Differential is the difference between _____ and _________.
purchase price (FV of consideration given); book value of parent's share of net identifiable assets
A positive differential means that the acquiring company paid _____ than it's share of the book value for the sub's net assets
more
how is the portion of differential that represents goodwill handled?
it is NOT amortized; it IS tested annually for impairment
how is the portion of differential related to depreciable and amortizable assets handled?
depreciated or amortized over the remaining time of the relative asset
how does amortization of the differential affect the investment account?
reduces
how is differential handled when the sub disposes of an asset?
the portion of differential related to the asset must be removed from the investment account on the parent's books
How does a parent recognize the sale of an asset?
their portion of the gain/loss LESS the remaining balance of related differential
Elimination entry for beginning balances with differential
Retained Earnings
Common Stock
Differential
investment in sub
elimination entry for current year activity
income from sub
dividends declared
investment in sub
elimination of current year differential activity
*ALWAYS CREDIT DIFFERENTIAL HERE
Goodwill
Differential
how are intercompany accounts payable and receivable handled?
all intercompany transactions should be eliminated (a company cannot owe itself money)
what is push-down accounting?
reevaluating acquired subsidiary's assets and liabilities to their fair value directly on the sub's books on date of acquisition - this means they are not made in the consolidation worksheets