Exam 3: Consolidated Statements: Subsequent to Acquisition

Company A purchased 90% interest in Company B in 2016 with total subsidiary goodwill of $135,000.Assume the investment amount exceeded the fair value of the subsidiary with the subsidiary book value based on acquisition date, amortized balances on December 31, 2019 of $1,000,000.The estimated fair value of Company B of $1,035,000 and the estimated fair value of net identifiable assets of $1,000,000.What is the impairment entry on Company A's books? a.Debit Goodwill Impairment Loss and Credit Investment in Company B for $35,000 b.Debit Goodwill Impairment Loss and Credit Investment in Company A for $35,000 c.Debit Goodwill Impairment Loss and Credit Investment in Company B for $31,500 d.Debit Goodwill Impairment Loss and Credit Investment in Company B for $90,000

Under IASB for small and medium entities, goodwill:

Prossart Company owned 70% of the outstanding stock of Say Company.During the annual goodwill impairment test, the following information pertaining to Say was noted: Book value of net assets \ 2,000,000 Fair value of Say Company 1,800,000 Estimated fair value of net identifiable assets 1,700,000 Recorded goodwill 200,000 The amount of goodwill impairment loss that would be recorded on Prossart's books would be:

Discuss the merits of accounting for subsidiaries using the: 1) Simple equity method 2) Sophisticated equity method 3) Cost method. ​

On January 1, 2016, Piston, Inc.acquired Spur Corp.While recording the acquisition, Piston established a deferred tax liability.It is most likely that this account was created because

On January 1, 2016, Payne Corp.purchased 70% of Shayne Corp.'s $10 par common stock for $900,000.On this date, the carrying amount of Shayne's net assets was $1,000,000.The fair values of Shayne's identifiable assets and liabilities were the same as their carrying amounts except for plant assets (net), which were $200,000 in excess of the carrying amount.For the year ended December 31, 2016, Shayne had net income of $150,000 and paid cash dividends totaling $90,000.Excess attributable to plant assets is amortized over 10 years. ​ In the December 31, 2016, consolidated balance sheet, non-controlling interest should be reported at ____.

Which of the following is not true regarding a subsidiary's tax loss carryovers in an acquisition?

On January 1, 2016, Parent Company purchased 80% of the common stock of Subsidiary Company for $316,000.On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $40,000, $120,000, and $190,000, respectively.Net income and dividends for 2 years for Subsidiary Company were as follows: ? ? 2016 2017 Net income \ 50,000 \ 90,000 Dividends 10,000 20,000 On January 1, 2016, the only tangible assets of Subsidiary that were undervalued were inventory and building.Inventory, for which FIFO is used, was worth $5,000 more than cost.The inventory was sold in 2016.Building, which was worth $15,000 more than book value, has a remaining life of 8 years, and straight-line depreciation is used.Any remaining excess is goodwill. ? Prepare Parent's 2016 and 2017 journal entries (after the purchase has been recorded) to record the transactions related to its investment in Subsidiary under the sophisticated equity method. ?

Alpha purchased an 80% interest in Beta on June 30, 2016.Both Alpha's and Beta's reporting periods end December 31.Which of the following represents the controlling interest in consolidated net income for 2016?

The method of accounting for subsidiaries where investment income is limited to dividends received is the

Pete purchased 100% of the common stock of the Sanburn Company on January 1, 2016, for $500,000.On that date, the stockholders' equity of Sanburn Company was $380,000.On the purchase date, inventory of Sanburn Company, which was sold during 2016, was understated by $20,000.Any remaining excess of cost over book value is attributable to patent with a 20-year life.The reported income and dividends paid by Sanburn Company were as follows: ? ? 2016 2017 Net income \ 80,000 \ 90,000 Dividends paid 10,000 10,000 Using the sophisticated (full) equity method, which of the following amounts are correct? ? Investment Income Investment Account Balance 2016 December 31,2016 A) \ 55,000 \ 555,000 B) \ 55,000 \ 545,000 C) \ 75,000 \ 565,000 D) \ 80,000 \ 570,000

The method of accounting for subsidiaries that better reflects the investment account on parent-only financial statements is the

In consolidated financial statements, it is expected that:

On January 1, 2016, Parent Company purchased 80% of the common stock of Subsidiary Company for $316,000.On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $40,000, $120,000, and $190,000, respectively.Net income and dividends for 2 years for Subsidiary Company were as follows: ? ? 201 202 Netincome \ 50,000 \ 90,000 Dividends 10,000 20,000 On January 1, 2016, the only tangible assets of Subsidiary that were undervalued were inventory and building.Inventory, for which FIFO is used, was worth $5,000 more than cost.The inventory was sold in 2016.Building, which was worth $15,000 more than book value, has a remaining life of 8 years, and straight-line depreciation is used.Any remaining excess is goodwill. ? Required: a.Prepare a value analysis schedule b.Prepare a determination and distribution of excess schedule

Which of the following statements applying to the use of the equity method versus the cost method is true?

On January 1, 2016, Promo, Inc.purchased 70% of Set Corporation for $469,000.On that date the book value of the net assets of Set totaled $500,000.Based on the appraisal done at the time of the purchase, all assets and liabilities had book values equal to their fair values except as follows: Book Value Fair Value Inventory \ 100,000 \ 120,000 Land 75,000 85,000 Equipment (useful life 4 years) 125,000 165,000 The remaining excess of cost over book value was allocated to a patent with a 10-year useful life. During 2016 Promo reported net income of $200,000 and Set had net income of $100,000. What income from subsidiary did Promo include in its net income if Promo uses the sophisticated equity method?

In a mid-year purchase when the subsidiary's books are not closed until the end of the year, the consolidated net income contains the parent's share of the