Recording Business Combinations Flashcards

1
Q

What does the legal form of a business combination determine?

A

Which accounts to use

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

What does the acquisition method of accounting in business combinations determine?

A

The amounts at which the accounts will be valued

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

In a legal consolidation, which entity is deemed to be the acquirer?

A

If only equity interest is issued by new entity, one of the preexisting entities must be determined to be the acquirer, not the new entity

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

Is preexisting Goodwill recognized in the assets acquired in a business combination?

A

No

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

What accounting transaction is required when cost of the investment is

A

Recognize gain for bargain purchase amount.

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

What method is used by a parent company to carry “investment in subsidiary” on its books?

A

Cost, Equity or other method

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

What is the journal entry by an investor to record an acquisition?

A

DR: Investment in Subsidiary

CR Cash/Other Consideration (Cost)

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

Where is a Subsidiary reported?

A

In the consolidated financials, unless parent lacks control

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

List the journal entry by the investor to record a merger/consolidation using the acquisition method.

A

DR: Assets acquired (at FMV)
CR: Liabilities assumed (at FMV)
CR: Cash/Other Consideration Paid (Cost)

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