replacement calculation in the parent's basic earnings for the EPS. d. only use the parent's common shares and shares represented by the parent's potentially dilutive securities.arrow_forward
- True or False Pls indicate if the statements are true or false. 1. The worksheet eliminations prepared subsequent to acquisition remove the allocated excess/purchase differential amortizations from the consolidated financial statements. 2. Allocated excess/purchase differential amortizations result in the Investment Income account disclosing the income that would have been allocated to the parent had the subsidiary’s financial records disclosed the market value of its assets and liabilities. 3.arrow_forwardHow shall an acquirer in a business combination account for the changes in fair value contingent consideration classified as equity instrument if the changes result from events after the acquisition date? a. The changes in fair value of contingent consideration classified as equity shall be recognized as gain or loss in profit or loss because they are not measurement period adjustments. b. Contingent consideration classified as equity shall not be re-measured and its subsequent settlement shall be accounted for within equity. c. The changes in fair value of contingent consideration classified as equity shell be retrospectively restated to beginning retained earnings because they are prior period error. d. The change in fair value of contingent consideration classified as equity shall be retroactively adjusted to goodwill/gain on bargain purchase because they are measurement period adjustments.arrow_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 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_forwardAnswer with true or false. No need explanation. 1. Indirect cost incurred by the entity in business combination is recognized as expense. 2. PFRS 10 defines control as the power to govern the financial and operating policies as to obtain benefits from its activities. 3. An investor has no power over the investee even if the investor holds the majority of the voting rights if those rights are not substantive. 4. A subsidiary should be excluded from the consolidated statements if the subsidiary operates under governmentally impose uncertainty.arrow_forwardGeneral 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 consolidationarrow_forward
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