Question 1

Contingent consideration will be classified as a liability when

Accepted Answer

A) it will be paid in the form of additional equity. 
B) it will be paid in the form of cash or another asset. 
C) the form of payment will be determined at a future date. 
D) the acquirer decides the appropriate time to make a payment. 
A) it will be paid in the form of additional equity. 
B) it will be paid in the form of cash or another asset. 
C) the form of payment will be determined at a future date. 
D) the acquirer decides the appropriate time to make a payment.

Question 2

The following data pertains to questions 
Parent and Sub Inc had the following balance sheets on July 31,2007:   The Net Incomes for Parent and Sub Inc for the year ended July 31,2007 were $120,000 and $60,000 respectively.
-Assuming once again that the Proprietary 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?

Accepted Answer

A) $26,000 
B) $130,000 
C) Nil 
D) Cannot be determined from the information given. 
A) $26,000 
B) $130,000 
C) Nil 
D) Cannot be determined from the information given.

Question 3

In many countries,exceptions to the general rule that all subsidiaries must be consolidated are allowed)These exclusions could include any of the following except:

Accepted Answer

A) any subsidiaries that are under temporary control. 
B) any subsidiaries that are immaterial in size. 
C) any holding companies that are not actively engaged in any business activity. 
D) any subsidiaries that are under reorganization or are bankrupt. 
A) any subsidiaries that are under temporary control. 
B) any subsidiaries that are immaterial in size. 
C) any holding companies that are not actively engaged in any business activity. 
D) any subsidiaries that are under reorganization or are bankrupt.

Question 4

The following data pertains to Questions
Keen and Lax Inc had the following balance sheets on October 31,2007:  
-Assume that the following draft balance sheet was prepared by a co-worker subsequent to Keen's 80% purchase of Lax Inc for $240,000.Assuming this balance sheet is devoid of technical errors,what can be concluded about the balance sheet below?

Accepted Answer

This balance sheet was prepared using th

Question 5

Non-Controlling Interest is presented under the Liabilities section of the Consolidated Balance Sheet using the:

Accepted Answer

A) the Entity Theory. 
B) the Proprietary Theory. 
C) the Parent Company Theory. 
D) both the Parent Company Theory and the Proprietary Theory. 
A) the Entity Theory. 
B) the Proprietary Theory. 
C) the Parent Company Theory. 
D) both the Parent Company Theory and the Proprietary Theory.

Question 6

Company A Inc.owns a controlling interest in Company B.which is located overseas.Company A and B are in entirely different lines of business.Company A wishes to file a request allowing it to not consolidate its financial statements with those of Company B.Assuming that Company A is based in Canada,is this allowed? Explain.

Accepted Answer

Generally speaking,this practice is not

Question 7

The following data pertains to questions 
Parent and Sub Inc had the following balance sheets on July 31,2007:   The Net Incomes for Parent and Sub Inc for the year ended July 31,2007 were $120,000 and $60,000 respectively.
-Assume that Parent Inc.decides to prepare an Income Statement for the combined entity on the date of acquisition.Assuming that Parent acquires 80% of Sub Inc.on that date,what would be the net income reported for the combined entity?

Accepted Answer

A) $130,000 
B) $120,000 
C) $104,000 
D) Nil 
A) $130,000 
B) $120,000 
C) $104,000 
D) Nil

Question 8

If a subsidiary's goodwill is reasonably measurable on the date of acquisition,which consolidation theory should the parent company apply after January 1,2009?

Accepted Answer

A) Proprietary Theory. 
B) Parent Company Theory. 
C) Parent Company Extension. 
D) Entity Theory. 
A) Proprietary Theory. 
B) Parent Company Theory. 
C) Parent Company Extension. 
D) Entity Theory.

Question 9

One commonly cited weakness of Consolidated Financial Statements is that:

Accepted Answer

A) they lack completeness. 
B) they are of little use to end-users. 
C) divergent accounting practices between Parent and its Subsidiary may often yield misleading results. 
D) a poor performance by one or more subsidiaries can be masked through the aggregation process. 
A) they lack completeness. 
B) they are of little use to end-users. 
C) divergent accounting practices between Parent and its Subsidiary may often yield misleading results. 
D) a poor performance by one or more subsidiaries can be masked through the aggregation process.

Question 10

Contingent consideration should be valued at

Accepted Answer

A) the fair value of the consideration on the date of acquisition. 
B) the book value of the consideration at the date of acquisition. 
C) the acquirer's pro-rata share of the subsidiary's net assets at book value at the date of acquisition. 
D) the acquirer's pro-rata share of the subsidiary's net assets at fair value at the date of acquisition. 
A) the fair value of the consideration on the date of acquisition. 
B) the book value of the consideration at the date of acquisition. 
C) the acquirer's pro-rata share of the subsidiary's net assets at book value at the date of acquisition. 
D) the acquirer's pro-rata share of the subsidiary's net assets at fair value at the date of acquisition.

Question 11

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

Accepted Answer

A) must be revalued) 
B) must be eliminated) 
C) must be recorded as a loss on acquisition. 
D) must be subject to an impairment test. 
A) must be revalued) 
B) must be eliminated) 
C) must be recorded as a loss on acquisition. 
D) must be subject to an impairment test.

Question 12

A negative acquisition differential

Accepted Answer

A) is always equal to negative goodwill. 
B) is equal to negative goodwill when the fair values of the subsidiary's identifiable net assets are equal to their book values. 
C) implies that the parent company may have overpaid for its acquisition. 
D) cannot occur under the acquisition method) 
A) is always equal to negative goodwill. 
B) is equal to negative goodwill when the fair values of the subsidiary's identifiable net assets are equal to their book values. 
C) implies that the parent company may have overpaid for its acquisition. 
D) cannot occur under the acquisition method)

Question 13

When the parent forms a new subsidiary,

Accepted Answer

A) there should be no acquisition differential. 
B) a gain or loss will usually arise. 
C) push down accounting rules must be followed) 
D) it should not be included in the company's consolidated financial statements as this would effectively be double-counting. 
A) there should be no acquisition differential. 
B) a gain or loss will usually arise. 
C) push down accounting rules must be followed) 
D) it should not be included in the company's consolidated financial statements as this would effectively be double-counting.

Question 14

The following data pertains to questions 
Parent and Sub Inc had the following balance sheets on July 31,2007:   The Net Incomes for Parent and Sub Inc for the year ended July 31,2007 were $120,000 and $60,000 respectively.
-Assuming that Parent Inc acquires 80% of Sub Inc,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?

Accepted Answer

A) $200,000 
B) Nil 
C) $120,000 
D) $100,000 
A) $200,000 
B) Nil 
C) $120,000 
D) $100,000

Question 15

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

Accepted Answer

A) by using an imputed acquisition cost,which would be the presumed cost of acquiring 100% of the outstanding voting shares of the subsidiary. 
B) by using the actual acquisition cost. 
C) by using the actual acquisition cost less any uncontrolled portion of the subsidiary's net assets at fair market value. 
D) by using the actual acquisition cost less any uncontrolled portion of the subsidiary's net assets at book value. 
A) by using an imputed acquisition cost,which would be the presumed cost of acquiring 100% of the outstanding voting shares of the subsidiary. 
B) by using the actual acquisition cost. 
C) by using the actual acquisition cost less any uncontrolled portion of the subsidiary's net assets at fair market value. 
D) by using the actual acquisition cost less any uncontrolled portion of the subsidiary's net assets at book value.

Question 16

The following data pertains to questions 
Parent and Sub Inc had the following balance sheets on July 31,2007:   The Net Incomes for Parent and Sub Inc for the year ended July 31,2007 were $120,000 and $60,000 respectively.
-Assuming that Parent Inc.purchased 80% of Sub's voting shares on the date of acquisition for $180,000,what would be the amount of the Non-Controlling Interest on the date of acquisition if the Entity Method were used?

Accepted Answer

A) $104,000 
B) $26,000 
C) $ 45,000 
D) $38,000 
A) $104,000 
B) $26,000 
C) $ 45,000 
D) $38,000

Question 17

Goodwill is:

Accepted Answer

A) the amount paid for the customer lists,patents and other intangibles in excess of book value. 
B) never recognized for accounting purposes. 
C) the differential between the amount paid and the book value of the net assets acquired) 
D) the difference between the total value of the subsidiary and the amounts assigned to identifiable assets and liabilities. 
A) the amount paid for the customer lists,patents and other intangibles in excess of book value. 
B) never recognized for accounting purposes. 
C) the differential between the amount paid and the book value of the net assets acquired) 
D) the difference between the total value of the subsidiary and the amounts assigned to identifiable assets and liabilities.

Question 18

The following data pertains to questions 
Parent and Sub Inc had the following balance sheets on July 31,2007:   The Net Incomes for Parent and Sub Inc for the year ended July 31,2007 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?

Accepted Answer

A) $137,000 
B) $130,000 
C) $138,000 
D) $88,000 
A) $137,000 
B) $130,000 
C) $138,000 
D) $88,000

Question 19

Section 1625 of the CICA Handbook states that a Parent can only require Push-Down accounting when it owns at least what percentage of the Subsidiary?

Accepted Answer

A) 80% 
B) 75% 
C) 90% 
D) 95% 
A) 80% 
B) 75% 
C) 90% 
D) 95%

Question 20

The following data pertains to Questions
Keen and Lax Inc had the following balance sheets on October 31,2007:  
-Assume once again that Keen Purchases 100% of Lax.However,in this instance,Keen acquired Lax for only $100,000.Prepare any journal entries you feel are necessary on the date of acquisition prior to the preparation of Consolidated Financial Statements.

Accepted Answer

@#IMG-DLM&_TB4094_00 Note: This question differs f

Contingent consideration will be classified as a liability when

In many countries,exceptions to the general rule that all subsidiaries must be consolidated are allowed)These exclusions could include any of the following except:

Non-Controlling Interest is presented under the Liabilities section of the Consolidated Balance Sheet using the:

If a subsidiary's goodwill is reasonably measurable on the date of acquisition,which consolidation theory should the parent company apply after January 1,2009?

One commonly cited weakness of Consolidated Financial Statements is that:

Contingent consideration should be valued at

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

A negative acquisition differential

When the parent forms a new subsidiary,

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

Goodwill is:

Section 1625 of the CICA Handbook states that a Parent can only require Push-Down accounting when it owns at least what percentage of the Subsidiary?

A Survey of International Accounting

Investments in Equity Securities

Business Combinations

Consolidation Subsequent to Acquisition Date

Intercompany Inventory and Land Profits

Aintercompany Profits in Depreciable Assets

Consolidated Cash Flows and Ownership Issues

Other Consolidated Reporting Issues

Foreign Currency Transactions

Translation and Consolidation of the Financial Statements of Foreign Operations

Accounting for Not-For-Profit Organizations and Governments

Filters

Exam 4: Consolidated Statements on Date of Acquisition

Contingent consideration will be classified as a liability when

In many countries,exceptions to the general rule that all subsidiaries must be consolidated are allowed)These exclusions could include any of the following except:

Non-Controlling Interest is presented under the Liabilities section of the Consolidated Balance Sheet using the:

If a subsidiary's goodwill is reasonably measurable on the date of acquisition,which consolidation theory should the parent company apply after January 1,2009?

One commonly cited weakness of Consolidated Financial Statements is that:

Contingent consideration should be valued at

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

A negative acquisition differential

When the parent forms a new subsidiary,

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

Goodwill is:

Section 1625 of the CICA Handbook states that a Parent can only require Push-Down accounting when it owns at least what percentage of the Subsidiary?

A Survey of International Accounting

Investments in Equity Securities

Business Combinations

Consolidation Subsequent to Acquisition Date

Intercompany Inventory and Land Profits

Aintercompany Profits in Depreciable Assets

Consolidated Cash Flows and Ownership Issues

Other Consolidated Reporting Issues

Foreign Currency Transactions

Translation and Consolidation of the Financial Statements of Foreign Operations

Accounting for Not-For-Profit Organizations and Governments

Filters