ACC440_COOKE_WEEK4 - Q4-1 How does an eliminating entry...

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Unformatted text preview: Q4-1 How does an eliminating entry differ from an adjusting entry? Elmininating entries are recorded on the books of companies oppossed to adjusting entries which are not recorded. Eliminating entries are entered in the consolidation workpaper. Q4-2 What is the term differential used to indicate? Diiferntial indicates the differences between acquisition date fair value and its book value. Q4-3 What is negative goodwill? How is it reported in the consolidated balance sheet? Negative goodwill is when a purchase price is less than the proportionate share of the fair value of the idnetifiable net assets of the acquired company. Negative goodwill is allocated on the balance sheet at fair value. Q4-11 Explain why consolidated financial statements become increasingly important when the purchase differential is very large. 4-1 How does an eliminating entry differ from an adjusting entry? lmininating entries are recorded on the books of companies oppossed to adjusting entries which are not recorded. liminating entries are entered in the consolidation workpaper. 4-2 What is the term differential used to indicate? iiferntial indicates the differences between acquisition date fair value and its book value. 4-3 What is negative goodwill? How is it reported in the consolidated balance sheet? egative goodwill is when a purchase price is less than the proportionate share of e fair value of the idnetifiable net assets of the acquired company. egative goodwill is allocated on the balance sheet at fair value. 4-11 Explain why consolidated financial statements become increasingly important when the purchase ifferential is very large. According to the reading the existence of a large differential indicates the parent paid well over book value to acqu ownership of the subsidiary. When the differential is assigned to identifiable assets or liabilities of the subsidiary, b the consolidated balance sheet and consolidated income statement are likely to provide information not available in financial statements of the individual companies. The consolidated statements are likely to provide a better picture o assets actually being used and the resulting income statement charges that should be reported. P4-18 A) The amount is equal to Kaspers retained earnings balance 567,000 70%= 1.00 -[96,000/ (150,000 + 170,000)] 140,000= 100,000+ [328,000 -(200,000 + 100,000)]/ .70 B) C) D) Compution of fair value Cash inventory Land Buildings and equipment fair value of total assets accounts payable fair value of net assets 60,000 140,000 80,000 220,000 500,000 -40,000 460,000 E) Purchase prices Proportionate share of book value Company's net assets (320,000 x .70) Differential assigned to inventory differential assigned to land differential assigned to buildings and equipment amount paid by Kasper 224,000 28,000 17,000 38,000 307,000 F) Eliminating entries 1) Common stock (timmin Co) Retained earnings Differential Investment in Timmin Co stock Noncontrolling interest Inventory Land Buildings and equipment Differential 150,000 170,000 83,000 307,000 96,000 28,000 17,000 38,000 83,000 ...
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