Concept CH 15

Question 1

Combined Statements

Answer 1

Are appropriately issued when 2 or more entities are under common control. When combined statements are issued intra-company loans and profits should be eliminated in there entiriety

Question 2

A business combination

Answer 2

is accounted for as an acquisition

Question 3

Acquisition method

Answer 3

The entry recording transaction is based on fv of exchange
Step1 Assign FV to ID assets and liabilities
Step 2 Assign goodwill consideration given minus FV o ID net id assets

Question 4

50% or greater of ownership

Answer 4

Must consolidate

Question 5

Goodwill is

Answer 5

1) Sum of Acq date FV or
a) consideration transferred
b) any NCI acquiree over
c) Acquirers prior equity investment OVER
2) Net of Acq Date FV of Net Assets (Assets-Liabilities)

Question 6

The parent recognizes a deconsolidation by recognizing gain or loss in net income attributable to parent It equals

Answer 6

1) the sum of
a) FV of consideration received
b) FV of any retained investment
c) Carrying amount of NCI
and
2) Carrying amount of subsidiary

Question 7

The primary beneficiary of a VIE

Answer 7

The one that absorbs the majority of expected losses

Question 8

Consolidated statements

Answer 8

Report financial postion, results of operation, and cash flows as if the it were a single entity thus all intra-entity transaction must be presented as if they had never occurred

Question 9

Consolidation intra-sales and COGS no inventory

Answer 9

Eliminate sale by seller

Eliminate COGS by purchaser

Question 10

Find accounts eliminated that are not COGS or inventory

Answer 10

(A/R Parent + A/R Sub) - Consolidated A/R = Eliminated A/R

(Revenue Parent + Revenue Sub) - Consolidated Revenue = Revenue Eliminated

Question 11

Consolidation intra-sales and COGS inventory

Answer 11

Find Parent’s GP
Find intra-entity inventory in Sub
Eliminate Sales to Sub
Reduce Inventory by GP of parent
Eliminate COGS by difference (Sales - GP) = COGS eliminated
Consolidated COGS = (P COGS + S COGS - Eliminated COGS)

Question 12

Contingent Obligation is

Answer 12

An obligation of the acquirer to transfer additional assets or securities to former owners of acquiree as part of exchange for control if conditions are met. Therefore are considered part of consideration transferred

Question 13

Consolidated Fees Cap or Expense - Attorney’s fees

Answer 13

expense

Question 14

Consolidated Fees Cap or Expense - Consultant fees

Answer 14

expense

Question 15

Consolidated Fees Cap or Expense - Cost of printing stock certificates

Answer 15

reduction of PiC

Question 16

Net income Attributable to parent

Answer 16

Consolidated NI - (Sub income x NCI %) = NI Attrib to parent

Question 17

Consolidated Dividends

Answer 17

Are those paid to parties outside consolidated entity

Question 18

Calculation for Consolidated Div

Answer 18

(Div Paid by P + Div Paid by Sub) - P proportionate share of Sub dividends

Question 19

NCI Adjusted for Income and Div

Answer 19

Beg NCI + NCI Share of Sub Income - NCI Share of Sub Dividend

Question 20

The balance of equipment in consolidated F/S should equal

Answer 20

The sum of the balances on separate books - undepreciated profit from intra-entity sale

Question 21

The parent determines its share of the subsidiary’s earnings after

Answer 21

adjusting for dividends on such stock and the share of the noncontrolling interest (NCI)

Question 22

. If the original useful life and the deprecation method remain the same

Answer 22

the depreciation expense eliminated is equal to the amount of gain on intraentity sale of equipment divided by the years of useful life remaining.