#12

Question 1

NCI under IFRS

Answer 1

FV of subsidiary net asset * NCI%

Question 2

How should the acquirer recognize a bargain purchase in a business acquisition?

Answer 2

As a gain in earning at acquisition date. Assets and liabilities in a business combination must be valued at fair value. Bargain purchase means the fair value is more than the what’s been given, so the purchaser records it as gain.

Question 3

Acquisition costs associated with a business transaction must be

Answer 3

expensed as incurred in current period

Question 4

A is a wholly owned subsidiary of B. A purchase stock of B, after which B declares dividend. Should B report this transaction in its consolidated income statement

Answer 4

As the rule of economic entity states, you cannot make money selling stock to yourself. So the purchase of stock of a member of the consolidated group by another member of the group is treated as treasury stock transaction

Question 5

How to figure out amount of intercompany sale between a company and its subsidiary

Answer 5

revenue of company + revenue of subsidiary - consolidated revenue

Question 6

Intercompany revenue = carrying amount of the inventory that subsidiary purchased from parent or vice versa

Answer 6

Yoyoyo

Question 7

All intercompany billings are eliminated in consolidation

Answer 7

Got it

Question 8

Combined statements are used for companies

1) under common management or
2) commonly controlled companies or
3) unconsolidated subsidiaries

Answer 8

got it

Question 9

How are Intercompany transactions and balances reported in combined financial statements?

Answer 9

Intercompany transactions and balances are eliminated in combined financial statement, just like consolidated financial statements. So intercompany loans and intercompany profits are eliminated.

Question 10

When is income statement affected by trading securities and available-for-sale securities?

Answer 10

Income statement is affected by all trading securities gains and losses. For available-for-sale securities, only when the unrealized loss is permanent.

Question 11

Is there valuation for unrealized gains and losses for trading securities?

Answer 11

Yes, in income statement

Question 12

Transfer securities from trading to available-for-sale, will there be unrealized gains and losses?

Answer 12

NO.Unrealized gains and losses for trading securities are recognized in earning in the period incurred, so there is no adjustment needed.

Question 13

How to calculate unrealized intercompany profit?

Answer 13

ending inventory of buyer * seller’s gross profit %

Question 14

Factoring receivables without recourse is:

Answer 14

a sale transaction that transfer the risk of uncollectible accounts to the buyer.

Question 15

Is direct write-off of collectible account expense consistent with acccrual accounting?

Answer 15

NO. Direct write-off does NOT mat expense with revenue, so it is not.

Question 16

How does uncollectible account written off affect the uncollectible account expense?

Answer 16

Uncollectible account written off DECREASE the uncollectible account expense

Question 17

When company A owns 60% of company B, what happens when A buys the remaining 40% of B?

Answer 17

Purchasing from the noncontrolling interest shareholders, it is an equity transaction. No gain or loss is recognized on the income statement.

Question 18

Acquired (purchased) goodwill is not amortized

Answer 18

It is subject to the impairment test

Question 19

Difference between gross method and net method for purchase discount?

Answer 19

Gross method: discount not applied in calculation, so if utilized, needs to be applied.
Net method: discount applied in calculation, so if not utilized, need to be subtracted from it.

Question 20

2/15, net 30

Answer 20

2% discount if paid within 15 days, otherwise full amount due in 30 days.