2011 Financial 3 Text Updates - This first page gives a...

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This first page gives a listing of the corrected lecture text pages that follow. Print these corrected pages and insert in the lecture text. FINANCIAL Date Added Lecture Page Number Description 03/17/2011 F-3 9 Text change 03/24/2011 F-3 10 Delete text 03/24/2011 F-3 11 Text change 03/24/2011 F-3 20 Text change 03/24/2011 F-3 23 Delete text from heading 03/24/2011 F-3 27 Change text 03/24/2011 F-3 39 Change text 03/24/2011 F-3 47 Change text
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Becker Professional Education | CPA Exam Review Financial 3 © 2010 DeVry/Becker Educational Development Corp. All rights reserved. F3- 9 SOLUTION (continued) 3. Unrealized gain or loss on income statement: Security DEF ($5,000) Only adjustments to trading securities valuations are reported on the income statement. The $160,000 carrying value of the trading securities must be reduced to the $155,000 fair value and an income statement unrealized loss of $5,000 is recognized. 4. Unrealized gain or loss (current year change)—other comprehensive income: Security GHI & JKL (net) $10,000 12/31/Y1 12/31/Y2 Accumulated OCI Year 2 OCI Accumulated OCI Gain<Loss> Gain<Loss> Gain<Loss> Security GHI <$25,000> 1 $25,000 -0- Security JKL 5,000 2 <15,000> <10,000> <$20,000> $10,000 <$10,000> 1 - Security GHI - Loss in 12/31/Y1 AOCI = $165,000 fair value - $190,000 cost = <$25,000> 2 - Security JKL - Gain in 12/31/Y1 AOCI = $175,000 fair value - $170,000 cost = $5,000
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Financial 3 Becker Professional Education | CPA Exam Review F3- 10 © 2010 DeVry/Becker Educational Development Corp. All rights reserved. BUSINESS COMBINATIONS/CONSOLIDATIONS I. PRESUMPTION The presumption is that consolidated financial statements are more meaningful than parent company financial statements and/or parent company financial statements together with separate subsidiary financial statements. A. Consolidated financial statements (including segment reporting) are necessary for fair presentation. B. The equity method is not a valid substitute for consolidation. II. CONSOLIDATED FINANCIAL STATEMENTS Consolidated financial statements ignore important legal relationships and emphasize economic substance over form. Consolidated financial statements are an economic truth but a legal fiction. III. LIMITATIONS OF CONSOLIDATED FINANCIAL STATEMENTS A. Noncontrolling interest shareholders, creditors, and bondholders of the subsidiary remain uninformed regarding the subsidiary's separate financial statements. B. Weak performance of one company (entity) may be offset by the strong performance of another company. C. Ratio analysis of consolidated data is not reliable. For example: 1. Poor income statement results of individual subsidiaries are hidden. 2.
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2011 Financial 3 Text Updates - This first page gives a...

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