Fundamentals of Advanced Accounting
6th Edition
ISBN: 9780077862237
Author: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
Publisher: McGraw-Hill Education
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Chapter 3, Problem 2P
To determine
Identify the appropriate answer for the given statement from the given choices.
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In 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.
Which of the following pertaining to Consolidated Financial Statements is correct?A. The preparation of Consolidated Financial Statements means that the companiesinvolved cease to operate as separate legal entities.B. The preparation of Consolidated Financial Statements is at the Parent Company'sdiscretion.C. When one company has control over another, Consolidated Financial Statementsmust be prepared for the combined entity.D. Before preparing Consolidated Financial Statements, a subsidiary's FinancialStatements prior to the date of acquisition must be restated.
Which of the following regarding the preparation of Consolidated Financial Statement iscorrect?A. Once the parent company prepares Consolidated Financial Statements, it no longerneeds to prepare financial statements for its own activities.B. Only the subsidiaries are required to prepare Financial Statements.C. Consolidated Financial Statements are required by the Parent Company for reportingpurposes only; each company must continue to prepare its own FinancialStatements.D. Consolidated Financial Statements are required only when both companies arepublicly traded.
Chapter 3 Solutions
Fundamentals of Advanced Accounting
Ch. 3 - Prob. 1QCh. 3 - Prob. 2QCh. 3 - Prob. 3QCh. 3 - Prob. 4QCh. 3 - When a parent company applies the initial value...Ch. 3 - Several years ago, Jenkins Company acquired a...Ch. 3 - Benns adopts the equity method for its 100 percent...Ch. 3 - Prob. 8QCh. 3 - Prob. 9QCh. 3 - Prob. 10Q
Ch. 3 - Prob. 11QCh. 3 - Prob. 12QCh. 3 - Prob. 1PCh. 3 - Prob. 2PCh. 3 - Prob. 3PCh. 3 - Prob. 4PCh. 3 - Prob. 5PCh. 3 - Prob. 6PCh. 3 - If no legal, regulatory, contractual, competitive,...Ch. 3 - Prob. 8PCh. 3 - Prob. 9PCh. 3 - Prob. 10PCh. 3 - Prob. 11PCh. 3 - Prob. 12PCh. 3 - Prob. 13PCh. 3 - Prob. 14PCh. 3 - Prob. 15PCh. 3 - Prob. 16PCh. 3 - Prob. 17PCh. 3 - Prob. 18PCh. 3 - Prob. 19PCh. 3 - Prob. 20PCh. 3 - Prob. 21PCh. 3 - Prob. 22PCh. 3 - Prob. 23PCh. 3 - Prob. 24PCh. 3 - Prob. 25PCh. 3 - Prob. 26PCh. 3 - Prob. 27PCh. 3 - Prob. 28PCh. 3 - Prob. 29PCh. 3 - Prob. 30PCh. 3 - Prob. 31PCh. 3 - Prob. 32PCh. 3 - Prob. 33PCh. 3 - Prob. 34PCh. 3 - Prob. 35PCh. 3 - Prob. 36PCh. 3 - Prob. 37PCh. 3 - Prob. 38PCh. 3 - Prob. 1DYSCh. 3 - FASB ASC AND IASB RESEARCH CASE A vice president...Ch. 3 - Prob. 4DYSCh. 3 - Prob. 5DYS
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- Which of the following is incorrect regarding consolidated financial statements? a. Consolidation involves adding similar assets, liabilities, income and expenses of the parent and its subsidiaries. b. The subsidiary’s equity is eliminated and replaced with non-controlling interest. c. The consolidated profit pertains only to the parent. d. A parent is exempt from consolidation if it is in itself a subsidiary, its securities are not traded, and its parent produce PFRS (IFRS) consolidated financial statements.arrow_forwardWhich of the following statements is true regarding the acquisition method of accounting for a business combination? a. Assets of the acquired company are recorded at book values. b. Assets of the acquired company are recorded at fair value, but only if the acquisition cost equals or exceeds fair value of the subsidiary's net assets. c. Assets of the acquired company are recorded at fair values regardless of the acquisition cost. d. Consulting costs related to the combination reduce additional paid-in capital.arrow_forwardTrue or False Pls indicate if the statements are true or false. 1. The worksheet eliminations prepared subsequent to acquisition remove the allocated excess/purchase differential amortizations from the consolidated financial statements. 2. Allocated excess/purchase differential amortizations result in the Investment Income account disclosing the income that would have been allocated to the parent had the subsidiary’s financial records disclosed the market value of its assets and liabilities. 3.arrow_forward
- The process of preparing Consolidated Financial Statements involves the elimination of intercompany transactions between a Parent Company and its subsidiary. Where would theseentries be recorded?A. On the Parent's books only.B. On the Subsidiary's books.C. The entries are not recorded in the books of either company. The entries are onlymade on the working papers.D. The effect of any inter-company transaction must be reflected on the books of bothcompaniesarrow_forwardStatement 1: The preparation of consolidated financial statements after acquisition is materially different concept from preparing them in the acquisition date in the sense that reciprocal accounts are eliminated and remaining balances are combined. Statement 2: All revenues and expenses of individual consolidating companies arising from transactions and actions with affiliated companies are included in the consolidated financial statements. a. Only Statement 1 is correct b. Both statements are correct c. Only Statement 2 is correct d. Both statements are incorrectarrow_forwardWhich of the following statements about pushdown accountling is correct? Select one: a. Pushdown accounting occurs when a subsidiary incurs the parent company's transaction costs related to the acquisition of the subsidiary. O b. On the date a parent company obtains control of a subsidiary, pushdown accounting will result in a subsidiary's pre-consolidation individual net assets being reported at fair value, consistent with FASB ASC 805. C. When a subsidiary applies pushdown accounting, the parent company's Equity Investment account is pushed down and reported on the subsidiary's balance sheet. d. When a subsidiary applies pushdown accounting, the parent company is no longer required to issue consolidated financial statements.arrow_forward
- IFRS 10 is an accounting standard that provides guidelines to consolidate financial statements for group companies. The following questions relate to a transaction between companies within a group where a sale of a non-depreciable asset occurred in the current year. (a) Describe the consolidation procedure that will be applied to account for the sale of an asset between the parent and subsidiary in the consolidated financial statements. (b) Discuss the effect of a profit and loss on sale on: (i) The consolidated statement of financial position (ii) The consolidated statement of profit or loss and other comprehensive Please note: Your answer should comply with the requirements of International Financial Reporting Standards (IFRS). Journals and preparation of financial statements are not required.arrow_forwardWhich of the following is NOT included in the cost of an acquired company? (applying section 19 of IFRS for SMEs) a. Contingent consideration determinable at the consummation date of the combination b. Finder’s fee for arranging the combination c. Cost of registering and issuing equity securities d. None of the abovearrow_forwardWhich consolidation method should be used in preparing consolidated financial statements in accordance with IFRS? A. Proportionate consolidation method.B. Either identifiable net assets or fair value enterprise method.C. New entity method.D. Parent company method.arrow_forward
- A 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_forwardA company has included in its consolidated financial statements this year a subsidiary acquired several years ago that was appropriately excluded from consolidation last year. This results in a. an accounting change that should be reported prospectively. b. an accounting change that should be reported by restating the financial statements of all prior periods presented. c. a correction of an error. d. neither an accounting change nor a correction of an error.arrow_forwardWhen we are preparing consolidated financial statements, will the financial statements of the parent entity, or the subsidiary companies, as at the beginning of the financial period reflect prior consolidation adjustments? Why?arrow_forward
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