LS4

When a parent acquires additional shares in its controlled subsidiary from the noncontrolling interest, any excess of the consolidated book value of these shares over the price paid by the parent is recorded as

an increase in the parent's additional paid-in capital

The allocation of goodwill across the controlling and noncontrolling 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

When active trades are unavailable, wotf are useful techniques for estimating the acquisition-date fair value of a noncontrolling interest when a control premium is likely?

comparisons to similar investments; discounted future cash flow estimations

When a parent acquires a controlling, but less-than-100% interest in a subsidiary, the basic elements for establishing an acquisition-date subsidiary value include

the fair value of the noncontrolling interest; the fair value of the controlling interest

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

When accounting treatment applies when a parent sells some of its subsidiary's shares, but nonetheless retains control over the subsidiary?

the sale of the subsidiary shares is considered a transaction within the consolidated entity; the parent recognizes any difference between the proceeds and the underlying carrying amount of the shares sold as an adjustment to APIC

Consolidation Entry S eliminated 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

What amounts comprise the ending balance of the noncontrolling interest reported in the stockholders' equity section of the consolidated balance sheet?

the noncontrolling interest beginning of the year balance; subsidiary dividends attributable to the noncontrolling interest; net income attributable to the noncontrolling interest

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

100%

Wotf are identified and measured by an acquiring firm as of the date of a 90% subsidiary acquisition

100% of all subsidiary assets and liabilities at full fair values; goodwill or a gain from bargain purchase; noncontrolling interest at acquisition-date fair value

When the parent company employs the initial value method for its investment in Subsidiary account, the consolidation worksheet utilizes Consolidation Entry I to remove the Intra-entity ____________ income.

dividend

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

excess acquisition-date fair value amortizations; the subsidiary's net income; the noncontrolling interest's ownership percentage in the subsidiary

According to the acquisition method, the noncontrolling interest valuation includes its shares 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

As long as control is maintained, when a parent sells a portion of its ownership shares in its subsidiary, no ________ or _______ is recognized in consolidated income.

gain; loss

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

goodwill

Consolidation Entry A2 focuses on valuation and allocation of wotf accounts?

goodwill only

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 amortization) is attributable to the noncontrolling interest?

20%

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.

King

When the parent company employs the partial equity method for its investment in Subsidiary account, Consolidation Entry *C is needed to adjust the parent's RE for excess fair value ___________ expenses from the acquisition date to the beginning of the current period.

amortization

The relevant criterion for the requirement to prepare consolidated financial statements is whether one company ________ the decision-making process of another company.

controls

As part of the consolidation process wotf 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

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

Comparing the textbook exhibits 4.6 and 4.8, which consolidated statement amounts change with the presence of a control premium paid by the parent in its acquisition of the subsidiary?

goodwill; current assets (cash)

wotf identify where noncontrolling interest amounts appear in consolidated financial statements?

in the consolidated income statement as an allocation of consolidated net income; in the conoslidated owners' equity section

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

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

Why may noncontrolling interest shares sell at a price less than shares recently sold that transferred control to an acquirer?

obtaining a controlling interest adds a valuable benefit to the acquirer; noncontrolling interest shares no longer carry the benefit of transferring control to a new owner

When a business acquisition resulting in control takes place midyear, how is the consolidation process affected?

only post-acquisition subsidiary expenses are included in consolidated totals; subsidiary book value must be computed as of the acquisition date; only post-acquisition subsidiary revenues are included in consolidated totals

The computation of the noncontrolling interest (NCI) share of consolidated net income includes:

an adjustment for the NCI's share of excess acquisition-date fair value allocation amortization; the NCI's proportional ownership of the subsidiary's net income

When a parent applies the initial value method to account for its investment in Subsidiary account, Consolidation Entry *C provides wotf adjustments to accrual accounting?

an adjustment to the parent's RE for its share of excess fair value amortization from acquisition date to the beginning of the current period; 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

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?

because the presence of a control premium affects the parent shares and not the noncontrolling interest's shares; because goodwill is not allocated proportionately across the ownership interests; because the unamortized acquisition-date excess fair values are allocated proportionately across ownership interests

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

The valuation principle for reporting the acquisition-date amount of a non-controlling interest is _______ value.

fair

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

the noncontrolling interest shares were neither brought nor sold as part of the acquisition

A Company establishes control with its most recent of a series of purchases of Company B's voting stock. What are the valuation implications for Company A's investment in Company B as of the date control is obtained?

Company B will be valued in total at its control-date fair value

The ending balance of the noncontrolling interest reported in a consolidated balance sheet includes a beginning balance, a portion of consolidated income, and a deduction for subsidiary __________ attributable to the noncontrolling interest.

dividends

Wotf are reasons for one company to gain control over another with less than 100% ownership?

the parent firm may not have resources sufficient to acquire all of its subsidiary shares; some outside owners of the subsidiary company may have been unwilling to sell their shares; the laws of some countries prevent complete ownership by a foreign firm

When the fair value of the subsidiary shares owned by the controlling and noncontrolling interests are equal at acquisition date, then

the parent has not paid a control premium for its proportional interest; any resulting goodwill will be recognized proportionately across the two ownership groups

Wotf accounting treatment applies when a parent sells enough of its subsidiary's shares so that it no longer possesses control over the subsidiary?

the parent recognizes either a gain or loss on the shares sold

Why is the goodwill shown in Exhibit 4.3 allocated to the controlling and noncontrolling interests according to their proportionate ownership percentages in the subsidiary?

the per share acquisition-date fair values of the shares owned by both the controlling and noncontrolling interests are identical

What accounting treatment applies when a parent sells some of its subsidiary's shares, but nonetheless retains control over the subsidiary?

the sale of the subsidiary shares is considered a transaction within the consolidated entity; the parent recognizes any difference between the proceeds and the underlying carrying amount of the shares sold as an adjustment to APIC

When will the acquisition-date fair values of the shares owned by the controlling and non-controlling interest equal one another?

when the parents acquires its shares in the subsidiary without paying a control premium; when the pershare price paid by the parent is representative of the acquiree's total acquisition-date fair value

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

zero

A consolidated balance sheet reports a noncontrolling interest as

a component of owners' equity

When a parent company obtains control of its subsidiary at a midyear date, the parent includes in consolidated totals subsidiary revenues and expenses only subsequent to the _____________ date.

acquisition

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

a gain or loss in net income

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

the equity method

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 amortization

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 the collective acquisition-date fair values of the subsidiary's identifiable net assets exceeds the sum of the acquisition-date fair values of the controlling and non-controlling interests, then the acquiring company recognizes a gain on _______ _________.

bargain purchase

Under the acquisition method, the _________ _______ concept calls for a parent to consolidate 100% of a controlled subsidiary's assets and liabilities despite owning less than 100% of the subsidiary's voting shares.

economic unit

The extra price per share paid to ensure a controlling interest in a business combination is referred to as a control _______________.

premium

When Company A achieves control over Company B after a series of stock acquisitions, then

Company A recognizes a gain or loss on revaluation to fair value of its previously held interests in Company B; the relevant subsidiary values for consolidation are acquisition-date fair value

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

retained earnings

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?

retained earnings 12/31; dividends declared; King Company's separate net income and the consolidated total for net income attributable to King Company; retained earnings 1/1

A primary difference between a single-step and multiple-step consolidation in the year control is obtained is the presence of a gain or loss on ____________ to fair value of the parent's previously owned investments in the subsidiary.

revaluation

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

serve to reduce the noncontrolling interest balance

Following a step acquisition that results in 80% ownership and control, what amounts does the parent include in investment in subsidiary account based on the equity method.

80% of post-control subsidiary net income less excess acquisition-date fair value amortization; the parent's pre-control subsidiary investment at control-date fair value; 80% of post-control subsidiary dividends as a deduction

Wotf are included in the calculation of Pawn Company's end-of-year 20% noncontrolling interest when the parent has paid a control premium?

20% of the excess fair value allocation for the subsidiary's beginning-of-year identifiable net assets; 20% of the subsidiary's beginning-of-year book value; current year net income allocation to the noncontrolling interest

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

80%

Regardless of its percentage ownership, when a parent acquires control over a subsidiary, the parent must recognize the noncontrolling interest at its acquisition-date ________ value.

fair

A parent sells a portion of its investment in a subsidiary company. Following the sale, if the parent maintains neither control nor significant influence over its former subsidiary, what is the appropriate accounting for the parent's retained investment?

market-value method