consolidation subsequent to acquisition

Question 1

Amounts reported on the consolidates Smt

Answer 1

Bal sheet (P+S+FV increment -ICO balances)
Income Stmt(P entire yr+S since acq -depc FV increment)
Equity accts (common stock on P only)
 RE of P only, if P used full equity methodmusi

Question 2

If full equity method is used

P will recognized its share on S net income as revenue

Answer 2

Consolidated RE equals P’s. The P will recognized a cash recv as a dividend income
Adjust on its books the carrying value of its invest to reflect:
1.- the parent’s share of the subsidiary’s income loss
DR Invet in subsidiary
CR: Income from Equity Investments
2.- The parent’s share of dividends declare by the subsidiary:
DR: dividends Receivable/cash
CR: Investment in Subsidiary
3.- The amortization(depc of any difference between the FV of the identif asset(NOT GW) and the BV of those assets (e.g assuming FV>BV)
DR: Income from equity investments
CR Investment in Subsidiary

Question 3

Push down accounting

Answer 3

Req by sec w/100% owned subsidiaries, It essentiatlly pushes down the revaluation on to the general ledger of S so that the revaluations are not allocated during the consolidation process-Upon consolitation revaluation capital account would be eliminated

Question 4

If P Uses the Cost Method to account foe the invt in S

The P books will reflect changes in S shareholders equity

Answer 4

-DOES NOT ADJ ON ITS Books the carrying value of its invt in S to reflect Income of loss, dividends declared by S, Dep and amtz diff bew FV of the S identifiable NA and the BV of S identifiable net asses
*DOES regognize its share of dividends declared by S as DIVIDEND INCOME-not as an adj to the investment
DR Dividends Receivable/Cash
CR Dividend Income

Question 5

Investment Elimination

GW is recognized on the consolidating wrks as part of the invt eliminating entry and should be amortized

Answer 5

is made at the beg of the yr of P against the S Shareholders’ Equity(as of the beg of the yr.
if the FV of S assets is

Question 6

combined FS

Answer 6

are simple prepared by combining the S FS classification w/appropiat elimination of ICO transct balc and prof

Question 7

NI reporting

Answer 7

In an acquisition the acquired includes net income for the acquiree only from the date of acquisition e.g
Acq on 10/xx FS presented at the end of year will include the full year of P co and 3 months of S, beacuse it was acquired in 10/xx till dec date of presentations 3 months