ACCT 4010 midterm Cheat Sheet.docx

ACCT 4010 midterm Cheat Sheet.docx - Chapter 1-4 Business...

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Chapter 1-4 Business combination? 2 or more previously seperate comp. are brought/control by a single comp. [Merger: B dissolve only;  Consolidation: both dissolve] Use Fair value for Asset/Liabilities  Control: when one or more corpoations become subsidiaries,  when one company transfers net assets to another, and  when each combining company transfes its net assets to  a newly formed corporation. Goodwill: AC> FC of identifiable net assets goodwill is not amortized for financial reporting  purposes => no effect on net income unless If goodwill is impaired, a loss will recognized. Consolidation:  to take over the assets and operations of two or more  separate business entities, with the previously separate  entities being dissolved Direct combination fee: Legal fee, finders fess indirect: Management salaries Which will included** from the process of  assigning  fair values  to assets and liabilities for purposes of  recording the acquisition?  a Patents developed by  Dart  //b. Dart's mortgage payable  c An asset or liability amount for over- or underfunding  of Dart's defined-benefit pension plan  Stock…. 20% common stock = exercise significant influence  over the investee 25% Cash , fair value of other assets given or securities  issued, exclude cost of registering and issuing equity  securities Equity.. of an investment at acquisition:  =BV of net aset The equity method is reported on one line of the  investor's income statement. When would more than one of the investor be required to report such income? when the investee's income includes gains or losses  from discontinued operations . If so, investee's ordinary  income is reported as investment income under one line  consolidation , but the investor's share of gains and  losses from DO is combined with similar items of the  investor GAAP provides indicators of an investor's inability to  exercise significant influence over an investee.  /Surrender of significant stockholder rights by  agreement  /Concentration of majority ownership in another group  rather than the investor /Failure to obtain representation on the investee's board  of directors  /Opposition by the investee that challenges the  investor’s influence /Inadequate or untimely information to apply the equity  method Pam Company owns 25 percent of Sun Corporation.  During the year, Sun had net earnings of $450,000 and  paid dividends of $28,000. Pam mistakenly recorded  these transactions using the cost method rather than the  equity method. What effect would this have on the  investment account, net earnings, and retained earnings,  respectively?
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Christopher Reinemann
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