Group Chp3 1-2, 4-11 - Patience Sampah Kelley Wolff Kristen...

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Patience Sampah, Kelley Wolff, Kristen Jack 1. LO2 A company acquires a subsidiary and will prepare consolidated financial statements for external reporting purposes. For internal reporting purposes, the company has decided to apply the initial value method. Why might the company have made this decision? a. It is a relatively easy method to apply . Pg 82-84 b. Operating results appearing on the parent’s financial records reflect consolidated totals. c. GAAP now requires the use of this particular method for internal reporting purposes. d. Consolidation is not required when the parent uses the initial value method. 2. LO2 A company acquires a subsidiary and will prepare consolidated financial statements for external reporting purposes. For internal reporting purposes, the company has decided to apply the equity method. Why might the company have made this decision? a. It is a relatively easy method to apply. b. Operating results appearing on the parent's financial records reflect consolidated totals. Pg 82-83 c. GAAP now requires the use of this particular method for internal reporting purposes. d. Consolidation is not required when the parent uses the equity method. 4. LO1 Willkom Corporation bought 100 percent of Szabo, Inc., on January 1, 2010. On that date, Willkom's equipment ( 10 -year life) has a book value of $300,000 but a fair value of $400,000 . Szabo has equipment ( 10 -year life) with a book value of $200,000 but a fair value of $300,000 . Willkom uses the equity method to record its investment in Szabo. On December 31, 2012, Willkom has equipment with a book value of $210,000 but a fair value of $330,000 . Szabo has equipment with a book value of $140,000 but a fair value of
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Group Chp3 1-2, 4-11 - Patience Sampah Kelley Wolff Kristen...

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