EBK ADVANCED FINANCIAL ACCOUNTING
12th Edition
ISBN: 9781260165104
Author: Christensen
Publisher: YUZU
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Chapter 9, Problem 9.16Q
To determine
Introduction: Multilevel ownership and control are where a corporate has multiple corporate levels using which they carry out diversified operations, i.e. a company may have a number of subsidiaries one of which is a retailer. When consolidated statements are prepared, for companies where parents have indirect investment along with direct ownership, the consolidation process will be complex because of additional ownership levels. All the intercompany transactions must be eliminated, at each level of ownership.
To explain: The reason why it is generally best to prepare consolidated financial statements by completing the consolidation entries for companies furthest from parent company ownership first and completing consolidation entries for those owned directly by parent when multilevel affiliations exist.
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Consolidation financial statements are prepared when a parent-subsidiary relationship exists in recognition of the accounting principle concept of:
a. Reliability
b. Entity
c. Materiality
d. Going Concern
When we are preparing consolidated financial statements, will the financial statements of the parent entity, or the subsidiary companies, as at the beginning of the financial period reflect prior consolidation adjustments? Why?
Demonstrate the consolidation process when a corporate ownership structure is characterized by a connecting affiliation.
Chapter 9 Solutions
EBK ADVANCED FINANCIAL ACCOUNTING
Ch. 9 - Prob. 9.1QCh. 9 - Prob. 9.2QCh. 9 - Prob. 9.3QCh. 9 - Prob. 9.4QCh. 9 - Prob. 9.5QCh. 9 - Prob. 9.6QCh. 9 - Prob. 9.7QCh. 9 - Prob. 9.8QCh. 9 - Prob. 9.9QCh. 9 - Prob. 9.10Q
Ch. 9 - Prob. 9.11QCh. 9 - Prob. 9.12QCh. 9 - Prob. 9.13QCh. 9 - Prob. 9.14QCh. 9 - Prob. 9.15QCh. 9 - Prob. 9.16QCh. 9 - Prob. 9.1CCh. 9 - Prob. 9.2CCh. 9 - Prob. 9.3CCh. 9 - Prob. 9.4CCh. 9 - Prob. 9.5CCh. 9 - Prob. 9.1.1ECh. 9 - Prob. 9.1.2ECh. 9 - Prob. 9.1.3ECh. 9 - Prob. 9.1.4ECh. 9 - Prob. 9.2.1ECh. 9 - Prob. 9.2.2ECh. 9 - Prob. 9.2.3ECh. 9 - Prob. 9.2.4ECh. 9 - Prob. 9.2.5ECh. 9 - Prob. 9.3ECh. 9 - Prob. 9.4ECh. 9 - Prob. 9.5ECh. 9 - Prob. 9.6ECh. 9 - Prob. 9.7ECh. 9 - Prob. 9.8ECh. 9 - Prob. 9.9ECh. 9 - Prob. 9.10ECh. 9 - Prob. 9.11ECh. 9 - Subsidiary Stock Dividend Stake Company reported...Ch. 9 - Prob. 9.13ECh. 9 - Prob. 9.14ECh. 9 - Prob. 9.15ECh. 9 - Prob. 9.16ECh. 9 - Prob. 9.17.1PCh. 9 - Prob. 9.17.2PCh. 9 - Prob. 9.17.3PCh. 9 - Prob. 9.17.4PCh. 9 - Prob. 9.17.5PCh. 9 - Prob. 9.18PCh. 9 - Prob. 9.19PCh. 9 - Prob. 9.20PCh. 9 - Prob. 9.21PCh. 9 - Prob. 9.22PCh. 9 - Prob. 9.23PCh. 9 - Prob. 9.24PCh. 9 - Prob. 9.25PCh. 9 - Prob. 9.26PCh. 9 - Prob. 9.27P
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- Demonstrate the consolidation process when a corporate ownership structure is characterized by mutual ownership.arrow_forwardWhich of the following statements is not correct in relation to consolidation accounting key terms? Select one alternative: Consolidated financial statements are financial statements of a group of entities presented as if that group was acting as a single economic entity. A parent is an entity that has more than one subsidiary. A subsidiary is an entity that is controlled by another entity. A group comprises a parent and all of its subsidiaries.arrow_forwardwhat is a good response to this post? Why must the eliminating entries be entered in the consolidation worksheet each time consolidated statements are prepared? Eliminating entries are crucial in the consolidation worksheet because they ensure that any intercompany transactions and balances are removed from the consolidated financial statements. This prevents double counting and provides a clear and accurate representation of the consolidated entity’s financial position. For instance, if a parent company and its subsidiary have intercompany sales, the revenue recorded by the parent and the corresponding expense recorded by the subsidiary must be eliminated to avoid inflating the consolidated revenues and expenses. Without these entries, the financial statements would not reflect the true economic substance of the group as a single entity (Phillips et al., 2021). How might this process under a GAAP basis compare to that under an IFRS basis? Under Generally Accepted Accounting…arrow_forward
- A "group" for consolidation purposes is Group of answer choices An entity, including an unincorporated entity such as partnership, that is controlled by another entity. An entity that obtains control over entities or businesses. An entity that has one or more subsidiaries. A parent and all of the subsidiaries.arrow_forwardExplain the impact that a net operating loss of an acquired affiliate has on consolidated figures.arrow_forwardAn entity shall determine whether a transaction or other event is a business combination by applying the definition in PFRS 3, which requires that: a. All of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination. b. All of the combining entities transfer their net assets, or the owners of those entities transfer their equity interests, to a newly formed entity. c. The assets acquired and the liabilities assumed constitute a business. d. All of the above.arrow_forward
- In an asset acquisition: a. A consolidation must be prepared whenever financial statements are issued. b. The acquiring company deals only with existing shareholders, not the company itself. c. The assets and liabilities are recorded by the acquiring company at their book values. d. Statements for the single combined entity are produced automatically and no consolidation process is needed.arrow_forwardDefine each of the following terms:d. Operating merger; financial mergerarrow_forwardAnswer these questions about consolidation accounting:1. Define parent company. Define subsidiary company.2. How do consolidated financial statements differ from the financial statements of a singlecompany?3. Which company’s name appears on the consolidated financial statements? How much ofthe subsidiary’s shares must the parent own before using consolidated statements?arrow_forward
- A horizontal merger takes place between companies operating:a. At different stages of the production processb. In the same area of businessc. In unrelated lines of businessd. All of the abovee. None of the abovearrow_forwardThe consolidated statement of changes in equity is prepared by consolidating the separate statements of changes in equity of the parent and its subsidiaries. Select one: True Falsearrow_forwardWhich 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.arrow_forward
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