Consolidated F/S Flashcards

1
Q

Acctng for Investment in Equity Securities

A

0-20%: No control or sign influence. Fair Value through net income
>20%: Sign Influence. Indicates investor has sign influence over the investee
>50%: Control: Investors have control over investee. Equity method during year and consolidate during YE

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2
Q

Consolidation Criteria

A

All Subs must be consolidated unless:
1. Sign doubt regarding the parent’s ability to control
2. Sub is in bankruptcy, legal reorg, or under severe foreign restrictions

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3
Q

Parent’s YE is not equal to Sub

A

YE diff is more than 3 months:
~ Sub must prep special f/s that correspond to parent’s f/s
YE diff is less than 3 month:
~ Sub can use their regular f/s
~ Must make material adjs for any sign trans or events that occurred during the gap period
If parent own more than 50% of a sub and the sub owns more than 50% of another co: 1st sub will consolidate w/ the 2nd co. The parent will consolidate with the sub

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4
Q

Steps in BS Consolidation

A
  1. Calc GW / Bargain purchase
  2. Elimination of inter-co transactions
  3. Calc the increase in FV
  4. Calc Parents R/E
  5. Cal Non-Controlling interest (NCI)
  6. Cal Investment in Sub
  7. Consolidate the Sub’s Assets & Liabs
  8. Prepare Consolidated B/S
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5
Q

Calc GW / Bargain Purchase

A

Market Capitalization Method: FV of company at acquisition = # of shares of sub x market price of sub’s share at acquisition date

Purchase Price Method: FV of company at acquisition = purchase price of investment in sub / ownership %

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6
Q

FV of Company’s Net Assets at Acquisition

A

FV of co’s net assets = FV of Assets - FV of Liabilities

FV of co’s net assets = Common Stock + APIC + R/E

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7
Q

Determine GW

A

FV of Co at Acquisition XX
Less: FV of Co’s Identifiable Net Assets @ Acquisition XX
Equals GoodWill

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8
Q

Determine Bargain Purchase

A

FV of Company’s Identifiable Net Assets @ Acquisition XX
Less: FV of Co at Acquisition XX
Equals Bargain Purchase

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9
Q

Elimination Entries

A

Interco A/R and A/P
DR. Parent AP
CR. Sub AR

Interco Sales/Purchases w/ all the inventory sold
DR. Sales
CR. Cost of Sales

Interco Sales/Purchases w/ some inventory unsold and unrealized profit
DR. Sales
CR. Cost of sales
CR. Inventory
The impact on the B/S from this elimination
DR. R/E
CR. Inventory

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10
Q

Elimination Entries

A

Interco Sales of PPE
DR. Asset
DR. Gain on Disposal
CR. A/D

DR. A/D
CR. Deprec Exp

Interco of Sales of Bonds
DR. Bonds Payable
CR. Investment in Bonds
DR. Interest Income
CR. Interest Expense
DR. Interest Payable
CR. Interest Receivable

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11
Q
A
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