Ch04: Post-Acquisition, CERO

Question 1

C - Current

Answer 1

Eliminate current year (complete) equity method entries.

1. you need equity in net income (ENI), and other relevant equity lines and dividends from the BS.
2. debit the equity lines; credit the dividends.
3. credit investment in the seller = (sum of debited equity accounts) - (sum of credited dividends)

Question 2

E - Equity

Answer 2

Eliminate the subsidiary’s beginning of the year BV equity accounts.

1. you need the BV equity accounts introduced in the question.
2. debit the positive equity balances; credit the negative equity balances.
3. credit investment in the seller = (sum of the debited BV equity accounts) - (sum of credited BV equity accounts)

Question 3

R - Revalue

Answer 3

Recognize the beginning of the current-period revaluations.

1. You need Goodwill and the asset and liability differences between FV and BV.
2. debit Goodwill, and the positive differences; credit the negative differences.
3. credit investment in the seller = (sum of the debited BV equity accounts) - (sum of credited BV equity accounts)

Question 4

O - Write-Offs, Adjustments

Answer 4

Recognize current-year revaluation adjustments.

1. You need an OpEx line first and the current-year adjusted assets and liabilities (from the ENI calculation).
2. Credit positive (debited adjustments); debit (credited) adjustments from the ENI calculation.
3. Credit Opex line at the top (may need to revise this)