F4 M4 Flashcards

1
Q
A

Acquisition of sub in cash: Debit investment and credit cash

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q
A

Acquisition of sub in stock: Debit investment and credit APIC and CS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q
A

On the day that the acquisition (stock given) to buy the sub takes place, always multiply
the stock x the FV to record the price of the investment (the parent’s basis is the
acquisition price)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q
A

Acquisition price (FV) = investment in sub

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q
A

When the consolidation takes place, 100% of the net assets acquired (regardless of %
acquired) are recorded at FV with any unallocated balance remaining creating goodwill

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q
A

Eliminating JEs (of the sub) are recorded on the consolidation workpapers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q
A

CAR (all debits) IN (both credits) BIG (all debits)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q
A

CAR = CS, APIC, and RE (debit each of these in the EJEs)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q
A

IN = Investment in sub (eliminated on parent’s BS) and noncontrolling interest is created
(recorded at FV)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q
A

Noncontrolling interest is created when the parent does not acquire 100% of the sub (the
parent will record it in their equity section on the consolidated FS as being separate from
their equity)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q
A

BIG = BS of subsidiary is adjusted to FV (100% of assets and liabilities), identifiable
intangible assets of the sub are recorded at their FV (record the INCREASE of the FV of
the assets, and goodwill (or gain) is the plug usually

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q
A

Acquisition cost + noncontrolling interest (NCI) > Sub FV (100%) = Goodwill (debit)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q
A

Sub FV > acquisition cost + NCI = Gain

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q
A

All of this is only done on the consolidated workpaper, not on the company books

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q
A

CAR + BIG = IN

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q
A

For investment in sub (I), direct out of pocket costs and indirect costs (ex: legal
expenses) are expensed and stock registration and issuance costs are a direct

reduction of the value of the stock issued (take $ out of APIC on day that acquisition
occurs - do both of these on date of acquisition)

17
Q
A

LEGAL EXP IS NOT CAPITALIZED (aka not added to the investment total)

18
Q
A

If a comp pays a sub extra $ as a thank you for consolidating, this $ must be added to
the investment in the sub along with a credit to an estimated liability for contingent
consideration

19
Q
A

The amt of CAR is usually the plug (IN = investment in sub + NCI) and BIG is goodwill +
BV to FV adjustment and intangible adjustments

20
Q
A

CAR can also just be the BV of the subs assets (always debit APIC for this amt)

21
Q
A

CAR is not the CS + APIC + RE of the parent, it is of the sub

22
Q
A

The equity or cost method are used INTERNALLY (just like for a comp who has sig
influence) but not externally