Consolidation Flashcards

1
Q

Dividend transaction effects on majority owner subsidy

A

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.

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2
Q

Do intercompany sales affect the non controlling interest account? What is the NCI formula?

A

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
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3
Q

Investment of sub account equity method (calculation)

A

Dr Cost of investment
Dr % of s’s NI
Cr depreciation of Id assets

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4
Q

What is push down accounting?

A

When the acquired revalues the assets, liabilities and goodwill based on the FV at the date of acquisition based on the acquirer’s valuation.

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5
Q

How do you calculate investor’s equity in earning (20% or greater ownership)?

A

% of ownership x NI
-Dividends paid to P/S
+percentage of P/S paid (if any owned)

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6
Q

If provisional amounts are reported for items recognized in a business combination, which of the following kinds of information must be disclosed?

A

The reasons why the accounting is incomplete.

The date at which each provisional amount is expected to be resolved.

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7
Q

Under the full equity method, how do you calculate RE in a consolidated F/S?

A

Equal to the parent’s amount

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8
Q

In a business combo accounted for as an acquisition what basis is used for the valuation?

A

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)

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9
Q

When does the measurement period end for a business combination in which there was incomplete accounting information on the date of acquisition?

A

When the acquirer receives the information or one year from the acquisition date, whichever occurs earlier.

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10
Q

Are consolidated financials prepared for ownership of 15%?

A

No.

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11
Q

In a business combination, how are the net incomes of businesses added?

A

100% of the NI’s are added onto the combined F/S

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12
Q

Lebow Corp. acquired control of Wilson Corp. by purchasing stock in steps. How should the previously held share be valued?

A

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.

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13
Q

Does an investment using equity accounting require consolidation?

A

No

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14
Q

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

A

Consolidated c/s = 5,000,000

3,000,000 + (200,000 x $10)

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