Question

5. Recognizing goodwill or gain from a bargain purchase is the final step of acquisition method. Therefore, Goodwill or Gain on bargain purchase is measured as the difference between the:

Select one:

a. Cost of the assets given up and the cost of the net assets acquired.

b. Fair value of the consideration transferred, and the fair value of net identifiable assets.

c. present value of the consideration transferred, and the present value of the net assets acquired

d. Cost of the net assets acquired, and the net present value of the consideration given up.

9. Consolidated financial statements involve combining the financial statements of the individual entities in a group. Which of the following is a reason for consolidation?

Select one:

a. None of the given answers are correct.

b. To acquire more entities in the future.

c. Report directors’ promotion capabilities.

d. Providing relevant information to shareholders.

3. A parent of an investment entity shall consolidate all entities that it controls, which of the following statement is not correct in consolidation of entities?

Select one:

a. The right of a party holding a non-controlling interest to approve various transactions is a protective right.

b. investor‘s control over investee means the ability of an investor to use its power over the investee to affect the amount of the investor’s returns.

c. All of the given answers are true in consolidation of entities

d. The holder must not have the practical ability to exercise the rights as it defines substantive rights.

Answer 1

Answer : 5) Correct option is b. Fair value of the consideration transferred, and the fair value of net identifiable assets.

Reason :

The difference between Fair value of the consideration transferred, and the fair value of net identifiable assets is recorded as Goodwill or gain on Bargain purchase as the case may be.

Answer :9) Correct Option is (d.) Providing relevant information to shareholders.

Reason :

Consolidated financial Satement gives the true picture of an entity and provides shareholder a compltete and relevant information.

Answer :10) Correct Option is (d.) The holder must not have the practical ability to exercise the rights as it defines substantive rights.

Reason :

For the purpose of consolidaton the investor or the holder must have practical ability to exercise such power ans the rights should be substantive rights.