8. If a firm consolidates subsidiaries that are not wholly owned, an income statement item is created that is termed: a. dividend income b. minority share of earnings c. equity income d. extraordinary e. gain from sale of subsidiary ANS: B
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- The method of accounting for subsidiaries where investment income is limited to dividends received is the a. cost method. b. simple equity method. c. investment method. d. sophisticated equity method.17. Dividends are recognized in profit or loss only when: a. The amount of the divident can be measured reliably b. The entity's right to receive payment of the dividend is established c. It is probable that the economic benefits associated with the dividend will flow to the entity. d. All of thesePlease concisely explain how the excess investment cost over book value is allocated. When is the intra-entity’s profits recognized on transfers between the investor and investee? What is the controlling interest percentage for a consolidated accounting financial statement?
- If the entity is using the equity method to account for investment in subsidiary, the entry to recognize dividends received from the subsidiary will: a.Be recognized in profit or loss b.Increase the carrying amount of investment c.Decrease the carrying amount of investment d.Be recognized in other comprehensive incomeWhich of the following measures the portion of a corporations profit allocated to each outstanding share of common stock? A. retained earnings B. EPS C. EBITDA D. NOPAT4. What method normally is used to account for the ownership of a subsidiary on the parent’s financial records? a Cost model/methodb. Equity methodc. Consolidationd. Either cost model/method or equity method
- 6. What is the effect on the financial statement elements if an SME receives goods or services in an equity-settled share-based payment transaction? a. Increase in assets and increase in income b. Increase in assets and increase in liability c. Increase in assets and increase in equity d. No effect on any of the financial statement elementsConsolidated financial statements are typically prepared when one company has A. a substantial equity interest in the net assets of another company. B. the controlling financial interest in another company. C. significant influence over the operating and financial policies of another company. D. accounted for its investment in another company by the equity method.When a parent company uses the equity method to account for an investment in a subsidiary, why do both the parent’s Net Income and Retained Earnings account balances agree with the consolidated totals?
- Dividends are recognized in profit or loss only when: Group of answer choices A. The amount of the dividend can be measured reliably. B. All of these. C. It is probable that the economic benefits associated with the dividend will flow to the entity. D. The entity’s right to receive payment of the dividend is established.In consolidated financial statements, it is expected that: A. Retained earnings equals to the sum of controlling interest separate retained earnings and non-controlling interest separate retained earnings. B. Ordinary share equals to the sum of parent’s ordinary share and subsidiary’s ordinary share. C. Net income equals to the sum of the income distributed to the controlling interest and distributed to non-controlling interest. D. Dividends declared equals the sum of the total parent company’s declared dividends and the total subsidiary’s declared dividends.5. On January 2, 2019, U Co. purchased 75% of the outstanding shares of N Co. resulting to a goodwill of P60,000. On that date, the non-cash assets of N Co. whose book values did not equal their book values were accounts receivable which was overstated by P4,500 and equipment with a remaining 5 year life on the purchase date which was understated by P50,000. For the year 2010, U and N reported net income of P350,000 and P200,000 each respectively. U's beginning inventory included merchandise purchased from N Company amounting to P39,000 which was sold to them by N at a 30% markup, 80% of these goods were sold during the year. N, on the other hand, included inventory items which they purchased from U Co. amounting to 18,000. These goods were sold by U at a 25% markup. 90% of these goods were sold by N for the year. Determine the consolidated net income for 2020. *