Chapter 4: Consolidated Financial Statements on Date of Business Combination

Question 1

Eliminating entries (E)

Answer 1

Eliminate sub’s equity accounts by debiting equity accounts (Common stock, Addl PIC, RE) and crediting Investment in Subsidiary

Question 2

Eliminating entries (R)

Answer 2

Revalue sub’s assets and liabilities from book value to fair value by:
Debiting: increases in assets, decreases in liabilities, Goodwill
Crediting: decreases in assets, increases in liabilities, Investment in subsidiary

Question 3

Entry to record stock acquisition

Answer 3

Debit: Investment in sub, merger expenses
Credit: Common stock, Addl PIC, Cash

Question 4

Noncontrolling interests are reported at

Answer 4

fair value

Question 5

Revaluations of acquired identifiable net assets are

Answer 5

attributed to both the controlling and noncontrolling interests in proportion to ownership interests

Question 6

Goodwill is

Answer 6

separately attributable to controlling and noncontrolling interests, usually in proportions that are different than the ownership interests