3. Which is true regarding the Investment in Subsidiary Stock account?
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Choose and explain :)
![3. Which is true regarding the Investment in Subsidiary Stock account? *
[a] It is accounted for in the parent's books and is included as non – current assets in the
parent's balance sheet
[b] It is not included in the consolidated balance sheet of parent and subsidiary
[c] It is decreased and or increased by the difference between fair value and book value of net
assets of the subsidiary for consolidation purposes.
[d] All of the above](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F47799160-4e7f-47c6-99f7-0842b3a6d73a%2Fa79d6999-d169-4dc9-81ea-b18c437d584e%2Fw6g1vv4_processed.png&w=3840&q=75)
Step by step
Solved in 2 steps
- 1. Which is true regarding the Investment in Subsidiary Stock account? A. It is accounted for in the parent’s books and is included as non – current assets in the parent’s balance sheetB. It is not included in the consolidated balance sheet of parent and subsidiaryC. It is decreased and or increased by the difference between fair value and book value of net assets of the subsidiary for consolidation purposes.D. All of the above 2. Which is true regarding the Non controlling interest? A. It is accounted for in the subsidiary’s books and is included on the Equity section of the subsidiary’s balance sheetB. It is accounted for in the parent’s books and is included on the Equity section of the parent’s balance sheetC. It is shown in the consolidated financial position as a separate section between the liabilities and equityD. It is shown in the consolidated financial position as an element of shareholders’ entity2. Statement 1: The dividends paid by the subsidiary are completely eliminated from the consolidated financial statements because only dividends paid to the parent company stockholders represent a distribution of consolidated net assets.Statement 2: Allocated excess/purchase differential amortizations are the allocation over time of the difference between the market value and the book value of the subsidiary’s assets and liabilities at the acquisition date. a. Only statement 1 is trueb. Only statement 2 is truec. Both statements are trued. Both statements are false3. Which is true regarding the Investment in SubsidiaryStock account?*A. It is accounted for in the parent's books and is included as non - current assets in the parent's balance sheetB. It is not included in the consolidated balance sheet ofparent and subsidiaryC. It is decreased and or increased by the differencebetween fair value and book value of net assets of thesubsidiary for consolidation purposes.Id] All of the above
- What is the correct method for treating a vesting differential linked to the acquisition of shares? privileged rights of the subsidiary by the parent company? Select an answer: a. It must be allocated to identifiable net assets or goodwill. b. It must be distributed in proportion to the identifiable assets and liabilities of the subsidiary. c. It must be charged to consolidated retained earnings or credited to contributed surplus. d. It must be taken care of in the current year.How is the Non-Controlling Interest displayed in a consolidated balance sheet? a. As a separate item in the stockholder’s equity section b. By means of a note to consolidated financial statements c. As a separate item between the liabilities and stockholder’s equity d. As a deduction from goodwill, if any e. Non-controlling interest is never presented in consolidated balance sheet.Which of the following is NOT included in the cost of an acquired company? (applying section 19 of IFRS for SMEs) a. Contingent consideration determinable at the consummation date of the combination b. Finder’s fee for arranging the combination c. Cost of registering and issuing equity securities d. None of the above
- How is the Non-Controlling Interest displayed in a consolidated balance sheet? O As a separate item in the stockholder's equity section As a deduction from goodwill, if any As a separate item between the liabilities and stockholder's equity O By means of a note to consolidated financial statements O Non-controlling interest is never presented in consolidated balance sheet.If a parent company has controlling interest in a subsidiary which has no potentially dilutive securities outstanding, then in the calculation of consolidated diluted EPS, it will be necessary to Select one: a. only make an adjustment of subsidiary's basic earnings. b. replace the parent's equity in subsidiary earnings with the parent's equity in subsidiary's diluted EPS. c. make a replacement calculation in the parent's basic earnings for the EPS. d. only use the parent's common shares and shares represented by the parent's potentially dilutive securities.In the equity method of acquisition income is recognized only when the subsidiary declares dividends Select one: True False
- Which of the following is true regarding consolidation of net income?A. Parent net income is decreased by the dividend income recognized due to declared bysubsidiary at full amount even if less than 100% ownership is acquired.B. Amortization of excess must be done to adjust net income of parent to arrive at parent netincome own operation.C. Adjusted net income of subsidiary is shared by Parent’s holding interest andnoncontrolling interest.D. Dividend declared by subsidiary is shared by Parent’s holding interest and noncontrollinginterest.1. Which of the following entries appear on the parent company’s books to account for its investment in subsidiary? [a] Credit to intercompany dividends [b] Credit to the parent company’s share in the net income of the subsidiary [c] Amortization and depreciation of differences between fair values and book values of net assets of subsidiary at acquisition date [d] All of the above 2. Which is true regarding the Investment in Subsidiary Stock account? [a] It is accounted for in the parent’s books and is included as non – current assets in the parent’s balance sheet [b] It is not included in the consolidated balance sheet of parent and subsidiary [c] It is decreased and or increased by the difference between fair value and book value of net assets of the subsidiary for consolidation purposes. [d] All of the aboveQuestion 2Each of the following independent statements may be true or false. Discuss the circumstances whereby the statement is true and the circumstances whereby it is false. (a) Goodwill on consolidation in the Consolidated Statement of Financial Position is the difference between consideration paid by the Parent and the Parent's share of fair value of identifiable net assets of a partially-owned Subsidiary. (b) Dividends declared by a Group (which is shown as an appropriation in the Consolidated Statement of Changes in Equity) comprises dividends declared by the Parent and dividends declared by a Subsidiary to its Non-controlling Interests. (c) A Group will always report a Consolidated Profit after Tax that is larger than the Consolidated Profit after Tax attributable to the Shareholders of the Parent.
