Why revenue, expense, dividend and equity accounts cannot be transferred to a parent under the acquisition...

Question

Question

Why revenue, expense, dividend and equity accounts cannot be transferred to a parent under the acquisition...

Why revenue, expense, dividend and equity accounts cannot be transferred to a parent under the acquisition method?

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

Under Acquisition method a company does accounting like it is purchasing an asset which will give company benefit in upcoming years.

Hence, company accounts for all the ASSETS and LIABILITIES of the subsidiary company as an asset. Revenues, expenses and dividend on the other hands are not a thing that can be purchased, these are not assets or liabilities.

Further, company cancels it's own investment in subsidiary by eliminating the equity of the subsidiary entity and goodwill is recorded. These are part of common consolidation entries.

Add a comment

Answer 2

Similar Homework Help Questions

Dividends declared by a subsidiary are eliminated against dividend income recorded by the parent under the...

Dividends declared by a subsidiary are eliminated against dividend income recorded by the parent under the a. partial equity method. b. equity method. c. cost method. d. equity and partial equity methods.
Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume a parent...

Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume a parent company acquires a 75% interest in its subsidiary for a purchase price of $924,000. The excess of the total fair value of the controlling and noncontrolling Interests over the book value of the subsidiary's Stockholders' Equity is assigned to a building in PPE, net) that is worth $88,000 more than its book value, an unrecorded patent with a fair value of $144,000, and Goodwill...
Under the equity method, the dividend revenue from a long-term investment—which has an ownership of 20%...

Under the equity method, the dividend revenue from a long-term investment—which has an ownership of 20% to 50%—the dividend is treated as a ________. return of capital credit to current assets debit to revenue from investments dividend revenue

Determining ending consolidated balances in the second year following the acquisition—Equity method Assume a parent company...

Determining ending consolidated balances in the second year following the acquisition—Equity method Assume a parent company acquired a subsidiary on January 1, 2015. The purchase price was $745,000 in excess of the subsidiary’s book value of Stockholders’ Equity on the acquisition date, and that excess was assigned to the following [A] assets: 37. Determining euding consolidated balances in the second year following the acquisition-Equity method Assume a parent company acquired a subsidiary on January 1, 2015. The purchase price was...
Question 4 4. A parent company's 75%-owned subsidiary declared and paid a dividend totalling $10,000. How...

Question 4 4. A parent company's 75%-owned subsidiary declared and paid a dividend totalling $10,000. How would the parent company record this dividend under the equity method? Under the cost method? 5. By which method, cost or equity, does IFRS require a parent company to record its investment in a
In an acquisition where control is achieved, how would the land accounts of the parent and...

In an acquisition where control is achieved, how would the land accounts of the parent and the land accounts of the subsidiary be combined?

QUESTION 12 Dividends declared by a subsidiary are eliminated against dividend income recorded by the parent...

QUESTION 12 Dividends declared by a subsidiary are eliminated against dividend income recorded by the parent under the a. partial equity method. b. equity method. C. cost method. d. equity and partial equity methods.
Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume ...

Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a parent company acquires an 80% interest in its subsidiary for a purchase price of $620,800. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiary's Stockholders' Equity is assigned to a building (in PPE, net) that the parent believes is worth $50,000 more than its book value, an: unrecorded Patent that the parent valued...
Identify each of the following accounts as a revenue, expense, asset, liability, or equity by placing...

Identify each of the following accounts as a revenue, expense, asset, liability, or equity by placing initials (R, Exp. A, L or Eq) in the blanks. Place your answers on the data sheet. (1) Owner, capital (2) Accounts Receivable (3) Owner, drawings Sales (5) Service Revenue (6) Rent Expense (7) Equipment (8) Prepaid Insurance (9) Accounts Payable (10) Supplies (11) Cash (12) Unearned Revenue The following accounts appear on either the Income Statement (IS) or Balance Sheet (BS). In the...

Identify the following accounts of Advanced Services Co. as asset, liability, owner’s equity, revenue, or expense,...

Identify the following accounts of Advanced Services Co. as asset, liability, owner’s equity, revenue, or expense, and state in each case whether the normal balance is a debit or a credit. Wages Expense a) Assets b) liability c) Owner's equity d) Revenue e) Expense f) debit g) Credit

Why revenue, expense, dividend and equity accounts cannot be transferred to a parent under the acquisition...

Homework Answers

Add Answer to:
Why revenue, expense, dividend and equity accounts cannot be transferred to a parent under the acquisition...

Post as a guest

Earn Coins

Dividends declared by a subsidiary are eliminated against dividend income recorded by the parent under the...

Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume a parent...

Under the equity method, the dividend revenue from a long-term investment—which has an ownership of 20%...

Determining ending consolidated balances in the second year following the acquisition—Equity method Assume a parent company...

Question 4 4. A parent company's 75%-owned subsidiary declared and paid a dividend totalling $10,000. How...

In an acquisition where control is achieved, how would the land accounts of the parent and...

QUESTION 12 Dividends declared by a subsidiary are eliminated against dividend income recorded by the parent...

Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume ...

Identify each of the following accounts as a revenue, expense, asset, liability, or equity by placing...

Identify the following accounts of Advanced Services Co. as asset, liability, owner’s equity, revenue, or expense,...

Why revenue, expense, dividend and equity accounts cannot be transferred to a parent under the acquisition...

Homework Answers

Add Answer to: Why revenue, expense, dividend and equity accounts cannot be transferred to a parent under the acquisition...

Post as a guest

Earn Coins

Add Answer to:
Why revenue, expense, dividend and equity accounts cannot be transferred to a parent under the acquisition...