ACCT 4200 Chapter 3 Consolidations - Subsequent to the Date of Acquisition

True or false: Consolidation Entry A may include an adjustment to recognize goodwill created by the business combination.

True. Reason: Goodwill is often recognized as an asset created in a business combination. Consolidation Entry A allocates the portion of the investment account represented by goodwill.

True or false: The consolidated entry to record goodwill is not accompanied by another consolidation entry to amortize goodwill.

True. Reason: Goodwill is periodically tested for impairment but not amortized.

In the quantitative goodwill impairment test, for each reporting unit -the fair value of goodwill is compared to its carrying amount. -the fair values of each of the reporting unit's individual assets and liabilities are determined. -a comparison is made between the reporting unit's carrying amount (including goodwill) and fair value. -a comparison is made between the reporting unit's carrying amount (excluding goodwill) and fair value.

-a comparison is made between the reporting unit's carrying amount (including goodwill) and fair value.

Under the initial value method of accounting for an investment in a subsidiary company, the parent recognizes income when the subsidiary -generates cash flows from its operations. -earns the income. -declares a dividend. -pays a dividend.

-declares a dividend.

In Consolidation Entry D, the credit to the Dividends Declared account -increases cash. -decreases the investment in the subsidiary. -increases the parent's retained earnings. -reduces the subsidiary's dividends balance.

-reduces the subsidiary's dividends balance.

In the quantitative test for goodwill impairment, if an individual reporting unit's fair value exceeds its carrying amount, goodwill is not considered ______ and no further procedures are needed.

impaired

When a parent company owns 100% of its subsidiary, what amounts for common stock and additional paid-in capital are included in consolidated stockholders' equity totals? -Parent company balances only -Subsidiary company balances only -Both parent and subsidiary company balances -Neither parent nor subsidiary company balances

-Parent company balances only

Select all that apply As compared to acquisition-date accounting for business combinations, subsequent to an acquisition the parent company must additionally report consolidated -revenues. -expenses. -intra-entity transactions. -net income.

-revenues. -expenses. -net income.

Subsequent to acquisition, consolidated depreciation expense is based upon -the book values of the subsidiary's depreciable assets. -the acquisition-date fair values of the parent's depreciable assets. -the acquisition-date fair values of the subsidiary's depreciable assets.

-the acquisition-date fair values of the subsidiary's depreciable assets.

Select all that apply Which of the following parts of a enterprise represent possible reporting units? -An entire enterprise. -A component of an operating segment that is economically similar to other components of the operating segment. -The operating segments of an enterprise. -A component of an operating segment at a level below that operating segment.

-An entire enterprise. -The operating segments of an enterprise. -A component of an operating segment at a level below that operating segment.

Select all that apply Which of the following contribute to the full-accrual income recognition of subsidiary income on the parent's financial records under the equity method? -The recognition of subsidiary dividends declared as income. -The recognition of subsidiary reported income. -The recognition of excess acquisition-date fair value adjustment amortizations to subsidiary income.

-The recognition of subsidiary reported income. -The recognition of excess acquisition-date fair value adjustment amortizations to subsidiary income.

Select all that apply Why is goodwill tested at the reporting unit level rather than the combined entity level? -A goodwill impairment in one reporting unit may be offset by an increase in goodwill in another unit thus preventing the detection of the impairment. -Synergies represented by goodwill exist within the distinct operating lines represented by reporting units. -Separate testing at the reporting unit level minimizes impairment that may exist at the combined entity level.

-A goodwill impairment in one reporting unit may be offset by an increase in goodwill in another unit thus preventing the detection of the impairment. -Synergies represented by goodwill exist within the distinct operating lines represented by reporting units.

Which of the following account balances are identical across the parent's records and consolidated totals when the parent applies the equity method for its Investment in Subsidiary account? -Net income -Amortization expense -Sales revenue -Retained earnings

-Net income -Retained earnings

What effect does the parent's selection of the equity method vs. the initial value method have on consolidated financial statements? -No effect. -Consolidated dividends will be higher under the initial value method. -The Investment in Subsidiary account balance in the consolidated balance sheet will be lower under the initial value method. -Consolidated net income will be higher under the equity method.

-No effect.

When a particular asset acquired in a business combination has an acquisition-date book value in excess of its fair value, the asset's carrying amount from the subsidiary's financial records -remains the same in consolidated financial statements as its current book value -must be reduced in preparing consolidated financial statements -must be increased in preparing consolidated financial statements

-remains the same in consolidated financial statements as its current book value

The values assigned to intangible assets with indefinite useful lives are -not subject to impairment testing. -allocated over time to depreciation expense. -allocated over time to amortization expense. -subject to periodic impairment testing.

-subject to periodic impairment testing.

Consolidation Entry D debits the "Investment in Subsidiary" account when -the parent company has declared a cash dividend for its shareholders. -the parent employs the equity method in accounting for its investment and the subsidiary has declared a current period cash dividend. -the parent employs the initial value method in accounting for its investment and the subsidiary has declared a current period cash dividend.

-the parent employs the equity method in accounting for its investment and the subsidiary has declared a current period cash dividend.

When the parent has applied the equity method in accounting for the earnings of its subsidiary, consolidated retained earnings will equal -the sum of the parent's and the subsidiary's retained earnings balances -the excess of the parent's retained earnings over the subsidiary's retained earnings balances. -the parent's retained earnings balance

-the parent's retained earnings balance

True or false: In the presence of acquisition-date excess fair over book values for subsidiary assets, both consolidation entries A and E are needed to adjust subsidiary assets to their end-of-the-year proper consolidated balances.

TRUE. Reason: Consolidation entry A brings the subsidiary asset to its beginning-of-the-year balance. The consolidation entry E completes the adjustment for the current year.

True or false: For any particular reporting unit, a goodwill impairment loss cannot exceed the carrying amount of that reporting unit's goodwill.

TRUE. Reason: Goodwill impairment losses are limited to any particular reporting unit's carrying amount of goodwill.

When the parent applies the equity method to its investment in subsidiary account, no worksheet entries are required to adjust the parent's retained earnings because the parent has routinely recognized income from the subsidiary on a full-_______ basis.

accrual

When the parent has applied the partial equity method for multiple accounting periods, Consolidation Entry asterisk C will include a debit to the parent's RE when -there was an acquisition-date fair value adjustment that decreased the amounts of limited life assets. -post-acquisition subsidiary dividends have exceeded post-acquisition subsidiary net incomes. -there was an acquisition-date fair value adjustment that increased the amounts of limited life assets.

-there was an acquisition-date fair value adjustment that increased the amounts of limited life assets.

The acquisition-date fair values assigned to an acquired subsidiary's intangible assets should be amortized over their useful lives unless such life is considered ______.

indefinite / unknown

Subsidiary dividends are excluded from consolidated retained earnings because they are attributable to the parent company and not to an _____ party.

outside / external

As part of the consolidation statement preparation process for a parent and subsidiary, the subsidiary's asset, liability, revenue, and expense balances are added to the ______ company balances after appropriate adjustments.

parent

When the acquisition-date fair value of subsidiary long-term debt exceeds its carrying amount, the difference serves to reduce interest expense over the life of the debt, similar to amortizing a bond ______.

premium

For goodwill testing purposes, operating units within a combined entity that report information about their earnings activities to upper management are designated as ______ units.

reporting

Consolidation entries S and A are part of a sequence of worksheet adjustments that bring the Investment in Subsidiary account to a ____ balance.

zero

True or false: Consolidated totals include the unamortized subsidiary acquisition-date excess of fair over book value allocations.

TRUE. Reason: The valuation basis for an acquired subsidiary's assets is acquisition-date fair value after amortization.

Worksheet entries focus on the parent's beginning retained earnings as needed to partially adjust to the full-accrual basis. To complete the adjustment, we combine current year consolidated ______ and ______ to arrive at full-accrual ending retained earnings.

-revenues -expenses

When a subsidiary's tangible asset has an excess acquisition-date book over fair value, Consolidation Entry E will show a ______ to depreciation expense.

credit / decrease

Consolidation worksheets are typically used in the process of preparing consolidated financial statements required by GAAP. Such worksheets utilize consolidation worksheet _______ to develop financial statement totals to be reported by the consolidated entity.

entries / adjustments

Because goodwill has an indefinite life, rather than amortization the FASB utilizes an _______ approach to assessing the appropriateness of reported values for goodwill.

impairment

Impairment testing (as opposed to amortization) is considered appropriate for measuring a decline in goodwill because goodwill is considered to have an ______ life.

indefinite, unlimited, limitless, or undefined

Select all that apply A parent company, over time, will routinely make which of the following adjustments in applying the equity method to its investment in subsidiary account? -Excess acquisition-date fair over book value amortization. -Dividends from the subsidiary. -Post-acquisition changes in the fair value of the subsidiary. -Income as it is earned and reported by the subsidiary.

-Excess acquisition-date fair over book value amortization. -Dividends from the subsidiary. -Income as it is earned and reported by the subsidiary.

Consolidation Entry P -eliminates any intra-entity receivables but leaves any intra-entity payables intact. -eliminates any intra-entity payables but leaves any intra-entity receivables intact. -removes the balances from intra-entity receivables and payables. -includes the balances from intra-entity receivables and payables.

-removes the balances from intra-entity receivables and payables.

When the acquisition-date fair value of subsidiary long-term debt exceeds its carrying amount, in periods subsequent to the acquisition, worksheet entries are needed to ______ interest expense.

decrease / reduce

True or false: Although the choice of an investment accounting method (e.g., equity, initial value, partial equity) produces differing balances on the parent's books, alternative sets of consolidation entries ensure that consolidated financial statement remain invariant to the investment accounting method chosen.

True. Reason: same consolidated balances across the three investment accounting methods.

True or false: Worksheet consolidation entries are not posted to the books of either the parent or the subsidiary.

True. Reason: Consolidation entries are only used to adjust the parent and subsidiary balances on a worksheet to help prepare consolidated financial statements.

Consolidation Entry A adjusts the subsidiary's assets to their unamortized acquisition-date fair value as of what date? -End of the current reporting period -The acquisition date -Beginning of the current reporting period

-Beginning of the current reporting period Reason: Consolidation Entry A adjusts the subsidiary's assets to unamortized fair value as of the beginning of the current period. Then Consolidation Entry E finishes the update to the end of the current period.

Consolidation Entry S credits the Investment in Subsidiary account in order to -remove the beginning of the year book value component of the investment account. -completely eliminate the investment account. -allocate goodwill acquired in the business combination.

-remove the beginning of the year book value component of the investment account. Reason: Multiple consolidation entries are typically needed to completely eliminate the investment account. Goodwill is recognized in consolidation entry A.

When the parent uses the equity method, Consolidation Entry I -ignores the parent's recorded equity income. -includes the parent's recorded equity income in consolidated totals. -removes the subsidiary's individual revenue and expense balances. -removes the parent's recorded equity income.

-removes the parent's recorded equity income.

Neither the initial value method nor the partial equity method represent full accrual accounting for the subsidiary's income. Therefore, over time the parent's beginning ______ ______ becomes misstated and must be appropriately established.

-retained -earnings

Periodic amortization expense should be recognized for the acquisition-date fair values of acquired subsidiary intangible assets with ______ useful lives.

definite, finite, or limited

When the parent applies the equity method to its investment in subsidiary account, Consolidation Entry D eliminates the effect of intra-entity subsidiary ______ as part of the consolidation process.

dividends

In accounting for goodwill impairment, the maximum amount of goodwill impairment to be recognized by a reporting unit is -the excess of the reporting unit's total carrying amount over total fair value. -the carrying amount of goodwill. -the excess of the reporting unit's total fair value over total carrying amount.

-the carrying amount of goodwill.

Regardless of whether the parent accounts for its subsidiary investment using the partial equity, initial value or the equity method, consolidation worksheet entries bring the investment account to a ______ balance.

zero

Goodwill is not amortized on the Exhibit 3.7 consolidation worksheet because it is considered a(n) ______ lived asset.

indefinite, perpetual, unlimited, unending, or permanent

Why does the FASB allow a firm the option to assess qualitative factors to determine whether further testing is required for detecting goodwill impairment? -The qualitative test is considered a more rigorous threshold for firms to meet in testing goodwill impairment. -Fair values for many firms' reporting units are unavailable. -The determination of fair values for a reporting unit's assets and liabilities is a costly periodic exercise.

-The determination of fair values for a reporting unit's assets and liabilities is a costly periodic exercise.

When a subsidiary's acquisition-date fair values exceed its book values for its limited-lived assets, the equity method records over time -a reduction in Equity in Subsidiary Earnings for amortization expense. -no effect on Equity in Subsidiary Earnings over time. -an increase in Equity in Subsidiary Earnings for amortization expense.

-a reduction in Equity in Subsidiary Earnings for amortization expense.

When the parent applies the initial value method for its investment accounting, Consolidation Entry I is needed to -remove the balance in the parent's Dividend Income and the subsidiary's Dividends Declared. -include the balance of subsidiary Dividends Declared in the consolidated totals. -record the amortization of excess acquisition-date fair value adjustments. -eliminate the parent's Dividend Income against the subsidiary's revenues and expenses.

-remove the balance in the parent's Dividend Income and the subsidiary's Dividends Declared.

Select all that apply Which of the following represent procedures required in preparing consolidated financial statements for a parent company and its subsidiary? -subsidiary assets and liabilities are adjusted to reflect acquisition-date fair values net of post-acquisition amortization. -intra-entity receivable and payables are eliminated. -the parent combines the Equity in Subsidiary Earnings balance with the subsidiary company's revenues less expenses. -excess acquisition-date fair over book values for limited-life subsidiary assets must be amortized over time.

-subsidiary assets and liabilities are adjusted to reflect acquisition-date fair values net of post-acquisition amortization. -intra-entity receivable and payables are eliminated. -excess acquisition-date fair over book values for limited-life subsidiary assets must be amortized over time. Reason: The Equity in Subsidiary Earnings balance is eliminated in consolidation.

Consolidation Entry E recognizes amortization expenses related to -current period amortizations of indefinite-lived intangible assets. -the subsidiary's acquisition-date differences between fair and book values. -the parent's separate intangible assets as of the acquisition date. -previous period's depreciation expenses.

-the subsidiary's acquisition-date differences between fair and book values.

Which of the following Exhibit 3.4 income statement accounts are eliminated for consolidated financial statement reporting? -Cost of goods sold -Amortization expense -Depreciation expense -Equity in subsidiary earnings

-Equity in subsidiary earnings

Select all that apply In a post-acquisition consolidation worksheet, which rows are not summed across to derive consolidation totals? -Retained earnings (ending balance) -Dividends declared -Investment in subsidiary -Net income

-Retained earnings (ending balance) -Net income

Select all that apply Which of the following Exhibit 3.4 income statement accounts are of the parent and subsidiary are simply added together (without adjustment)? -Depreciation expense -Revenues -Cost of goods sold -Amortization expense

-Revenues -Cost of goods sold Reason: Amortization and Depreciation have additional amounts added.

Why does Consolidation Entry S remove the subsidiary's stockholders' equity accounts? -Because the subsidiary stockholders' equity accounts are reported in consolidated statements as part of the Investment in Subsidiary account. -Subsidiary ownership accounts are not relevant, because consolidated statements are prepared for the parent company owners. -Because the subsidiary has been formally dissolved, its stockholders equity accounts no longer exist.

-Subsidiary ownership accounts are not relevant, because consolidated statements are prepared for the parent company owners.

Which of the following represent components of subsidiary income recognized when the parent applies the partial equity method? -Dividends declared. -The parent's share of the subsidiary's reported income. -Amortization of the acquisition-date excess fair over book value. -Deferral of unrealized intra-entity gains.

-The parent's share of the subsidiary's reported income.

Under the partial equity method the parent records dividends from it subsidiary as -a reduction of the investment account -equity in subsidiary earnings -as dividend income -an increase in the investment account

-a reduction of the investment account

Select all that apply When the initial value method is used, the parent's separate net income on a consolidation worksheet will -equal the consolidated net income amount. -differ from the consolidated net income amount. -be adjusted by Consolidation Entry S. -be adjusted by Consolidation Entry I.

-differ from the consolidated net income amount. -be adjusted by Consolidation Entry I.

When the parent employs either the initial value or the partial equity method, establishing an appropriate beginning ______ ______ balance for the parent is crucial to the preparation of consolidated financial statements.

-retained -earnings

If a parent uses either the initial value or partial equity method, then a worksheet adjustment must be made to bring the parent's retained earnings balance to equal that of the ______ method.

equity / accrual

When the acquisition-date fair value of subsidiary long-term debt exceeds its carrying amount, in periods subsequent to the acquisition, consolidation worksheet entries are needed to ______ long-term debt.

increase

Select all that apply Under the partial equity method the parent records income from it subsidiary as -A decrease in the investment in subsidiary account -An increase in the investment in subsidiary account -Dividend income -Equity in subsidiary earnings

-An increase in the investment in subsidiary account -Equity in subsidiary earnings

When a particular asset acquired in a business combination has an acquisition-date fair value in excess of its acquisition-date book value, the asset's carrying amount from the subsidiary's financial records -must be reduced in preparing consolidated financial statements. -must be increased in preparing consolidated financial statements. -remains the same in consolidated financial statements as its current book value.

-must be increased in preparing consolidated financial statements.

Contingent stock issued in connection with a business combination is typically recorded by the parent as a component of _______ ______.

-stockholders', shareholder's, owners' -equity

The label "S" in Consolidation Worksheet Entry S refers to the subsidiary's ______ ______ accounts.

-stockholders', shareholders', stockholders, shareholders, owners', or owners -equity

True or false: Consolidation Entry E is identical for worksheets regardless of whether the parent uses the initial value method or the equity method.

True.

Consolidation Entry P removes intra-entity payable and receivable balances because the parent and subsidiary companies are viewed as a single ______ for financial reporting purposes.

entity

Which of the following is a characteristic of the partial equity method of accounting for a parent company's investment in a subsidiary company? -The parent company accrues income as reported by the subsidiary. -The parent records subsidiary dividends as an increase in the investment account. -The parent recognizes the income effect of amortizing excess subsidiary acquisition-date fair over book value. -Unrealized gains on intra-entity transactions are deferred from income.

-The parent company accrues income as reported by the subsidiary.

Select all that apply Which of the following accounts of both the parent and subsidiary are combined for consolidated financial reporting? -common stock. -assets and liabilities. -dividends declared. -revenues and expenses.

-assets and liabilities. -revenues and expenses.

Select all that apply Using the equity method, which of the following affects the Investment in Subsidiary account on the parent's books? -increases in subsidiary equity from subsidiary net income -decreases in subsidiary equity from subsidiary dividends -the original consideration transferred for the investment -decreases in the parent's equity from dividends paid by the parent

-increases in subsidiary equity from subsidiary net income -decreases in subsidiary equity from subsidiary dividends -the original consideration transferred for the investment

Select all that apply Among the most prominent internal record-keeping methods for accounting for an investment in a subsidiary are -net realizable value method. -the equity method. -the initial value method. -the partial equity method.

-the equity method. -the initial value method. -the partial equity method. Reason: Although appropriate for accounts receivable, the net realizable value method is not used for an investment in subsidiary account.

In conjunction with combining a subsidiary's assets and liabilities with those of the parent company, the investment in subsidiary account is brought to a ______ balance as part of the consolidation process.

Zero

Under the initial value method, the parent records income when its subsidiary declares a dividend. Over time, the parent's retained earnings fail to accrue any subsidiary income not distributed as a dividend. Therefore, worksheet entries are required to adjust the parent's beginning retained earnings to a full-______ basis.

accrual

Three alternative methods of investment accounting available to the parent for its internal record-keeping are the equity method, the initial value method, and the partial equity method. Regardless of its choice, the investment accounting method has no effect on the ________ expense related to acquisition-date fair value adjustments to the subsidiary's assets and liabilities.

amortization

Under the initial value method, the parent recognizes income when its subsidiary declares a dividend. Because of the brief time span between dividend declarations and cash payments, the initial value is said to reflect the ______ basis for income recognition.

cash

When the parent applies the equity method, the retained earnings amounts on the parent's individual financial records equal the _______ totals.

consolidated / combined

Subsidiary dividends attributable to its parent are excluded from ______ totals because they represent an intra-entity transfer with no financial effect outside the reporting entity.

consolidated / consolidation

When a parent includes equity method earnings with its own earnings, the parent's net income equals consolidated net income. As a result, the equity method is often referred to as a single-line ______.

consolidation

If a subsidiary company has a debt payable to its parent company, the intra-entity payable and receivable (on the parent's books) is removed as part of the _______ process.

consolidation / reporting

Under the initial value method, the parent records income when the subsidiary declares a ______.

dividend

Consolidation Entry A adjusts subsidiary balances for acquisition-date related excess _______ value adjustments as part of the consolidation process.

fair

Consolidation Entry A, in the first year subsequent to acquisition, adjusts the subsidiary's asset and liability balances to acquisition-date ____ values.

fair

To measure an impairment loss for an indefinite-lived intangible asset, the asset's carrying amount is compared to its ______ value.

fair

When the carrying amount of acquisition-date subsidiary long-term debt exceeds its fair value, a consolidation worksheet entry is required to ______ the amount of interest expense for consolidated financial reporting.

increase

Select all that apply The following facts and circumstances may be useful in judging that a reporting unit's carrying amount exceeds its fair value. -A deterioration in macroeconomic conditions that affect the firm. -Increases in materials and labor that the firm may be unable to pass along to its customers. -Increased income taxes resulting from increased net income. -Declining operating cash flows.

-A deterioration in macroeconomic conditions that affect the firm. -Increases in materials and labor that the firm may be unable to pass along to its customers. -Declining operating cash flows.

Select all that apply A parent company's choice of investment accounting method (equity method, initial value method, or partial equity method) will affect which of the following balances on the parent's books? -Common stock -Income from the subsidiary -Retained earnings -Investment in subsidiary

-Income from the subsidiary -Retained earnings -Investment in subsidiary

Select all that apply Depending on the investment accounting method (equity, initial value, partial equity) chosen, which of the following accounts will vary on the parent's financial records. -Income from the subsidiary. -Sales revenues. -The investment account. -Retained earnings.

-Income from the subsidiary. -The investment account. -Retained earnings.

Select all that apply How do the consolidation worksheets compare across Exhibit 3.5 (parent uses the equity method) and Exhibit 3.9 (parent uses the initial value method)? -In the Parrot Company column, "Investment in Sun Company" account balances are the same across the three exhibits. -Consolidation entries S, A, and E are the same across the three exhibits. -No differences in consolidation totals across the three exhibits. -In the Parrot Company column, Net Income is the same across the three exhibits.

-No differences in consolidation totals across the two exhibits. -Consolidation entries S, A, and E are the same across the two exhibits.

A parent company controls a subsidiary company through ownership of 100% of the subsidiary's voting stock. How are cash dividends declared by the subsidiary on its voting stock treated in the parent's consolidated financial reports? -Included in consolidated dividends declared. -Not included having been eliminated in the consolidation process. -Included in consolidated dividend income. -As an increase in consolidated retained earnings.

-Not included having been eliminated in the consolidation process.

Select all that apply Which of the following are characteristics of the equity method of accounting for a parent company's investment in a subsidiary company? -The parent recognizes the income effect of amortizing excess subsidiary acquisition-date fair over book value. -The parent records subsidiary dividends as increases to the investment account. -The parent company accrues income as earned by the subsidiary. -Unrealized gains on intra-entity transactions are deferred from income.

-The parent recognizes the income effect of amortizing excess subsidiary acquisition-date fair over book value. -The parent company accrues income as earned by the subsidiary. -Unrealized gains on intra-entity transactions are deferred from income. Reason: Subsidiary dividends decrease the investment account.

When the parent uses the equity method, Consolidation Entry D -eliminates the intra-entity subsidiary dividends attributable to the parent company. -includes all subsidiary dividends declared in consolidated totals. -removes the dividends declared by the parent company.

-eliminates the intra-entity subsidiary dividends attributable to the parent company.

Select all that apply When is Consolidation Entry asterisk C required? -in post-acquisition periods when the parent has used the equity method to account for its subsidiary investment. -in post-acquisition periods when the parent has used the initial value method to account for its subsidiary investment. -in all post-acquisition period consolidation worksheets. -in post-acquisition periods when the parent has used the partial equity method to account for its subsidiary investment.

-in post-acquisition periods when the parent has used the initial value method to account for its subsidiary investment. -in post-acquisition periods when the parent has used the partial equity method to account for its subsidiary investment.

A parent has applied the partial equity method for multiple accounting periods and the subsidiary has reported profits (after subtracting excess acquisition-date fair value amortizations). In preparing a consolidated worksheet, Consolidation Entry asterisk C will include a debit to the parent's RE and a credit to the -investment income account. -subsidiary's retained earnings account -parent's investment in subsidiary account.

-parent's investment in subsidiary account.

Prior to impairment testing for an indefinite-lived intangible asset, a reporting entity has the option to -amortize the asset over a fixed number of years. -forego quantitative impairment tests if there is a greater than 50% likelihood that the intangible asset may be impaired. -perform a qualitative assessment as to the likelihood of impairment.

-perform a qualitative assessment as to the likelihood of impairment.

Select all that apply Possible methods for determining the fair value of a reporting unit for goodwill impairment testing include -present value techniques. -original consideration transferred by the parent in an acquisition. -the use of market prices. -prices of comparable businesses.

-present value techniques. -the use of market prices. -prices of comparable businesses.

Select all that apply When a parent company uses the partial equity method to account for an investment in a subsidiary, Consolidation Entry asterisk C is needed to -update the parent's retained earnings for current year amortizations acquisition-date fair value adjustments. -update the parent's retained earnings for past years' amortizations acquisition-date fair value adjustments. -simulate the equity method for the parent's retained earnings in deriving consolidated totals.

-update the parent's retained earnings for past years' amortizations acquisition-date fair value adjustments. -simulate the equity method for the parent's retained earnings in deriving consolidated totals.

True or false: Conducting goodwill impairment tests at the reporting unit level (rather than the combined entity level) helps capture goodwill impairment losses that may otherwise be offset by an increase in goodwill in another reporting unit.

TRUE. Reason: If goodwill impairment testing was performed at the combined entity level, its possible that overall goodwill for the entity does not change, but goodwill may have decreased in some reporting units and increased in other reporting units.

True or false: Consolidation Entry I removes the Equity in Subsidiary Earnings which is then replaced by the inclusion of the subsidiary's individual revenue and expense accounts on the consolidated income statement.

TRUE. Reason: Rather than report a one-line amount for subsidiary earnings, consolidation requires the addition of the separate subsidiary revenue and expense accounts with those of the parent.