Advanced Accounting Chapter 4

what is a basic premise of the acquisition method regarding accounting for a noncontrolling interest?

a subsidiary should be included in its entirety regardless of ownership amount

how are identifiable assets and liabilities recorded on the acquisition date?

identifiable assets and liabilities must be recorded at their full fair value on the acquisition date regardless of full or partial interest

how is intercompany debt recorded in consolidated financial statements?

100% of all intercompany balances (receivables & payables) must be eliminated regardless of full or partial interest

how are consolidated asset book values calculated for the balance sheet when not given both book valules?

fair value on acquisition date
- amortization expense

where is consolidated outside ownership recognized on the balance sheet?

in owners’ equity

how is attributable consolidated net income calculated?

parent’s net income
+ parent’s share of subsidiary’s adjusted net income

how is adjusted net income calulcated?

net income
- total fair value adjustment

how is total subsidiary fair value calculated?

consideration paid by parent
+ NCI fair value on acquisition date

how are fair value adjustments calculated?

consideration paid by parent
+ NCI fair value on acquisition date
- NBV of subsidiary

how is consolidated net income calculated?

parent’s net income
+ subsidiary’s net income
- annual amortization expenses

how is goodwill calculated?

fair value of initial investment
+ fair value of additional investment
+ fair value of NCI
- fair value of subsidiary’s net identifiable assets

how is the ending NCI balance calculated?

fair value of NCI on acquisition date
+ NCI’s share of subsidiary’s net income
- NCI’s share of subsidiary’s dividends

how are consolidated asset book values calculated for the balance sheet when given both book valules?

parent’s book value
+ subsidiary’s book value
+ remaining fair value adjustment

how is consolidated revenue calculated on the consolidate income statement?

parent’s revenues + subsidiary’s revenues

how is consolidated expense calculated on the consolidate income statement?

parent’s expenses + subsidiary’s expenses + annual amortization expenses