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Questions And Answers
Indirect Control - correct answer ✅Occurs when a company's common stock is owned by one or more other companies that are all under common control Direct Control - correct answer ✅Occurs when one company owns a majority of another company's common stock Ability to Exercise Control - correct answer ✅A parent company cannot exercise control when the subsidiary was in legal reorganization, bankruptcy, or if control rests with a court-appointed trustee Effective Control - correct answer ✅Occurs when there is an ability to direct the policies of another entity even though majority ownership is lacking Three Eliminating Entries - correct answer ✅Intercompany stockholdings, Intercompany receivables and payables, and Intercompany sales
Questions And Answers
Intercompany Stockholdings - correct answer ✅Because the parent company owns the subsidiary's stock, the common stock and retained earnings is eliminated during the preparation of the Consolidated Financial Statements Intercompany Sales - correct answer ✅The ending inventory from intercompany sales must be restated to it's original cost, the profit recognized on intercompany sales and the amount included in retained earnings must be removed Difference Between FV and BV - correct answer ✅The fair value reflects the current value of the acquired assets. First we allocate it to the differential, then to Goodwill Noncontrolling Interest - correct answer ✅The shareholders of the subsidiary other than the parent
Questions And Answers
Primary Beneficiary - correct answer ✅An enterprise that will absorb a majority of the VIE's expected losses, receive a majority of the VIE's expected residual return, or both. The primary beneficiary must consolidate the VIE Proprietary Theory - correct answer ✅Views the firm as an extension of the owners. The firms' assets, liabilities, revenues, and expenses are viewed as those of the owners Pro Rata Consolidation - correct answer ✅In which the parent company consolidates only its proportionate share of a less-than-wholly owned subsidiary's assets, liabilities, revenues, and expenses Parent Company Theory - correct answer ✅Recognizes the parent has the ability to effectively control all of the assets and liabilities of a majority-owned subsidiary, not just a proportionate share, even though he parent does not actually own the subsidiary's assets or have obligations for the liabilities. Includes all in the F/S
Questions And Answers
Entity Theory - correct answer ✅Focuses on the firm as a separate economic entity rather than on the ownership rights of the shareholders. All of the assets, liabilities, revenues, and expenses of a less-than-wholly owned subsidiary are included in the consolidated F/S Acquisition Entry - correct answer ✅Dr- Investment in Sub Cr- Cash Dividend Entry - correct answer ✅Dr- Cash Cr- Investment in Sub Income Allocation Entry - correct answer ✅Dr- Investment in Subsidiary Cr- Income from Subsidiary Differential Amortization - correct answer ✅Dr- Income from Subsidiary Cr- Investment in Subsidiary
Questions And Answers
Overall Goal of Consolidation - correct answer ✅To present a set of financials to represent one company Consolidation Workpaper - correct answer ✅Provides a mechanism for effectively combining the accounts of the separate companies involved in the consolidation and for adjusting the combined balances to the amounts that would be reported if all consolidating companies were actually a single company Eliminating Entries - correct answer ✅Are used in the consolidation workpaper to adjust the totals of the individual account balances of the separate consolidating companies to reflect the amounts that would appear if all the legally separate companies were actually a single company Differential - correct answer ✅PP -C/S and R/E
Questions And Answers
Investment Elimination Entry - correct answer ✅C/S R/E ---Investment in Sub Investment Elimination Entry with Differentail - correct answer ✅C/S R/E Differential --Investment in Sub Treatment of a Positive Differential - correct answer ✅The FV might exceed the BV because of errors or omissions on the books of the subsidiary, excess of FV over the BV of the subsidiary's net identifiable assets, or because of the existence of Goodwill Allocating the Differential Entry - correct answer ✅Land --Differential
Questions And Answers
operations, excluding investment income from consolidated subsidiaries, plus the net income from each of the consolidated subsidiaries Consolidated R/E - correct answer ✅As it appears in the consolidated B/S, is the portion of the consolidated enterprise's undistributed earnings accruing to the parent company shareholders Push Down Accounting - correct answer ✅Refers to the practice of revaluing an acquired subsidiary's assets and liabilities to their FV directly on that subsidiary's books at the date of acquisition
