Consolidated Financial Statements

Question 1

What does Control or majority voting interest mean for consolidated financial statements ?

Answer 1

More than 50% of direct or indirect ownership of another entity.

Question 2

What should be reported as Liabilities of Consolidated FS?

Answer 2

P+S

Question 3

Gross profit rate formula

Answer 3

Gross profit rate = Gross profit over total sales

Question 4

For which items does only the share of parent get reported in the BS?

Answer 4

P ONLY - Dividends/Retained Earnings/Net Income/Common Stock

*Stockholder’s equity too (only if equity method of accounting is used) if they had paid with the stock, purchase price will also be added to the stockholder’s equity}

Question 5

What is Gain from Bargain Purchase (ASC topic 810)?

Answer 5

The excess of the FV of the net assets acquired over acquisition cost is recognized as a gain from a bargain purchase in the period of acquisition.

Question 6

When is goodwill recognized in the consolidation?

Answer 6

Goodwill is recognized during acquisition or purchase of company/business

Formula to calculate value of Goodwill or when to recognize goodwill = CV - FV

Question 7

How to calculate NCI of a parent co. in sub at the end of the year?

Answer 7

NCI of P in Sub at the beginning of the year + (% share in sub NI of Sub) - Dividends paid by Sub NCI Share of P in %)

Question 8

Is consolidation process carried out on the books of the parent entity? How does the process take place?

Answer 8

No. It rather takes place on worksheets and schedules that are separate from any set of books. Consolidated Financial statements report 2 or more legal entities as though they are a single economic entity.

Question 9

What does 20% to 50% voting ownership signify?

Answer 9

Significant Influence

Question 10

What does more than 50% voting ownership signify?

Answer 10

Control

Question 11

How to calculate Goodwill ?

Answer 11

FV of Consideration paid by P
+ NCI FV
(-) FV of Shaw’s net assets
_____________________________________
= Goodwill

Question 12

NCI

Answer 12

NCI recognized during consolidation
+ NCI net Income (of S)
(-) NCI dividends (S)
___________________________
NCI interest of P in S

Question 13

Investment in Subsidiary will be _____________

Answer 13

ELIMINATED entirely in consolidation

Question 14

NCI is shown in ______________ but not in separate unconsolidated financial statements.

Answer 14

CONSOLIDATED FIN STATEMENTS

Question 15

In which circumstances consolidation is not required?

Answer 15

When subsidiary is in bankruptcy and when S in a foreign country where severe restrictions have been imposed by that Govt.

Question 16

Total Owner’s equity in consolidation is calculated as :

Answer 16

P’s equity + new stock of P issued in acquisition

Question 17

An adjustment is required to remove the payable from P’s books and the corresponding amount from the receivables on the subsidiary’s books.

Answer 17

True

Question 18

The consolidation process requires a decrease to the SALES REVENUE of the S’s company and a corresponding decrease to the COGS of P’s company.

Answer 18

True

Question 19

Intercompany gain will be eliminated with a credit to __________

Answer 19

INVENTORY

Question 20

How should TOTAL ASSETS be reported in Consolidated BS

Answer 20

P + S + Goodwill (Purchase - FV of Net Assets of Sub)

Question 21

The difference between the bond carrying amounts in the two companies would decrease

Answer 21

RETAINED EARNINGS for either the year of acquisition or a subsequent year.

Question 22

The method used by the parent to carry on its book its investment in the subsidiary will affect the final consolidated financial statements.

Answer 22

True

Question 23

Intercompany sales = P+S - Consolidated Revenue

Answer 23

Look at REVENUE figures

Question 24

For intercompany, Payable :Check AR

Answer 24

P+S - Consolidated AR