Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
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Chapter A2, Problem 15MCQ
To determine
The amount of total assets that will be presented in the consolidated Balance sheet is to be determined.
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Students have asked these similar questions
A parent company owns 80% of the issued capital of its subsidiary. On consolidation, a sale of inventories between parent and subsidiary will be eliminated as follows
Select one:
A. 20% of the sale amount
B. 80% of the sale amount
C. 100% of the sale amount
D. not eliminated
Requirements:
4. How much is the consolidated operating expenses for 2x19?5. How much is the consolidated profit attributable to parent on December 31, 2x19?6. How much is the non-controlling interest in profit of Subsidiary Company on December 31, 2x19?\
8.
Accountancy Company acquired 75% of outstanding ordinary shares
of Finance Company for P900,000. Book value of Finance
Company's net assets is P1,000,000. Upon re-measurement of
acquires net assets, it shows that inventory has a fair value lower by
P40,000 than its book value and equipment held for 3 years has a fair
value and book value of P450,000 and P360,000, respectively. The
original cost of Finance Company's equipment is P576,000 with no
residual value. Accountancy opt to measure NCI at fair value of
P275,000.
During the year Accountancy reported net income from own
operation of P300,000 and received P30,000 dividend from Finance.
Finance Company's net income amounts to P120,000. Goodwill, if
partial, is impaired by P13,500.
Compute the consolidated net income.
a. P424,000
b. P439,000
c. P427,000
d. P394,000
Chapter A2 Solutions
Cornerstones of Financial Accounting
Ch. A2 - How do long-term investments differ from...Ch. A2 - Prob. 2DQCh. A2 - Prob. 3DQCh. A2 - Prob. 4DQCh. A2 - Prob. 5DQCh. A2 - Prob. 6DQCh. A2 - Prob. 7DQCh. A2 - How does the equity method discourage the...Ch. A2 - Prob. 9DQCh. A2 - Prob. 10DQ
Ch. A2 - Prob. 11DQCh. A2 - Prob. 12DQCh. A2 - Prob. 13DQCh. A2 - Prob. 14DQCh. A2 - Prob. 15DQCh. A2 - Prob. 1MCQCh. A2 - Prob. 2MCQCh. A2 - Prob. 3MCQCh. A2 - Prob. 4MCQCh. A2 - Prob. 5MCQCh. A2 - Prob. 6MCQCh. A2 - Prob. 7MCQCh. A2 - Prob. 8MCQCh. A2 - Prob. 9MCQCh. A2 - Prob. 10MCQCh. A2 - Prob. 11MCQCh. A2 - When the market value of a companys...Ch. A2 - Prob. 13MCQCh. A2 - Prob. 14MCQCh. A2 - Prob. 15MCQCh. A2 - Prob. 16MCQCh. A2 - Prob. 17ECh. A2 - Trading Securities Pear Investments began...Ch. A2 - Prob. 19ECh. A2 - Prob. 20ECh. A2 - Adjusting the Allowance to Adjust Trading...Ch. A2 - Prob. 22ECh. A2 - Prob. 23ECh. A2 - Prob. 24ECh. A2 - Prob. 25ECh. A2 - Prob. 26ECh. A2 - Prob. 27ECh. A2 - Prob. 28ECh. A2 - Prob. 29ECh. A2 - Prob. 30E
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- Companies X, Y and Z, parties to a consolidation, have the following data: X Co Y Co Z CoNet assets P400,000 P600,000 P1,000,000Average annual earnings 60,000 60,000 80,000The parties collectively agreed that the new corporation, AA Co will issue a single class of stock based on the earnings ratio. What is the stock distribution ratio to companies X, Y and Z, respectively?arrow_forward7. Suppose that a parent company acquires a subsidiary and the following is an elimination entry before you prepare consolidated financial statements as of the date of acquisition. Common stock 200,000 Retained earnings 100,000 Land 10,000 Building 60,000 Goodwill 17,500 Investment in subsidiary 310,000 NCI in net assets of subsidiary 77,500 Now assume that in the first year of acquisition, the subsidiary reports a net income of 20,000 TL and declares a dividend of 12,000 TL. The useful life of the building is 10 years. The parent applies equity method. What amount will be reported as noncontrolling interest on the consolidated balance sheet? a) 77,900 TL b) 79,100 TL c) 80,300 TL d) 81,500 TL 8. Suppose that net profit margin is 30%, asset turnover rate is 50%, and debt-to-equity is 2. What would be the ROE? a) 45% b) 50% c) 55% d) 60% 9. Suppose that a company is established in the beginning of the year 2020. As of the 2020 year end, you have the following data: (a) Current…arrow_forwardQ1) When a company owns 50% or more of another company, accounting standards require that the owner (parent) consolidates its financial statements with the subsidiary. Explain the rationale and the reasons behind that requirement.arrow_forward
- Which item is eliminated when preparing a consolidation worksheet? a. Equipment acquisitions Macca Ltd has a wholly (100%) owned subsidiary, Walnut Ltd. Walnut Ltd has a subsidiary, Cashew Ltd and owns 75% of the subsidiary’s shares. If Cashew Ltd went into liquidation, Macca Ltd would be entitled to: a. 75% of any surplus of Cashew Ltd’s assets over its liabilities. b. 100% of profits made by Cashew Ltd since Macca Ltd acquires Walnut Ltd. c. 75% of profits made by Cashew Ltd since its acquisition by Walnut Ltd. d. whichever of the above that gives Macca Ltd the highest entitlement. b. Intragroup dividends c. Goodwill d. Retained earningarrow_forwardTRUE OR FALSE: Indicate whether the statements are true or false. 1. Worksheet elimination 1 will include only the subsidiary’s stock (par value and additional paid-in capital), Retained Earnings, and the parent’s Investment in Subsidiary account when the parent has acquired 100 percent of the subsidiary’s stock at book value at the beginning of the period. 2.arrow_forwardDo not use negative signs with your answers below. Reconciliation of Cost to Equity Method Parent's pre-consolidation net income 401000 v Dividend Income 81000 v P% x Net income of subsidiary P% x AAP amortization 0 x Net income attributable to controlling interest $ 0 x b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement Sales $ 12200000 v Cost of goods sold 8120000 v Gross profit 4080000 v Operating expenses 0 x Net income Net income attributable to noncontrolling interests 0 x Net income 0 xarrow_forward
- TRUE OR FALSE 1. Subsequent to the date of acquisition worksheet elimination number 1 will not completely remove the Investment in Subsidiary account from the consolidated balance sheet. 2. The consolidation worksheet will only eliminate all of the Investment in Subsidiary account when the parent owns 100 percent of the subsidiary’s stock. 3.arrow_forwardRequirements: WHAT IS THE AMOUNT OF: A. Goodwill to be reported on the consolidated balance sheet on January 1, 2x19? B. Non-controlling interest on January 1, 2x19? C. Consolidated operating expenses for 2x19? D. Consolidated profit attributable to parent on December 31, 2x19? E. Non-controlling interest in profit of Subsidiary Company on December 31, 2x19? F. Non-controlling interest is to be presented in the consolidated statement of financial position on December 31, 2x19? G. Consolidated retained earnings attributable to Parent's shareholder equity on December 31, 2x19? H. Total consolidated assets on December 31, 2x19?arrow_forwardChoose the letter of the correct answer. 1. Which of the following is not correct with regard to a parent’s ownership of 100 percent of a subsidiary’s stock subsequent to a book value acquisition? A. Consolidated Investment in Subsidiary balance equals the parent’s Investment in Subsidiary balance B. Consolidated Retained Earnings equals the parent’s Retained Earnings C. Consolidated dividends equal the parent’s dividends D. Consolidated net income equals the parent’s net income 2. What amount of allocated excess/purchase differential amortization is recognized in the parent’s financial records subsequent to the subsidiary’s acquisition? A. The noncontrolling interest percentage ownership in the subsidiary B. 100 percent of the purchase differential amortization C. Allocated excess/purchase differentials are not amortized D. The parent percentage ownership in the subsidiaryarrow_forward
- What method must be used if FASB 94 prohibits full consolidation of a 70% owned subsidiary? a. The cost method. b. The Liquidation value. c. Market value. d. Equity method.arrow_forwarda.Which of the following statement/s regarding the method of consolidation is true: (1) Subsidiaries are consolidated in full (2) Associates are equity accounted Select one: a. Neither statement b. Statement (1) only c. Both statements d. Statement (2) Q2. Which of the following is a characteristic of the cost method of accounting for subsidiary operations? Select one: a. Parent company net income equals consolidated net income. b. More working paper eliminations are required than for the equity method of accounting. c. Consolidated amounts differ from the comparable amounts under the equity method of accounting. d. None of the above Q3. How soon does goodwill acquired in a business combination need to be tested after an acquisition? Select one: a. The year after acquisition b. The year of acquisition c. Two years after acquisition d. None of the abovearrow_forwardThe goal of the consolidation process for A. The assets of the non-controlling interest to be predominantly displayed on the balance sheet. B. Asset acquisitions and 100% stock acquisition to result in the same balance sheet. C. Goodwill to appear on the balance sheet of the consolidated entity D. The investment in the subsidiary to be properly valued on the consolidated balance sheet.arrow_forward
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