2/15/23, 10:20 AM Quiz: Midterm Examination

Midterm Examination
 This is a preview of the published version of the quiz

Started: Feb 15 at 10:17am

Quiz Instructions
Answer the questions carefully.

Solutions should be in written form to be uploaded at the last item of the examination.

For problem solving: Answers without solutions uploaded will be unacceptable.

SOLVE ON YOUR OWN. DO NOT REPRODUCE.

Good luck and God bless you!

Question 1 1 pts

Statement 1 (S1): The balance of the Allowance for Overvaluation of Inventories: Branch ledger account is deducted from the
balance of the Investment in Branch account in the separate balance sheet of the home office.

Statement 2 (S2]: If the home office bills shipments of merchandise to the branch is 25% above home office cost and the adjusted
balance of the Allowance for Overvaluation of Inventories: Branch ledger account is P20,400, the amount of branch inventories at
billed prices is P81,600.

S1 - False: S2 - True

S1 - True; S2 - False

S1 - False: S2 - False

S1-True; S2-True

Home office bills its branch for merchandise shipments at 30% above cost.
The following are some of the account balances on the books of home office and its branch as of December 31, 2022:

  Home Office Books Branch Books

Inventory, January 1 35,000 101,500

Shipments from Home Office   263,900

Purchases 1,575,000 350,000

Shipments to Branch 253,750  

Branch Inventory Allowance 91,875  

Sales 2,100,000 1,260,000

Operating Expenses 507,500 192,500

Per physical count, the ending inventory of the branch is P73,500 including goods from outside purchases of P48,475; the ending
inventory of the home office is P210,000.

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Question 2 1 pts

What is cost of goods available for sale of the branch?

P689,500

P638,750

P715,400

P781,375

Question 3 1 pts

What is the total ending inventory to be shown on the combined financial statements?

P277,725

P118,475

P328,475

P280,000

Question 4 1 pts

What is the combined net income for the year?

P942,725

P871,850

P957,950

P891,975

Question 5 1 pts

What date should be used as the acquisition date for a business combination?

The date when the acquirer obtains control of the acquiree

The date when the acquirer purchased more than 20% of the stock of the acquiree

The date when all the contingencies related to the transaction are resolved

The date when the acquirer signs the contract to purchase the business

On January 1, 2020, East Corporation purchased 80% of the common stocks of Slow Company. Separate balance sheets for the
companies at acquisition date are as follows:

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  East Corp Slow Co FMV

Cash P 12,000 P 119,000  

Accounts receivable 72,000 13,000  

Inventory 66,000 19,000 29,000

140,000 (remaining life – 5

Investment in Fast 196,000    

Total assets P 615,000 P 271,000  

Accounts payable P103,000 P 71,000  

Capital stock 400,000 150,000  

Retained earnings 112,000 50,000  

Total equities P 615,000 P 271,000  

Question 6 1 pts

Goodwill (income) to be recorded by East Corp

P45,000

(P 34,000)

(P 26,000)

P0

Question 7 1 pts

Total assets on the consolidated balance sheet

P 720,000

P 931,000

P 735,000

P 705,000

Question 8 1 pts

Non-controlling interest in net assets as of January 1, 2020

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P 49,000

P 46,000

P 39,200

P 40,000

A and B formed a joint operation. The following were the transactions during the year:

  A B

Total purchases 400 320

Total sales 960 720

Expenses paid 800  

Other income   40

The joint operation was completed at the end of the year. Each joint operator is entitled to a 10% commission on its purchases and a
20% commission on its sales. Any remaining profit or loss is divided equally.

Question 9 1 pts

How much is the profit (loss) of the joint operation?

200

180

(180)

(200)

Question 10 1 pts

On the cash settlement between the joint operators,

A pays B ₱368

B pays A ₱428

A pays B ₱428

B pays A ₱368

At December 31, 2022 the following information were ascertained by the Home Office for reconciliation of the reciprocal accounts of
the Home Office and the Branch. The Home Office’s Investment in Branch account had a balance of P1,256,000.

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The home office transferred furniture and fixtures in the amount of P34,000, but the branch recorded the transaction as P3,400.
On December 30, 2022 the branch sent cash P94,000 to the home office for the payment of the home office’s account. The
branch debited its accounts payable. On the other hand the home office recorded the remittance of cash in the amount of P9,400
twice.
The branch store insurance of P19,500 was paid by the home office, but the branch recorded the transaction as P15,180.
The home office recorded general expenses amounting to P54,000 and allocated 2/5 to the branch. The branch recorded the
transaction as 3/5 of the general expenses
On December 30, 2022 the branch returned merchandise in the amount of P64,000 to the home office. The home office debited
its Investment in Branch account upon receipt of the returned merchandise. The home office shipped merchandise to the branch
at cost.

Question 11 1 pts

What is the amount of the adjusted balance of the Home Office Current account?

1,116,800

1,052,800

1,043,400

1,107,400

Question 12 1 pts

What is the amount of the unadjusted balance of Home Office Current account?

1,122,680

1,186,680

982,920

1,113,280

Question 13 1 pts

What is the amount of the net adjustment in the Investment in Branch account?

203,200 CR

212,600 CR

138,200 CR

148,600 CR

Question 14 1 pts

What is the amount of the net adjustment in the Home Office Current account?

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24,120 CR

133,880 DR

60,480 DR

69,880 DR

Question 15 1 pts

When the freight on shipments to branch was paid by the home office, it involves a

Debit to the Investment account

Debit to freight-in

Credit to the Investment account

No entry

Question 16 1 pts

Which of the following transactions will increase the Home Office Current account of the Branch?

Payment of Home Office’s accounts payable

Returned merchandise by the Branch to the Home Office

Collection of Home Office’s customer accounts

Credit memo received from the Home Office

During the first year of operations, the books of Baliwag Branch showed the following balances:

Sales 2,400,000

Shipments from home office 2,240,000

Purchases 240,000

Ending inventory 400,000

Operating Expenses 300,000

Shipments to branch were billed at 140% of cost. The ending inventory of the branch included P52,800 from outside purchases.

Question 17 1 pts

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What amount should be reported as ending inventory of the Baliwag Branch at cost?

300,800

400,000

347,200

538,880

Question 18 1 pts

What amount should be reported as true net income of Baliwag branch?

20,000

560,800

508,000

540,800

Question 19 1 pts

What is the main difference between the branch’s reported net income against the true net income of the branch?

Overstatement of the cost of goods sold from home office merchandise

Overstatement of the cost of goods sold from outside purchases

Understatement of the beginning inventory coming from outside purchases

Allowance for overvaluation branch inventory before adjustment

Question 20 1 pts

When the home office receives a credit memo from the branch, the effect is,

Increase in the Investment in Branch account

Decrease the Investment in Branch account

Memo entry only by the home office

Decrease the Home Office Current account

Baliwag Company decided to open a branch in Albay. Shipments of merchandise to the branch totaled P2,160,000 which included a
20% markup on cost. All accounting records are kept at the home office. The branch submitted the following report summarizing the
operations for the year ended December 31, 2022:

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Sales on account 4,800,000

Sales on cash basis 2,000,000

Collections of accounts receivable 3,200,000

Expenses paid 1,120,000

Expenses unpaid 480,000

Purchases from outside suppliers for cash 2,000,000

Inventory on hand, December 31, 80%, from home

Remittance to home office  2,200,000

Question 21 1 pts

What amount should Baliwag Company report at Albay branch inventory on December 31, 2022 at cost?

1,040,000

400,000

1,000,000

800,000

Question 22 1 pts

What amount should Albay branch report as net income for 2022?

2,760,000

2,920,000

2,240,000

2,440,000

Question 23 1 pts

What amount should Baliwag Company report as the total goods available for sale by the Albay branch?

4,160,000

2,000,000

3,800,000

2,120,000

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Question 24 1 pts

When the branch receives a credit memo from the home office, the effect is

Debit in the Investment in Branch account

Credit in the Home Office Current account

Debit in the Home Office Current account

Memo entry only by the branch

On January 1, 2022, RR Co. acquired the identifiable net asset of BB, Inc. On this date, the identifiable assets acquired and
liabilities assumed have fair values of P7,680,000 and P4,320,000, respectively. RR Co. incurred the following acquisition-related
costs:

Legal fees P48,000

Due diligence costs 480,000

General and Administrative costs of maintaining an internal

As consideration, RR Co. transferred 9,600 of its own shares with par value and fair value per share of P400 and P500, respectively,
to BB’s former owners. Costs of registering the shares (previously issued and newly issued) amounted to P192,000 (P24,000
pertains to listing fees of previously issued shares).

Question 25 1 pts

How much is the goodwill (gain on bargain purchase) on the business combination?

1,300,000

1,440,000

667,200

720,000

Question 26 1 pts

How much is the total amount charged to profit or loss in relation to the transaction above?

624,200

648,000

750,000

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816,000

Question 27 1 pts

Which of the following accounts is a reciprocal account to the Investment in Branch Account?

Shipments from Home Office

Home Office

Branch Income

Shipments to Branch

Question 28 1 pts

How should accounting fees for an acquisition be treated?

Expensed in the period of acquisition

Capitalized as part of the acquisition cost

Deferred and amortized

Deferred until the company is disposed of wound-up

On January 1, 2022, PP Corporation acquired 80% of SS Corporation’s P10 par common stock for P956,000. On this date, the fair
value of the non-controlling interest was P239,000, and the carrying amount of SS’s net assets was P1,000,000. The fair values of
SS’s identifiable assets and liabilities were the same as their carrying amounts except for plant assets (net) with a remaining life of
20 years, which were P100,000 in excess of the carrying amount. For the year-ended December 31, 2022, SS had net income of
P190,000 and paid cash dividends totaling P125,000.

Question 29 1 pts

In the January 1, 2022, consolidated balance sheet, the amount of goodwill reported should be

76,000

None

95,000

156,000

Question 30 1 pts

In the December 31, 2022, consolidated balance sheet, the amount of non-controlling interest reported should be

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239,000

200,000

251,000

252,000

Pasig Tire Company operates a branch in Cabanatuan City. At the end of the year, the Branch account in the books of the home
office at Manila shows a balance of P150,000. The following information are ascertained:

The home office billed the branch the amount of P37,500 for the merchandise, which was in transit on December 31.
A home office accounts receivable for P10,500 was collected by the branch. Said collection was not reported to the home office
by the branch.
Supplies of P4,500 was returned by the branch to the home office but the home office has not yet reflected in its records the
receipt of the supplies.
The branch made profit of P10,100 for the month of December but the home office erroneously recorded it as P11,180.
The branch has not received the cash in the amount of P25,000 sent by the home office on
December 31. This was charged to General Expense account.

All accounts are presumed to have been properly recorded.

Question 31 1 pts

What is the balance of the Home Office account on the books of the branch as of December 31, before adjustments?

106,920

117,420

121,920

123,000

Question 32 1 pts

What is the adjusted balance of the reciprocal accounts?

117,420

106,920

179.920

96,420

Question 33 1 pts

ND Incorporated, a joint operator, has a contractual right to 40% of the revenues and expenses of a joint operation, together with CP
Corporation which owns the rest of the 60%

The joint operation earned P4,000,000 sales revenue during the same year when it sold a total of P500,000 worth of goods to ND
Incorporated and another P500,000 to CP Corporation. As of the end of that year, ND Incorporated was only able to sell 75%, while

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CP Corporation was only able to sell 80% of these goods to third parties. How much is the share of ND Incorporated in the sales
revenue of the joint operation?

1,200,000

1,400,000

1,510,000

1,550,000

Question 34 1 pts

On January 1, 2022, AOM Corporation acquired 50% interest in a company for a total cost of P1,100,000, gaining joint control in the
process. The investee is properly classified as a Joint Venture under IFRS 11.

In its statement of comprehensive income for the year ended December 31, 2022, the joint venture reported a net profit of
P2,500,000 and other comprehensive income of P500,000.

On November 10, 2022, the joint venture declared P300,000 cash dividends to AOM Corporation, to be paid on January 2, 2023.
How much is the balance of the investment in joint venture account of AOM as of December 31, 2022?

2,200,000

2,300,000

2,450,000

3,800,000

Question 35 1 pts

Joint operations are accounted for using

acquisition method

equity method

the relevant IFS

cost method, equity method, or fair value method

Question 36 1 pts

Which of the following is not true with regard to a business combination accomplished in the form of a stock acquisition?

Consolidated financial statements are normally required

All of the above statements are true

Two companies remain in existence after the combination

A parent-subsidiary relationship is said to exist

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ACNE Co. paid P110,000 for the net assets of Pimple Corp. At the time of acquisition, the following information was available related
to Pimple’s balance sheet:

  Book Value Fair Value

Current Assets 50,000 50,000

Building 80,000 100,000

Equipment 40,000 50,000

Liabilities 30,000 30,000

Question 37 1 pts

What is the amount recorded by ACNE for the building?

20,000

100,000

80,000

110,000

Question 38 1 pts

What amount of goodwill or gain should be recognized?

Goodwill of 30,000

Gain of 30,000

Goodwill of 60,000

Gain of 60,000

Question 39 1 pts

Control over an acquiree can be attained through which of the following?

Acquisition of the acquiree stock

Acquisition of the acquiree assets

Neither acquisition of the acquiree assets or stocks

Either acquisition of the acquiree assets or stock

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Question 40 1 pts

Which of the following would explain why the Investment in Branch account is less than the Home Office Capital Account?

An inventory shipment to the branch (at cost) is in transit

None of the above

A cash transfer to the home office is in transit

A cash transfer to the branch is in transit

Boracay Branch of PAL Company at the end of its first quarter operations, submitted the following income statement:

Sales                                                                                        300,000

Cost of sales:

            Shipments from HO                280,000

            Local purchases                        30,000

Total                                                    310,000

Inventory, end                                      50,000                       260,000

Gross profit on sales                                                                 40,000

Expenses                                                                                  35,000

Net income                                                                                5,000

Shipments to the branch were billed at 140% of cost. The branch inventory at September 30 amounted to P50,000 of which P6,600
was locally purchased. Mark-up on local purchases, 20% over cost. Branch expense incurred by Head Office amounted to P2,500
not yet recorded by the branch.

Question 41 1 pts

True branch net income

2,500

5,000

70,100

45,400

Question 42 1 pts

Compute the branch inventory that should be presented in the combined income statement:

50,000

43,300

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36,500

37,600

Question 43 1 pts

The Northern Branch of Cristobal Company reported net income of P60,000 for the month of January. The appropriate journal entry
for the home office of Cristobal Company is:

DR- Income Summary 60,000; CR- Branch Income 60,000

DR- Branch Income 60,000; CR- Income Summary 60,000

DR- Investment in Northern Branch 60,000; CR- Branch Income 60,000

DR- Investment in Northern Branch 60,000; CR- Income Summary 60,000

Question 44 1 pts

Statement 1: Parties in a joint arrangement are bound by a contractual arrangement

Statement 2: The contractual arrangement of a joint arrangement gives two or more of those parties joint control of the arrangement

Only statement 2 is true

Both statements are false

Only statement 1 is true

Both statements are true

Question 45 1 pts

The parties sharing joint control obtain rights over the joint arrangement’s net assets. Which of the following is considered a joint
venture?

The parties sharing joint control obtain rights over the joint arrangement’s net assets

The joint arrangement is structured in a separate vehicle as a corporation.

The parties sharing joint control obtain rights and obligations over the joint arrangement’s assets and liabilities.

A or B

Question 46 1 pts

Defined by IFRS 11 as a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets,
and obligations for the liabilities, relating to the arrangement.

Joint operation

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Joint venture

Jointly controlled entity

Jointly controlled asset

Question 47 1 pts

Excited, Inc. opens a sales agency in Marikina City, and a working fund for P20,000 is established on the imprest basis. The first
payment from the fund is P3,000 for rent.  This transaction should be recorded by the home office as follows:

Dr. – Davao Agency P3,000 / Cr. – Cash P3,000

Dr. – Davao Agency P3,000 / Cr. – Working Fund P3,000

No entry

Dr. – Rent P3,000 / Cr. – Profit and Loss P3,000

On  December  3,  2022,  the  Home  Office  of  Elmo  Office  Supply  Company  recorded  a  shipment  of merchandise to its Ilocos
branch as follows:

Ilocos Branch……………………………………………………………… 39,000

Shipments to Branch………..…………………………………………  32,500

Unrealized Profit in Branch Inventory………....................        5,200

Cash (for freight charges)…………………………………….........       1,300

The Ilocos branch sells 40% of the merchandise to outside entities during the rest of December 2022. The books of the home office
and Elmo Office Supply are closed on December 31 of each year.

On  January 5, 2023,  the  Ilocos branch transfers half  of  the  original  shipment  to  the  Zamboanga  branch, and the Ilocos
branch pays P650 as the shipment.

Question 48 1 pts

What amount  should  the  60%  of  the  merchandise  remaining  unsold  be  included  in the  inventory of the Ilocos branch at
December 31, 2022

P22,620

P23,920

P23,400

P20,280

Question 49 1 pts

What amount  should  the  60%  of  the  merchandise  remaining  unsold  at  December  31,  2022  be included  in  the  published 
balance  sheet  of  Elmo  Office  Supply  at  December  31,  2022  shows inventory at:

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P20,280

P20,800

P19,500

P23,400

Question 50 1 pts

What is the entry on the home office books in respect to January 5, 2023 transfer, assuming that the transfer cost of the
merchandise to Zamboanga branch would have been P780.

DR- Branch Current-Zamboanga 19,630, Excess Freight 520; CR-Branch Current-Ilocos 20,150

DR-Shipments 18,850, Freight-in 780; CR- Home Office Current 19,630

DR-Branch Current-Zamboanga 19,630, Excess Freight 780; CR-Branch Current-Ilocos 20,410

DR-Home Office 20,150; CR- Cash 780, Inventory 19,500

1. The after-closing balances of Starbucks Corporation’s home office and its branch at January 1, 2022 were as follows:

  Home Office Branch

Cash P         7,000 P        2,000

Accounts receivable-net 10,000 3,500

Inventory 15,000 5,500

Plant assets-net 45,000 20,000

Branch 28,000 -

Total assets P     105,000 P     31,000

Accounts payable P        4,500 P       2,500

Other liabilities 3,000 500

Unrealized profit-branch inventory 500 -

Home office - 28,000

Capital stock 80,000 -

Retained earnings 17,000 -

Total equities P    105,000 P     31,000

A summary of the operations of the home office and branch for 2022 follows:

1. Home office sales: P100,000, including P33,000 to the branch. A standard 10% markup on cost applies to all sales to the branch.
Branch sales to its customers totaled P50,000.
2. Purchases from outside entities: home office, P50,000; branch P7,000.
3. Collections from sales: home  office  P98,000  (including  P30,000  from  branch);  branch collections, P51,000.

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4. Payments on account; home office, P51,500; branch P4,000.
5. Operating expenses paid: home office, P20,000; branch, P6,000
6. Depreciation on plant assets: home office, P4,000; branch P1,000.
7. Home office operating expenses allocated to the branch, P2,000.
8. At December 31, 2022, the home office inventory is P11,000 and the branch inventory is P6,000, of which P1,050 was acquired
from outside suppliers.

Question 51 1 pts

The combined net income amounted to:

P4,550

P0

P21,000

P25,550

Question 52 1 pts

TulogNa Inc. operates a branch in Manila City. At the end of the year, the investment account in the books of the home office shows
a balance of P600,000. The home office current account in the books of the branch shows a balance of P385,680. The following
reconciling items were discovered:

1. The branch made a profit of P40,400 for the month of December, but the home office erroneously recorded it as P44,720.
2. The branch has not received the cash in the amount of P100,000 sent by the home office. The home office debited “Other
expense” for this transfer.
3. The home  office has billed the branch the  amount of P150,000 for  merchandise, which was in transit on December 31.
4. Supplies of P18,000 was returned by the branch to the home office. The home office failed to record the receipt of the
supplies.
5. The branch accounts receivable for P42,000 was collected by the home office. The home office failed to notify the branch.

What is the adjusted balance of the reciprocal accounts?

P635,680

P577,680

P593,680

P677,680

Question 53 1 pts

Under PFRS 10, which financial statements must be presented by a parent corporation?

Condensed financial statements

Consolidated financial statements

Separate financial statements

Combined financial statements

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Question 54 1 pts

Under PFRS 10, which of the following is not an essential element of control?

Exposure or Right

Ability

Power

Ownership of majority of voting stocks

Question 55 1 pts

Which of the following costs incurred by the acquirer in relation to business combination shall be expensed as incurred?

Stock issuance costs

Bond issue costs of financial liability at amortized cost

Contingent consideration

Direct costs of business combination

On January 1, 2022, Park Corporation and Strand Corporation and their condensed balance sheet are as follows:

On January 2, 2022, Park Corporation borrowed P60,000 and used the proceeds to obtain 80% of the outstanding common shares
of Strand Corporation. The P60,000 debt is payable in 10 equal annual principal payments, plus interest, beginning December 31,
2022. The excess fair value of the investment over the underlying book value of the acquired net assets is allocated to inventory
(60%) and to goodwill (40%).

On a consolidated balance sheet as of January 2, 2022, what should be the amount for each of the following?

Question 56 1 pts

The amount of goodwill using (1) proportionate basis (partial) and (2) full fair value (full/gross-up) basis:

(1) P 0; (2) P20,000

(1) P10,000; (2) P 8,000

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(1) P 8,000; (2) P10,000

(1) P 0; (2) P0

Question 57 1 pts

Assuming NCI is measured at fair value, total Current assets should be:

P 90,000

P100,000

P102,000

P105,000

Question 58 1 pts

Non-current asset using (1) proportionate basis (partial) and (2) full fair value basis (full/gross-up) in computing goodwill should be:

(1) P138,000; (2) P138,000

(1) P140,000; (2) P140,000

(1) P138,000; (2) P140,000

(1) P130,000; (2) P130,000

Question 59 1 pts

(1) Current liabilities and (2) non-current liabilities should be:

(1) P40,000; (2) P104,000

(1) P46,000; (2) P 90,000

(1) P46,000; (2) P104,000

(1) P50,000; (2) P110,000

Question 60 1 pts

Stockholders’ equity using (1) proportionate basis (partial) and (2) full fair value basis (full/gross-up) basis of determine non-
controlling interest should be:

(1) P93,000; (2) P 95,000

(1) P80,000; (2) P 95,000

(1) P95,000; (2) P95,000

(1) P93,000; (2) P93,000

https://baliuagu.instructure.com/courses/10500/quizzes/32754/take?preview=1 20/22
2/15/23, 10:20 AM Quiz: Midterm Examination

Question 61 1 pts

Parental Company and Sub Company were combined in an acquisition transaction. Parental was able to acquire Sub at a bargain
price. The sum of the fair values of identifiable assets acquired less the fair value of liabilities assumed exceeded the cost to
Parental. After eliminating previously recorded goodwill, there was still some "negative goodwill." Proper accounting treatment by
Parental is to report the amount as

a deferred credit, which is amortized.

an ordinary gain.

an extraordinary gain.

paid-in capital.

Question 62 1 pts

What is the theoretically preferred method of presenting a non-controlling interest in a consolidated balance sheet?

As a separate item within the stockholders’ equity section.

As a deduction from (contra to) goodwill from consolidation, if any.

By means of notes or footnotes to the balance sheet.

As a separate item within the liability section.

Question 63 1 pts

Horizontal business combinations occur when one entity purchases which of the following?

A supplier

A customer

None of the above

A competitor

Question 64 1 pts

The investment in a subsidiary should be recorded on the parent's books at the

fair value of the consideration given.

underlying book value of the subsidiary’s net assets.

fair value of the subsidiary’s net identifiable assets.

fair value of the consideration given plus an estimated value for goodwill.

https://baliuagu.instructure.com/courses/10500/quizzes/32754/take?preview=1 21/22