Term
| The two types of business combinations are: |
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Definition
1) Acquisition of net assets
2) Acquisition of stock |
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Term
| All identifiable assets are recorded at: |
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Definition
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Term
| Any excess of cost over fair value of identifiable net assets is recorded as: |
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Definition
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Term
| Any excess of fair value over cost is reported as: |
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Definition
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Term
| Stock issuance costs are a reduction of: |
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Definition
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Term
| __________ addresses how companies should account for and report the effects of business combinations. |
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Definition
| ASC 805, Business Combinations |
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Term
| When are intangible assets recorded separately from goodwill? |
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Definition
If they're either:
Contractual or legal rights - Doesn't matter if the rights are transferrable or separable from acquired entity
-Trademarks, domain names, custimer relationships, favorable leases, and contracts
Separable, capable of being separated or divided from acquired entity and sold, transferred, licensed, rented, or exchanged.
-Customer lists, databases, unpatented technology
If these aren't identified separately, they're lumped into goodwill and that's BAD. |
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Term
| Research and Development is recognized at: |
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Definition
| Fair Value, regardless of whether they have alternative future use |
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Term
| Completed R&D projects that have assets and a definite life are: |
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Definition
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Term
| Completed R&D projects that have assets and an indefinite life are: |
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Definition
| not amortized, just tested for impairment |
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Term
| When Research and Development is abandoned, what does the company do? |
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Definition
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Term
| What percentage must be owned for there to be a "parent" and "subsidiary" company? |
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Definition
| Acquiring company must acquire at least 50% in order to be the parent |
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Term
| Parent company must __________ the subsidiary is the parent company has __________ |
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Definition
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Term
| If parent company does not have control (e.x. subsidiary in bankruptcy) then: |
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Definition
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Term
| If subsidiary is not consolidated, then investment must be reported based on: |
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Definition
| The Complete Equity Method |
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Term
| Is a make-believe world in which it is assumed that the parent actually acquired the net assets of the subsidiary rather than the stock |
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Definition
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Term
| T/F Consolidation is not limited to working paper, and affects the books of both companies |
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Definition
| False; completed on working paper only and NEVER affects either company's books |
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Term
| During a stock acquisition, the companies |
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Definition
| remain legally separate companies |
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Term
| During asset acquisition, the companies |
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Definition
| the purchased company loses its identify and net assets of acquired company are recorded on the books of the acquiree |
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Term
| If stick is acquired only __________ is recorded |
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Definition
Investment
Start an investment account in the books, assets stay with the company. |
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Term
| Entries and information for Cost Method: |
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Definition
The only entries made when using this method is for receipt of dividends:
DR CASH
CR Dividend Revenue
Original investment is NOT affected by these entries and remains at cost |
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Term
| Steps, information, and entries of Complete Equity Method: |
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Definition
1) Investee reports net income which increases equity.
DR Investment
CR Investment Revenue
2) Investee declares and distributes dividends
DR CASH
CR Investent
3) Amortizations or any differences between book value and fair value of net assets at acquisition date. Amortize only that which would be amortized under GAAP.
DR Investmenr Revenue
CR Investmenr |
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Term
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Definition
| The same as the complete equity method without the amortization entry. Only records for earning of net income and receipt of dividends |
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Term
| Noncontrolling interest is when: |
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Definition
| Parent company owns less than 100% of subsidiary. This is whatever percentage that parent company doesn't own |
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Term
| Noncontrolling Interest in Net Assets (NCINA) must be measured on ______ at ______ |
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Definition
| Acquisition date; fair value |
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Term
| T/F Parent and Subsidiary companies both have their own income from their own revenues and expenses |
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Definition
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Term
| For consolidations, accounting is concerned with |
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Definition
| Substance over form. It is more important to report the substance of the activity rather than its form. |
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Term
| SFAS No. 94 requires that |
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Definition
| Majority-owned subsidiaries be consolidated unless the parent is precluded from exercising control or control is temporary |
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Term
| If consolidation occurs at acquisition date |
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Definition
| There would only be a consolidated balance sheet. Without passage of time, income statement doesn't come into play. |
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Term
| (S) Entries are, and they contain: |
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Definition
(S)tockholders' Equity entries
i.e.
DR Common Stock
DR Paid in Capital
DR Retained Earnings
CR Investment
This will get rid of the equity, because in a make believe world the subsidiary no longer exists and therefore no longer has equity.
Even though this adjustment is in journal form, it is NOT a journal entry and it is only recorded on the worksheet and never touches the books. |
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Term
| (A) Entries are and include: |
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Definition
(A)llocation of Excesses entries
i.e.
DR Inventory
DR Land
DR Equipment
CR Investment |
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Term
| Consolidated Net Income, Retained Earnings are equal to parent net income ONLY if you use: |
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Definition
| Complete Equity Method. consolidated dividends are equal to parent dividends regardless of what method is used to account for the investmenr |
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Term
| Asset Acquisition: What entry is made on CoP's books if there is a stock issuance, finders' fee, or other direct costs? |
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Definition
DR APIC - for the stock
DR Expense - for finders fee and/or other
CR CASH |
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Term
| Asset Acquisition: How do you find the cost of the acquisition? |
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Definition
| Common Stock + Paid in Capital + Cash |
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Term
| Asset Acquisition: Find out how much CoP's equity increased |
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Definition
| Common Stock + Paid in Capital - Stock Issuance Costs |
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Term
| If Book value for EQUIPMENT is greater than fair value, what are the entries? How is it put onto excess schedule? |
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Definition
Subtracted from stuff when trying to find goodwill
Negative on excess schedule. Amortization is also negative
(A) Credit it
(E)
DR Equip
CR Dep Exp |
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Term
| If fair value is greater than book value for BONDS PAYABLE, is that a discount or premium? How is it factored when trying to find goodwill? What is it on excess schedule? What are the entries for it? |
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Definition
Premium, because the company got them or has them on books for cheaper than they're worth
Subtracted when calculating goodwill
Negative on excess schedule, as well as the amortization entries
(A) CR Premium on BP
(S)
DR Premium on BP
CR Int Exp |
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