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 7Q
To determine
Explain the manner in which the consolidation process be affected if these transfers were downstream and the manner in which consolidated financial statements be affected if these transfers were upstream.
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Demonstrate the consolidation procedures to eliminate intra-entity sales and purchases balances.
Many companies transfer inventories from one subsidiary to another. Often the companies have integrated operations in which one subsidiary provides raw materials, another manufacture finished products, and another distributes and perhaps another sells the product at retail.
Required:
Discuss how intercompany transfers should be treated for consolidation purposes, in both the statement of financial position and the statement of comprehensive income.
Scenario
Many companies transfer inventories from one subsidiary to another. Often the companies have integrated operations in which one subsidiary provides raw materials, another manufacture finished products, and another distributes, and perhaps another sells the product at retail.
Required:
Discuss how intercompany transfers should be treated for consolidation purposes, in both the statement of financial position and the statement of comprehensive income. Also, make reference to the related IFRS’s an IAS’s.
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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- what 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_forwardDescribe the process of consolidating financial statements for a parent company and its subsidiaries, including the elimination of intercompany transactions and balances.arrow_forward1. For external reporting, the individual financial statements of the home office and the branch are combined a. by using complex consolidation procedures. b. by recognizing the home office's own assets, liabilities, income and expenses plus its share in the branch's assets, liabilities, income and expenses. c. by adding together similar items of assets, liabilities, income and expenses. d. by adding together similar items of assets, liabilities, income and expenses 'and eliminating reciprocal accounts. 2. A credit memo received from the branch is recorded by the home office as a. Credit to home office account b. Credit to allocated expense c.Credit to investment account d. Debit to investment accountarrow_forward
- An entity shall determine whether a transaction or other event is a business combination by applying the definition in PFRS 3, which requires that: a. All of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination. b. All of the combining entities transfer their net assets, or the owners of those entities transfer their equity interests, to a newly formed entity. c. The assets acquired and the liabilities assumed constitute a business. d. All of the above.arrow_forwardDemonstrate the consolidation process when a corporate ownership structure is characterized by a connecting affiliation.arrow_forwardWhich of the following statements is not correct in relation to consolidation accounting key terms? Select one alternative: Consolidated financial statements are financial statements of a group of entities presented as if that group was acting as a single economic entity. A parent is an entity that has more than one subsidiary. A subsidiary is an entity that is controlled by another entity. A group comprises a parent and all of its subsidiaries.arrow_forward
- Why do we need to pass the consolidation elimination entry everytime we prepare a consolidated financial statement?arrow_forward8. During the post-merger integration of two companies, which of the following activities support a successful change? a. implementing the merger integration plan as soon as possible b. ensuring key profit levers are under control c. constant communications d. a and c only e. all of the abovearrow_forwardSegment Reporting To provide information that can be used to evaluate _____ and ______ across different lines of business and in different parts of the world, Multinational Corporations (MNCs) disaggregate consolidated totals and provide disclosures on a segment basis. This information may also be used to assess how __________ an MNC is. Fill in the spaces?arrow_forward
- Consolidation accountinga. eliminates all liabilities.b. reports the receivables and payables of the parent company only.c. combines the accounts of the parent company and its subsidiary companies.d. all of the abovearrow_forwardRegarding Business Combinations: Critically analyse the key characteristics of an acquiring company as far as mergers and acquisition is concerned.arrow_forwardDiscuss how intercompany transactions and debts should be treated for consolidation purposes, in both the statement of financial position and the statement of comprehensive income.arrow_forward
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