M7 - Consolidated Financial Statements

Question 1

To find share of earnings from a subsidiary you use:

Answer 1

Retained Earnings

B (Beginning Balance) xxxxxx
A (Income) - Squeeze for sometimes xxx
—————————————————————-
Total
S (Dividends Paid) xxxx
—————————————————————-
E (Ending Balance)

And if they don’t own 100% then you would take the income part that you found by squeezing and take that by the percentage owned.

Question 2

True or False: At date of acquisition, the consolidated equity will be equal to the parent company’s equity plus the FV of any non controlling interest. The subsidiary company’s equity accounts are eliminated.

Answer 2

True

Question 3

Consolidated retained earnings are the same as the parent company retained earnings, when financial statements are consolidated under the acquisition method. (true or false)

Answer 3

True

Question 4

True or False: In an acquisition, the net income of a newly acquired subsidiary will only be included in consolidated net income from the date of the acquisition.

Answer 4

true

Question 5

100% of a purchased subsidiary’s shareholders’ equity (including COMMON STOCK) as of the date of acquisition is eliminated in consolidation. (true or false)

Answer 5

True

Question 6

The acquisition method requires that 100% of the FV of the subsidiary’s assets be recognized. Therefore, plant assets reported on the consolidated balance sheet would be the FV of the subs plant assets plus the (book or FV) of the parents plant assets?

Answer 6

Book Value of parents plant assets

FV of Subs plant assets
+ BV of Parents plant assets
—————————————
Total plant assets reported