Consolidation Flashcards
Dividend transaction effects on majority owner subsidy
Declaring and paying dividends has no effect on retained earnings but decreases the non controlling interest account.
Ex: if P owns 75% of S and paid dividend of 15K and S paid 8K.
Dividends in consolidated would be 15k. 6k (8k x .75) would be eliminated and 2k would reduce NCI account.
Do intercompany sales affect the non controlling interest account? What is the NCI formula?
No as long as the sale was downstream.
Nci % of sub’s NI
- Nci % of sub’s dividends
- Nci % of GW
- Nci % of amort/deprec
Investment of sub account equity method (calculation)
Dr Cost of investment
Dr % of s’s NI
Cr depreciation of Id assets
What is push down accounting?
When the acquired revalues the assets, liabilities and goodwill based on the FV at the date of acquisition based on the acquirer’s valuation.
How do you calculate investor’s equity in earning (20% or greater ownership)?
% of ownership x NI
-Dividends paid to P/S
+percentage of P/S paid (if any owned)
If provisional amounts are reported for items recognized in a business combination, which of the following kinds of information must be disclosed?
The reasons why the accounting is incomplete.
The date at which each provisional amount is expected to be resolved.
Under the full equity method, how do you calculate RE in a consolidated F/S?
Equal to the parent’s amount
In a business combo accounted for as an acquisition what basis is used for the valuation?
The FV of the purchase price.
EX: S co was acquired for 2,000 shares of $10 par at $18 market value, by P co. What should the consolidated APIC be, if P co’s APIC is 1,300,000?
C/s= 2,000,000 (2,000x$10)
APIC=2,900,000 ((2,000x$18)-2,000,000+1,300,000)
When does the measurement period end for a business combination in which there was incomplete accounting information on the date of acquisition?
When the acquirer receives the information or one year from the acquisition date, whichever occurs earlier.
Are consolidated financials prepared for ownership of 15%?
No.
In a business combination, how are the net incomes of businesses added?
100% of the NI’s are added onto the combined F/S
Lebow Corp. acquired control of Wilson Corp. by purchasing stock in steps. How should the previously held share be valued?
As of the date of acquired control shares should be valued at FV as of that date. Any gains in OCI should be realized in income in that period.
Does an investment using equity accounting require consolidation?
No
In a business combination the consolidated common stock should be?
Parent = 3,000
Parent acquired all of subs stock for 200,000 shares of its $10 par with a market value of $18
Consolidated c/s = 5,000,000
3,000,000 + (200,000 x $10)