Cart $0.00 0
No products in the cart.
Chapter_03_Consolidated_Statements_Subsequent_to_Acquisition
digital downloadNursingTest Bank

Chapter_03_Consolidated_Statements_Subsequent_to_Acquisition

Advanced Accounting 12e Paul M Fischer William J Taylor Rita H Cheng

$2.99

Chapter_03_Consolidated_Statements_Subsequent_to_Acquisition

 

Complete Chapter Questions With Answers

 

Sample Questions Are Posted Below

 

1. The method of accounting for subsidiaries that better reflects the investment account on parent-only financial statements is the

  a. ​cost method.
  b. ​simple equity method.
  c. ​investment method.
  d. ​sophisticated equity method.

 

ANSWER:   d
RATIONALE:   Under the sophisticated equity method the subsidiary income, and therefore, the investment account, is adjusted for the amortizations of the excess fair value over book value of the net assets acquired.
DIFFICULTY:   E
LEARNING OBJECTIVES:   ADAC.FISC.3-1

 

2. The method of accounting for subsidiaries that is required for influential investments is the

  a. ​cost method.
  b. ​simple equity method.
  c. ​investment method.
  d. ​sophisticated equity method.

 

ANSWER:   d
RATIONALE:   The sophisticated equity method is required by GAAP for unconsolidated investments over which the investor has significant influence.
DIFFICULTY:   E
LEARNING OBJECTIVES:   ADAC.FISC.3-1

 

3. The method of accounting for subsidiaries where investment income is limited to dividends received is the

  a. ​cost method.
  b. ​simple equity method.
  c. ​investment method.
  d. ​sophisticated equity method.

 

ANSWER:   a
RATIONALE:   Under the cost method, dividends received from the subsidiary are recorded as income.
DIFFICULTY:   E
LEARNING OBJECTIVES:   ADAC.FISC.3-1

 

4. Which of the following statements applying to the use of the equity method versus the cost method is true?

  a. ​A parent company may incur a delay in closing its books while waiting for a subsidiary that it accounts for using the cost method to determine its income.
  b. ​If no dividends were paid by the subsidiary, the investment account would have the same balance under both methods.
  c. ​The method used has no impact on consolidated financial statements.
  d. ​An advantage of the equity method is that no amortization of excess adjustments needs to be made on the consolidated worksheet.

 

ANSWER:   c
RATIONALE:   Regardless of the method the parent uses to account for the subsidiary, the consolidated financial statements will have the same result.
DIFFICULTY:   E
LEARNING OBJECTIVES:   ADAC.FISC.3-1

 

5. On January 1, 2016, Rabb Corp. purchased 80% of Sunny Corp.’s $10 par common stock for $975,000. On this date, the carrying amount of Sunny’s net assets was $1,000,000. The fair values of Sunny’s identifiable assets and liabilities were the same as their carrying amounts except for plant assets (net), which were $100,000 in excess of the carrying amount.

​

In the January 1, 2016, consolidated balance sheet, goodwill should be reported at ____.

  a. ​$0
  b. ​$75,750
  c. ​$95,000
  d. ​$118,750

 

ANSWER:   d
RATIONALE:   Determination and Distribution of Excess Schedule:

​ Implied Fair Value Parent Price

80%

 NCI Value

20%
Fair value of subsidiary $1,218,750 $975,000 $243,750
Less book value of interest acquired 1,000,000 800,000 200,000
Excess of book value over fair value $ 218,750 $175,000 $ 43,750
​ ​ ​ ​
Adjustment of identifiable accounts ​ ​ ​
Plant assets $100,000 ​ ​
Goodwill 118,750 ​ ​
Total $218,750 ​ ​
DIFFICULTY:   M
LEARNING OBJECTIVES:   ADAC.FISC.3-1

Additional information

Add Review

Your email address will not be published. Required fields are marked *

Related Products

Quick Links
Contact Information

511 SW 10th Ave 1206, Portland, OR, United States

Pinterest

Nurse Guide Hub

©2026 – All Rights Reserved