Part A Cost Method
Investment in Song Company
Dividend Income (.8 $25,000)
Dividend Income (.8 $50,000)
Investment in Song Company (.8 $35,000)
Part B Partial Equity Method
Consolidated Financial Statements after Acquisition
An investor adjusts the investment account for the amortization of any difference between cost and
book value under the
a. cost method.
b. complete equity method.
c. partial equity method.
Name: _ Date: _
1. Under the partial equity method, the entry to eliminate subsidiary income and dividends
includes a debit to
A) Dividend Income.
B) Dividends Declared - S Company.
C) Equity in Subsidiary Income.
D) Retained Earnings - S Company.
Allocation and Depreciation of
Differences Between Implied and Book Value
When the implied value exceeds the aggregate fair values of identifiable net assets, the residual
difference is accounted for as
a. excess of implied ov
Introduction to Business Combinations and the Conceptual Framework
1. Stock given as consideration for a business combination is valued at
a. fair market value
b. par value
c. historical cost
d. None of the above
2. Which of the
Topic: Intercompany Sales of Depreciable Assets
When is a gain recognized on an intercompany sale of equipment?
If Cloggins Co. sold equipment with a six-year life at a gain of $12,000 to Prosey Enterprises, its
subsidiary, in the conso
If Cloggins Co. sold equipment with a six-year life at a gain of $12,000 to Prosey
Enterprises, its subsidiary, in the consolidated statements, the gain will:
a. Never be recognized
b. Be recognized over the six-year period
Be recognized immediately
Sample Questions The answers are underlined
The partnership of Gilligan, Skipper, and Ginger had total capital of $570,000 on December 31,
2014 as follows:
Gilligan, Capital (30%)
Skipper, Capital (45%)
Ginger, Capital (25%)
Consolidated Financial StatementsDate of Acquisition
A majority-owned subsidiary that is in legal reorganization should normally be accounted for using
a. consolidated financial statements.
b. the equity method.
c. the market
Elimination of Unrealized Profit on Intercompany Sales of Inventory
Sales from one subsidiary to another are called
a. downstream sales.
b. upstream sales.
c. intersubsidiary sales.
d. horizontal sales.
Accounting for Business Combinations
SFAS 141R requires that all business combinations be accounted for using
the acquisition method.
Under the acquisition method, if the fair values of identifiable net assets exceed the va
General areas of review for Test 3
1. Goal of IASB
2. What is the authority of the SEC?
3. What SEC filings are require of foreign companies
4. What is included in the Accounting Standard Codification
5. What is a forward exchange contract
6. How do you c
Review of Chapters 1 through 3
1. Why do firms combine?-symmetry, growth and ego
2. Business combinations two or more companies under same control.
3. Statements 141 R and 160: Acquisition and handling of NCI
4. Friendly vs. unfriendly takeovers
Changing World Environment
U.S. GAAP and IFRS
Explain some of the major differences between IFRS and U.S. GAAP.
List some of the milestones that must be achieved before the SEC will
require adoption of IFRS.
Describe the SE
1. The goal of the IASB Committee is to formulate a single set of auditing standards to apply
in all countries. T or F
2. Property, Plant and equipment are valued at fair value for IFRS and US GAAP. T or F
3. The FASB is accountable to the S
Invest. In Sub
Excess of Implied
Total Liabilities and
Subsidary Elininatio Entries
ADVANCED ACCOUNTING TEST 1
Student Name: _
1. FASB 141R and FASB 160 were intended to establish congruency with tax rules relating
to business combinations. T or F
2. Greenmail is a combination defense tactic that is specified in the Internal Revenue
Suggested areas of review for Quiz 3
1. What organization governs the IASB
2. Inventory methods allowed by IFRS
3. Time line for convergence
4. American Depository Receipts and Global Depository Receipts
5. Impact of Norwalk Agreement
6. Allowance of Comp
Suggested areas of general review for exam 2
1. Know when and how a parent records financial information from its investment in
another company: under the cost, partial equity and complete or full equity methods.
2. Be able to prepare and analyze the comp
Suggested topics for review for first quiz:
1. Trends in business combinations
2. Know why firms combine
3. Identify defensive tactics used to prevent a business combination
4. Know the difference between an asset acquisition and a stock acquisition
Advanced Accounting Test Three
Assume that your company purchases inventories from a supplier on December 15. The invoice
specifies that payment is to be made on March 15 in Euros in the amount of 10,000 Euros. Your
company operates on a calendar yea
5. FASB ASC 805-20-55-6 provides the following guidance: The acquirer subsumes into
goodwill the value of an acquired intangible asset that is not identifiable as of the
acquisition date. For example, an acquirer m