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 by subsidiary 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 net income own operation. C. Adjusted net income of subsidiary is shared by Parent’s holding interest and noncontrolling interest. D. Dividend declared by subsidiary is shared by Parent’s holding interest and noncontrolling interest.

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 by subsidiary 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 net income own operation. C. Adjusted net income of subsidiary is shared by Parent’s holding interest and noncontrolling interest. D. Dividend declared by subsidiary is shared by Parent’s holding interest and noncontrolling interest.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter14: Intercorporate Investments In Common Stock

Section: Chapter Questions

Problem 8Q

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Under the Cost Method A. The parent’s investment in the Subsidiary is recorded at cost and reduced by an excess dividends received from subsidiary. B. The parent’s investment in the subsidiary is recorded at cost, and never changed thereafter. C. The parent records its pro rata share of the subsidiary’s post-acquisition income as an increase to the investment account and reduces the investment account with its share of the dividends declared by the subsidiary. D. The parent records it pro rata share of the subsidiary’s cumulative earnings as an increase to the investment account and reduces the investment account with its share in the dividends declared by the subsidiary
What is true about the choice by the parent as to whether to use the equity, partial equity or initial value methods for its investment in its consolidated subsidiary. Partial equity method has the parent record excess amortization All methods result in the same Investment balance on the parent's books Consolidated totals for all three methods will be identical Equity method results in the highest consolidated net income
Which of the following income items may affect both Consolidated Net Income attributable to Parent and Non-Controlling Interest in Profit? * A. Gain on bargain purchase arising from business combination. B. Gain (loss) arising from intercompany sale of fixed assets from parent to subsidiary. C. Answer not given D. Amortization of excess in merchandise inventory of the acquired company. E. Impairment of a goodwill recognized using the proportionate or relevant share.
Under the Cost Method The parent records its pro rata share of the subsidiary’s post-acquisition income as an increase to the investment account and reduces the investment account with its share of the dividends declared by the subsidiary. The parent’s investment in the subsidiary is recorded at cost, and never changed thereafter. The parent records it pro rata share of the subsidiary’s cumulative earnings as an increase to the investment account and reduces the investment account with its share in the dividends declared by the subsidiary The parent’s investment in the Subsidiary is recorded at cost and reduced by an excess dividends received from subsidiary.
What is true about the choice by the parent as to whether to use the equity, partial equity or initial value methods for its investment in its consolidated subsidiary. Partial equity method has parent recording identical excess amortization as under equity method Equity method results in the highest consolidated net income All methods result in an identical Investment balance on the parent's books Consolidated totals for all three methods will be identical
Consolidated Net Income is equal to: Multiple Choice the sum of the net incomes of both the parent and its subsidiaries less any inter-company dividends. the parent's net income excluding any income arising from its investment in the Subsidiary, plus the net income of the subsidiary less the amortization of the acquisition differential and the impairment of goodwill. the parent's net income excluding any income arising from its investment in the subsidiary. the sum of the net incomes of both the parent and its subsidiaries.
Choose the letter of the correct answer. 1. Which of the following is not correct with regard to a parent’s ownership of 100 percent of a subsidiary’s stock subsequent to a book value acquisition? A. Consolidated Investment in Subsidiary balance equals the parent’s Investment in Subsidiary balance B. Consolidated Retained Earnings equals the parent’s Retained Earnings C. Consolidated dividends equal the parent’s dividends D. Consolidated net income equals the parent’s net income 2. What amount of allocated excess/purchase differential amortization is recognized in the parent’s financial records subsequent to the subsidiary’s acquisition? A. The noncontrolling interest percentage ownership in the subsidiary B. 100 percent of the purchase differential amortization C. Allocated excess/purchase differentials are not amortized D. The parent percentage ownership in the subsidiary
4. What method normally is used to account for the ownership of a subsidiary on the parent’s financial records? a Cost model/methodb. Equity methodc. Consolidationd. Either cost model/method or equity method
In the equity method of acquisition income is recognized only when the subsidiary declares dividends Select one: True False
If the entity is using the equity method to account for investment in subsidiary, the entry to recognize dividends received from the subsidiary will: a.Be recognized in profit or loss b.Increase the carrying amount of investment c.Decrease the carrying amount of investment d.Be recognized in other comprehensive income
A) When preparing consolidated financial statement workpapers, unrealized intercompany gains, as a result of equipment or inventory sales by affiliates, are allocated proportionately by percent of ownership between parent and subsidiary only when selling affiliate is a. The parent, and the subsidiary is less than wholly owned. b. The subsidiary, and the subsidiary are less than wholly owned c. A wholly owned subsidiary d. The parent of a wholly owned subsidiary. B) Gain or loss returning from an intercompany sale of equipment between a parent and a subsidiary is a. Considered to be realized over the remaining useful life of the equipment as an adjustment to depreciation in the consolidation statements. b. Considered to be unrealized in the consolidated statements until the equipment is sold to a third party c. Amortized over a period not less than 2 years and not greater than 40 years. d. Recognized in the consolidated statements in the year of the sale
Choose the letter of the correct answer: 1. What amount of allocated excess/purchase differential amortization is recognized in the consolidated financial statements subsequent to the subsidiary’s acquisition? A. The noncontrolling interest percentage ownership in the subsidiary B. 100 percent of the purchase differential amortization C. Allocated excess/purchase differentials are not amortized D. The parent percentage ownership in the subsidiary 2. What amount of allocated excess/purchase differential amortization is recognized in the consolidated financial statements subsequent to the subsidiary’s acquisition? A. Allocated excess/purchase differentials are not amortized B. The parent percentage ownership in the subsidiary C. The noncontrolling interest percentage ownership in the subsidiary D. 100 percent of the purchase differential amortization