Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 6, Problem 4P
To determine
Identify the appropriate answer for the given statement from the given choices.
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Which of the following statements is TRUE?
O The acquirer shall measure the identifiable assets acquired and the liabilities
assumed at their acquisition-date fair value.
O According to IFRS #3: Revised, cost directly attributable in effecting the
business combination (e.g., finders' fee and other direct cost) must be charged
to share premium.
Transaction costs directly related to the issue of debt instruments are
deducted from the fair value of the debt on initial recognition and are
amortized over the life of the debt as part of the effective interest rate.
Directly attributable transaction costs incurred issuing equity instruments are
deducted from revenue.
In net asset acquisition, gain on bargain purchase is recognized in the Profit or
Loss of the acquirer (after reassessment) if the consideration transferred is
more than the fair value of net assets acquired.
17. When a debt investment at FVOCI is reclassified to FVPL, an entity willa. Remeasure the investment to the original cost and eliminate the cumulative unrealized gain or loss in OCI.b. Transfer the cumulative unrealized gain or loss to retained earningsc. The cumulative gain or loss previously recognized in OCI is reclassified to profit or loss.d. The effective rate at the date of reclassification shall be the basis for interest income to be recognized in subsequent periods.
The 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.
Chapter 6 Solutions
Advanced Accounting
Ch. 6 - Prob. 1QCh. 6 - Prob. 2QCh. 6 - When is a firm required to consolidate the...Ch. 6 - Prob. 4QCh. 6 - Prob. 5QCh. 6 - Prob. 6QCh. 6 - Prob. 7QCh. 6 - Prob. 8QCh. 6 - Prob. 9QCh. 6 - Prob. 10Q
Ch. 6 - Prob. 11QCh. 6 - How do noncontrolling interest balances affect the...Ch. 6 - Prob. 13QCh. 6 - Prob. 14QCh. 6 - Prob. 15QCh. 6 - Prob. 16QCh. 6 - Prob. 17QCh. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Prob. 3PCh. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Problems 7 and 8 are based on the following...Ch. 6 - Prob. 8PCh. 6 - Bens man Corporation is computing EPS. One of its...Ch. 6 - Prob. 10PCh. 6 - Prob. 11PCh. 6 - Prob. 12PCh. 6 - Prob. 13PCh. 6 - Prob. 14PCh. 6 - Prob. 18PCh. 6 - Prob. 19PCh. 6 - Prob. 37PCh. 6 - Prob. 38PCh. 6 - Prob. 39PCh. 6 - Prob. 40PCh. 6 - Prob. 41PCh. 6 - Prob. 42P
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- Which of the following statements is TRUE? a. The acquirer shall measure the identifiable assets acquired and the liabilities assumed at their acquisition-date fair value. b. Transaction costs directly related to the issue of debt instruments are deducted from the fair value of the debt on initial recognition and are amortized over the life of the debt as part of the effective interest rate. Directly attributable transaction costs incurred issuing equity instruments are deducted from revenue. c. In net asset acquisition, gain on bargain purchase is recognized in the Profit or Loss of the acquirer (after reassessment) if the consideration transferred is more than the fair value of net assets acquired. d. According to IFRS #3: Revised, cost directly attributable in effecting the business combination (e.g., finders’ fee and other direct cost) must be charged to share premium.arrow_forwardTrue 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_forward1. When preparing the consolidated financial statements, which of the followingshould be deducted from the group reserves?a) Share in associate profit b) Value of the loan from subsidiary to associate c) Group’s share of sub-subsidiary’s profit d) Value of goodwill impairment expensearrow_forward
- If a company invests in the debt instrument of another entity, any premium or discount is: Select one: a. included in other comprehensive income and amortized over the life of the instrument. b. included in the carrying value of the instrument and not amortized. c. amortized as part of interest income over the life of the instrument. d. immediately expensed to income.arrow_forwardP Ltd bought 80% of S Ltd’s equity shares on 1 January 2016. On the date of the purchase of S Ltd's shares, among other things, S Ltd's statement of financial position contains the following: $ Retained profit 72,000 Tangible non-current assets Cost 288,000 Fair value 360,000 On the date of acquisition (of S Ltd's shares) by P Ltd, S Ltd's assets were not revalued to fair value. It is part of S Ltd's accounting policy to depreciate non-current assets on a straight-line basis for 10 years. The income statements of P Ltd and S Ltd for the year ended 31 December 2020 are as follows: P Ltd S Ltd $ $ Revenue 240,000 168,000 Cost of sales 144,000 24,000 Gross profit 96,000 144,000 Expenses 12,000 14,400 Depreciation and amortization Operating profit 24,000 28,800 60,000 100,800 9,600 50,400 Income tax 2,400 Net profit 98,400 Reserves (brought forward) Reserves (carried forward) 240,000 168,000 290,400 266,400 Note: P Ltd and S Ltd are considered to be in the same group for the purpose of…arrow_forwardS1: The acquisition-related costs in a business combination to be expensedimmediately include cost of issuing debt securities. S2: In a business combination any “gain on bargain purchase” shall be recognized in other comprehensive income. A. Only S1 is correct.B. Only S2 is correct.C. Both statements are incorrect.D. Both statements are correct.arrow_forward
- 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 yeararrow_forwardWhich of the following is incorrect regarding measurement period? a. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. b. During the measurement period, the acquirer shall also recognise additional assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have resulted in the recognition of those assets and liabilities as of that date. c. The measurement period ends as soon as the acquirer receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. d. During the measurement period, the acquirer shall prospectively adjust the provisional amounts recognised at the acquisition date…arrow_forwardYou are required to prepare the consolidated statement of financial position as at 31 December x7. Assume: i. Non-controlling interest is measured based on the net assets of the investee on the acquisition date. il. Non-controlling interest is measured based on its fair value.arrow_forward
- How is the amount assigned to the non-controlling interest normally determined when a consolidated balance sheet is prepared immediately after a business combination?arrow_forwardFor cash-settled share based payment transactions, until the liability is settled, the entity is required to re-measure the fair value of the liability at each reporting date and at the date of settlement and any changes in fair values are: a. Not recognized b. Included in earnings c. Included in accumulated profits d. Treated as a component of equityarrow_forwarda) The amount of the adjustment to the non-controlling interest in consolidated net assets is equal to the non-controlling interest’s percentage of the A. Realized intercompany gain at the end of the period. B. Unrealized intercompany gain at the beginning of the period C. Realized intercompany gain at the beginning of the period D. Unrealized intercompany gain at the end of the period b) In years subsequent to the upstream intercompany sale of non-depreciable assets, the necessary consolidated workpaper entry is debit to the A. Non-controlling interest and retained earnings (parent) accounts, and credit to the non-depreciable asset B. No entries are necessary C. Non-depreciable asset and credit to non-controlling interest and Investment in Subsidiary account. D. Retained Earnings (parent) account and credit to non-depreciable asset.arrow_forward
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