Reference no: EM133023941
Questions -
i. When an investor uses the equity method to account for investments in equity securities, how should the investor account for cash dividends received from the investee be shown?
a. As a deduction from the investor's share of the investee's profits
b. As dividend income
c. As a deduction from dividends paid by the investor
d. As a deduction from the investment account.
ii. On January 1st.2020, X acquired 30,000 shares(30% of the outstanding shares) of Y at a price of $10.00 per share giving it significant influence over Y. Y had net income of $400,000 for the year ended December 31st.2020 and declared and paid dividends of $160,000 to its shareholders on December 31st.2020. On the date of acquisition, Y's net book value was $1,600,000 and there was no difference between the fair value and book value of Y's identifiable net assets. What was the balance in X's "Investment in Y' account as of December 31st.2020?
a. $300,000
b. $252,000
c. $372,000
d. $228,000
iii. Which method of consolidation, should an acquirer Company use if it has problems identifying the goodwill at acquisition?
a. Acquisition method
b. Net Identifiable Asset Method
c. Proportionate Method
d. Fair Value Method
iv. On December 31st.2020, X purchased 80% of the common shares of Y for $1,000,000. The fair value of Y's identifiable net assets was $1,080,000 on that date. At December 31st., 2020 the fair values and carrying values of Y's identifiable net assets were equal except for the equipment where the fair value exceeded the carrying value by $40,000 and the long-term liabilities' fair value exceeded the carrying value by $60,000. What is the consolidated goodwill?
a. $150,000
b. $270,000
c. $190,000
d. $230,000
v. Before a Company can report on a consolidated basis, the acquirer Company has to ensure certain conditions must be met. Which of the following is not true?
a. An acquirer must be identified
b. The Company must be able to fair value the assets and liabilities of the subsidiary company
c. The Company must announce an acquisition date
d. Any negative goodwill identified at the date of acquisition must be reported on the consolidated balance sheet at acquisition
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