EBK ADVANCED FINANCIAL ACCOUNTING
12th Edition
ISBN: 9781260165104
Author: Christensen
Publisher: YUZU
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Chapter 4, Problem 4.10.1E
To determine
Concept Introduction:
Equity Method of valuation of investment: In this method parent company value investment on the historical cost of the investment plus apportioned profit in the associate company less dividend paid by the associate company. Difference in the historical value and the amount paid for investment is debited to
To choose:Meaning of goodwill.
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Please answer the following questions relating to unrealized profit in a business combination.
1) Intra entity transfers between the components of business combinations are quite common. Why do these intra company transactions occur frequently?
2) How are unrealized inventory gross profit created, and what are the necessary consolidation entries created to account for these gains?
3) How do intra entity profit present in any year affect the noncontrolling Interest calculation?
Under PFRS 3, when is a gain recognized in consolidating financial information?
Group of answer choices
a.When the amount of a bargain purchase exceeds the value of the applicable liability held by the acquired company.
b.In an acquisition when the value of all assets and liabilities cannot be determined.
c.When any bargain purchased is created
d.In a combination created in the middle of the fiscal year
Which of the following accounting treatments for costs related to business combination is incorrect?
Group of answer choices
a. 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 internal acquisitions department shall be recognized as expense in the Profit/Loss in the periods in which the costs are incurred.
b. 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.
c. The costs related to the organization of the newly formed corporation also known as pre-incorporation costs shall be capitalized as goodwill or deduction from…
Chapter 4 Solutions
EBK ADVANCED FINANCIAL ACCOUNTING
Ch. 4 - When is the carrying value of the investment...Ch. 4 - What is a differential? How is a differential...Ch. 4 - Prob. 4.3QCh. 4 - Prob. 4.4QCh. 4 - Prob. 4.5QCh. 4 - Prob. 4.6QCh. 4 - Prob. 4.7QCh. 4 - Prob. 4.8QCh. 4 - Prob. 4.9QCh. 4 - Prob. 4.10Q
Ch. 4 - Prob. 4.11QCh. 4 - What determines whether the balance assigned to...Ch. 4 - What does the termpushdown accountingmean?Ch. 4 - Under what conditions is push-down accounting...Ch. 4 - Prob. 4.15QCh. 4 - Prob. 4.2CCh. 4 - Prob. 4.3CCh. 4 - Prob. 4.4CCh. 4 - Prob. 4.1ECh. 4 - Prob. 4.2ECh. 4 - Prob. 4.3ECh. 4 - Prob. 4.4ECh. 4 - Prob. 4.5ECh. 4 - Prob. 4.6ECh. 4 - Prob. 4.7ECh. 4 - Prob. 4.8ECh. 4 - Prob. 4.9ECh. 4 - Prob. 4.10.1ECh. 4 - Prob. 4.10.2ECh. 4 - Prob. 4.10.3ECh. 4 - Prob. 4.10.4ECh. 4 - Prob. 4.10.5ECh. 4 - Prob. 4.11.1ECh. 4 - Prob. 4.11.2ECh. 4 - Prob. 4.11.3ECh. 4 - Prob. 4.11.4ECh. 4 - Prob. 4.12ECh. 4 - Prob. 4.13ECh. 4 - Prob. 4.14ECh. 4 - Prob. 4.15ECh. 4 - Prob. 4.16ECh. 4 - Prob. 4.17ECh. 4 - Prob. 4.18.1ECh. 4 - Prob. 4.18.2ECh. 4 - Prob. 4.18.3ECh. 4 - Prob. 4.18.4ECh. 4 - Prob. 4.18.5ECh. 4 - Prob. 4.18.6ECh. 4 - Prob. 4.19ECh. 4 - Prob. 4.20ECh. 4 - Prob. 4.21ECh. 4 - Prob. 4.22ECh. 4 - Prob. 4.23ECh. 4 - Prob. 4.24AECh. 4 - Prob. 4.25PCh. 4 - Prob. 4.26PCh. 4 - Prob. 4.27PCh. 4 - Consolidated Balance Sheet Powder Company spent...Ch. 4 - Prob. 4.29PCh. 4 - Prob. 4.30PCh. 4 - Prob. 4.31PCh. 4 - Prob. 4.32PCh. 4 - Prob. 4.33PCh. 4 - Prob. 4.34PCh. 4 - Prob. 4.35PCh. 4 - Prob. 4.36PCh. 4 - Prob. 4.37AP
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Similar questions
- In a transaction accounted for using the acquisition method where consideration transferred is less than fair value of net assets acquired, which statement is true? Multiple Choice Negative goodwill is recorded. A deferred credit is recorded. A gain on bargain purchase is recorded. Long-term assets of the acquired company are reduced in proportion to their fair values. Any excess is recorded as a deferred credit. Long-term assets and liabilities of the acquired company are reduced in proportion to their fair values. Any excess is recorded as gain.arrow_forwardNeed Answerarrow_forwardA bargain purchase arises when the price paid to acquire a controlling interest in another company is less than the acquirer’s share of the fair value of net assets of the company being acquired. At the end of your preliminary analysis, you believe that a business combination results in a bargain purchase. What is your next step? A. Recognize an immediate gain in the consolidated statement of profit and loss without further analysis. B. Recognize a liability in the consolidated balance sheet. C. Contact the acquiree to confirm its intention. D. Reassess each step of your analysis to confirm your preliminary findings.arrow_forward
- If the asset or disposal group is acquired as part of a business combination, it shall be measured at: A. The lower of “Cost” and “Fair value, less costs to sell’ B. Fair value, less costs to sell C. Cost D. The higher of “Cost” and “Fair value, less costs to sell’arrow_forwardlowing appropr right 1. Goodwill 2. Amount realized 3. Fair market value 4. Adjusted basis 5. Holding period a. The ability of a business to generate income in excess of a normal rate on assets due to superior managerial skills, market position, new product technology, etc. b. The amount at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of the relevant facts. c. It is crucial in determining whether gain or loss from the sale or exchange of a capital asset is long term or short term. d. This amount is the sum of the cash and the fair market value of any property or services received, plus any related debt assumed by the buyer. e. The cost or other basis of property reduced by deprecation (cost recovery) allowed or allowable and increased by capital improvements. Match the following terms in the left column with the appropriate definition from the right column. 1.…arrow_forwardPlease helparrow_forward
- Under PFRS 3, when is a gain recognized in consolidating financial information? a. In a combination created in the middle of the fiscal year b. In an acquisition when the value of all assets and liabilities cannot be determined. c. When any bargain purchased is created d. When the amount of a bargain purchase exceeds the value of the applicable liability held by the acquired company.arrow_forwardcorrect Answer pleasearrow_forwardget the answer please i want it tooarrow_forward
- General Accountingarrow_forwardWhich of the following statements is true regarding the acquisition method of accounting for a business combination? a. Assets of the acquired company are recorded at book values. b. Assets of the acquired company are recorded at fair value, but only if the acquisition cost equals or exceeds fair value of the subsidiary's net assets. c. Assets of the acquired company are recorded at fair values regardless of the acquisition cost. d. Consulting costs related to the combination reduce additional paid-in capital.arrow_forwardMatch the correct term with its definition.A. Cost principlei. if uncertainty in a potential financial estimate, a company should err on the side ofcaution and report the most conservative amount B. Full disclosureprinciple ii. also known as the historical cost principle, states that everything the company ownsor controls (assets) must be recorded at their value at the date of acquisition C. Separateentity concept iii. (also referred to as the matching principle) matches expenses with associatedrevenues in the period in which the revenues were generated D. Monetarymeasurementconcept iv. business must report any business activities that could affect what is reported onthe financial statements E. Conservatismv. system of using a monetary unit by which to value the transaction, such as the USdollar F. Revenuerecognitionprinciple vi. period of time in which you performed the service or gave the customer theproduct is the period in which revenue is recognized G. Expenserecognitionprinciple…arrow_forward
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