Consolidation at Acquisition

Question 1

What is the amount at which any noncontrolling interest is recognized in eliminating entry at the date of business combination?

Answer 1

Fair value of Noncontrolling Interest percentage claim to consolidated net assets attributable to the subsidiary. This would include its claim to the Sub’s net assets at fair value and any Goodwill recognized in the combination

Question 2

Where will a noncontrolling interest account show in consolidated financial statements?

Answer 2

On Consolidated Balance Sheet as a separate item within Shareholders’ Equity.

Question 3

How is an “in-transit” intercompany transaction handled?

Answer 3

Make an adjusting entry on the consolidating worksheet to complete the transaction as though it had been received by the receiving company

Question 4

List some examples of intercompany amounts to be eliminated during a consolidation

Answer 4

1. )Receivables/payables;
2. )Interest;
3. )Dividends;
4. )Bonds

Question 5

What steps should be followed to make adjusting entries to help derive the consolidated financial statements?

Answer 5

1. )Determine if any transactions are in transit between the affiliated entities;
2. )Record entry on consolidating worksheet to treat in transit transactions as though they were completed.

Question 6

Under which method of carrying a subsidiary on it’s books, will the carrying value of the investment normally change following a combination?

Answer 6

Equity Method

Question 7

Will the parent entities financials be different in a period after a business combination?

Answer 7

Yes both Balance Sheet and Income Statement. B/S will have an “investment in” account and I/S will have subsidiary revenues and expenses.

Question 8

If, during a business combination, a subsidiary owned inventories with a different MV than BV at date of combination, a consolidated BS would show this difference where?

Answer 8

In the Inventories account. It will need to be marked up to FMV.

Question 9

On the date of a business combination, will the Equity on the consolidated financials show the net of assets and liabilities?

Answer 9

It will always show the parent company amounts. This will continue to be the case as long as the parent company uses a complete equity method to account for the sub