What is the correct method for treating a vesting differential linked to the acquisition of shares?privileged rights of the subsidiary by the parent company? Select an answer: a. It must be allocated toidentifiable net assets or goodwill. b. It must be distributed in proportion to the identifiable assets andliabilities of the subsidiary. c. It must be charged to consolidated retained earnings or credited tocontributed surplus. d. It must be taken care of in the current year.

When a parent company acquires shares in a subsidiary, they often pay more or less than the book…

Answered: What is the correct method for treating…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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In a business combination - stock acquisition, difference between current fair values and book values of subsidiary’s identifiable assets and liabilities on acquisition date is:
When there is a dividend payable by the subsidiary at acquisition date, under what conditions should the existence of this dividend be taken into consideration in preparing the pre-acquisition entries?
If the entity is using the equity method to account for investment in subsidiary, the entry to recognize dividends received from the subsidiary will: a.Be recognized in profit or loss b.Increase the carrying amount of investment c.Decrease the carrying amount of investment d.Be recognized in other comprehensive income
When a parent company uses the equity method to account for an investment in a subsidiary, why do both the parent’s Net Income and Retained Earnings account balances agree with the consolidated totals?
For cash-settled share based payment transactions, until the liability is settled, the entity is required to re-measure the fair value of the liability at each reporting date and at the date of settlement and any changes in fair values are: a. Not recognized b. Included in earnings c. Included in accumulated profits d. Treated as a component of equity
How is non-controlling interest in the subsidiary’s net assets presented in the consolidated statement of financial position? a. Within equity but separately from the equity of the owners of the parents. b. Within equity as part of retained earnings. c. Any of these as a matter of accounting policy choice. d. As a mezzanine item between liabilities and equity.
When a contingent consideration arising from a business combination is classified as equity, how is any change in its fair value accounted for if the difference arises due to a change in circumstances? Multiple Choice As a memorandum entry indicating that additional shares hed been isued, As an edjustment to an estimate included in the determination of net income. As an adjustment to consolidated contributed surplus. As an adiustment to the consideration naid for the subsidiarv
Under the equity method of accounting for the operating results of a subsidiary, the dividends declared by the subsidiary to the parent company are accounted for by the parent company as A. Dividend revenue on the declaration date. B. A reduction of the Investment in Subsidiary account on the payment date. C. Dividend revenue on the payment date. D. A reduction of the Investment in Subsidiary account on the declaration date.
S1: Current fair value of the investment adjusted for dividends received describes the amount at which a parent company reports its investment in a Subsidiary under the cost method for periods subsequent to the business combination. S2: Under the cost method of accounting for investment, depreciation and amortization of the allocated difference between the fair values and book values of acquired subsidiary’s identifiable net assets is debited to the Subsidiary’s expense accounts, in the working paper. Only S1 is correct Both statements are correct Both statements are incorrect Only S2 is correct
1. When preparing the consolidated financial statements, which of the followingshould be deducted from the group reserves?a) Share in associate profit b) Value of the loan from subsidiary to associate c) Group’s share of sub-subsidiary’s profit d) Value of goodwill impairment expense
In the equity method of acquisition income is recognized only when the subsidiary declares dividends Select one: True False
When the acquisition of a subsidiary occurs during a reporting period, the computation of both BEPS and DEPS includes subsidiary income O and subsidiary securities for the entire period. O for the entire period and the number of subsidiary shares weighted for the partial period. O for the partial period and the number of subsidiary shares weighted for the partial period O for the partial period and the number of subsidiary shares entire period

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