FAR 4.4 & 4.5 - Acquisition Method

Question 1

The investment is valued at:

Answer 1

The fair value at close date

Question 2

The year end consolidating journal entry known as the consolidating work paper eliminating journal entry is:

Answer 2

DR: Common stock - sub
DR: APIC - sub
DR: Retained earnings - sub
CR: investment in sub
CR: Noncontrolling interest
DR: BS adjustments to FV
DR: Intangible assets to FV
DR: Goodwill or CR: Gain

Question 3

Non controlling interest at the acquisition date is calculated as:

Answer 3

Fair value of sub X non controlling interest %

Question 4

Non controlling interest after the acquisition date is calcualated as:

Answer 4

Beginning noncontolling interest
+ NCI share of subs net income
- NCI share of subs dividends
= ending noncontrolling interest

Question 5

The calculation for total consolidated equity is:

Answer 5

Noncontrolling interest
+ parents common stock
+ parents APIC
+ parents retained earnings
= consolidated equity