A 70 percent owned subsidiary company declares and pays a cash dividend. What effect does the dividend have on the retained earnings and noncontrolling interest balances in the parent company's consolidated balance sheet?
a) Decreases in both retained ear
b) No effect on retained earnings and a decrease in noncontrolling interest.
How is the portion of consolidated earnings to be assigned to the noncontrolling interest in consolidated financial statements determined?
Question options:
a) The amount of the subsidiary's earnings recognized for consolidation purposes is multiplied by
a) The amount of the subsidiary's earnings recognized for consolidation purposes is multiplied by the noncontrolling interest's percentage of ownership.
On January 1, 20X5, Post Company acquired an 80 percent investment in Stake Company. The acquisition cost was equal to Post's equity in Stake's net assets at that date. On January 1, 20X5, Post and Stake had retained earnings of $500,000 and $100,000, res
c) $650,000.
On January 1, 20X8, Ritt Corporation acquired 80 percent of Shaw Corporation's $10 par common stock for $956,000. On this date, the fair value of the noncontrolling interest was $239,000, and the carrying amount of Shaw's net assets was $1,000,000. The fa
c) $95,000.
On January 1, 20X8, Ritt Corporation acquired 80 percent of Shaw Corporation's $10 par common stock for $956,000. On this date, the fair value of the noncontrolling interest was $239,000, and the carrying amount of Shaw's net assets was $1,000,000. The fa
d) $251,000.
Goodwill is
a)
Reported when more than book value is paid in purchasing another company.
b)
Reported when the fair value of the acquiree is higher than the fair value of the net identifiable assets acquired.
c)
Generally smaller for small companies and in
b) Reported when the fair value of the acquiree is higher than the fair value of the net identifiable assets acquired.
Goodwill represents the excess of the sum of the fair value of the (1) consideration given,(2) shares already owned, and (3) the noncontrolling interest over the
a)
Sum of the fair values assigned to identifiable assets acquired less liabilities assumed.
a) Sum of the fair values assigned to identifiable assets acquired less liabilities assumed.
In a business combination, costs of registering equity securities to be issued by the acquiring company are a(n)
a)
Addition to goodwill.
b)
Expense of the combined company for the period in which the costs were incurred.
c)
Reduction of the recorded valu
c) Reduction of the recorded value of the securities.
Which of the following is the appropriate basis for valuing fixed assets acquired in a business combination carried out by exchanging cash for common stock?
a)
Historical cost
b)
Cost plus any excess of purchase price over book value of assets acquired
c)
d) Fair value
When a parent-subsidiary relationship exists, consolidated financial statements are prepared in recognition of the accounting concept of
a)
Materiality.
b)
Economic entity.
c)
Reliability.
d)
Legal entity.
b) Economic entity.
Consolidated financial statements are typically prepared when one company has a controlling interest in another unless
a)
The subsidiary is a finance company.
b)
The fiscal year-ends of the two companies are more than three months apart.
c)
Circumstances
c) Circumstances prevent the exercise of control.
Penn Inc., a manufacturing company, owns 75 percent of the common stock of Sell Inc., an investment company. Sell owns 60 percent of the common stock of Vane Inc., an insurance company. In Penn's consolidated financial statements, should Sell and Vane be
b) Consolidation used for both Sell and Vane.
Which of the following is the best theoretical justification for consolidated financial statements?
Question options:
a)
In form, the companies are one entity; in substance, they are separate.
b)
In form, the companies are separate; in substance, they are
b) In form, the companies are separate; in substance, they are one entity.