Chapter 6, Problem 6UTI

a.

To determine

Business combination:

Business combination refers to the combining of one or more business organizations in a single entity. The business combination leads to the formation of combined financial statements. After business combination, the entities having separate control merges into one having a control over all the assets and liabilities. Merging and acquisition are types of business combinations.

Consolidated financial statements:

The consolidated financial statements refer to the combined financial statements of the entities which are prepared at the year-end. The consolidated financial statements are prepared when one organization is either acquired by the other entity or two organizations merge to form the new entity. The consolidated financial statements serve the purpose of both the entities about financial information.

Consolidated net income:

Consolidated net income is the combined income of the parent company and the subsidiary company after eliminating the intra-entity transactions and the unrealized gains.

The consolidated net income and the distribution of the net income to controlling and non-controlling interests, when the consolidated firm files the consolidated tax return.

b.

To determine

Consolidated net income:

Consolidated net income is the combined income of the parent company and the subsidiary company after eliminating the intra-entity transactions and the unrealized gains.

The consolidated net income and the distribution of the net income to controlling and non-controlling interests, when the consolidated firm files the separate tax return.