Question 1

When a subsidiary issues shares, ________.

Accepted Answer

A) no gain or loss is recognized 
B) a gain or loss is always recognized 
C) this reduces the NCI 
D) this may increase the NCI 
A) no gain or loss is recognized 
B) a gain or loss is always recognized 
C) this reduces the NCI 
D) this may increase the NCI D

Question 2

Gumble Ltd. has owned 65% of the common shares of Lopez for several years. This year, Gumble reduced its interest in Lopez to 10%. Which of the following statements is true?

Accepted Answer

A) Gumble must change from reporting under consolidation to the equity method. 
B) Gumble must change from reporting under consolidation to the cost method. 
C) Gumble must change from reporting under the equity method to the cost method. 
D) Gumble is not required to change its reporting method. 
A) Gumble must change from reporting under consolidation to the equity method. 
B) Gumble must change from reporting under consolidation to the cost method. 
C) Gumble must change from reporting under the equity method to the cost method. 
D) Gumble is not required to change its reporting method. B

Question 3

A parent company reduced its ownership in its subsidiary from 80% to 15%. How should this be reported on the parent's consolidated financial statements?

Accepted Answer

A) As a disposal of its interest in the subsidiary and a reacquisition of the retained interest at fair value 
B) As a disposal of its interest in the subsidiary and a reacquisition of the retained interest at book value 
C) As a write-down to the retained interest 
D) As an adjustment to the shareholders' equity 
A) As a disposal of its interest in the subsidiary and a reacquisition of the retained interest at fair value 
B) As a disposal of its interest in the subsidiary and a reacquisition of the retained interest at book value 
C) As a write-down to the retained interest 
D) As an adjustment to the shareholders' equity A

Question 4

On January 1, 20X7, Water Limited purchased 700,000 shares of Bottle Inc. for $2.8 million. On January 1, 20X9, Water sold 150,000 shares of Bottle for $700,000. During the entire period Bottle had 1,000,000 shares outstanding. Water accounts for its investment in Bottle under the equity method. The following information was extracted from the financial records of Bottle:
 $$\begin{array} { | l | l | l | l | } 
\hline & \text { lanuary 1, } & \text { Tanuary 1, } & \text { December } 31 , \
& 20 \times 7 & 0 \times 9 & 20 \times 10 \
\hline \text { Net carrying value of buildings } & \$ 3,560,000 & 3,320,000 & 3,320,000 \
\hline \text { Fair value of the buildings } & \$ 4,760,000 & 4,804,000 & 4,804,000 \
\hline \begin{array} { l } 
\text { Remaining useful life of } \
\text { buildings }
\end{array} & 30 & 28 & 26 \
\hline \text { Common shares } & \$ 1,000,000 & \$ 1,000,000 & \$ 1,000,000 \
\hline \text { Retained earnings } & \$ 1,500,000 & 1,820,000 & 2,200,000 \
\hline
\end{array}$$ All net identifiable assets had a fair value equal to their carrying value on the date of acquisition except the buildings. There is no goodwill reported on the separate entity financial statements of Water or Bottle. There have been no intercompany transactions between Water and Bottle.
Required:
Calculate the balances of the following accounts on the consolidated statement of financial position at December 31, 20X10, under the parent-company extension method:
a. Goodwill
b. NCI
Determine the adjustment to equity required.

Accepted Answer

@#IMG-DLM& Building Fair value increment Amortizat

When a subsidiary issues shares, ________.

Gumble Ltd. has owned 65% of the common shares of Lopez for several years. This year, Gumble reduced its interest in Lopez to 10%. Which of the following statements is true?

A parent company reduced its ownership in its subsidiary from 80% to 15%. How should this be reported on the parent's consolidated financial statements?

Setting the Stage

Intercorporate Equity Investments: an Introduction

Business Combinations

Appendix A: AIncome Tax Allocation

Wholly Owned Subsidiaries: Reporting Subsequent Acquisitions

Appendix A: Wholly Owned Subsidiaries: Reporting Subsequent Acquisitions

Appendix B: Wholly Owned Subsidiaries: Reporting Subsequent Acquisitions

Consolidation of Non-Wholly Owned Subsidiaries

Appendix A: Step Purchases

Subsequent-Year Consolidations: General Approach

Appendix A: Preferred and Restricted Shares of Investee Corporation

Appendix B: Intercompany Bond Holdings

Segment and Interim Reporting

Foreign Currency Transactions and Hedges

Reporting Foreign Operations

Financial Reporting for Not-For-Profit Organizations

Appendix A: Fund Accounting

Public Sector Financial Reporting

Filters

Exam 5: Appendix B: Decreases in Ownership Interest

When a subsidiary issues shares, ________.

Gumble Ltd. has owned 65% of the common shares of Lopez for several years. This year, Gumble reduced its interest in Lopez to 10%. Which of the following statements is true?

A parent company reduced its ownership in its subsidiary from 80% to 15%. How should this be reported on the parent's consolidated financial statements?

Setting the Stage

Intercorporate Equity Investments: an Introduction

Business Combinations

Appendix A: AIncome Tax Allocation

Wholly Owned Subsidiaries: Reporting Subsequent Acquisitions

Appendix A: Wholly Owned Subsidiaries: Reporting Subsequent Acquisitions

Appendix B: Wholly Owned Subsidiaries: Reporting Subsequent Acquisitions

Consolidation of Non-Wholly Owned Subsidiaries

Appendix A: Step Purchases

Subsequent-Year Consolidations: General Approach

Appendix A: Preferred and Restricted Shares of Investee Corporation

Appendix B: Intercompany Bond Holdings

Segment and Interim Reporting

Foreign Currency Transactions and Hedges

Reporting Foreign Operations

Financial Reporting for Not-For-Profit Organizations

Appendix A: Fund Accounting

Public Sector Financial Reporting

Filters