tatement 1: Consolidated inventory on the statement of financial position is recorded at fair market value to the affiliated group. Statement 2: In a business combination resulting in a parent company-wholly owned subsidiary relationship, goodwill developed in the working paper elimination is attributed in its entirety to the parent. Statement 3: If a new entity is formed to issue equity interests to effect a business combination, one of the combining entities that existed before the combination shall be identified as the acquirer. Statement 4: If the intercompany seller is the subsidiary, it is the subsidiary's income that needs adjustment. Statement 5: On the date of the business combination and its partially owned subsidiary, the amount assigned to minority interest in net assets of subsidiary is based on the cost of the parent company's investment in the parents' common stock. Which statement/s is/are true?

tatement 1: Consolidated inventory on the statement of financial position is recorded at fair market value to the affiliated group. Statement 2: In a business combination resulting in a parent company-wholly owned subsidiary relationship, goodwill developed in the working paper elimination is attributed in its entirety to the parent. Statement 3: If a new entity is formed to issue equity interests to effect a business combination, one of the combining entities that existed before the combination shall be identified as the acquirer. Statement 4: If the intercompany seller is the subsidiary, it is the subsidiary's income that needs adjustment. Statement 5: On the date of the business combination and its partially owned subsidiary, the amount assigned to minority interest in net assets of subsidiary is based on the cost of the parent company's investment in the parents' common stock. Which statement/s is/are true?

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter6: Audit Evidence

Section: Chapter Questions

Problem 15CYBK

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Statement 1: In the financial settlement of a contingent consideration classified as financial liability, the amount shall be remeasured at fair value with any gain or loss included in profit or loss. Statement 2: If a new entity is formed to issue equity interests to effect a business combination one of the combining entitites that existed before the combination shall be identified as the acquirer. Which statement/s is TRUE?
Following the completion of a business combination in the form of a statutory consolidation, what is the balance in the new corporation’s Retained earnings account? A. The sum of the acquirer and acquiree retained earnings account balances. B. The acquirer retained earnings account balance C. Zero D. The acquiree retained earnings account balance
Statement I: Gain on bargain purchase is included in the consolidated balance of shareholders’ equity at the date of acquisition.Statement II: For business combination for SMEs, all business combination expenses, direct, indirect, and share-issue costs are deducted in the consolidated balance of shareholders’ equity at the date of acquisition. a. False, True b. False, False c. True, True d.True, False
1- In a business combination resulting in a parent-subsidiary relationship, the identifiable net assets of the subsidiary must be reflected in the consolidated balance sheet at their current values on the date of the business combination. Does this require the subsidiary to enter the current fair values of the identifiable net assets in its accounting records? Explain. 2- The controller of Ahmed Corporation, which has just become the parent of Hassan Company in a business combination, inquires if a consolidated income statement is required for the year ended on the date of the business combination. What is your reply? Explain
Which of the following statements is true regarding the acquisition method of accounting for a business combination? a. Assets of the acquired company are recorded at book values. b. Assets of the acquired company are recorded at fair value, but only if the acquisition cost equals or exceeds fair value of the subsidiary's net assets. c. Assets of the acquired company are recorded at fair values regardless of the acquisition cost. d. Consulting costs related to the combination reduce additional paid-in capital.
Which of the following income items may affect both Consolidated Net Income attributable to Parent and Non-Controlling Interest in Profit? * A. Gain on bargain purchase arising from business combination. B. Gain (loss) arising from intercompany sale of fixed assets from parent to subsidiary. C. Answer not given D. Amortization of excess in merchandise inventory of the acquired company. E. Impairment of a goodwill recognized using the proportionate or relevant share.
1. The amount of goodwill (gain from a bargain purchase) resulting from the business combination is 2. On the date of acquisition, the NCI to appear in the consolidated statement of financial position is:
Statement I: A consolidation occurs when the entity that issues securities (the legal acquirer) is identified as the acquiree for accounting purposes.Statement II: In a consolidation, all of the combining entities transfers their net assets to form a new entity or sometimes referred as roll-up or put-together transaction. a. True, True b. False, False c. False, True d. True, False
Statement I: Gain on bargain purchase is included in the consolidated balance of shareholders’ equity at the date of acquisition.Statement II: All business combination expenses, direct, indirect, and share-issue costs are deducted in the consolidated balance of shareholders’ equity at the date of acquisition. True, False False, False True, True False, True
A business combination resulting to a goodwill is accounted using acquisition method. In the consolidated balance sheet at the date of acquisition, which of the following statement about retained earnings (RE) is TRUE? Group of answer choices RE is equal to the sum of the RE of the acquirer and acquire. RE is equal to RE of the acquirer plus unadjusted net income of the acquire. RE is equal to RE of the acquirer plus adjusted income of subsidiary net of minority interest in subsidiary’s net income. RE is equal to RE of the acquirer only.
A) When preparing consolidated financial statement workpapers, unrealized intercompany gains, as a result of equipment or inventory sales by affiliates, are allocated proportionately by percent of ownership between parent and subsidiary only when selling affiliate is a. The parent, and the subsidiary is less than wholly owned. b. The subsidiary, and the subsidiary are less than wholly owned c. A wholly owned subsidiary d. The parent of a wholly owned subsidiary. B) Gain or loss returning from an intercompany sale of equipment between a parent and a subsidiary is a. Considered to be realized over the remaining useful life of the equipment as an adjustment to depreciation in the consolidation statements. b. Considered to be unrealized in the consolidated statements until the equipment is sold to a third party c. Amortized over a period not less than 2 years and not greater than 40 years. d. Recognized in the consolidated statements in the year of the sale
Statement 1: In a business combination resulting a parent company-wholly owned subsidiary relationship, goodwill developed in the working paper elimination is attributed in its entirety to the parent. Statement 2: On the date of business combination of a parent company and its partially owned subsidiary, under the computation method used in full goodwill method, the amount assigned to minority interest in nest assets of subsidiary is based on the cost of the parent company’s investment in the subsidiary’s common stock. Statement 3: Consolidated net income is equal to the parent’s income from its net income under its Income Statement, plus the net income from each of the consolidated subsidiaries, adjusted for any differential write-off. Statement 4: It is useful to formulate eliminating entries in general form, because they are recorded in the general journal of the parent, to be sure that they balance before entering them in the working paper. Which statements above are correct?