Chapter 7 Consolidated FinancialStatements (Part 4) PROBLEM 1: MULTIPLE CHOICE 1.

A – 1,240,000 - If the investment in sub

,240,000 - If the investment in subsidiary is measured under the equity method , the consolidated retained earnings is equal to the paren
ned earnings is equal to the parent’s retained earnings. 2.C Solution: R etained earning s – Subsidiary 36,000 1/1/1991 Dividends 5,000 20
000 1/1/1991 Dividends 5,000 20,000 Profit (squeeze)51,000 Share in profit of subsidiary = 20,000 x 80% = 16,000 3.A Solution: Investme
% = 16,000 3.A Solution: Investment in subsidiary Initial cost (squeeze) 120,000 Sh. in profit of Sub. 16,000 4,000(a) Dividends received Sh
00 4,000(a) Dividends received Share in the amortization of - undervaluation of assets (b) 132,000 Dec. 31, 20x1 (a) (5,000 x 80%) = 4,000
31, 20x1 (a) (5,000 x 80%) = 4,000 4. D Solution: Consideration transferred 120,000 Non-controlling interest in the acquiree (100K x 20%)
rest in the acquiree (100K x 20%) 20,000 Previously held equity interest in the acquiree - Total 140,000 Fair value of net identifiable asset
Fair value of net identifiable assets acquired (100,000) Goodwill at acquisition date 40,000 Accumulated impairment losses since acquisitio
impairment losses since acquisition date - Goodwill, net – current year 40,000