425 Exam Investment

A deduction from the investors share of the profits

Dividend income

A deduction from the stockholders equity account

E deduction from the investment account (AICPA adapted)

Material intra-entity transactions

The investor owns 30 percent of the investeee but another owner holds 70 percent

Interchange of personnel

Technological dependency

A cumulative effect of an accounting change is shown in current inc statement

No change is recorded

A retrospective adjustment is made to restate all prior yeras presented using equity method

Sisk will report the change as a component of accum other comp income

The investees reported income adjusted for excess cost over book value amortization

Changes in the fair value of the investors ownership shares of the investee

Intra-equity profits from upstream sales

Extraordinary items reported by the investee

A deduction from the investors share of the investees reported income

A deductions from the investment account

A reduction from accum other comp income reported

Dividend income

COGS

Prop,plant,equip

Goodwill

Bonds payable

Combinations as a vehilcle for acheiving rapid growth and competitiveness

Cost savings through elimination of duplicate facilities and staff

Quick entry for new and exisitng products into markets

Large rfirms being less likely to fail

In form the companies are one entity; in substance they are seperate

In form the companies are seperate; in substance they are one entity

In form and subtance they are one entitiy

In form and substacne they are seperate

Recognized as an ordinary gain from a bargain purchase

Treated as negative goodwill

Treated as goodwill

Applied pro rata to reeduce the amounts initially assigned

Expense upon acquisition

Capatiliz as an asset

Expense is there is no alternative use for the assetsused in r&d

Expense until further economic benefits become ceratin

An intangible asset under the contractual-legal criterion

A parrt of goodwill

An intangible asset under the seperability criterion

A building

When a bargain purchase occurs

In a combination created in the middle of a fiscal year

In an acquisition when the value cannot be determined

When the amount of a bargain exceeds the value of assets

Capatilized as part of the overall FV

Recorded as an expense in the period the merger takes place

Included in recognized goodqill

Written off over a five year useful life

Consolidates the subs assets at FV and the liabs at BV

Consolidate all subs assets and liabs at BV

Consolidate all subs assets and liabs at FV

Consolidates the subs assets at BV and the liabs at FV

Stock issuance costs are a part of the acquistion costs

Direct combination costs are a part of the acquisition costs and stock issuance costs are a reduction to addition PIC

Direct combination costs are expensed and stock issuance costs are a reduction to addition PIC

Both are treated as reduction to PIC

Cost of the investment less the subs BV at the beginning of the year

Cost of the investment less the subs BV at the acquisition date

Cost of the investment less the subs FV at the beginning of the year

Cost of the investment less the subs FV at the acquistion date

It is a relatively easy method to apply

Operating results appearing on on the parents fincls reflect cons. totals

GAAP now required the use of this method for internal purposes

Consolidation is not required when the parent uses the initial value method

It is a relatively easy method to apply

Operating results appearing on on the parents fincls reflect cons. totals

GAAP now required the use of this method for internal purposes

Consolidation is not required when the parent uses the initial value method

No goodwill impairment loss isrecognized unless the implied value for goodwill exceeds its carrying amount

A goodwill impairment loss is recognized if the carrying amount for goodwill exceeds its implied value

A goodwill impairment loss is recognized for the difference betweeen the reporting units fair calue and carrying amount

The reporting unit reduces the values assigned to its longterm assets

If both the fair value of a reporting unit and its associtaed implied goodwill fall below their repestive carrying amoutns

Whenever the entitys fair value declines significantly

If a reporting units fair value falls below its original acquisition price

Annually on a systematic and rational basis

20 years

20 years with an annual impairment review

Infinitely

Indefinately (no amortization) with an annual impairment review until its life becomes finite

The amount of consolidated net income

The assets on the consolidated balance sheet

The balance in the investment account of the parents books

The amount of consolidated COGS

A requirement that a sub must use the same accounting principles as its parent company

Inventory transfers made from a parent to a sub

A subs recording of the fair value allocations as well as subsequent amortization

The adjustments required fro consolidation when a parent has applied the equity method of accounting for internal purposes

Goodwill recognized in consolidation must be amortized over 20 years

Goodwill recognized in consolidation will not be amortized, but subject to an annual test or impairment

Goodwill recognized in consolidation can never be written off

Goodwill recognized in consolidation must be amortized over 40 years

Legal, regulatory, or contractual provisions

The residual value of an asset

The entitys expected use of the intangible asset

All of the above

Cons fincl statements should be primarily for the benfit of the parent companys stockholders

Cons fincl statements shoud be produced only if both the parent and the sub are in the same basic industry

A sub is an indivisible part of a business combination and should be included in its entirety regardless of the degree of ownership

Cons fincl statements should not report a noncontrolling interest balance because these outside owners do not hold stock in the parent

Include 100 percent of mark-Rights revenues and expenses

Exclude 100 percent of the preacquisiton revenues and 100 percent f the preacquisition expenses from their respective consolidated totals

Exclude 15 percent of preacquisition revenues and expences

Deduct 15 percent from net combined revenues and expenses

Maintained as initial value

Adjusted to its equity method balance as the date of the second acquisition

Adjusted to fair value at the date of the second acquisition with a resulting gain or loss recorded

Adjusted to fair value at the date of the second acquisition with a resulting adjustment to addintional paid in capital

In the liability section

In the mezzanine section between liabilities and owners equity

In the owners equity section

The noncontrolling interst in not recognized

Revenues and COGS must be recognized for all intra-entity sales regardless of whether the sales are upstream or downstream

Intra-entity sales result from gross profit overstaements

Gross profits must be deferred indefinately because sales among affilaites always remian in the consolidation group

When intra-entity sales remian in ending inventory, ownership of the goods has not changes

The subs reported net income is adjusted for the impact of upstream transfers prior to computing the noncontrolling interests allocation

The subs reported income is adjusted for the impact of all transfers prior to computing the noncontrolling interests allocation

The subs reported income is not adjusted for the impact of transfers prior to computing the noncontrolling interests allocation

The subs reported net income is adjusted for the impact of downstream transfers prior to computing the noncontrolling interests allocation

Proportionally over a designated period of years

When Wood Co. sells the land to a third party

No gain can be recognized

As wood uses the Land