ACCT 402 Online - Exam 3

When a parent company uses the partial equity method to account for an investment in a subsidiary, Consolidation Entry *C is needed to: simulate the equity method for the parent's retained earnings in deriving consolidated totals 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

a and b

How does a parent company account for contingent consideration at the date of the acquisition of a subsidiary company? a stock-based contingency is recorded as APIC for its acquisition date fv the parent's investment account is reduced for the amount of A-D consideration a cash payment contingency based on future performance is recorded as a liability for its A-D FV

a and c

Which of the following describe IFRS goodwill impairment? goodwill recognized in a business combination is allocated across cash generating units expected to benefit from the business combination gw is tested for impairment using a one step approach gw is considered impaired if the carrying amount of a cash generating unit exceeds fv gw impairment losses may be recoverable in later periods if circumstances indicate an increase in FV

a b c

In the first step of the quantitative goodwill impairment test, for each reporting unit,

a comparison is made between the carrying amount including goodwill and fv

The implied FV of GW is used in measuring GW impairment because:

an actual FV for GW is not observable

In a posse-acquisition consolidation worksheet, which rows are not summed to derive consolidation totals dividends declared net income retained earnings investment in subsidiary

b and c

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 excess acquisition date FV adjustment amortizations to subsidiary income the recognition of subsidiary reported income

b and c

The amount of a reporting unit's goodwill impairment loss is computed as the excess of a reporting unit's

carrying amount of goodwill over its implied value

A parent agreed to pay an additional cash amount to former owners if certain performance metrics were achieved in the first year. The amount paid to former owners exceeds the FV originally recorded by the parent. In accounting for the cash payment to former owners, the parent records:

credit to cash loss on revaluation of contingent performance obligation reduction of the performance obligation

Under the initial value method, the parent records income when the subsidiary

declares a dividend

When the acquisition date fv of lt debt exceeds carrying amounts, in periods subsequent to acquisition, worksheet entries are needed to ____ interest expense

decrease

Consolidation entry C* relates to

income effects from previous periods

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

indefinite

How are the cash dividends declared by the subsidiary in its voting stock treated on the parent's consolidated financial reports when the company owns 100% of the stock?

not included as they are eliminated in the consolidation process

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

Prior to impairment testing for an indefinite-lived intangible asset, a reporting entity has the option to

perform a qualitative assessment as to the likelihood of impairment

when the equity method is used, Consolidation Entry I

removes the parent's equity income

depending on the investment accounting method chosen, which of the following accounts will vary on the parents financial records

retained earnings investment account income from subsid NOT sales revenue

Contingent stock payments made in connection w/ a business combination are recorded by the parent as a component of

stockholders' equity

why does an increase to the fv of acquisition date subsidiary result in a decrease to interest expense on the consolidated worksheet?

the parent has essentially borrowed the fv of the debt but will only repay the lesser contractual maturity value

Under the FASBs proposed simplification of accounting for goodwill impairment, goodwill impairment is measured as the excess of the carrying amount of a reporting unit over its fair value

true

Under the initial value method, the parent records income when the 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-accrual basis

true