TEST2 Flashcards
A firm’s GW is only recognized in fs when the firm is taken over
thus, any goodwill already depicted on S books is not carried over to consolidated fs
ang gw ay pwede lang ma recognized sa fs
kung ang firm ay na take over na
therefore, any gw already depicted on S books
is not carried over to consolidated fs
the first WP1 elimination entries during the year-cost method
debit-dividend revenue
cr.-dividend declared
How would the liabilities of an acquiring company be valued in the consolidated financial statement following a business combination?
at BV regardless of whether the combination was a purchase or a pooling of interest
in pooling of interest net assets valuation & goodwill are treated as?
book values & no goodwill
in acquisition method, net asset valuation & goodwill are treated as..
FMV & recognition of goodwill
NBV = NET ASSETS
ASSET - LIAB=OE
compute S’s NBV or net assets
asset bv - liability bv
If no common stock, apic, and retained earnings are given, look for nbv or net assets
to get differential
Perfict) how to compute P’s differential? -DOA
debit S’s CAR/net asset Dif
cr inv.estment in S-P’s 80% cost
MI % of nbv (20% of OE/Net asset)
cost method WP1 elimination entries during the year
dr. dividend revenue
cr dividends declared
cost method) WP2 elim entries during the year
dr. MI/NCI-S income
cr. dividends declared -S
cr MI/NCI - S
cost method ) WP3 elim entries during the year
Same as WP#1 @ DOA
CS -S
APIC-S
RE-S
DIFL
INV IN S
MI/NCI -SPERFICT Corp.) total goodwill?
D - I = G 33750-25000=8750
difl/.8(P’s %) 27k/.8=33750
increment = 25k (MV-BV of land and equip)
Perfict) P’s III (intercompany investment income)
Ps % .8 ( Sni -amort) 40k-2k=38k x .8=30,400
amort= 20k/10=2k diff. of mv-bv of bldg. only not land
Perfict) P’s separate income for year A
P’s NI - III (320k - 30400=289600)
total consolidated NI
P’s separate income + S confirmed NI
[S’s confirmed NI = Sni - amort]
Perfict prob) P’s balance (BS) in investment in S Corp. 12/31/A
this is a separate computation from income
inv in S 275k beg
Sni 40
- S div (22)
- amort ( 2)
= 16k
multiply by P's% .80 = 12,800
Balance inv in S 287,800Perfict prob) TOTAL NCI reported on 12/31/A
Consolidated Balance Sheet
MI/NCI-S (100% of S ] 343,750
TEV 275K/.8
LESS: P’s cost-beg - 275,000
Beg. bal = 68,750
+MI% net of S 20%x 16k +3,200
Total Non Controlling Interest 12/31/A = 71,950
Calculate 12/31/A consolidated RE
Beg. RE 1M
Add: NI -P +320,000
Less: Dividend-P -80,000
Consolidated RE -end 1,240,000
Upstream Sale of Land: Subsequent Year Elimination entry
P’s R/E
P’s Land
WP#3 EOY
Debit CARAD
CS-S
APIC-S
RE-S (1/1 bal)
AOCI-S (1/1 bal)
DIFL
credit INV. IN S
MI/NCI-Sif P owns 80% or more of S, then
P and S may file a consolidated return p111
c) The loss on the constructive retirement of P’s bonds by S (also called a “bond extinguishment loss” is recognized
Over the remaining term of the bonds
d) P and its 80% owned subsidiary made several intercompany sales of non-current assets over the past two years. The amount of income allocated to the non-controlling interest for the second year should include its share of gain:
Confirmed in the second year from sales made in both years.
e) A wholly owned subsidiary sold land (upstream) to its parent during the current year at a gain. P holds the land at year-end. What amount should be reported as consolidated net income for year one?
P’s separate operating income + S’s net income less the intercompany gain
