21. To prepare a consolidated balance sheet on the date of acquisition, all of the following information is required except:
A. the cost of the assets and liabilities on the parent's balance sheet.
B. the historic cost of the assets and liabilities appearing on the subsidiary's balance sheet.
C. the fair value of the subsidiary's assets and liabilities.
D. the value of goodwill arising from the acquisition.
22. Which of the following accounts would be found on the consolidated financial statements of a company?
A. Investment in subsidiary
B. Subsidiary's share capital
C. Subsidiary's retained earnings
D. Goodwill
23. Patel Company paid $5 million for 100% of the voting shares of Satel Company. On the date of acquisition the book value of Satel's net assets was $4 million and the fair value was $4.4 million. What would be the value of goodwill reported on the consolidated balance sheet at the date of acquisition?
A. $0
B. $400,000
C. $600,000
D. $1,000,000
$5.0 million - $4.4 million = $0.6 million
24. How should the investment account related to the subsidiary be shown when preparing consolidated financial statements?
A. It is shown separately on the balance sheet.
B. It is combined with any goodwill that arose from the investment.
C. It is eliminated to prevent double accounting.
D. It must be reclassified as equity.
25. Goodwill is:
A. the difference between the total fair value of the subsidiary and the amounts assigned to identifiable assets and liabilities.
B. the amount paid for the customer lists, patents and other intangibles.
C. never recognized for accounting purposes.
D. the difference between the amount paid and the book value of the net assets acquired.
26. One commonly cited weakness of consolidated financial statements is that:
A. they lack completeness.
B. they are of little use to end-users.
C. different accounting practices between parent and its subsidiary may often yield misleading results.
D. a poor performance by one or more subsidiaries can be hidden through the aggregation process.
27. On the date of acquisition, the parent's investment (in subsidiary account) is:
A. revalued to fair market value.
B. replaced with 100% of the assets and liabilities of the subsidiary at fair market value.
C. replaced with 100% of the assets and liabilities of the subsidiary at book value.
D. replaced with the parent's pro rata share of the assets and liabilities of the subsidiary at book value.
28. On the date of acquisition, consolidated shareholder equity is equal to:
A. the sum of the parent and subsidiary's shareholders' equity.
B. the sum of the parent's shareholder equity plus its pro rata share of the subsidiary's shareholders' equity on the date of acquisition.
C. the parent's shareholders' equity.
D. the subsidiary's shareholders equity.
29. In which of the following situations would the account "Non-controlling interest" appear on the consolidated financial statements of Parent Company?
A. When Parent owns 10% of an investee company.
B. When Parent owns 40% of an investee company.
C. When Parent owns 80% of an investee company.
D. When Parent owns 100% of an investee company.
30. How are the portion of the assets and liabilities of the subsidiary company that are not owned by the parent company reported?
A. As a non-controlling interest on the subsidiary's balance sheet.
B. As a non-controlling interest on the parent's balance sheet.
C. As a component of assets on the parent's balance sheet.
D. They are not reported anywhere.