FA Quiz 4 Group Accounting

A parent company which has not real activities but owns stock in other companies is known as:

• A subsidiary

• A holding company

• The group leader

• The main company

What is goodwill?

• Amount paid to cover tax costs

• Good relationship between parent company and subsidiary company

• Amount paid above the book value of the company acquired

• A tangible asset the parent company wants to acquire

The process of consolidation and group accounting demonstrates this accounting principle:

• Matching principle

• Prudence

• Full disclosure

• Single economic entity

In the process of full consolidation the financial assets figure is replaced by the ____.

• Net assets of acquired company

• Nothing at all

• Goodwill paid

• The equity of acquired company

Minority interest reflects the interest in the acquired company which is _____.

• Not important

• Not owned by the parent company

• Not mentioned in the acquisition

• Not calculated in the acquisition

These are the balance sheets before acquisition of Company P and Company S. Company P acquires 65% of Company S at 10% over the book value. This is done using cash. Calculate the cost of acquisition.

(Note: numbers are in 1,000).

• $780,000

• $770,000

• $858,000

• $880,000

These are the balance sheets before acquisition of Company P and Company S. Company P acquires 65% of Company S at 10% over the book value. This is done using cash.  What is the goodwill for the acquisition?

(Note: numbers are in 1,000).

• $78,000

• $77,000

• $76,000

• $75,000

These are the balance sheets before acquisition of Company P and Company S. Company P acquires 65% of Company S at 10% over the book value. This is done using cash. What is the minority interest if a full consolidation was done?

(Note: numbers are in 1,000).

• $300,000

• $420,000

• $430,000

• $78,000

Company X and Company Y had the following Income Statements before the acquisition was made. Company X acquires 80% of Company Y. The acquisition was fully paid by cash. What is the consolidated group income after the acquisition?

• $225,000

• $245,600

• $305,900

• $326,000