advanced ch 3 smartbook
A
When a particular asset acquired in a business combination has an acquisition-date book value in excess of fair value, the asset's carrying amount from the subsidiary's financial records A. must be reduced in preparing consolidated financial statements B. must be increased in preparing consolidated financial statements C. remains the same in consolidated financial statements as its current book value
A,B,C,E
when the parent applies the equity method, which of the following worksheet entries helps to eliminate the investment in subsidiary account balance in consolidation? A. Entry A B. Entry I C. Entry S D. Entry P E. Entry D
A,C
Consolidation Entry E A. increases expenses when excess fair over book value acquisition date allocations are made to depreciable subsidiary assets B. provides cumulative amortization expense for the acquisition date fair value adjustments C. provides current period amortization expense for the acquisition date fair value adjustments D. increases expenses when excess book over fair value acquisition date allocations are made to depreciable subsidiary assets
B,D
How do the consolidation worksheets compare across Exhibit 3.5 (parent uses the equity method) to Exhibit 3.9 (parent uses the initial value method)? A. In the Parrot company column, Net Income is the same across the two exhibits B. no differences in the consolidation totals across the two exhibits C. In the Parrot Company column, "Investment in Sun Company" account balance are the same across the two exhibits D. Consolidation entries S, A, and E are the same across the two exhibits
D
Consolidation E entry recognizes amortization expenses related to A. previous period's depreciation expense B. the parent's separate intangible assets as of acquisition date C. current period amortizations of indefinite-lived intangible assets D. the subsidiary's acquisition date differences between fair and book value
subsidiary
The consolidated amount for trademarks exceeds the sum amounts shown by parent and subsidiary companies in Exhibit 3.4. The extra amount is attributable to the acquisition date excess fair value over book value for the trademarks of the ____________ company
D
Which of the following represent components of subsidiary income recognized when the parent applies the partial equity method? A. deferral of unrealized intra entity gains B. amortization of the acquisition date fair over book value C. dividends declared D. the parent's share of the subsidiary's reported income
implied fair value
in step two of the measurement of goodwill impairment the ____________ __________ _________ of goodwill is computed in a manner similar to the determination of goodwill in a business combination
two step
the quantitative measurement and testing procedures for goodwill impairment involve a __________ _________ process
fair
to measure an impairment loss for an indefinite lived intangible asset the asset's carrying amount is compared to its __________ value
true
true or false: The FASB has proposed to remove step 2 from the goodwill testing procedures
true
true or false: included in the consolidated totals are the subsidiary's amortized acquisition date excess fair over book value allocations
parent
As part of the consolidation 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
A
Consolidation S Entry credits the Investment in Subsidiary account in order to A. remove the beginning of year book value component of the investment account B. allocate goodwill acquired in the business combination C. completely eliminate the investment account
D
When a parent company owns 100% of its subsidiary, what amounts for common stock and additional paid in capital are included in the consolidated stockholders equity totals? A. subsidiary company balances only B. neither parent nor subsidiary company balances C. Both parent and subsidiary company balances D. parent company balance only
B,C
When a parent company uses the partial equity method to account for an investment in a subsidiary, consolidation entry asterisk c is needed to A. update the parent's retained earnings for current year amortization acquisition date fair values B. to simulate the equity method for parent's retained earnings in deriving consolidated totals C. update the parent's retained earnings for past year's amortizations acquisition date fair values
C
Which of the following is a characteristic of the partial equity method of accounting for a parent company's investment in a subsidiary company? A. unrealized gains on intra-entity transactions are deferred from income B. The parent recognizes the income effect of amortizing excess subsidiary acquisition date fair value over book value C. the parent company accrues income as reported by the subsidiary D. the parent records subsidiary dividends as an increase in the investment account
impairment
because goodwill has an indefinite life, rather than amortization the FASB utilizes an ________________ approach to assessing the appropriateness of reported values for goodwill
D
beyond recording the acquisition price, what periodic adjustments does the parent typically make to the investment account when the initial value method is employed? A. the investment account is increased for subsidiary dividends received B. the investment account is increased as the subsidiary reports net income C. the investment account is reduced for excess acquisition date fair value adjustments D. no periodic adjustments are typically made
B
Consolidation Entry I A. excludes excess acquisition-date fair over book value amortizations B. brings the "Equity in Subsidiary Earnings" account to a zero balance C. allows the inclusion of the "Equity in Subsidiary Earnings" account as a reported figure in the consolidated income statement D. results in the exclusion of individual subsidiary revenue and expense accounts from consolidated balances
A
Consolidation D entry debits the investment in subsidiary account when A. the parent employs the equity method of accounting for its investment and the subsidiary has declared a current period cash dividend B. the parent company has declared a cash dividend for its shareholders C. the parent employs the initial value method of accounting for its investment and the subsidiary has declared a current period cash dividend
C
The amount of a reporting unit's goodwill impairment loss is computed as the excess of a reporting unit's A. implied value of goodwill over its carrying amount B. total fair value over the collective fair values of its identifiable assets and liabilities C. carrying amount of goodwill over its implied value D. identifiable assets over its liabilities
B,D
how does a parent company account for contingent consideration at the date of acquisition of a subsidiary company? A. at the date of acquisition, no entry is made to record contingent consideration B. a cash payment contingency based on future performance is recorded as a liability for the acquisition date fair value C. the parent's investment income account is reduced for the amount of acquisition date consideration D. a stock-based contingency is recorded as additional paid in capital for its acquisition date fair value
C
Why does Consolidation S remove the subsidiary's stockholder's equity accounts? A. Because the subsidiary's stockholder's equity accounts are reported in consolidated financial statements as part of the Investment in the subsidiary account B. Because the subsidiary has been formally dissolved, its stockholders equity accounts no longer exist C. subsidiary ownership accounts are not relevant because consolidated statements are prepared for the parent company's owners
D
Consolidation Entry P A. includes the balances from intra-entity receivables and payables B. eliminates any intra-entity receivables but leaves any intra-entity payables intact C. eliminates any intra-entity payables but leaves any intra-entity receivables intact D. removes the balances from intra-entity receivables and payables
zero
In conjunction with combining a subsidiary's revenues and expenses with those of the parent company, the income from the subsidiary account accrued by the parent is brought to a ______________ balance as a part of the consolidation process.
B
Subsequent to acquisition, consolidated depreciation expense is based upon A.the acquisition-date fair values of the parent's depreciable assets B. the acquisition-date fair values of the subsidiary's depreciable assets C.the book values of the subsidiary's depreciable assets
stockholders
The label "S" in Consolidation worksheet Entry S refers to the subsidiary's ____________ equity accounts
C
Under the initial value method for accounting for an investment in a subsidiary company, the parent recognizes income when the subsidiary A.pays a dividend B. generates cash flows from its operations C. declares a dividend D. earns the income
accrual
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 full- _____________ basis
D
Under the partial equity method the parent records dividends from its subsidiary as A. equity in subsidiary earnings B. as dividend income C. an increase in the investment account D. a reduction in the investment account
reduce
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
A,B,C
When the parent applies the equity method on its internal records, what account balances are removed on the consolidated worksheet? A. the parent's share of subsidiary dividends declared B. investment in subsidiary C. equity in subsidiary earnings D. the parent's common stock
dividends
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
A
When the parent uses the equity method, Consolidation Entry D A. eliminates the intra-entity subsidiary dividends attributable to the parent company B. includes all subsidiary dividends declared in consolidated totals C. removes the dividends declared by the parent company
C
Consolidation Entry A adjusts the subsidiary's assets to the unamortized acquisition date fair-value as of what date? A. end of the current reporting period B. the acquisition date C. beginning of the current reporting period
B
Intangible assets with an indefinite useful lives are A. not subject to impairment testing B. subject to periodic impairment testing C. allocated overtime to depreciation expense D. allocated overtime to amortization expense
True
True of False: Conducting goodwill impairment tests at the reporting level unit 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
False
True or False: The balances reported in the consolidated financial statements will differ depending on the parent's selection of investment accounting method (e.g. equity, initial value, partial equity)?
True
True or false: Consolidation Entry A may include an adjustment to recognize goodwill created by the business combination
A,B,D
Among the most prominent internal record-keeping methods for an investment in a subsidiary are A. the initial value method B. the partial equity method C.net realizable value method D. the equity method
C
Are the acquisition date fair values of subsidiary intangible assets amortized to expense across time on consolidated financial statements? A. No, impairment tests must be conducted for any subsidiary intangible assets recognized in the business combination B. Yes, but only for intangible assets with indefinite useful lives C. Yes, but only for intangible assets with definite useful lives D. Yes, for both definite and indefinite intangible assets
A,B,D
As compared to acquisition date accounting for business combinations, subsequent to an acquisition a parent must additionally report consolidated A. Net income B. expenses C. intra-entity transactions D. revenues
accrual
By recognizing subsidiary income as it is earned, rather than when cash is received through a dividend, the equity method embraces the __________ method of accounting.
equity
If a parent uses either initial value or partial equity method, then a worksheet adjustment must be made to bring the parent's retained earnings balance to equal of that of the __________ method
D
In the first step of the quantitative goodwill impairment test, for each reporting unit A. a comparison is made between the reporting units carrying amount ( excluding goodwill) and fair value B. the fair values of each reporting unit's individual assets and liabilities are determined C. the fair value of goodwill is compared to its carrying amount D. a comparison is made between the reporting units carrying amount (including goodwill) and fair value
C,D
Included in the accounts of the parent and the subsidiary combined for financial reporting are A. dividends declared B. common stock C. revenues and expenses D. assets and liabilities
A,C
The consolidation asterisk C entry is needed to A. simulate the equity method in adjusting the parent's beginning retained earnings B. adjust the parent's ending retained earnings to a full-accrual basis that simulates the equity method C. adjust the parent's beginning retained earnings to full accrual basis
C
What effect does the parent's selection of initial value method vs. equity method have on consolidated financial statements? A. the investment in subsidiary account balance in the consolidated balance sheet will be lower under the initial value method B. consolidated net income will be higher under the equity method C. No effect D. consolidated dividends will be higher under the initial value method
reduction
When a depreciable asset acquired in a business combination has an acquisition-date book value in excess over its fair value , the excess will be allocated over time as a ______________ to consolidated depreciation expense
B
When a subsidiary's acquisition-date fair values exceed its book values for limited-lived assets, the equity method records over time A. no effect on Equity in Subsidiary Earnings over time B. A reduction in Equity in Subsidiary Earnings for amortization expense C. An increase in Equity in Subsidiary Earnings for amortization expense
A
When the parent uses the equity method, Consolidation Entry I A. removes the parent's recorded equity income B. removes the subsidiary's individual revenue and expense balances C. ignores the parent's recorded equity income D. includes the parent's recorded equity income in consolidated totals
B,C
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 the subsidiary account? A. amortization expense B.Net Income C. Retained Earnings D. Sales Revenue
B,C,D
A parent agreed to pay an additional cash amount to the former owners of its acquired subsidiary if certain performance metrics were achieved in the first year subsequent to acquisition. The amount paid to the former owners exceeds the fair value originally recorded by the parent. In accounting for the cash payment to the former owners, the parent records A. a gain on reevaluation of the contingent performance obligation B. a reduction of the performance obligation C. a credit to cash D. a loss on reevaluation of the contingent performance obligation
zero
Although maintained on the books of the parent, the Investment in subsidiary account is always brought to a ________________ balance in consolidation
A,C,D
A parent company, over time, will routinely make which of the following adjustments in applying the equity method to its investment in subsidiary account? A. dividends from the subsidiary B. post-acquisition changes in the fair value of the subsidiary C. Income as it is earned and reported by the subsidiary D. excess acquisition-date fair value over book value amortization
