Advanced Accounting - Chapter 4: Consolidated Financial Statements and Outside Ownership

Which of the following items enter into the computation of net income attributable to the noncontrolling interest?

- The noncontrolling interest's ownership percentage in the subsidiary. - Excess acquisition-date fair value amortizations. - The subsidiary's net income.

The beginning balance of the noncontrolling interest (NCI) can be viewed as the NCI's ownership share multiplied by the sum of which of the following two components?

- The unamortized excess acquisition-date subsidiary fair over book value as of the beginning of the period. - The book value of the subsidiary as of the beginning of the period.

For most cases, the best measure of a noncontrolling interest's acquisition-date fair value is

the market price of the noncontrolling shares surrounding the date of an acquisition.

Following a sale, when a parent retains only a non-controlling portion of its former subsidiary's shares, what accounting is appropriate for the retained investment?

- A gain or loss is recognized on the revaluation of the retained investment to fair value. - The retained investment is revalued to fair value as of the date control is lost.

When a parent applies the initial value method to account for its Investment in Subsidiary account, Consolidation Entry asterisk C provides which of the following adjustments to accrual accounting?

- An adjustment to the parent's RE for its share of the change in subsidiary RE from acquisition date to the beginning of the current period. - An adjustment to the parent's RE for its share of excess fair value amortizations from acquisition date to the beginning of the current period.

Why are two separate consolidation entries (A1 and A2) useful when the parent has paid a control premium for its controlling, but partial interest in a subsidiary? Multiple select question.

- Because the presence of a control premium affects primarily the parent shares. Because the unamortized acquisition-date excess fair values are allocated proportionately across ownership interests. - Because goodwill is not allocated proportionately across the ownership interests.

As part of the consolidation process which of the following are included in the calculation of the ending balance of the noncontrolling interest?

- Dividends from the subsidiary attributable to the noncontrolling interest. - The consolidated entity's net income attributable to the non-controlling interest. - The balance of the noncontrolling interest as of the beginning of the period.

Which of the following identify where noncontrolling interest amounts appear in consolidated financial statements?

- In the consolidated income statement as allocation of consolidated net income - In the consolidated owners' equity section

Consolidation Entry S eliminates 100% of the subsidiary's beginning-of-the-period stockholders' equity accounts. In the presence of a noncontrolling interest, to what accounts is the total elimination allocated?

- The Noncontrolling Interest. - The Investment in Subsidiary

A parent company owns 80% of the voting stock of a subsidiary. In Consolidation Entry I, what percentage of the parent's balance in its Equity in Subsidiary Earnings account should be eliminated?

100%

Business Combination

A business making an investment in another business by acquiring a controlling share, often greater than 50%, of the outstanding voting stock of another corporation by paying cash or exchanging stock.

What is the valuation principle for the non-controlling interest?

Acquisition-date fair value

When the parent company employs the initial value method for its Investment in Subsidiary account

Entry D is unnecessary

Why does measuring the acquisition-date fair value of a noncontrolling interest require estimation?

The Non controlling interest shares were neither bought nor sold as part of the acquisition.

Control Premeium

The extra price per share paid to ensure a controlling interest in a business combination.

Non-controlling Interest

The portion of equity (net assets) interest in a subsidiary not attributable to the parent company.

In periods subsequent to acquisition, noncontrolling (NCI) interest valuation in consolidated financial reports is based on Multiple choice question.

acquisition-date fair value adjusted for the NCI's share of post-acquisition adjusted subsidiary net income less dividends.

When control is lost following a parent's sale of its subsidiary shares, the parent recognizes

an adjustment to APIC

The combined credits to the noncontrolling interests in Consolidation Entries S and A equal the total balance of the noncontrolling interest as of the

beginning of the period

Fill in the blank question. When a parent company employs the equity method, consolidation Entry D eliminates subsidiary dividends attributable to the

parent company

Consolidation Entry A adjusts subsidiary assets and liabilities for any excess acquisition-date excess fair over book values. The Consolidation Entry A adjustment to the subsidiary's assets and liabilities is net of

previous period's excess fair over book value amortizations.

When the parent applies the equity method, which of the following balances are the same across the parent company accounts and consolidated balances?

retained earnings

On a consolidation worksheet, the noncontrolling interest's share of subsidiary dividends declared

serve to reduce the noncontrolling interest balance

Consolidation Entry I represents part of a sequence of worksheet entries that bring the Investment in Subsidiary account to a

zero balance

A parent company owns 80% of the voting stock of a subsidiary. What percentage of the subsidiary's net income (after excess acquisition-date fair value amortizations) is attributable to the noncontrolling interest?

20%

For an 80% owned subsidiary accounted for under the equity method, the parent includes in the Investment in Subsidiary account balance

- a deduction for 80% of subsidiary dividends declared since acquisition. - 80% of post-acquisition subsidiary earnings adjusted for excess acquisition-date fair value amortizations.

In periods subsequent to an acquisition, how is consolidated net income generally computed in the presence of a 20% noncontrolling interest?

100% of the parent's net income plus 100% of the subsidiary's net income adjusted for excess acquisition-date fair value amortizations.

Consolidated retained earnings equal the parent's retained earnings when the parent accounts for its Investment in Subsidiary using

the equity method

When collective acquisition-date FV of subsidiary's net assets exceeds the sum of acquisition fair values of all interests, there is a

Gain on Bargain Purchase

How is the Equity of the subsidiary owners of a non-controlling interest group recognized

In the parent's consolidated financial statement

Under the partial equity method, the parent records on its internal financial records

its share of subsidiary dividends as a reduction to its investment account. its share of reported subsidiary income.

When a parent pays a control premium in a less-than-100% acquisition

more goodwill will be allocated to the parent than to the noncontrolling interest relative to their proportionate ownership percentages

Because it is an intra-entity transfer, the portion of a subsidiary dividend payable to its parent company is

eliminted in consolidation