Choose the correct. In a father-son-grandson business combination, which of the following is true?a. The father company always must have its total accrual-based income computed first.b. The computation of a company’s accrual-based net income has no effect on the accrual-based net income of other companies within a business combination.c. A father-son-grandson configuration does not require consolidation unless one company owns shares in all of the other companies.d. All companies solely in subsidiary positions must have their accrual based net income computed first within the consolidation process.

Choose the correct. In a father-son-grandson business combination, which of the following is true?a. The father company always must have its total accrual-based income computed first.b. The computation of a company’s accrual-based net income has no effect on the accrual-based net income of other companies within a business combination.c. A father-son-grandson configuration does not require consolidation unless one company owns shares in all of the other companies.d. All companies solely in subsidiary positions must have their accrual based net income computed first within the consolidation process.

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter8: Investing Activities

Section: Chapter Questions

Problem 12QE

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In a father-son-grandson business combination, which of the following is true?a. The father company always must have its total accrual-based income computed first.b. The computation of a company’s accrual-based net income has no effect on the accrual-based net income of other companies within a business combination.c. A father-son-grandson configuration does not require consolidation unless one company owns shares in all of the other companies.d. All companies solely in subsidiary positions must have their accrual-based net income computed first within the consolidation process.
Entity A and Entity B combined their businesses. The acquirer in the businesscombination is not clearly identifiable. Which of the following is not an indicator that Entity A is the acquirer? A. Entity A is the initiator of the business combination. B. Entity A’s former owners receive the largest portion of the voting rights in the combined entity. C. Entity A’s former management team dominates the management of the combined entity. D. Entity C, a new entity, is formed and Entity C transfers cash to Entity A and Entity B
Which of the following is not true with regard to a business combination accomplished in the form of a stock acquisition? a. Two companies remain in existence after the combination b. A parent-subsidiary relationship is said to exist c. Consolidated financial statements are normally required d. All of the above statements are true
Please answer the following questions relating to unrealized profit in a business combination. 1) Intra entity transfers between the components of business combinations are quite common. Why do these intra company transactions occur frequently? 2) How are unrealized inventory gross profit created, and what are the necessary consolidation entries created to account for these gains? 3) How do intra entity profit present in any year affect the noncontrolling Interest calculation?
When one company buys the assets and liabilities of another company, this is known as which of the following?Choose one answer.a. Limited liability company b. Merger c. Conventional corporation d. Acquisition
In many cases, EPS is computed based on the parent’s portion of consolidated net income and parent company shares and convertibles. However, a different process must be used for some business combinations. When is this alternative approach required?
Assuming the existence of two companies, A and B, which of the following is not a business combination? Company C is formed to acquire all the assets and liabilities of Company A and Company B. Both Company A and Company B liquidate. Company A acquires all assets and liabilities of Company B, and Company B liquidates. Company A acquires all assets and liabilities of Company B. Company B continues as a company, holding shares of Company A. Company A acquires a group of assets of Company B, the group of assets not constituting a business. Company B continues to operate as a company.
Assuming the existence of two companies, A and B, which of the following is not a business combination? a. Company A acquires all assets and liabilities of Company B. Company B continues as a company, holding shares of Company A. b. Company C is formed to acquire all the assets and liabilities of Company A and Company B. Both Company A and Company B liquidate. c. Company A acquires all assets and liabilities of Company B, and Company B liquidates. d. Company A acquires a group of assets of Company B, the group of assets not constituting a business. Company B continues to operate as a company.
a.Which of the following statement/s regarding the method of consolidation is true: (1) Subsidiaries are consolidated in full (2) Associates are equity accounted Select one: a. Neither statement b. Statement (1) only c. Both statements d. Statement (2) Q2. Which of the following is a characteristic of the cost method of accounting for subsidiary operations? Select one: a. Parent company net income equals consolidated net income. b. More working paper eliminations are required than for the equity method of accounting. c. Consolidated amounts differ from the comparable amounts under the equity method of accounting. d. None of the above Q3. How soon does goodwill acquired in a business combination need to be tested after an acquisition? Select one: a. The year after acquisition b. The year of acquisition c. Two years after acquisition d. None of the above
Which one of the following statements is incorrect with regards to non-controlling interests? 1. Non-controlling interests can be calculated using the analysis of owners’ equity of the subsidiary. 2. The retained earnings total in the consolidated statement of changes in equity does not include the non-controlling interests amount. 3. Non-controlling interests reduces the profit of the owners of the parent in the consolidated statement of profit or loss and other comprehensive income. 4.Non-controlling interests are presented as an asset in the consolidated statement of financial position.
Which of the following is true regarding consolidation of net income?A. Parent net income is decreased by the dividend income recognized due to declared bysubsidiary at full amount even if less than 100% ownership is acquired.B. Amortization of excess must be done to adjust net income of parent to arrive at parent netincome own operation.C. Adjusted net income of subsidiary is shared by Parent’s holding interest andnoncontrolling interest.D. Dividend declared by subsidiary is shared by Parent’s holding interest and noncontrollinginterest.
What does empirical evidence suggest about the distribution of gains from mergers? Shareholders of the acquired firm gain the most. Shareholders of the acquiring firm gain the most. Neither group of shareholders is likely to gain. Both groups of shareholders gain equally.