Exam 4: Consolidation of Non-Wholly Owned Subsidiaries

If the non-controlling interest at acquisition is based on the fair value of the subsidiary's identifiable net assets, which consolidation theory is being applied?

When the Non-Controlling Interest's share of the subsidiary's goodwill cannot be reliably determined, the method used to prepare consolidated financial statements is:

Assuming that Keen Inc. purchases 100% of Lax Inc. for $200,000, prepare the Consolidated Balance Sheet on the Date of Acquisition.

There are a number of theories of how financial statements should be prepared for non-wholly owned subsidiaries. Briefly discuss each theory and provide your reasoning to support the theory that is being adopted under IFRSs.

The Net Incomes for Parent and Sub Inc for the year ended July 31, 2012 were $120,000 and $60,000 respectively. Assuming the Entity Theory was applied, what would be the amount of Goodwill appearing on the Consolidated Balance Sheet on the Date of acquisition, assuming once again that Parent purchased 80% of Sub Inc. for $180,000?

Any goodwill on the subsidiary company's books on the date of acquisition:

On the date of acquisition, consolidated shareholders' equity is equal to:

A business combination involves a contingent consideration. As a result, two years after the acquisition date, the acquirer was required to issue an additional 40,000 common shares at a time when the fair value of the common shares was $4 per share. What effect would this transaction have on the balance in the common shares account in the consolidated financial statements on the date of acquisition?

A negative acquisition differential:

Assuming that Keen Inc. purchases 80% of Lax Inc. for $240,000, prepare the Consolidated Balance Sheet on the Date of Acquisition.

The calculation of Goodwill and Non-Controlling Interest under the Entity Theory is derived :

When a contingent consideration arising from a business combination is classified as a liability, how is any change in its fair value as a result of new information about the facts and circumstances that existed at the acquisition date accounted for if identified and measured within one year subsequent to the acquisition date?

A company owning a majority (but less than 100%) of another company's voting shares on the date of acquisition should account for its subsidiary (in its consolidated balance sheet):

The Net Incomes for Parent and Sub Inc for the year ended July 31, 2012 were $120,000 and $60,000 respectively. Assuming that Parent Inc acquires 80% of Sub Inc on August 1, 2012, what amount would appear in the Non- Controlling Interest Account on the Consolidated Balance Sheet on the date of acquisition if the Proprietary Method were used?

Assuming that Keen Purchases 100% of Lax for a consideration of $100,000, and accounts for its investment using the cost method, prepare: a) the journal entry that Keen Inc. would make to record the acquisition; b) the elimination entry necessary to produce consolidated balance sheet on the acquisition date.

The Net Incomes for Parent and Sub Inc for the year ended July 31, 2012 were $120,000 and $60,000 respectively. The Shareholders' Equity section of Parent's Consolidated Balance Sheet on the date of acquisition would total what amount under the Entity Method?