Advance Chapter 4

Consolidated retained earnings equal the parent's retained earnings when the parent accounts for its Investment in Subsidiary using the equity method. the fair value method. the partial equity method. the initial value method.

the equity method.

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. the market price per share paid by the parent for the acquisition. an estimate based on future income projections.

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

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

zero

A parent company owns 80% of the voting stock of a subsidiary. What percentage of the subsidiary's revenues and expenses are consolidated? 20% 100% 80% 0%

100 %

A parent company owns 80% of the voting stock of a subsidiary. What percentage of the total beginning subsidiary's stockholders' equity elimination should Consolidation Entry S allocate to the noncontrolling interest? 20% 0% 100% 80%

20%

Examining the Exhibit 4.6 consolidation worksheet when the parent accounts for its 80% owned subsidiary using the equity method, what new financial statement balances are created in the consolidation process beyond the balances reflected in the parent (King Company) and subsidiary (Pawn Company) columns? Consolidated net income Noncontrolling interest in Pawn at 12/31 Net income attributable to noncontrolling interest Cost of goods sold and revenues

Consolidated net income Noncontrolling interest in Pawn at 12/31 Net income attributable to noncontrolling interest

Following the ________ _________ concept, a parent includes 100% of a subsidiary's net income in consolidated net income even when the parent owns less than 100% of its controlled subsidiary's voting stock.

Economic unit

Examining the Exhibit 4.6 consolidation worksheet when the parent accounts for its 80% owned subsidiary using the equity method, what balances that occur on the parent's (King Company) column are brought to zero via consolidation entries? Goodwill Equity in Pawn's earnings Dividends declared Investment in Pawn Company

Equity in Pawn's earnings Investment in Pawn Company

Consolidation Entry A2 focuses on valuation and allocation of which of the following accounts? The parent's separate identifiable net assets. The subsidiary's goodwill and its identifiable net assets. Goodwill only. The subsidiary's identifiable net assets only.

Goodwill only.

Consolidated net income attributable to the parent company owners may be computed as consolidated net income less net income attributable to the __________ _______.

Noncontrolling interest

In consolidated financial reports, the ________ __________ represents a set of owners, in addition to the parent company, who have a legal claim to the subsidiary's net assets.

Noncontrolling interest

For financial reporting purposes, the acquisition method views a parent company and its controlled, but less than 100% owned, subsidiary as a noncontrolling interest. independent reporting entities. a single economic unit.

a single economic unit.

A noncontrolling interest in a consolidated entity may be described as a set of owners, other than the parent company owners, but with no legal claim on a subsidiary's net assets. a set of owners with a proportionate ownership in the consolidated entity equal to their proportionate ownership of the subsidiary's voting shares. all creditors with a priority claim to the subsidiary's net assets. an ownership interest in a subsidiary held by owners other than the parent company.

an ownership interest in a subsidiary held by owners other than the parent company.

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. 100% of the parent's net income plus 20% of the subsidiary's net income adjusted for excess acquisition-date fair value amortizations. 100% of the parent company's net income excluding any income from the subsidiary. 100% of the parent's net income plus 80% of the subsidiary's net income adjusted for excess acquisition-date fair value amortizations.

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

In the Exhibit 4.6 consolidation worksheet, the parent accounts for its 80% owned subsidiary using the equity method. What balances in the worksheet are identical across the parent (King Co.) column and the consolidated totals column? Dividends declared Retained Earnings 1/1 Total assets and total equities and liabilities King Company's separate net income and the consolidated total for net income attributable to King Company. Retained Earnings 12/31

Dividends declared Retained Earnings 1/1 King Company's separate net income and the consolidated total for net income attributable to King Company. Retained Earnings 12/31

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 Investment in Subsidiary The Noncontrolling Interest. The subsidiary company's Common Stock The parent company's Retained Earnings

The Investment in Subsidiary The Noncontrolling Interest.

A consolidated balance sheet reports a noncontrolling interest as a deferred asset account. a contra-owners' equity account. a liability account. a component of owners' equity.

a component of owners' equity.

In periods subsequent to acquisition, noncontrolling (NCI) interest valuation in consolidated financial reports is based on the current carrying amounts of the subsidiary's assets and liabilities. acquisition-date fair value adjusted for the NCI's share of post-acquisition adjusted subsidiary net income. current fair value of the noncontrolling interest's equity shares. acquisition-date fair value adjusted for the NCI's share of post-acquisition adjusted subsidiary net income less dividends.

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

The allocation of goodwill across the controlling and noncontrolling interests proceeds in a similar fashion when the business combination resulted in a bargain purchase. compares acquisition date total fair values to the relative (proportional) fair values of the subsidiary's identifiable net assets. always results in all goodwill being allocated to the parent company. does not always result in an allocation proportional to percentage ownership interests.

compares acquisition date total fair values to the relative (proportional) fair values of the subsidiary's identifiable net assets. does not always result in an allocation proportional to percentage ownership interests.

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

eliminated

According to the acquisition method, the noncontrolling interest valuation includes its share of the acquisition-date ______ value of the subsidiary's identifiable net assets adjusted for post-acquisition amortization.

fair

At the date of a business acquisition, the parent values any noncontrolling interest shares at _______ value.

fair

If available, market trading activity in noncontrolling interest shares surrounding an acquisition can provide an estimate of the noncontrolling interest's acquisition-date _____ value.

fair

Regardless of its percentage ownership, when a parent acquires control over a subsidiary, the parent must recognize the 100% of the subsidiary's assets and liabilities at their acquisition-date _______ values.

fair

Consolidation Entry A2 is required when ______ is disproportionately allocated to the parent and noncontrolling ownerships.

goodwill

In Exhibit 4.6, the amount of net income that is included in the 12/31 consolidated retained earnings balance is the net income attributable to______ Company.

parent

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 allocations to the non-controlling interests. post-acquisition subsidiary net income or net loss. all post-acquisition amortizations of subsidiary assets and liabilities. previous period's excess fair over book value amortizations.

previous period's excess fair over book value amortizations.

On the consolidated balance sheet, dividends paid to the noncontrolling interest reduce consolidated retained earnings. have no effect on the noncontrolling interest balance. reduce the noncontrolling interest balance.

reduce the noncontrolling interest balance.

For an 80% owned subsidiary accounted for under the equity method, the parent includes in the Investment in Subsidiary account balance 100% of post-acquisition subsidiary earnings adjusted for excess acquisition-date fair value amortizations. a deduction for 80% of subsidiary dividends declared since acquisition. a deduction for 100% of subsidiary dividends declared since acquisition. 80% of post-acquisition subsidiary earnings adjusted for excess acquisition-date fair value amortizations.

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

Despite the fact that 100% of a controlled subsidiary's assets and liabilities are consolidated with those of a parent in consolidation, only the parent's percentage ownership is used for internal accounting under the _________ method for subsidiary income accruals.

equity

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% 0% 80% 20%

100%

A parent company owns 80% of the voting stock of a subsidiary. What percentage of the total excess fair value net adjustment should Consolidation Entry A allocate to the noncontrolling interest? 80% 0% 20% 100%

20%

On a consolidation worksheet, the noncontrolling interest's share of subsidiary dividends declared reduces consolidated retained earnings. serve to reduce the noncontrolling interest balance. serve to increase the noncontrolling interest balance. has no effect on the noncontrolling interest balance.

serve to reduce the noncontrolling interest balance.

A parent paid a control premium in acquiring an 80% voting interest in a subsidiary. How is the goodwill from the combination allocated across the controlling and noncontrolling interests? Goodwill is allocated 80% to the parent's controlling interest and 20% to the noncontrolling interest in the subsidiary. Goodwill is always allocated 100% to the parent's controlling interest. Controlling and noncontrolling interest acquisition-date fair values are compared to relative fair values of subsidiary's identifiable net assets. Goodwill is always allocated 100% to the subsidiary's noncontrolling interest.

Controlling and noncontrolling interest acquisition-date fair values are compared to relative fair values of subsidiary's identifiable net assets.

As part of the consolidation process which of the following are included in the calculation of the ending balance of the noncontrolling interest? The balance of the noncontrolling interest as of the beginning of the period. Dividends from the subsidiary attributable to the noncontrolling interest. The consolidated entity's net income attributable to the non-controlling interest. All subsidiary dividends paid to either the controlling or noncontrolling interests.

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