Which of the following statements is true regarding the acquisition method of accounting for abusiness combination? a. Assets of the acquired company are recorded at book values. b. Assets of theacquired company are recorded at fair value, but only if the acquisition cost equals or exceeds fairvalue of the subsidiary's net assets. c. Assets of the acquired company are recorded at fair valuesregardless of the acquisition cost. d. Consulting costs related to the combination reduce additionalpaid-in capital.

The assets and liabilities of the acquired company are recognised at their fair values at the…

Answered: Which of the following statements is…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Prepare and compute for the CONSOLIDATED TOTAL ASSETS at the date of acquisition.
P Ltd bought 80% of S Ltd’s equity shares on 1 January 2016. On the date of the purchase of S Ltd's shares, among other things, S Ltd's statement of financial position contains the following: $ Retained profit 72,000 Tangible non-current assets Cost 288,000 Fair value 360,000 On the date of acquisition (of S Ltd's shares) by P Ltd, S Ltd's assets were not revalued to fair value. It is part of S Ltd's accounting policy to depreciate non-current assets on a straight-line basis for 10 years. The income statements of P Ltd and S Ltd for the year ended 31 December 2020 are as follows: P Ltd S Ltd $ $ Revenue 240,000 168,000 Cost of sales 144,000 24,000 Gross profit 96,000 144,000 Expenses 12,000 14,400 Depreciation and amortization Operating profit 24,000 28,800 60,000 100,800 9,600 50,400 Income tax 2,400 Net profit 98,400 Reserves (brought forward) Reserves (carried forward) 240,000 168,000 290,400 266,400 Note: P Ltd and S Ltd are considered to be in the same group for the purpose of…
From a consolidated point of view, the intercompany gain or loss on a parent’s sale of a non-depreciable asset to subsidiary is realized when: a. The parent company sells the asset to the subsidiary b. The subsidiary start to use the asset c. The subsidiary resells the asset to the parent d. The subsidiary resells the asset to the outsider
Which of the following costs generally would be capitalized to a property, plant and equipment account? O installation costs related to the machine O import duties incurred on purchase O freight-out O Interest on debt incurred to purchase the item
What is one of the primary objectives of accounting for business amalgamations? A) To recognize the fair value of the acquired assets and liabilities. B) To minimize tax liabilities for the acquiring company. C) To maintain separate accounting records for the acquiring and acquired entities. D) To increase shareholder dividends in the acquiring company.
A subsidiary, acquired for cash in a business combination, owned equipment with a market value in excess of book value as of the date of combination. A consolidated balance sheet prepared immediately after the acquisition would treat this excess as Goodwill. Plant and equipment. Retained earnings.
If the value implied by the purchase price of an acquired company exceeds the fair values of identifiable net assets, the excess should be * accounted for as goodwill. allocated to gain on acquisition allocated to reduce current and long- lived assets. O allocated to reduce long-lived assets. RCo iccuod 6 000 shares of its
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Which of the following statements is true? Multiple Choice The pooling of interests for business combinations is an alternative to the acquisition method. The purchase method for business combinations is an alternative to the acquisition method. Neither the purchase method nor the pooling of interests method is allowed for new business combinations. Any previous business combination originally accounted for under purchase or pooling of interests accounting method will now be accounted for under the acquisition method of accounting for business combinations. Companies previously using the purchase or pooling of interests accounting method must report a change in accounting principle when consolidating those subsidiaries with new acquisition combinations.
1. What is the consolidated assets as of date of acquisition? 2. What is the consolidated equity as of date of acquisition?
What is a good response to? The unrealized intercompany profits can assuredly have an impact on the consolidated financial statements, as true profits and losses will not be recognized until inventory is sold to an unrelated entity. Prior to this third-party sale the intercompany profit or loss in unrealized and must be removed from the reports consolidation to avoid overstating the consolidated net income (Hoyle, Schaefer, & Doupnik, 2024). It is also important to determine if the inventory sale was upstream or downstream, as the considerations will vary based on the sale in relation to the parent company. For an upstream sale (subsidiary to parent company) any unrealized profit or loss can be partially allocated to non-controlling interests assuming such entities exist, and once the inventory has been resold the recognized revenue is subsequently split accordingly. During a downstream sale (parent to subsidiary company) the unrealized revenue is allocated to the parent company,…
Statement 1: Non-controlling interest in subsidiary's net income is never affected by a gain on the transfer of depreciable asset. Statement 2: When change in the estimated life of depreciable assests occurs at the time of an intercompany sales, the treatment is different than if the change occured while the asset remained on the books of the selling affiliate . Which statement/s is TRUE?

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