Combos & Consolid. Ch 31

Question 1

Which of the following expenses rel. to bus. acq. s/b inc. in total in the determination of net income of the combined corp for the period in which exps are incurred?

1. Fees of Finders and Consult.
2. Regist. Fees for Equity Securities issued

Answer 1

Only Direct Costs such as Finders Fees are expenses considered in Net Income calc.

(Regist. fees for equity sec. are a reduction to APIC, not expensed - the fees reduce the amts recog as proceeds from their issuance.)

Question 2

In consolidated statements, APIC is always equal to what?

Answer 2

APIC always equal to Parents amount.

Question 3

In consolidated statements C/S is always equal to what?

Answer 3

Common stock is always equal to parent’s amount.

Question 4

In consol. stmts, Current Assets are equal to what?

Answer 4

Parent CA + Subsidiary CA adjusted to fv (may incl. value of excess over purchase price allocated to Inventory)

Question 5

When a subsidiary pays dividends, what effect does this have on Retained Earnings and Noncontrolling Interest in Consolidated balance sheet?

Answer 5

When a subsidiary pays dividends, the portion that is paid to parent is eliminated, thus no effect on RE. The remainder which is paid to NCI reduces the minority interest.

Question 6

Intercompany receivable calculation in Consolidated B/S

Answer 6

Same as intercompany payable:
P + S - I/C reciprocal amts.

Receivable will be = to Payable.

Question 7

In consolidated stmts, Stockholders Equity will equal?

Answer 7

P + NCI

subsidiaries SE is eliminated when consolidation occurs

Question 8

An asset under IFRS is recognized as goodwill only when___________?

Answer 8

It is acquired by purchase.

Question 9

Determine partners’ cash after liquidation by allocating p/l and adding/subracting from _______?

Answer 9

Partners’ capital balances. Other figures were not used in sample problem.

Question 10

Project not compeleted in one year, 120k spent in Jan, 150 spent in Aug. How much interest s/b capitalized at end of year?

Answer 10

Lesser of:
Wtd ave accum. expenditure or
Total interest
120 x 12/12 = 120 x .10= 12,000
\+ 150 x 4/12 = 50 x .10= 5,000

Question 11

Direct financing lease
Lessor will recognize____?
Lessee will recognize____?

Answer 11

Lessor: Only will recognize Interest over term of lease using rate implicit to the lease.
(DOES NOT recog. P or L on sale of Asset.)
LESSEE: Recognizes Asset at its PV using lesee’s incrememental borrowing rate, and Depreciation on asset.

Question 12

The funded status of a defined benefit pension plan should be reported in the _____?

Answer 12

Statement of financial position.

Question 13

COGS for financial reporting includes both cost of inventory sold and inventory shortages is a disadvantage of what type of inventory accounting system?

Answer 13

Periodic Inventory system

Question 14

when Treasury stock is sold for a price that exceeds its cost, the excess is recognized as___?

Answer 14

APIC

Question 15

during rising price period, perpetual and periodic methods would result in same ending inventory at year end under which method(s)?

Answer 15

Fifo, not Lifo

Question 16

when determining amt of g/l of a futures contract due in Jan, compare the future rate at time of engagement to Future contract rate or Sport rate?

Answer 16

Future contract rate

Future contract vs. Future contract, duh.

Question 17

what are the 3 standard sections of a government CAFR (comprehensive annual financial report)

Answer 17

Introductory
Financial
Statistical

Question 18

What makes up Retained Earnings on consolidated b/s?

Answer 18

Parent RE + P & S NI adj for depreciation

Question 19

Under acquisition method, how are direct costs such as finders fees treated?

Answer 19

Expensed in the period they were incurred.

Question 20

In Stmt of Cash Flows – a proprietary govt fund receives interest revenue recd in cash, where do you report it?

Answer 20

Investing activities section

Question 21

A material loss s/b rptd under income from continuing operations when it is _________.

Answer 21

Not unusual, but infrequent