Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 3, Problem 4Q
To determine
Explain the necessity of removing this amortization.
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True 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.
In reference to the downstream or upstream sale of depreciable assets, which of the following statements is correct?
A. Gains and losses appear in the parent-company accounts in the year of sale and must be eliminated by the parent company determining its investment income under equity method of accounting.
B. The initial effect of unrealized gains and losses from downstream sales of depreciable asset is different from the sale of non-depreciable assets.
C. Gains, but not losses, appear in the parent-company accounts in the year of sale and must be eliminated by the parent company in determining its investment income under the equity method of accounting.
D. Upstream sales from the subsidiary to the parent company always result in unrealized gains or losses.
Which statement is incorrect regarding reclassification of financial assets?
A. Reclassifications are only permitted on the change of an entity's business model and are expected to occur only infrequently.
B. None of these.
C. An entity shall restate any previously recognized gains, losses (including impairment gains or losses) or interest.
D. An entity shall account for transfers between categories prospectively, at the beginning of the period after the change in the business model.
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