Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 4, Problem 1P
To determine
Identify the appropriate answer for the given statement from the given choices.
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Choose the correct. What is a basic premise of the acquisition method regarding accounting for noncontrolling interest?a. Consolidated financial statements should be primarily for the benefit of the parent company’s stockholders.b. Consolidated financial statements should be produced only if both the parent and the subsidiary are in the same basic industry.c. A subsidiary is an indivisible part of a business combination and should be included in its entirety regardless of the degree of ownership.d. Consolidated financial statements should not report a noncontrolling interest balance because these outside owners do not hold stock in the parent company.
The noncontrolling interest represents an outside ownership in a subsidiary that is not attributable to the parent company. Where in the consolidated balance sheet is this outside ownership interest recognized?a. In the liability section.b. In a mezzanine section between liabilities and owners’ equity.c. In the owners’ equity section.d. The noncontrolling interest is not recognized in the consolidated balance sheet.
What is push-down accounting?a. A requirement that a subsidiary must use the same accounting principles as a parent company.b. Inventory transfers made from a parent company to a subsidiary.c. A subsidiary’s recording of the fair-value allocations as well as subsequent amortization.d. The adjustments required for consolidation when a parent has applied the equity method of accounting for internal reporting purposes.
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Choose the correct. The noncontrolling interest represents an outside ownership in a subsidiary that is not attributable to the parent company. Where in the consolidated balance sheet is this outside ownership interest recognized?a. In the liability section.b. In a mezzanine section between liabilities and owners’ equity.c. In the owners’ equity section.d. The noncontrolling interest is not recognized in the consolidated balance sheet.arrow_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_forwardChoose the correct. What is push-down accounting?a. A requirement that a subsidiary must use the same accounting principles as a parent company.b. Inventory transfers made from a parent company to a subsidiary.c. A subsidiary’s recording of the fair-value allocations as well as subsequent amortization.d. The adjustments required for consolidation when a parent has applied the equity method of accounting for internal reporting purposes.arrow_forward
- Which 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_forwardIn the cost method of acquisition income is recognized only when the subsidiary declares dividends Select one: True Falsearrow_forwardWhich 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.arrow_forward
- The following independent statements may be true or false. Discuss the circumstances whereby the statement is true and the circumstances whereby it is false. (a) Goodwill on consolidation in the Consolidated Statement of Financial Position is the difference between consideration paid by the Parent and the Parent's share of fair value of identifiable net assets of a partially-owned Subsidiary.arrow_forwardWhat 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.arrow_forwardIn the equity method of acquisition income is recognized only when the subsidiary declares dividends Select one: True Falsearrow_forward
- Choose the correct. A company acquires a subsidiary and will prepare consolidated financial statements for external reporting purposes. For internal reporting purposes, the company has decided to apply the initial value method. Why might the company have made this decision?a. It is a relatively easy method to apply.b. Operating results appearing on the parent’s financial records reflect consolidated totals.c. GAAP now requires the use of this particular method for internal reporting purposes.d. Consolidation is not required when the parent uses the initial value method.arrow_forwardWhich of the following is not an application of the acquisition method? a. Measuring the non-controlling interest at the non-controlling interest’s proportionate share in the acquiree’s net identifiable assets or fair value, whichever is higher. b. Measuring the consideration transferred at fair value. c. Identifying the acquirer which is the entity that obtains control over another business in a business combination. d. Determining the acquisition date which is the date the acquirer obtains control over acquiree.arrow_forwardAnswer with true or false. 1. The non-controlling interest is presented in the statement of financial position as an asset. 2. Foreign subsidiaries need not be consolidated in preparing the consolidated financial statements if they are reported as a separate operating group under segment reporting. 3. Consolidated financial statements is needed if the investor has significant influence over the investee company.arrow_forward
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