Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 7, Problem 2P
To determine
Identify the appropriate answer for the given statement from the given choices.
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Choose the correct. A subsidiary owns shares of its parent company. Which of the following is true concerning the treasury stock approach?a. It is one of several options to account for mutual holdings available under current accounting standards.b. The original cost of the subsidiary’s investment is a reduction in consolidated stockholders’ equity.c. The subsidiary accrues income on its investment by using the equity method.d. The treasury stock approach eliminates these shares entirely within the consolidation process.
What 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.
1.) When share options issued to employees are exercised, the entity shall:
a. recognize a loss for the unamortized balance
b. make a transfer among equity components
c. recognize a gain for the unamortized balance
d. do nothing
2.) A share-based payment transaction with cash alternative whereby the right of choice of settlement is retained by the entity is accounted for as:
a. either cash-settled or equity-settled, but not both
b. equity-settled
c. partly cash-settled and equity-settled
d. cash-settled
3.) A share-based payment transaction with cash alternative whereby the right of choice of settlement is given to the employee is accounted for as:
a. cash-settled
b. either cash-settled or equity-settled, but not both
c. partly cash-settled and equity-settled
d. equity-settled
Chapter 7 Solutions
Advanced Accounting
Ch. 7 - Prob. 1QCh. 7 - Prob. 2QCh. 7 - Prob. 3QCh. 7 - How does the presence of an indirect ownership...Ch. 7 - Prob. 5QCh. 7 - In accounting for mutual ownerships, what is the...Ch. 7 - Prob. 7QCh. 7 - Prob. 8QCh. 7 - Prob. 9QCh. 7 - Prob. 10Q
Ch. 7 - Prob. 11QCh. 7 - Jones acquires Wilson, in part because the new...Ch. 7 - Prob. 13QCh. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Which of the following is correct for two...Ch. 7 - Prob. 5PCh. 7 - Prob. 6PCh. 7 - Prob. 7PCh. 7 - Prob. 8PCh. 7 - Prob. 9PCh. 7 - Prob. 10PCh. 7 - Prob. 11PCh. 7 - Prob. 13PCh. 7 - Prob. 14PCh. 7 - Prob. 15PCh. 7 - Prob. 16PCh. 7 - Prob. 17PCh. 7 - Prob. 18PCh. 7 - Prob. 19PCh. 7 - Prob. 20PCh. 7 - Prob. 23PCh. 7 - Prob. 24PCh. 7 - Prob. 26P
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- The motivation of a parent company to purchase the outstanding bonds of a subsidiary could be to: a. replace the existing debt with new debt at a lower interest rate. b. reduce the parent company's acquisition price for the subsidiary. c. increase the parent company's ownership percentage in the subsidiary. d. create interest revenue to offset interest expense in future income statements.arrow_forwardIf a parent company has controlling interest in a subsidiary which has no potentially dilutive securities outstanding, then in the calculation of consolidated diluted EPS, it will be necessary to Select one: a. only make an adjustment of subsidiary's basic earnings. b. replace the parent's equity in subsidiary earnings with the parent's equity in subsidiary's diluted EPS. c. make a replacement calculation in the parent's basic earnings for the EPS. d. only use the parent's common shares and shares represented by the parent's potentially dilutive securities.arrow_forward1. Shares issued in connection with business combination are recorded at: A discount A premium Fair value Par value 2. Indirect costs related to acquisition of another entity is treated as An expense An investment account Share capital Share premium 3. The cost of registering equity securities in a business combination should be capitalized debited to share premium expensedarrow_forward
- Which 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_forwardThe following independent statements may be true or false. Discuss the circumstances whereby the statement is true and the circumstances whereby it is false. Dividends declared by a Group (which is shown as an appropriation in the Consolidated Statement of Changes in Equity) comprises dividends declared by the Parent and dividends declared by a Subsidiary to its Non-controlling Interests.arrow_forwardThe fair value method of accounting for stock a.recognizes dividends as income b.requires the investment to be decreased by the reported net income of the investee c.requires the investment to be increased by the reported net income of the investee d.is only appropriate as part of a consolidationarrow_forward
- Which statement is incorrect? * A. EPS disclosures are required for entities whose ordinary shares are publicly traded as well as entities that are in the process of issuing ordinary shares in the public market. B. When an entity issues both consolidated ad separate financial statements, the EPS information is required for the consolidated financial statements only. C. In computing basic EPS, the amount of preference dividends on noncumulative preference shares for the period should be deducted from net income whether declared or not D. In computing the weighted average of shares outstanding, when a share dividend or share split occurs, the additional shares are considered outstanding at the beginning of the earliest year reported. E. none of the abovearrow_forwardWhich of the following statements is correct regarding working paper entries to facilitate the preparation of the consolidated financial statements? * A. Debit Non-controlling Interest in Net Assets in the working paper to assign to the non-controlling stockholders their share in the gain on bargain purchase. b. Debit Share Premium relating to issuance of stocks in the working paper to record the cost of SEC registration and listing fees. c. Credit Investment in Subsidiary Company Stock in the working paper to record the purchase of outstanding shares from subsidiary company. d. Credit Equipment in the working paper to adjust a fair value differential of an overvalued equipment.arrow_forwardIf the issuing company has only one class of share capital, a transfer from retained earnings to contributed capital equal to the market value of the shares issued is ordinarily a characteristic of: A. A bonus issue but not a share split B. Neither a bonus issue nor a share split C. Either a bonus issue or a share split D. A share split but not a bonus issuearrow_forward
- In the equity method of acquisition income is recognized only when the subsidiary declares dividends Select one: True Falsearrow_forwardHow is the Non-Controlling Interest displayed in a consolidated balance sheet? a. As a separate item in the stockholder’s equity section b. By means of a note to consolidated financial statements c. As a separate item between the liabilities and stockholder’s equity d. As a deduction from goodwill, if any e. Non-controlling interest is never presented in consolidated balance sheet.arrow_forwardWhen share options issued to employees are exercised, the entity shall make a transfer among equity components do nothing recognize a gain for the unamortized balance recognize a loss for the unamortized balancearrow_forward
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