FAR-F4-M7-Consolidated Financial Statements

Question 1

Is the following statement true or false? At date of acquisition, the consolidated equity will be equal to the parent company’s equity PLUS the fair value of any noncontrolling interest. The subsidiary company’s equity accounts (common stock, APIC, retained earnings) are eliminated.

Answer 1

True. See the CAR im IN is BIG journal entry. At date of acquisition, the consolidated equity will be equal to the parent company’s equity PLUS the fair value of any noncontrolling interest. The subsidiary company’s equity accounts (common stock, APIC, retained earnings) are eliminated.

Question 2

Is the following statement true or false? The acquisition method requires that 100% of the fair value of the subsidiary’s assets be recognized.

Answer 2

True. The acquisition method requires that 100% of the fair value of the subsidiary’s assets be recognized.

Question 3

Are the consolidated retained earnings the same as the parent company’s retained earnings, when financial statements are consolidated under the acquisition method?

Answer 3

Yes. The consolidated retained earnings are the same as the parent company’s retained earnings, when financial statements are consolidated under the acquisition method.

Question 4

How is the consolidated income statement presented?

Answer 4

The consolidated income statement should show separately, the consolidated net income, net income attributable to the noncontrolling interest and net income attributable to the parent company.

Question 5

When presenting the consolidated income statement, are the subsidiary’s revenues and expenses included before the date of acquisition?

Answer 5

No. The consolidated statement of income includes 100% of the parent’s revenues and expenses and ALL of the subsidiay’s revenues and expenses AFTER the date of acquisition. The PRE-ACQUISITION revenues and expenses are not included in the consolidated income statement.

Question 6

When presenting the consolidated income statement, are the subsidiary’s revenues and expenses included before the date of acquisition?

Answer 6

No. The consolidated statement of income includes 100% of the parent’s revenues and expenses and ALL of the subsidiary’s revenues and expenses AFTER the date of acquisition. The PRE-ACQUISITION revenues and expenses are not included in the consolidated income statement.

Question 7

How should the statement of consolidated comprehensive income be presented?

Answer 7

The statement of comprehensive income should show, separately, consolidated comprehensive income, comprehensive income attributable to the non-controlling interest and comprehensive income attributable to the parent company.

Question 8

How should the consolidated statement of changes in equity be presented?

Answer 8

The consolidated statement of changes in equity should present a reconciliation of the beginning of period and end of period carrying amount of total equity, equity attributable to the parent and equity attributable to the noncontrolling interest.

Question 9

What are the financial statements that are presented in the consolidated financial statements?

Answer 9

consolidated balance sheet
consolidated statement of income
consolidated statement of comprehensive income
consolidated statement of changes in equity