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Homework answers / question archive / Push-down accounting is concerned with the A) impact of the purchase on the subsidiary's financial statements
Push-down accounting is concerned with the
A) impact of the purchase on the subsidiary's financial statements.
B) recognition of goodwill by the parent.
C) correct consolidation of the financial statements.
D) impact of the purchase on the separate financial statements of the parent.
E) recognition of dividends received from the subsidiary.
9. Under the equity method,
A) The investment account remains at initial cost.
B) Dividends received are recorded as revenue.
C) Goodwill is amortized over 20 years.
D) Income reported by the subsidiary increases the investment account.
E) Dividends received increase the investment account.
10. Under the partial equity method,
A) The investment account remains at initial cost.
B) Dividends received are recorded as revenue.
C) Amortization of the excess of cost over book value of net assets is applied over their useful lives to reduce the investment account.
D) Amortization of the excess of cost over book value is ignored in regard to the investment account.
E) Dividends received increase the investment account.
8. Push-down accounting is concerned with the
A) impact of the purchase on the subsidiary's financial statements.
B) recognition of goodwill by the parent.
C) correct consolidation of the financial statements.
D) impact of the purchase on the separate financial statements of the parent.
E) recognition of dividends received from the subsidiary.
Answer: A) impact of the purchase on the subsidiary's financial statements.
Push-down Accounting: On the date of acquisition the subsidiary revalues its assets and liabilities based on the parent's acquisition cost
9. Under the equity method,
A) The investment account remains at initial cost.
B) Dividends received are recorded as revenue.
C) Goodwill is amortized over 20 years.
D) Income reported by the subsidiary increases the investment account.
E) Dividends received increase the investment account.
Answer: D) Income reported by the subsidiary increases the investment account.
When the equity method of accounting is used, the investor initially records the investment in the stock of an investee at cost. The investment account is then adjusted to recognize the investor's share of the income or losses of the investee after the date of acquisition when it is earned by the investee.
Dividends received from an investee reduce the carrying amount of the investment and are not reported as dividend income
Thus D) is correct and A),B) and E) are incorrect.
After year 2002, goodwill is no longer amortized.
10. Under the partial equity method,
A) The investment account remains at initial cost.
B) Dividends received are recorded as revenue.
C) Amortization of the excess of cost over book value of net assets is applied over their useful lives to reduce the investment account.
D) Amortization of the excess of cost over book value is ignored in regard to the investment account.
E) Dividends received increase the investment account.
Answer: D) Amortization of the excess of cost over book value is ignored in regard to the investment account.
The partial equity method does not recognize excess amortization expenses.
