Advanced Accounting Exam 3

chapter 4 and 5

The total acquired firm fair value in the presence of a partial acqusition is

the sum of the two components at the acquisition date (FV of controlling interest + FV of noncontrolling interest)

The parent company that controls its subsidiary must consolidate ___________ of subsidiary assets, liabilities, revenues, and expenses.

100%, regardless of ownership amount,

The noncontrolling interest balance is reported in the parent’s consolidated financial statements as a(n) ______________________.

component of stockholders’ equity

When would entry A be split into two entries?

if a control premium exists

Control Premium

parent pays ‘extra’ than stock price

What would entry A1 refer to?

excess assets and liabilities

What would entry A2 refer to?

goodwill

When referring to net income, the economic unit concept states

consolidated net income includes 100% of parent’s NI and 100% of subsidiary’s NI, adjusted for excess acquisition-date fair value over book value amortizations

Step Acquisitions

occurs when control is achieved in a series of equity acquisitions, as opposed to a single transaction

During step acquisitions, on the date of attaining control

all of the parent’s previous investments in the subsidiary are adjusted to fair value and a gain or loss recognized as appropriate. valuation basis is established at fair value (100%)

Intercompany

the transfer of assets between the companies within a consolidated entity

Any gain created by intra-entity transfers is

removed in consolidation each year until the land is sold to an outside party

What are the journal entries for the TL entry?

Debit Gain, Credit Land

What are the journal entries for entry *GL?

Debit Retained Earnings, Credit Land

What would the consolidation worksheet entry be to recognize the gain on sale of land when it is sold to an outside party?

Debit Retained Earnings, Credit Gain

What are the journal entries for the TA entry?

debit gain, debit equipment, credit accumulated depreciation

What are the journal entries for the *TA entry?

debit retained earnings, debit equipment, credit accumulated depreciation

What are the journal entries for the ED entry?

debit accumulated depreciation, credit depreciation expense

What intra-entity entries are relevant to land sales?

TL and *GL

What intra-entity entries are relevant to equipment sales?

TA, ED, *TA

What intra-entity entries are relevant to inventory sales?

TI, G, *G

What are the journal entries for the TI entry?

debit Sales, credit COGS

What are the journal entries for the G entry?

debit COGS, credit inventory

What are the journal entries for the *G entry?

debit Retained Earnings, credit COGS

Gross Profit Ratio

MC / (1+MC) OR GP/Sales

Markup on Cost (MC)

GPR / (1-GPR) OR GP/COGS