business combinations / revenue recognition Flashcards
where are these recorded in the financial statements:
- goodwill
- bargain purchase gain
consolidated BS only
consolidated + parent’s IS
what account is credited if a sub sells:
- no inventory
- all inventory
- sub inventory
ending inventory
cogs
both (in proportion)
what amount needs to be eliminated in an intercompany inventory transaction?
intercompany profit
where is goodwill recorded?
- parent’s balance sheet
- consolidation balance sheet
- both
consolidation balance sheet
when does the SEC require consolidated financial statements?
when 2 separate entities are controlled by the same management
describe a legal merger:
A+B = A. there is only one company left. A eats up B’s assets and liabilities
describe a legal consolidation:
A+B+C. there is only one company left. C eats up A and B’s assets and liabilities
describe a legal acquisition:
A+B = A+B. there are 2 separate entities. both maintain separate assets and liabilities. must consolidate when reporting to the SEC.
what are the 2 journal entries when eliminating intercompany fixed assets and depreciation?
eliminate intercompany gain
restore fixed asset to historical cost
eliminate sub’s overstated depreciation expense
what kind of arrangement is a contract when repurchase price > original selling price
financing
what type of account is allowance for returns and allowances?
contra asset
what type of account is sales returns and allowances?
contra revenue
what kind of arrangement is a contract when repurchase price < original selling price?
lease
revenue from gift cards =
gift cards redeemed + forfeited
unearned franchise fee =
cash paid + PV of future payments
