Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 5, Problem 3P
To determine
Identify the appropriate answer for the given statement from the given choices.
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In computing the noncontrolling interest’s share of consolidated net income, how should the subsidiary’s net income be adjusted for intra-entity transfers?a. The subsidiary’s reported net income is adjusted for the impact of upstream transfers prior to computing the noncontrolling interest’s allocation.b. The subsidiary’s reported net income is adjusted for the impact of all transfers prior to computing the noncontrolling interest’s allocation.c. The subsidiary’s reported net income is not adjusted for the impact of transfers prior to computing the noncontrolling interest’s allocation.d. The subsidiary’s reported net income is adjusted for the impact of downstream transfers prior to computing the noncontrolling interest’s allocation.
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
The Investment in a Subsidiary should be recorded on the parent’s books at the
A. Fair value of the consideration given plus an estimated value for goodwill.B. Fair value of the subsidiary’s net identifiable assetsC. Underlying book value of subsidiary’s net assetsD. Fair value of the consideration given
Chapter 5 Solutions
Advanced Accounting
Ch. 5 - Prob. 1QCh. 5 - Prob. 2QCh. 5 - Prob. 3QCh. 5 - Prob. 4QCh. 5 - James, Inc., sells inventory to Matthews Company,...Ch. 5 - Prob. 6QCh. 5 - Prob. 7QCh. 5 - Prob. 8QCh. 5 - Prob. 9QCh. 5 - Prob. 10Q
Ch. 5 - Prob. 11QCh. 5 - Prob. 12QCh. 5 - Prob. 13QCh. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Prob. 5PCh. 5 - Prob. 6PCh. 5 - Prob. 8PCh. 5 - Prob. 11PCh. 5 - What is the total of consolidated cost of goods...Ch. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - What is the consolidated total for inventory at...
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- Please concisely explain how the excess investment cost over book value is allocated. When is the intra-entity’s profits recognized on transfers between the investor and investee? What is the controlling interest percentage for a consolidated accounting financial statement?arrow_forwardIn the separate financial statement of the parent company, which of the following statements concerning the different accounting treatment for investment in subsidiary is correct? a. Under equity method, cash or property dividend received shall be recognized as dividend income by the parent. b. Under cost method, the transaction cost directly attributable to acquisition of the investment shall be expensed as incurred. c. Under fair value model, the parent company shall recognize share in net income from the subsidiary. d. Regardless of the method, the investment in subsidiary account shall be presented as noncurrent asset in the parent’s separate statement of financial position.arrow_forwardWhat is the correct method for treating a vesting differential linked to the acquisition of shares? privileged rights of the subsidiary by the parent company? Select an answer: a. It must be allocated to identifiable net assets or goodwill. b. It must be distributed in proportion to the identifiable assets and liabilities of the subsidiary. c. It must be charged to consolidated retained earnings or credited to contributed surplus. d. It must be taken care of in the current year.arrow_forward
- When a parent company uses the equity method to account for an investment in a subsidiary, why do both the parent’s Net Income and Retained Earnings account balances agree with the consolidated totals?arrow_forwardThe investment in a subsidiary should be recorded on the parent's books at the underlying book value of the subsidiary's net assets O fair value of the subsidiary's net identifiable assets O fair value of the consideration given O fair value of the consideration given plus an estimated value for goodwillarrow_forwardIn accordance with PFRS 2, Share-based Payment, how should an entity recognize the change in fair value of the liability in respect of a cash-settled share-based payment transaction? Group of answer choices Do not recognize in the financial statements but disclose in the notes thereto. Recognize in other comprehensive income. Recognize in the statement of changes in entity. Recognize in profit or loss.arrow_forward
- Describe the difference between the economic entity concept and the parent company concept approaches to the reporting of subsidiary assetsand liabilities in the consolidated financial statements on the date of the acquisition.arrow_forwardIn the consolidated statement of comprehensive income to be prepared by the parent corporation, which of the following items will affect both consolidated net income attributable to parent and non-controlling interest in net income? Impairment loss on goodwill recognized when the noncontrolling interest is measured at proportionate share of fair value of net assets of subsidiary. Amortization of difference between fair value and book value of liability of subsidiary. Realization of unrealized gain or (loss) from sale of parent company to subsidiary company. Recognition of gain on bargain purchase arising from business combination.arrow_forwardThe unamortized excess account is a. the excess purchase cost that is attributable to goodwill. b. the excess purchase cost that is attributable to a bargain purchase. c. the excess purchase cost over the subsidiary’s net assets’ book value d. the excess purchase cost over the subsidiary’s net assets’ fair value.arrow_forward
- What is the noncontrolling interest in Subsidiary income? Select one: a. The portion of Subsidiary income that is not included in consolidated income b. The allocation of difference between fair value and book value c. The difference between Parents reported income and Subsidiary reported income d. The part of Subsidiary income that is owned by shareholders other than Parentsarrow_forwardwhat are intra-entity transfers? How do you treat intra-entity transfers while consolidating the financial statements of a parent company and its subsidiary?. Discuss with suitable examples.arrow_forwardIn a business combination, an acquirer's interest in the fair value of the net assets acquired exceeds the consideration transferred in the combination. Under PFRS 3 Business Combinations, the acquirer should A. recognize the excess immediately in profit or los B. recognize the excess immediately in other comprehensive income C. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in other comprehensive income D. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in profit or lossarrow_forward
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