Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Question
Chapter 4, Problem 4.10.1E
To determine
Concept Introduction:
Equity Method of valuation of investment: In this method parent company value investment on the historical cost of the investment plus apportioned profit in the associate company less dividend paid by the associate company. Difference in the historical value and the amount paid for investment is debited to
To choose:Meaning of goodwill.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
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?
Under PFRS 3, when is a gain recognized in consolidating financial information?
Group of answer choices
a.When the amount of a bargain purchase exceeds the value of the applicable liability held by the acquired company.
b.In an acquisition when the value of all assets and liabilities cannot be determined.
c.When any bargain purchased is created
d.In a combination created in the middle of the fiscal year
In a transaction accounted for using the acquisition method where consideration
transferred is less than fair value of net assets acquired, which statement is true?
Multiple Choice
Negative goodwill is recorded.
A deferred credit is recorded.
A gain on bargain purchase is recorded.
Long-term assets of the acquired company are reduced in
proportion to their fair values. Any excess is recorded as a
deferred credit.
Long-term assets and liabilities of the acquired company are
reduced in proportion to their fair values. Any excess is recorded
as gain.
Chapter 4 Solutions
Advanced Financial Accounting
Ch. 4 - When is the carrying value of the investment...Ch. 4 - What is a differential? How is a differential...Ch. 4 - Prob. 4.3QCh. 4 - Prob. 4.4QCh. 4 - Prob. 4.5QCh. 4 - Prob. 4.6QCh. 4 - Prob. 4.7QCh. 4 - Prob. 4.8QCh. 4 - Prob. 4.9QCh. 4 - Prob. 4.10Q
Ch. 4 - Prob. 4.11QCh. 4 - What determines whether the balance assigned to...Ch. 4 - What does the termpushdown accountingmean?Ch. 4 - Under what conditions is push-down accounting...Ch. 4 - Prob. 4.15QCh. 4 - Prob. 4.2CCh. 4 - Prob. 4.3CCh. 4 - Prob. 4.4CCh. 4 - Prob. 4.1ECh. 4 - Prob. 4.2ECh. 4 - Prob. 4.3ECh. 4 - Prob. 4.4ECh. 4 - Prob. 4.5ECh. 4 - Prob. 4.6ECh. 4 - Prob. 4.7ECh. 4 - Prob. 4.8ECh. 4 - Prob. 4.9ECh. 4 - Prob. 4.10.1ECh. 4 - Prob. 4.10.2ECh. 4 - Prob. 4.10.3ECh. 4 - Prob. 4.10.4ECh. 4 - Prob. 4.10.5ECh. 4 - Prob. 4.11.1ECh. 4 - Prob. 4.11.2ECh. 4 - Prob. 4.11.3ECh. 4 - Prob. 4.11.4ECh. 4 - Prob. 4.12ECh. 4 - Prob. 4.13ECh. 4 - Prob. 4.14ECh. 4 - Prob. 4.15ECh. 4 - Prob. 4.16ECh. 4 - Prob. 4.17ECh. 4 - Prob. 4.18.1ECh. 4 - Prob. 4.18.2ECh. 4 - Prob. 4.18.3ECh. 4 - Prob. 4.18.4ECh. 4 - Prob. 4.18.5ECh. 4 - Prob. 4.18.6ECh. 4 - Prob. 4.19ECh. 4 - Prob. 4.20ECh. 4 - Prob. 4.21ECh. 4 - Prob. 4.22ECh. 4 - Prob. 4.23ECh. 4 - Prob. 4.24AECh. 4 - Prob. 4.25PCh. 4 - Prob. 4.26PCh. 4 - Prob. 4.27PCh. 4 - Consolidated Balance Sheet Powder Company spent...Ch. 4 - Prob. 4.29PCh. 4 - Prob. 4.30PCh. 4 - Prob. 4.31PCh. 4 - Prob. 4.32PCh. 4 - Prob. 4.33PCh. 4 - Prob. 4.34PCh. 4 - Prob. 4.35PCh. 4 - Prob. 4.36PCh. 4 - Prob. 4.37AP
Knowledge Booster
Similar questions
- Which of the following accounting treatments for costs related to business combination is incorrect? Group of answer choices a. Acquisition related costs such as finder’s fees; advisory, legal, accounting, valuation and other professional and consulting fees; and general administrative costs, including the costs of maintain an internal acquisitions department shall be recognized as expense in the Profit/Loss in the periods in which the costs are incurred. b. The costs related to issuance of financial liability at fair value through profit or loss shall be recognized as expense while those related to issuance of financial liability at amortized cost shall be recognized as deduction from the book value of financial liability or treated as discount on financial liability to be amortized using effective interest method. c. The costs related to the organization of the newly formed corporation also known as pre-incorporation costs shall be capitalized as goodwill or deduction from…arrow_forwardThe existence of overvalued assets (when comparing book and market value) on the books of the entity acquired in an acquisition method business combination: Decrease the excess of cost over book value applicable to unrecorded goodwill. Has the same effect as overvalued liabilities on the excess of cost over book value applicable to unrecorded goodwill Means that there will never be goodwill recorded in the business combination. Increase the excess of cost over book value applicable to unrecorded goodwill.arrow_forwardA bargain purchase arises when the price paid to acquire a controlling interest in another company is less than the acquirer’s share of the fair value of net assets of the company being acquired. At the end of your preliminary analysis, you believe that a business combination results in a bargain purchase. What is your next step? A. Recognize an immediate gain in the consolidated statement of profit and loss without further analysis. B. Recognize a liability in the consolidated balance sheet. C. Contact the acquiree to confirm its intention. D. Reassess each step of your analysis to confirm your preliminary findings.arrow_forward
- When does gain recognition accompany a business combination?a. When a bargain purchase occurs.b. In a combination created in the middle of a fiscal year.c. In an acquisition when the value of all assets and liabilities cannot be determined.d. When the amount of a bargain purchase exceeds the value of the applicable noncurrent assets (other than certain exceptions) held by the acquired company.arrow_forwardIf the asset or disposal group is acquired as part of a business combination, it shall be measured at: A. The lower of “Cost” and “Fair value, less costs to sell’ B. Fair value, less costs to sell C. Cost D. The higher of “Cost” and “Fair value, less costs to sell’arrow_forwardUnder PFRS 3, when is a gain recognized in consolidating financial information? a. In a combination created in the middle of the fiscal year b. In an acquisition when the value of all assets and liabilities cannot be determined. c. When any bargain purchased is created d. When the amount of a bargain purchase exceeds the value of the applicable liability held by the acquired company.arrow_forward
- LBO Valuation - Normalizing EBITDA The ultimate valuation of a prospective LBO is usually based on normalized EBITDA so it's important to understand potential adjustments to derive normalized EBITDA. Which of the following is not typically considered an adjustment when normalizing EBITDA? Gains/losses on sale of assets A O Personal expenses being expensed to the company Reducing cost of goods sold as the private equity firm will drive costs lower Transaction or professional fees Scroll down for more Nextarrow_forwardIf the value implied by the purchase price of an acquired company exceeds the fair values of identifiable net assets, the excess should be a. Allocated goodwill b. Allocated to reduce long-lived assets c. Allocated to reduce any previously recorded goodwill and classify any remainder as an ordinary gain. d. Allocated to reduce current and long-lived assets A branch office allowed to make sales, carry inventory for resale to customers, and incur normal operating expenses. The home office ships merchandise to the branch office at cost plus a 20% markup. The home office account is used in its customary fashion, it will track: a. Unrealized inventory profits and overall branch profits losses b. Overall branch profits and losses but not unrealized inventory profits c. Unrealized inventory profits only d. Unrealized inventory profits and overall branch profits but not branch lossesarrow_forwardIn an asset acquisition: a. A consolidation must be prepared whenever financial statements are issued. b. The acquiring company deals only with existing shareholders, not the company itself. c. The assets and liabilities are recorded by the acquiring company at their book values. d. Statements for the single combined entity are produced automatically and no consolidation process is needed.arrow_forward
- Which of the following LEAST accurately describes the advantages of specific types of mergers and acquisitions?a. The catch-all term for the benefits from M&As is synergy.b. A diversified group of business may further acquire other businesses in a conglomerate type of acquisition.c. The acquisition of an entity outside the industry and supporting services will result to decrease in cost of production of the acquirer.d. Financial advantages of M&A include decreased operating costs, increased financial capacity, and combined sales.arrow_forwardWhat is the appropriate accounting treatment for the value assigned to in-process research and development acquired in a business combination?a. Expense upon acquisition.b. Capitalize as an asset.c. Expense if there is no alternative use for the assets used in the research and development and technological feasibility has yet to be reached.d. Expense until future economic benefits become certain and then capitalize as an asset.arrow_forwardWhich of the following statements is true about goodwill? Goodwill may be recorded when the fair value of a company's assets exceeds their а. cost. b. Goodwill may be recorded when one company acquires another in a business combination. С. Goodwill may be recorded when a company has exceptional customer relations. d. Goodwill may be recorded when it is identified within a company.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education