Consolidation at Acquisition

Question 1

What types of questions:

Answer 1

• Amounts to be reported on the financial statements
• Balance Sheet (P + S + Fair Value Increment)
• Income Statement (P entire Year)
• Statement of Retained Earning (P Only)
• Statement of Cash Flows (P entire year)

Question 2

Tools:

Answer 2

• Diagrams
• T-Accounts
• Decomposition at acquisition

Question 3

Decomposition Tool:

Answer 3

PRICE PAID 
       Goodwill  
NET FV ASSETS AND LIABILITIES 
        Plant Assets 
        Intangible Assets 
NET BOOK VALUE (ASSETS - LIABILITIES)

Question 4

What is statements would require a consolidated financial statement AT THE DATE OF ACQUISITION?

Answer 4

The Balance Sheet

Question 5

T/F: Consolidating entries are performed on the general ledger of the parent company?

Answer 5

False!

Question 6

If a subsidiary has goodwill on it’s balance sheet at acquisition date, how should that be treated?

Answer 6

Remove goodwill from the net book value calculation when performing the decomposition tool.