Quiz 3: Chapter 4

gain/loss is recognized in Additional Paid-in Capital Account

how is the gain/loss recognized during a sales of subsidiary shares with control maintained

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

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

equity section of the balance sheet

where should the noncontrolling interest's claims be reported in a set of consolidated financial statements?

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

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

fair

following a sale, when a parent retains only a non-controlling portion of its former subsidiary's shares, the retained investment is revalued to _____ value as of the date control is lost

$220,000 fair value

Atwater Company acquires 80 percent of the outstanding voting stock of Belwood company. On that date, Belwood possess a building with a $160,00 book value but at $220,000 fair value. at what value would this building be consolidated?

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

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?

always rarely

control premiums are _____________ included in the fair value of the controlling interest but are _______________ included in the fair value of the noncontrolling interest

step acquisition

occurs when control is achieved in a series of equity acquisitions, as opposed to a single transaction

serve to reduce the noncontrolling interest balance

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

true

true/false consolidation entry E does not vary depending on the percentage of the controlled subsidiary owned by the parent

no

December 31 consolidated financial statements are being prepared for Allsports Company and its new subsidiary acquired on July 1 of the current year. should allsports adjust its consolidated balances for the preacquisition subsidiary revenues and expenses?

true

true/false regardless of whether a parent obtains control in a single or multiple steps, the subsidiary's assets and liabilities are revalued in the entirety to fair value at the date control is obtained

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

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

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

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

a subsidiary is an indivisible part of a business combination and should be included in its entirety regardless of the degree of ownership

what is a basic premise of the acquisition method regarding accounting for a noncontrolling interest?

economic unit

following the __________ ____________ concept, a parent includes 100% of a subsidiary's net income in consolidated net income event when the parent owns less than 100% of its controlled subsidiary's voting stock

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

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

depends on the percentage of ownership if Duke still has control then the acquisition method is still used if Duke has significant influence the equity method is used

duke corporation owns a 70% equity interest in Salem company, a subsidiary corporation. how would duke account for the remainder of its investment subsequent to the sale of this partial interest?

the book value of the investment has decreased as a result of the shares that were sold

duke corporation owns a 70% equity interest in salem company, a subsidiary corporation, during the current year, a portion of this stock is sold to an outside party. before recording this transaction, duke adjusts the book value of its investment account. what is the purpose of this adjustment?

gain/loss is recognized in gain/loss on sale of investment account

how is the gain/loss recognized during a sale of subsidiary shares with control lost?

noncontrolling interest

if the parent doesn't own 100% of the company, outside owners are referred to as this

onwers' equity

the placement of noncontrolling interest in the subsidiary's equity is in the consolidated _______________ section