How consolidations change when a company acquires at least 50%, but less then 100% of another...

How consolidations change when a company acquires at least 50%, but less then 100% of another company. What new account/s are present? How are these accounts classified/reported. What consolidation entries change?

Expert Solution

a) When company acquires less than 50%, it is considered as an associate.

Accounting for associate:

Equity method is followed for the same. Investments are recorded at cost plus share of profit attributable to parent (ie., to the extent of holding of parent in associate). So only one account appears - Investment in associates at the time of consolidation.

b) When company acquires more than 50%, it is considered as subsidiary.

Accounting for subsidiaries:

All assets are and liabities of subsidiary are added line by line in parents financials. (100% amounts)

Goodwill or bargain purchase is calculated and recorded as a separate line item at the time of acquistions.

Various adjustment entries are passed at time of consolidation to make accounting policies uniform.

Where, less than 100% shares are acquired, Non controlling interest is shown as separate line item below equity. It represents the interests in subsidiary which are not acquired by holding/parent.

ekkarill92 answered 2 years ago

If the company acquires another small company, assess how it would know if it has to...

If the company acquires another small company, assess how it would know if it has to consolidate its financial statements on an annual basis. Defend your response.

When one corporation acquires control of another entity, the investor corporation is referred to as the...

When one corporation acquires control of another entity, the investor corporation is referred to as the parent and the investee corporation as the: child. joint venture. subsidiary. associate.

If a company acquires a 40% interest in another company one of the fair value models...

If a company acquires a 40% interest in another company one of the fair value models is usually applicable. the equity method is usually applicable. the investor does not have the ability to exert significant influence over the investee. it would always have a controlling interest.

When a company defaults on its debt, debtholders often received 50% or less of the amount...

When a company defaults on its debt, debtholders often received 50% or less of the amount they are owed, as well as lost interest. Is the difference between the amount debtholders are owed, and the amount they actually receive as cost of bankruptcy?

When valuing a parent company that owns less than 100 percent of a subsidiary, the minority...

When valuing a parent company that owns less than 100 percent of a subsidiary, the minority interest holder of the subsidiary has a claim on the parent company’s assets. A. True B. False

On January 1, 2021, a company acquires $480,000 of another company’s 15% bonds at a price...

On January 1, 2021, a company acquires $480,000 of another company’s 15% bonds at a price of $630,000. For the investor company, interest is received on January 1 of each year, and the bonds mature on January 1, 2031. The investment will provide the investor a 10% yield (assumed, for ease of computation; do not attempt computation beyond the years necessary). The bonds are classified as held-to-maturity. Using the effective interest method, what is the amount the investor company will...

On January 1, 2021, a company acquires $540,000 of another company’s 7% bonds at a price...

On January 1, 2021, a company acquires $540,000 of another company’s 7% bonds at a price of $410,000. For the investor company, interest is received on January 1 of each year, and the bonds mature on January 1, 2031. The investment will provide the investor a 10% yield (assumed for ease of computation; do not attempt computation beyond the years necessary). The bonds are classified as held-to-maturity. Using the effective interest method, what is the amount the investor company will...

A Contingent Consideration Problem Parent Company acquires 100 % of Sub Company for by exchanging 100,000...

A Contingent Consideration Problem Parent Company acquires 100 % of Sub Company for by exchanging 100,000 shares of its $1 par value common stock with a current market value of $35 per share. The agreement contains a provision that: If the subsidiary earns a net income of more than $500,000 during the first year following the acquisition, an additional cash payment for 30% of the excess over $500,000 will be paid at that time, and If the price per share...

Assume that Company A acquires 70% of Company for a cash price of $10 million when...

Assume that Company A acquires 70% of Company for a cash price of $10 million when the share capital and reserves of Company B are: Share capital $8 million Retained earnings $2 million $10 million (a) What amount will be shown in the consolidated statement of financial position for goodwill pursuant to AASB 3 assuming that any non-controlling interest in the acquired is measured at fair value? (b) What amount will be shown in the consolidated statement of financial position...

If you are to be acquired by another company, what will be the least preferred defense...

If you are to be acquired by another company, what will be the least preferred defense maneuver of your choice? Kindly explain the defense you will least likely use and elaborate further why such defense is your least among the choices.

Question