F3 - Consolidated Financial Statements

Question 1

What are the eliminating journal entries for consolidation?

Answer 1

CAR IN BIG:

C - common stock of sub
A - APIC of sub
R - retained earnings of sub

I - investment in sub
N - non-controlling interest (NCI) created

B - balance sheet FV adjustment
I - identifiable intangible assets
G - goodwill OR gain

Question 2

T/F: Stock registration costs are expensed in the period incurred

Answer 2

False; they are charged against APIC; all other costs are expensed in the period in which they occur

Question 3

How is goodwill calculated?

Answer 3

Purchase price
(FV of identifiable net assets)
(FV of intangible assets)

Question 4

The general guidelines for assigning amounts to the inventories acquired provide for:

Answer 4

Finished goods to be valued at estimated selling prices, less both costs of disposal and a reasonable profit allowance (in other words, FV)

Question 5

How should assets and liabilities be presented in consolidated financial statements?

Answer 5

At FV

Question 6

T/F: Only parents’ dividends declared and paid are included in retained earnings

Answer 6

True; subs’ retained earnings accounts are eliminated

Question 7

Under the partial goodwill method, what amount is the NCI percentage multiplied by?

Answer 7

The FV of net identifiable assets

Question 8

Under the acquisition method, at what values are assets of the parent and sub recorded on the consolidated balance sheet?

Answer 8

Parents’ are recorded at BV and subs’ at FV