C Total liabilities on the consolidated balance sheet. E The amount of consolidated cost of goods sold. Under the partial equity method, the parent recognizes income when 5. A Dividends are received from the investee. B Dividends are declared by the investee. C The related expense has been incurred. D The related contract is signed by the subsidiary. E It is earned by the subsidiary.
An impairment model is used 6. A To assess whether asset write-downs are appropriate for indefinite-lived assets. B To calculate the fair value of intangible assets. C To calculate the amortization of indefinite-lived assets over their useful lives.
D To determine whether the fair value of assets should be recognized. E To determine the likelihood that the fair value of an assumed liability will increase. Racer Corp. Tangiers maintained its incorporation. C Investment in Tangiers Co. How does the partial equity method differ from the equity method? A In the total assets reported on the consolidated balance sheet. B In the treatment of dividends. C In the total liabilities reported on the consolidated balance sheet.
E Under the partial equity method, the balance in the investment account is not decreased by amortization on allocations made in the acquisition of the subsidiary.
Income balances previously reported were combined on a retrospective basis. Reported net income was usually higher in subsequent years than in a purchase because the lack of valuation adjustments reduced amortization. A newly acquired entity may elect the option to apply pushdown accounting in the reporting period immediately following the acquisition.
When push-down accounting is elected, A. The subsidiary revalues its assets and liabilities based on the acquisition-date fair value allocations. The subsidiary then recognizes periodic amortization expense on those allocations with definite lives. In the case of a bargain purchase gain, pushdown accounting recognize an adjustment to its additional paid-in capital, not as a gain in its income statement.
The parent uses no special procedures when push-down accounting is being applied. However, if the equity method is in use, amortization need not be recognized by the parent since that expense is included in the figure reported by the subsidiary. A business combination is the process of forming a single economic entity by the uniting of two or more organizations under common ownership.
The term also refers to the entity that results from this process. This transaction is labeled a statutory merger if the acquired company transfers its assets and liabilities to the buyer and then legally dissolves as a corporation. Both companies retain their separate legal identities although the common ownership indicates that only a single economic entity exists.
Consolidated financial statements represent accounting information gathered from two or more separate companies. This data, although accumulated individually by the organizations, is brought together or consolidated to describe the single economic entity created by the business combination.
Companies that form a business combination will often retain their separate legal identities as well as their individual accounting systems. In such cases, internal financial data continues to be accumulated by each organization. Separate financial reports may be required for outside shareholders a noncontrolling interest , the government, debt holders, etc. This information may also be utilized in corporate evaluations and other decision making.
However, the business combination must periodically produce consolidated financial statements encompassing all of the companies within the single economic entity. The purpose of a worksheet is to organize and structure this process. The worksheet allows for a simulated consolidation to be carried out on a regular, periodic basis without affecting the financial records of the various component companies.
Several situations can occur in which the fair value of the 50, shares being issued might be difficult to ascertain. Thus, a quoted figure at any specific point in time may not be an adequate or representative value for long-term accounting purposes. For combinations resulting in complete ownership, the acquisition method allocates the fair value of the consideration transferred to the separately recognized assets acquired and liabilities assumed based on their individual fair values.
The revenues and expenses both current and past of the parent are included within reported figures. However, the revenues and expenses of the subsidiary are Chapter 02 — Consolidation of Financial Information — Hoyle, Schaefer, Doupnik, 13e 8. The operations of the subsidiary are only applicable to the business combination if earned subsequent to its creation. In the vast majority of cases the assets acquired and liabilities assumed in a business combination are recorded at their fair values.
If the fair value of the consideration transferred including any contingent consideration is less than the total net fair value assigned to the assets acquired and liabilities assumed, then an ordinary gain on bargain purchase is recognized for the difference. We use PayPal as our payment gateway for both direct card payments and express checkouts. PayPal, as you know is the most secure and trusted payment gateway online. Further, you are covered by the PayPal Buyer Protection when you purchase from us.
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