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Flashcards in BCC Deck (45):
1

A business combination is accounted for appropriately as a business acquisition. Which of the following should be deducted in determining the combined corporation’s
net income for the current period?
a. Direct costs of acquisition
b. General expenses related to acquisition
c. both
d. Neither

Both

2

On June 30, year 2, Needle Corporation purchased for cash at $10 per share all 100,000 shares of the outstanding common stock of Thread Company. The total appraised value of identifiable assets less liabilities of Thread was $1,400,000 at June 30, year 2, including the appraised value of Thread’s property, plant, and equipment (its only noncurrent asset) of $250,000. The consolidated income statement of Needle Corporation and its wholly owned subsidiary for the year ended June 30, year 2, should reflect

A gain from bargain purchase of $400,000.

3

Ownership of 51% of the outstanding voting stock of a company would usually result in

A consolidation.

4

Sayon Co. issues 200,000 shares of $5 par value common stock to acquire Trask Co. in a purchase-business combination. The market value of Sayon’s common stock is $12. Legal and consulting fees incurred in relationship to the purchase are $110,000. Registration and issuance costs for the common stock are $35,000. What should be recorded in Sayon’s additional paid-in capital account for this business combination?

$1,365,000

5

The separate condensed balance sheets and income statements of Purl Corp. and its wholly owned subsidiary, Scott Corp., are as follows:
BALANCE SHEETS
December 31, year 2
Purl Scott
Assets
Current assets:
Cash $80,000 $60,000
Accounts receivable (net) 140,000 25,000
Inventories 90,000 50,000
Total current assets 310,000 135,000
Property, plant, and equipment (net) 625,000 280,000
Investment in Scott (equity method) 400,000
Total assets 1,335,000 415,000

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable 160,000 95,000
Accrued liabilities 110,000 30,000
Total current liabilities 270,000 125,000
Stockholders’ equity:
Common stock ($10 par) 300,000 50,000
Additional paid-in capital 10,000
Income Statement
Sales 2,000,000 750,000
Cost of goods sold 1,540,000 500,000
Gross margin 460,000 250,000
Operating expenses 260,000 150,000
Operating income 200,000 100,000
Equity in earnings of Scott 70,000
Income before income taxes 270,000 100,000
Provision for income taxes 60,000 30,000
Net income 210,000 70,000
Additional information:
. On January 1, year 2, Purl acquired for $360,000 all of Scott’s $10 par, voting common stock. On January 1, year 2, the fair value of Scott’s assets and liabilities equaled their carrying amount of $410,000 and $160,000, respectively, except that the fair values of certain items identifiable in Scott’s inventory were $10,000 more than their carrying amounts. These items were still on hand at December 31, year 2. Goodwill is determined to be unimpaired at December 31, year 2.
. During year 2, Purl and Scott paid cash dividends of $100,000 and $30,000, respectively. For tax purposes, Purl receives the 100% exclusion for dividends received from Scott.
. There were no intercompany transactions, except for Purl’s receipt of dividends from Scott and Purl’s recording of its share of Scott’s earnings.
. Both Purl and Scott paid income taxes at the rate of 30%.
In the December 31, year 2 consolidated financial statements of Purl and its subsidiary, net income should be

$210,000

6

On April 1, year 2, Hart, Inc. paid $1,700,000 for all the issued and outstanding common stock of Ray Corp. On that date the costs and fair values of Ray’s recorded
assets and liabilities were as follows:
Cost Fair-value
Cash $ 160,000 $ 160,000
Inventory 480,000 460,000
Property, plant, and equipment 980,000 1,505,000
(net)
Liabilities (360,000) (360,000)
Net assets $1,260,000 $1,300,000
In Hart’s March 31, year 3 balance sheet, what is the amount of goodwill that should be reported as a result of this business combination, assuming that goodwill is not impaired?

$400,000

7

A 70%-owned subsidiary company declares and pays a cash dividend. What effect does the dividend have on the retained earnings and noncontrolling interest balances in the parent company’s consolidated balance sheet?

No effect on retained earnings and a decrease in minority interest.

8

Sun Co. is a wholly owned subsidiary of Star Co. Both companies have separate general ledgers, and prepare separate financial statements. Sun requires stand
alone financial statements. Which of the following statements is correct?
a. Consolidated financial statements should only be prepared by Star and not by Sun.
b. After consolidation, the accounts of both Star and Sun should be combined together into one general-ledger accounting system for future ease in reporting.
c. Consolidated financial statements should be prepared for both Star and Sun.
d. After consolidation, the accounts of both Star and Sun should be changed to reflect the consolidated totals for future ease in reporting.

Consolidated financial statements should only be prepared by Star and not by Sun.

9

Which of the following is the appropriate basis for valuing fixed assets acquired in a business combination accounted for as a business acquisition carried out by
exchanging cash for common stock?
a. Historic cost.
b. Fair value.
c. Cost plus any excess of purchase price over book value of asset acquired.
d. Book value.

Fair value.

10

Nolan owns 100% of the capital stock of both Twill Corp. and Webb Corp. Twill purchases merchandise inventory from Webb at 140% of Webb’s cost. During year 2,
merchandise that cost Webb $40,000 was sold to Twill. Twill sold all of this merchandise to unrelated customers for $81,200 during year 2. In preparing combined
financial statements for year 2, Nolan’s bookkeeper disregarded the common ownership of Twill and Webb. What amount should be eliminated from cost of goods sold in the combined income statement for year 2?

$56,000

11

A subsidiary, acquired for cash in a business combination, owned equipment with a market value in excess of book value as of the date of combination. A consolidated balance sheet prepared immediately after the acquisition would treat this excess as

Plant and equipment.

12

Dunn Corp. owns 100% of Grey Corp.’s common stock. On January 2, year 2, Dunn sold to Grey for $40,000 machinery with a carrying amount of $30,000. Grey is
depreciating the acquired machinery over a 5-year life by the straight-line method. The net adjustments to compute year 2 and year 3 consolidated income before income tax would be an increase (decrease) of
Year 2 Year 3
a. $ (8,000) $2,000
b. $ (8,000) $0
c. $ (10,000) $2,000
d. $ (10,000) $0

$ (8,000) $2,000

13

On 1/1/Y2, Rolan Corp. issued 10,000 shares of common stock in exchange for all of Sandin Corp.’s outstanding stock. Condensed balance sheets of Rolan and Sandin immediately prior to the combination are as follows:
Rolan Sandin
Total assets $1,000,000 $500,000
Liabilities $ 300,000 $150,000
Common stock 200,000 100,000
Retained earnings 500,000 250,000
Total equities $1,000,000 $500,000
Rolan’s common stock had a market price of $60 per share on January 1, year 2. The market price of Sandin’s stock was not readily ascertainable. Rolan’s investment in Sandin’s stock will be stated in Rolan’s balance sheet immediately after the combination in the amount of

$600,000

14

Company X acquired for cash all of the outstanding common stock of Company Y. How should Company X determine in general the amounts to be reported for the
inventories and long-term debt acquired from Company Y’
Inventories Long-term debt
a. Fair value Fair value
b. Fair value Recorded value
c. Recorded value Fair value
d. Recorded value Recorded value

Fair value Fair value

15

Vulture Corp. owns 100% of the outstanding common stock of Dove, Inc. On December 31, year 1, Dove sold equipment with an original cost of $275,000 and
accumulated depreciation of $150,000 to Vulture for $200,000. On the December 31, year 1 consolidated balance sheet, the equipment should be reported at

$125,000

16

On January 1, year 2, Pitt Corp. acquired 50,000 shares of Shaw Corp. stock which represented 80% of Shaw’s $10 par common stock for $19.50 per share. On the date of acquisition, the fair value of the 12,500 shares representing the noncontrolling interest in Shaw was $18 per share. On this date, the carrying amount of Shaw’s net assets was $1,000,000. The fair values of Shaw’s identifiable assets and liabilities were the same as their carrying amounts. For the year ended December
31, year 2, Shaw had net income of $190,000 and paid cash dividends totaling $125,000. In the December 31, year 2, consolidated balance sheet, noncontrolling
interest should be reported at

$238,000

17

The separate condensed balance sheets and income statements of Purl Corp. and its wholly owned subsidiary, Scott Corp., are as follows:
BALANCE SHEETS
December 31, year 2
Purl Scott
Assets
Current assets:
Cash $80,000 $60,000
Accounts receivable (net) 140,000 25,000
Inventories 90,000 50,000
Total current assets 310,000 135,000
Property, plant, and equipment (net) 625,000 280,000
Investment in Scott (equity method) 400,000
Total assets 1,335,000 415,000

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable 160,000 95,000
Accrued liabilities 110,000 30,000
Total current liabilities 270,000 125,000
Stockholders’ equity:
Common stock ($10 par) 300,000 50,000
Additional paid-in capital 10,000
Retained Earnings 765,000 230,000
Total Stockholders' equity 1,065,000 290,000
Total liabilities and Stockholders'
Equity 1,335,000 415,000
Income Statement
Sales 2,000,000 750,000
Cost of goods sold 1,540,000 500,000
Gross margin 460,000 250,000
Operating expenses 260,000 150,000
Operating income 200,000 100,000
Equity in earnings of Scott 70,000
Income before income taxes 270,000 100,000
Provision for income taxes 60,000 30,000
Net income 210,000 70,000
Additional information:
. On January 1, year 2, Purl acquired for $360,000 all of Scott’s $10 par, voting common stock. On January 1, year 2, the fair value of Scott’s assets and liabilities equaled their carrying amount of $410,000 and $160,000, respectively, except that the fair values of certain items identifiable in Scott’s inventory were $10,000 more than their carrying amounts. These items were still on hand at December 31, year 2. Goodwill is determined to be unimpaired at December 31, year 2.
. During year 2, Purl and Scott paid cash dividends of $100,000 and $30,000, respectively. For tax purposes, Purl receives the 100% exclusion for dividends received from Scott.
. There were no intercompany transactions, except for Purl’s receipt of dividends from Scott and Purl’s recording of its share of Scott’s earnings.
. Both Purl and Scott paid income taxes at the rate of 30%.
In the December 31, year 2, consolidated financial statements of Purl and its subsidiary, total retained earnings should be

$765,000

18

Key Corp. issued 1,000 shares of its nonvoting preferred stock for all of Lev Corp.’s outstanding common stock. At the date of the transaction, Key’s nonvoting preferred stock had a market value of $100 per share, and Lev’s tangible net assets had a book value of $60,000. In addition, Key issued 100 shares of its nonvoting
preferred stock to an individual as a finder’s fee for arranging the transaction. As a result of this capital transaction, Key’s total net assets would increase by

$100,000

19

The separate condensed balance sheets and income statements of Purl Corp. and its wholly owned subsidiary, Scott Corp., are as follows:
BALANCE SHEETS
December 31, year 2
Purl Scott
Assets
Current assets:
Cash $80,000 $60,000
Accounts receivable (net) 140,000 25,000
Inventories 90,000 50,000
Total current assets 310,000 135,000
Property, plant, and equipment (net) 625,000 280,000
Investment in Scott (equity method) 400,000
Total assets 1,335,000 415,000

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable 160,000 95,000
Accrued liabilities 110,000 30,000
Total current liabilities 270,000 125,000
Stockholders’ equity:
Common stock ($10 par) 300,000 50,000
Additional paid-in capital 10,000
Income Statement
Sales 2,000,000 750,000
Cost of goods sold 1,540,000 500,000
Gross margin 460,000 250,000
Operating expenses 260,000 150,000
Operating income 200,000 100,000
Equity in earnings of Scott 70,000
Income before income taxes 270,000 100,000
Provision for income taxes 60,000 30,000
Net income 210,000 70,000
Additional information:
. On January 1, year 2, Purl acquired for $360,000 all of Scott’s $10 par, voting common stock. On January 1, year 2, the fair value of Scott’s assets and liabilities equaled their carrying amount of $410,000 and $160,000, respectively, except that the fair values of certain items identifiable in Scott’s inventory were $10,000 more than their carrying amounts. These items were still on hand at December 31, year 2. Goodwill is determined to be unimpaired at December 31, year 2.
. During year 2, Purl and Scott paid cash dividends of $100,000 and $30,000, respectively. For tax purposes, Purl receives the 100% exclusion for dividends received from Scott.
. There were no intercompany transactions, except for Purl’s receipt of dividends from Scott and Purl’s recording of its share of Scott’s earnings.
. Both Purl and Scott paid income taxes at the rate of 30%.
In the December 31, year 2, consolidated financial statements of Purl and its subsidiary, total current assets should be

$455,000

20

Par Corp. owns 60% of Sub Corp.’s outstanding capital stock. On May 1, year 2, Par advanced Sub $70,000 in cash, which was still outstanding at December 31, year
2. What portion of this advance should be eliminated in the preparation of the December 31, year 2, consolidated balance sheet?

$70,000

21

On October 1, Company X acquired for cash all of the outstanding common stock of Company Y. Both companies have a December 31 year-end and have been in business for many years. Consolidated net income for the year ended December 31 should include net income of

Company X for 12 months and Company Y for 3 months.

22

On January 1, year 2, Neel Corp. issued 400,000 additional shares of $10 par value common stock in exchange for all of Pym Corp.’s common stock. Immediately before this business combination, Neel’s stockholders’ equity was $16,000,000 and Pym’s stockholders’ equity was $8,000,000. On January 1, year 2, the fair value of Neel’s common stock was $20 per share, and the fair value of Pym’s net assets was $8,000,000. Neel’s net income for the year ended December 31, year 2, exclusive of any consideration of Pym, was $2,500,000. Pym’s net income for the year ended December 31, year 2, was $600,000. During year 2 Neel paid dividends of $900,000. Neel had no business transactions with Pym in year 2.
Assuming that this business combination is appropriately accounted for as a business acquisition, consolidated stockholders' equity at December 31, year 2, should be

$26,200,000

23

In identifying the acquiring entity in a business combination, all of the following factors should be considered except:
a. The composition of the governing body of the combined entity.
b. The terms of the exchange of equity securities.
c. The relative amount of intangible assets on the individual entity financial statements.
d. The relative voting rights in the combined entity after the combination.

The relative amount of intangible assets on the individual entity financial statements.

24

Birk Co. purchased 30% of Sled Co.’s outstanding common stock on December 31, year 1, for $200,000. On that date, Sled’s stockholders’ equity was $500,000, and
the fair value of its identifiable net assets was $600,000. Assume Birk Co. uses the equity method to account for this investment. On December 31, year 1, what
amount of goodwill should Birk attribute to this acquisition?

$20,000

25

On November 30, year 2, Eagle, Incorporated purchased for cash at $25 per share all 300,000 shares of the outstanding common stock of Perch Company. Perch’s balance sheet at November 30, year 2, showed a book value of $6,000,000. Additionally, the fair value of Perch’s property, plant, and equipment on November 30, year 2, was $800,000 in excess of its book value. What amount, if any, will be shown in the balance sheet as “Goodwill’ in the November 30, year 2 consolidated balance sheet of Eagle, Incorporated, and its wholly owned subsidiary, Perch Company?

$ 700,000

26

Wagner, a holder of a $1,000,000 Palmer, Inc. bond, collected the interest due on March 31, year 2, and then sold the bond to Seal, Inc. for $975,000. On that date,
Palmer, a 100% owner of Seal, had a $1,075,000 carrying amount for this bond. What was the effect of Seal’s purchase of Palmer’s bond on the retained earnings
and noncontrolling interest amounts reported in the March 31, year 3 consolidated balance sheet?
Retained earnings Noncontrolling interest
a. $ 100,000 increase $ O
b. $ 75,000 increase $ 25,000 increase
c. $ O $ 25,000 increase
d. $ O $100,000 increase

$ 100,000 increase $ O

27

During year 2 the Henderson Company purchased the net assets of John Corporation for $800,000. On the date of the transaction, John had no long-term investments in marketable securities, deferred assets, or prepaid assets and had $100,000 of liabilities. The fair value of John’s assets when acquired were as follows:
Current assets $ 400,000
Noncurrent assets 600,000
$1,000,000
How should the $100,000 difference between the fair value of the net assets acquired ($900,000) and the cost ($800,000) be accounted for by Henderson?

The $100,000 difference should be recorded as a gain in the period of acquisition.

28

On March 1, year 2, Agront Corporation issued 10,000 shares of its $1 par value common stock for all of the outstanding stock of Barcelo Corporation, when the fair
market value of Agront’s stock was $50 per share. In addition, Agront made the following payments in connection with this business combination:
Finder’s and consultant’s fees $20,000
SEC registration costs 7,000
Agront’s acquisition cost would be capitalized at

$500,000

29

Which statement is true with respect to noncontrolling interest?
a. US G.&AP records noncontrolling interest at the proportionate share of the value of identifiable net assets of the acquiree.
b. IFRS permits recording noncontrolling interests at either fair value or the proportionate share of the value of identifiable net assets of the acquiree.
c. Both US GAAP and IFRS record noncontrolling interest at the proportionate share of the value of identifiable net assets of the acquiree.
d. IFRS only records noncontrolling interest at the proportionate share of the value of identifiable net assets of the acquiree.

IFRS permits recording noncontrolling interests at either fair value or the proportionate share of the value of identifiable net assets of the acquiree.

30

Combined statements may be used to present the results of operations of
Unconsolidated Companies under
Subsidiaries common management
a. Yes Yes
b. Yes No
c. No Yes
d. No No

Yes Yes

31

On January 2 of the current year, Peace Co. paid $310,000 to purchase 75% of the voting shares of Surge Co. Peace reported retained earnings of $80,000, and Surge reported contributed capital of $300,000 and retained earnings of $100,000. The purchase differential was attributed to depreciable assets with a remaining useful life of 10 years. Peace used the equity method in accounting for its investment in Surge. Surge reported net income of $20,000 and paid dividends of $8,000 during the current year. Peace reported income, exclusive of its income from Surge, of $30,000 and paid dividends of $15,000 during the current year. What amount will Peace report as dividends declared and paid in its current year’s consolidated statement of retained earnings?

$15,000

32

Beni Corp. acquired 100% of Carr Corp.’s outstanding capital stock for $430,000 cash. Immediately before the acquisition, the balance sheets of both corporations
reported the following:
Beni Carr
Assets $2,000,000 $ 750,000
Liabilities $ 750,000 $ 400,000
Common stock 1,000,000 310,000
Retained earnings 250,000 40,000
Liabilities and $2,000,000 $ 750,000
stockholders’ equity
At the date of acquisition, the fair value of Carr’s assets was $50,000 more than the aggregate carrying amounts. In the consolidated balance sheet prepared immediately after the acquisition, the consolidated stockholders’ equity should amount to

$1,250,000

33

The separate condensed balance sheets and income statements of Purl Corp. and its wholly owned subsidiary, Scott Corp., are as follows:
BALANCE SHEETS
December 31, year 2
Purl Scott
Assets
Current assets:
Cash $80,000 $60,000
Accounts receivable (net) 140,000 25,000
Inventories 90,000 50,000
Total current assets 310,000 135,000
Property, plant, and equipment (net) 625,000 280,000
Investment in Scott (equity method) 400,000
Total assets 1,335,000 415,000

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable 160,000 95,000
Accrued liabilities 110,000 30,000
Total current liabilities 270,000 125,000
Stockholders’ equity:
Common stock ($10 par) 300,000 50,000
Additional paid-in capital 10,000
Income Statement
Sales 2,000,000 750,000
Cost of goods sold 1,540,000 500,000
Gross margin 460,000 250,000
Operating expenses 260,000 150,000
Operating income 200,000 100,000
Equity in earnings of Scott 70,000
Income before income taxes 270,000 100,000
Provision for income taxes 60,000 30,000
Net income 210,000 70,000
Additional information:
. On January 1, year 2, Purl acquired for $360,000 all of Scott’s $10 par, voting common stock. On January 1, year 2, the fair value of Scott’s assets and liabilities equaled their carrying amount of $410,000 and $160,000, respectively, except that the fair values of certain items identifiable in Scott’s inventory were $10,000 more than their carrying amounts. These items were still on hand at December 31, year 2. Goodwill is determined to be unimpaired at December 31, year 2.
. During year 2, Purl and Scott paid cash dividends of $100,000 and $30,000, respectively. For tax purposes, Purl receives the 100% exclusion for dividends received from Scott.
. There were no intercompany transactions, except for Purl’s receipt of dividends from Scott and Purl’s recording of its share of Scott’s earnings.
. Both Purl and Scott paid income taxes at the rate of 30%.
In the December 31, year 2, consolidated financial statements of Purl and its subsidiary, total assets should be

$1,460,000

34

On September 29, year 2, Wall Co. paid $860,000 for all the issued and outstanding common stock of Hart Corp. On that date, the carrying amounts of Hart’s
recorded assets and liabilities were $800,000 and $180,000, respectively. Hart’s recorded assets and liabilities had fair values of $840,000 and $140,000,
respectively. In Wall’s September 30, year 2 balance sheet, what amount should be reported as goodwill?

$160,000

35

Nolan owns 100% of the capital stock of both Twill Corp. and Webb Corp. Twill purchases merchandise inventory from Webb at 140% of Webb’s cost. During year 2,
merchandise that cost Webb $40,000 was sold to Twill. Twill sold all of this merchandise to unrelated customers for $81,200 during year 2. In preparing combined
financial statements for year 2, Nolan’s bookkeeper disregarded the common ownership of Twill and Webb. By what amount was unadjusted revenue overstated in
the combined income statement for year 2?

$56,000

36

On August 31, year 1, Shell Corp. issued 100,000 shares of its $20 par value common stock for the net assets of Pine, Inc., in a business combination accounted for
by the acquisition method. The market value of Shell’s common stock on August 31 was $34 per share. Shell paid a fee of $160,000 to the consultant who arranged
this acquisition. Costs of registering and issuing the equity securities amounted to $80,000. No goodwill was involved in the acquisition. What amount should Shell
capitalize as the cost of acquiring Pine’s net assets?

$3,400,000

37

On April 1, year 2, Union Company paid $1,600,000 for all the issued and outstanding common stock of Cable Corporation in a transaction properly accounted for as
an acquisition. The recorded assets and liabilities of Cable Corporation on April 1, year 2, were as follows:
Cash $ 160,000
Inventory 480,000
Property, plant and equipment (net) 960,000
Liabilities (360,000)
On April 1, year 2, it was determined that Cable’s inventory had a fair value of $460,000, and the property, plant and equipment (net) had a fair value of $1,040,000.
What is the amount of goodwill resulting from the business combination?

$300,000

38

Pride Inc. owns 80% of Simba Inc.'s outstanding common stock. Simba, in turn, owns 10% of Pride's outstanding common stock. What percentage of common stock cash dividends declared by the individual companies should be reported as dividends declared in the consolidated financial statements?

Pride 90% Simba 0%

39

Consolidated financial statements are typically prepared when one company has a controlling financial interest in another unless

The investee is in bankruptcy.

40

In a business combination accounted for as an acquisition, the appraisal values of the identifiable assets acquired exceeds the acquisition price. The excess appraisal
value should be reported as a

A bargain purchase.

41

At December 31, year 2, Spud Corp. owned 80% of Jenkins Corp.’s common stock and 90% of Thompson Corp.’s common stock. Jenkins’ year 2 net income was
$100,000 and Thompson’s year 2 net income was $200,000. Thompson and Jenkins had no intercompany ownership or transactions during year 2. Combined year 2
financial statements are being prepared for Thompson and Jenkins in contemplation of their sale to an outside party. In the combined income statement, combined
net income should be reported at

$300,000

42

Grant, Inc. has current receivables from affiliated companies at December 31, year 2, as follows:
. A $50,000 cash advance to Adams Corporation. Grant owns 30% of the voting stock of Adams and accounts for the investment by the equity method.
. A receivable of $160,000 from Bullard Corporation for administrative and selling services. Bullard is 100% owned by Grant and is included in Grant’s consolidated statements.
. A receivable of $100,000 from Carpenter Corporation for merchandise sales on open account. Carpenter is a 90% owned, unconsolidated subsidiary of Grant.
In the current assets section of its December 31, year 2 consolidated balance sheet, Grant should report accounts receivable from investees in the total amount of

$150,000

43

Mr. and Mrs. Gasson own 100% of the common stock of Able Corp. and 90% of the common stock of Baker Corp. Able previously paid $4,000 for the remaining 10%
interest in Baker. The condensed December 31, year 2 balance sheets of Able and Baker are as follows:
Able Baker
Assets $600,000 $60,000
Liabilities $200,000 $30,000
Common stock 100,000 20,000
Retained earnings 300,000 10,000
$600,000 $60,000
In a combined balance sheet of the two corporations at December 31, year 2, what amount should be reported as total stockholders’ equity?

$426,000

44

Under IFRS, a parent may exclude a subsidiary from consolidation if all of the following conditions exist, except:
a. It reports only one class of stock in its balance sheet.
b. It does not have any debt or equity instruments publicly traded.
c. It is wholly or partially owned and its other owners do not object to nonconsolidation.
d. Its parent prepares consolidated financial statements that comply with IFRS.

It reports only one class of stock in its balance sheet.

45

Which statement is true with respect to push-down accounting?
a. IFRS does not permit the use of push-down accounting.
b. SEC accounting does not permit the use of push-down accounting.
c. Both SEC accounting and IFRS permit the use of push-down accounting.
d. IFRS permits the use of push-down accounting.

IFRS does not permit the use of push-down accounting.