Question

1. A company acquires a subsidiary and will prepare consolidated financial statements for extemal reporting purposes. For internal reporting purposes, the company has decided to apply the initial value method, Why might the company have made this decision? a. It is a relatively easy method to apply. 5. Operating results appearing on the parent's financial records rellect consolidated totals. c. GAAP now requires the use of this particular method for internal reporting purposes. d. Consolidation is not required when the parent uses the initial value method. 2. Acompany acquires a subsidiary and will prepare consolidated financial statements for external reporting purposes. For internal reporting purposes, the company has decided to apply the equity method. Why might the company have made this decision? a. It is a relatively easy method to apply. b. Operating results appearing on the parent's financial records reflect consolidated total c. GAAP now requires the use of this particular method for internal reporting purposes. d. Consolidation is not required when the parent uses the equity method. 3. On January 1, 2018. Jay Company acquired all the outstanding ownership shares of Zee Company In assessing Zee's acquisition-date fair values, Jay concluded that the carrying value of Zee's long-term debt (8-year remaining life) was less than its fair value by $20,000. At December 31. 2018, Zee Company's accounts show interest expense of $12.000 and long-term debt of $250,000. What amounts of interest expense and long-term debt should appear on the December 31, 2018, consolidated financial statements of Jay and its subsidiary Zee? Interest expense Long-term debi a. $14,500 $270,000 b. $14,500 $267.500 c. $9.500 $270,000 d. $9,500 $267.500 4. When should a consolidated entity recognize a goodwill impairment loss? a. If both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying amounts. b. Whenever the entity's fair value declines significantly. c. If the fair value of a reporting unit with goodwill fall below its carrying amount. d. Annually on a systematic and rational basis.

Answer 1

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Requiremento Jemen t company acquires a subsidiary and will prepare consolidated financial Statements for external reporting porposes. for internal reporting porposes, the company has decided to apply the initial value method why might the company have made this deasion ? ster & Answer: option 'a' is correct : It is a relatively easy method to apply. Realeyirement --- ent @ a company acasures a subsidiary and will prepare. consolidated financial Statements for external purposes and for internal purposes, the company has decided to apply equity method why might the company have made this decision ? option 'b' is correct : Ansper. parentis financial operating records results reflect appearing consolidated on the totals. + 3 : given interest expense of 12000 Long-term debt = 250000 Reapfirement (3. Given, in assessing zee's acquisition date fair values, Jay concluded that the Carrying value of zee's long term debr (8year) was less than its far value by $ 20000. Interest expense is reduced by $2500 ($20000 ) resulting from the acquisition date tair value of long term debt allocation - The debt is increated by $20000 - 4 2500 (1 year of interest amortization) & 17.500 8year)

Interest - $ 12000 - $ 2500 4 9500 Long term debt - $ 250000 & & 17500 = $267500 Hence, option 'd is correct. consolidated entity recognize a goodwill 4: When should a impairement loss? pauirement option a'is correct. Am Answer It both associated cassying the fair value implied goodwill amounts. of a reporting fall below onit ther and its respective _ S