Multiple-Choice Questions on Complex Organizations
Select the correct answer for each of the following questions.
4. When an existing company creates a new subsidiary and transfers a portion of its assets andliabilities to the new entity
a. The new entity records both the assets and liabilities it received at fair values.
b. The new entity records both the assets and liabilities it received at the carrying values of theoriginal company.
c. The original company records a gain or loss on the difference between its carrying valuesand the fair values of the assets transferred to the new entity.
d. The original company records the difference between the carrying values and the fair valuesof the assets transferred Lo the new entity as
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Advanced Financial Accounting
- In a business combination, an acquirer's interest in the fair value of the net assets acquired exceeds the consideration transferred in the combination. Under PFRS 3 Business Combinations, the acquirer should A. recognize the excess immediately in profit or los B. recognize the excess immediately in other comprehensive income C. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in other comprehensive income D. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in profit or lossarrow_forwardThe meaning of goodwill in accounting is: Multiple Choice The amount by which a company's value exceeds the value of its individual assets and liabilities. Long term assets held as investment. The support of the board of directors for the operating decisions of management. The cost of developing, maintaining, or enhancing the value of a trademark. Rights granted to an entity to deliver a product or service under specified conditions.arrow_forwardUnder PFRS 3, when is a gain recognized in consolidating financial information? Group of answer choices a.When the amount of a bargain purchase exceeds the value of the applicable liability held by the acquired company. b.In an acquisition when the value of all assets and liabilities cannot be determined. c.When any bargain purchased is created d.In a combination created in the middle of the fiscal yeararrow_forward
- Which of the following statements is true about goodwill? Goodwill may be recorded when the fair value of a company's assets exceeds their а. cost. b. Goodwill may be recorded when one company acquires another in a business combination. С. Goodwill may be recorded when a company has exceptional customer relations. d. Goodwill may be recorded when it is identified within a company.arrow_forwardChoose the correct. What is push-down accounting?a. A requirement that a subsidiary must use the same accounting principles as a parent company.b. Inventory transfers made from a parent company to a subsidiary.c. A subsidiary’s recording of the fair-value allocations as well as subsequent amortization.d. The adjustments required for consolidation when a parent has applied the equity method of accounting for internal reporting purposes.arrow_forwardUnder PFRS 3, when is a gain recognized in consolidating financial information? a. In a combination created in the middle of the fiscal year b. In an acquisition when the value of all assets and liabilities cannot be determined. c. When any bargain purchased is created d. When the amount of a bargain purchase exceeds the value of the applicable liability held by the acquired company.arrow_forward
- Please concisely explain how the excess investment cost over book value is allocated. When is the intra-entity’s profits recognized on transfers between the investor and investee? What is the controlling interest percentage for a consolidated accounting financial statement?arrow_forwardConceptual Framework and Reporting Standard: Small and Medium Sized Enterprise 1. In SME, borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds. True or False? 2. Provision, in SME, shall be recognized if an entity has an obligation at the reporting date as a result of a past event and it is possible that the entity will be required to transfer economic benefits in settlement. True or False? 3. An entity can compute post-employment benefit by using either defined benefit plan or defined contribution plan. True or False?arrow_forwardIn a business combination, an acquirer's interest in the fair value of the net assets acquired exceeds the consideration transferred in the combination. Under IFRS 3 Business Combinations, the acquirer should a. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in profit or loss b. recognize the excess immediately in other comprehensive income c. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in other comprehensive income d. recognize the excess immediately in profit or lossarrow_forward
- Which of the following is / are external indicator/s of impairment loss? Impact of legal environment that affects the entity Changes in the market interest rates Technological changes in the industry that entity operates All of themarrow_forwardUnder PFRS 15, in which of the following instances will the revenue from contracts with customers be recognized at a point in time instead of over time? Group of answer choices When the entity’s performance creates or enhances an asset that the customer controls as the asset is created. When the customer simultaneously receives and consumes all of the benefits provided by the entity as the entity performs. When the entity has transferred physical possession and legal title to the asset to the customer When the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.arrow_forwardWhen does gain recognition accompany a business combination?a. When a bargain purchase occurs.b. In a combination created in the middle of a fiscal year.c. In an acquisition when the value of all assets and liabilities cannot be determined.d. When the amount of a bargain purchase exceeds the value of the applicable noncurrent assets (other than certain exceptions) held by the acquired company.arrow_forward
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