Bus 430

Which of the following best describes the income recognition basis reflected by the equity method

Accrual basis

Consolidation Entry I

Brings the "equity in subsidiary earnings" account to a zero balance

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 or reduce

Consolidation entry A subsidiary balances for acquisition date related excess_ value adjustments as part of consolidation process

Fair

In a business combination, the acquiring firm increases its retained earnings for the amount of the acquisition date subsidiary retained earnings

False

In the quantitive test for goodwill impairment, if individual reporting units fair value exceeds its carrying amount, goodwill is not considered __ and no further procedures are needed

Impaired

Under the equity method of accounting for an investment

Income reported by the subsidiary increases the investment account

When the carrying amount of acquisition date subsidiary long term debt exceed its fair value. A consolidation worksheet entry is required to _ the amount of interest expense for consolidated financial reporting

Increase

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 parents books

Investment in subsidiary, retained earnings, income from subsidiary

Goodwill recognized in a business combination

May embody synergies the acquirer expects to achieve from the combination, may capture value derived from other intangible assets not otherwise eligible for recognition, is an asset that represents future economic benefits

When a company acquired all of the assets and liabilities of another firm and the acquired firm is dissolved as separate entity, this combination is referred to as a statuary

Merger

When in particular asset acquired in a business combination has an acquisition date book value in excess of its fair value the asset carrying amount from the subsidiary's financial records

Must be reduced in preparing consolidated financial statements

In consolidation Entry D, the credit to the dividends declared account

Reduces the subsidiary dividends balance

Under the fair-value method of accounting for an investment in another firms ownership shares, the investor recognizes income when

The investee pays a dividend, the fair value of the invester's shares increase

Which of the following are characteristics of the equity method of accounting for parent companies investment in a subsidiary company

The parent company accrues income as earned by the subsidiary, unrealized gains on infra-entity transactions are deferred from income, the parent recognizes the income effect of amortizing excess subsidiary acquisition-date over book value

Scott co paid 28,000 to acquire all of the common stock of Dawn Corp on January 1, 2020. Dawns reported earnings for 2020 totaled 512,000 and it paid 160,000 in dividends during the year. The amortization of allocations related to the investment was 28000. Scott's net income, not including the investment, was 3310000 and it paid dividends of 950,000. On the consolidated financial statements for 2020, what amount should have been shown for Equity in Subsidairy Earnings

$0

Goodwill recognized in a business combination

1. Is an asset that represents future economic benefits 2. May embody synergies the acquirer expects to achieve from the combination 3. May capture value derived from other intangible assets not otherwise eligible for recognition

Which of the following may be included in the calculation of the consideration transferred for a newly acquired firm?

1. The liabilities incurred by the acquirer to former owners of the acquirer 2. Sum of the acquisition date fair value of the assets transferred by the acquirer 3. The equity interests issued by the acquirer on the combination

In the quantitative goodwill impairment test, for each reporting unit

A comparison is made between the reporting units carrying amount ( including goodwill) for fair value

The values assigned to intangible assets with indefinite useful lives are

Subject over time to amortization expenses

Using the equity method, which of the following affects the investment in subsidiary account on the parents books

The original consideration transferred for the investment, decreases in subsidiary equity from subsidy dividends, increases in subsidiary equity from subsidiary net income

Scott co paid 2800000 to acquire all of the common stock of Dawn in January 1, 2020. Dawns reported earnings for 2030 totaled 512,000 and it paid 160000 in dividends during the year. The amortization of allocations related to the investment was 28000. Scott's net income, not including the invest as 3310000 and it paid dividends of 950,000. On the consolidated financial statements for 2020, what amount should have been shown for consolidated dividends?

$950,000

What are consolidated financial statements?

A single set of combined financial Statements for multiple companies tied together through common control