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Advanced Financial Accounting
1. Tree, Inc., has held a 10 percent interest in the stock of Limb Company for several years. Because of the level of ownership, this investment has been accounted for using the fair- value method. At the beginning of the current year, Tree acquires an additional 70 percent interest, which provides the company with control over Limb. In preparing consolidated financial statements for this business combination, how does Tree account for the previous 10 percent ownership interest?
2. Franklin, Inc. owns 80% of Prevatt Company. During the current year, a portion of the investment in Prevatt is sold. Prior to recording the sale, Franklin adjusts the book value of its investment. What is the purpose of the adjustment?
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******** *** **** *** has **** * 10 ******* ******** in *** stock ** **** ******* *** ******* ***** Because ** the ***** ** ********* **** ********** *** **** ********* *** ***** the ***** ***** ****** At *** ********* ** the ******* **** **** acquires ** additional ** percent interest ***** ******** *** company **** ******* **** **** In preparing ************ ********* statements *** **** ******** *********** *** does Tree ******* *** *** ******** ** percent ownership **********
The
**** Market ***** ***** is ** ********** ******** **** ******** ** ******** of the ***** ** *** ****** for * ******** ** asset ** such the ****** ** * ******* ***** *** is not ********* ** has ******** ********* ** the market *** attest to *** buy the asset ******* the ******** ** ********** ** *** ************* ** **** ***** and the ********* ** ***** ********** ********** couples **** *** ********** ** *** buyers *** *** ******** *********
****
*** *** a less **** 20% ******** in the ***** ** **** ******* prior ** ********* *** 70% ******** ** *** stock ********* ** the **** ****** value ******** *** ********* ** **** **** *** ** a company ******** ** ********** ******** **** ** carried ***** ** FMV *** ********* for ** *** ******* ***** ** *** investor *** **** Tree *** has ******** *** *********** ***** of *** Limb ******* ********** *** *** ******* ** percent ********* interest ******* a **** that *** ** ******* for * ****** of *********** ***** ***
things
** ** considered ** Tree *** *** *** *************** fair ***** **** **** accrue ** the company **** the duration of *** *********** **** ** ** ** done ***** the ** ******* ******** ** *** ********* of Limb ******* ** ******* ** the ******* new ************ ** ** ******* *** **** business ***** ** Limb ******* ********* *** trade name of *** ******* the *********** consolidation *** business **** *** *** ******* book ***** ** *** ******** *** *** to be *********** ******** **** ********
***
**** *** of ******* ******* ****** *** ******* **** * portion ** the investment ** ******* ** **** Prior ** recording *** **** ******** ******* the book value ** *** ********** **** ** *** ******* ** *** ************ *** measure of *
***************
valuation ** **** constitutes ** adjusted **** value *** ********* ** **** ***** ** *********** ** *********** ********* *** ******* ***** liabilities and *** ****** are ***** * *** ***** ******* ** adjustment **** ******** ***** **** ****** value *********** ****** ***** ********** ** *********** *** value of investment **** ******** does not ****** on *** figures ******** in *** ******* sheet ** *** ******** it ** ********* on *** ********** earnings ** * company **** **** *** disposed of *** ****** to ******* ** *** **** ****** ***** ** *** ********** ** *** time of *** **** ****** ** ************ **** it ** different ****
price
** **** ******** **** is ********** dependent ** *** ****** ****** and *** the ***** ** the *** ** *** assets Unlike *** *********** ****** *** ******** **** ***** ******** **** *** reflect *** ***** **** ***** ******* ** the ****** ** the ****** *** separated from *** business *** **** ** *** free ****** ** **** the ***** ******* ** *** ****** on *** **** *** **** ****** **** *** reflect *** contributing worth of *** ****** about the business continuity ******* ownership of * company **
***
***** ******* *** ****** who controls *** ******* ****** ** ***** in *** *********** ******** more ** **** **** ***** *** **** is **** ******* *** ** ********** or lost *** Franklin Inc ** *** **** **** Franklin ********* control ***** the sale ** ******* that *** ******** earned by the ***** *** the ********** in *** **** ***** **** reflect an ********** ** the ****** ** the ************* equity ** *** other **** ** ***** the **** control ** *** ********** **** *** ********** ******* the ******** ** *** **** *** the *********** ** the book value will reflect a gain or **** on the investment ************ of which method is **** **
this
situation **** ** accounting perspective *** **** value ****** ****** ** ** the equity ****** ***** **** ensures **** *** *** ********** *** equity ****** basis guarantees **** the ****** ***** ** **** the **** is **** ** ******** As * ****** *** ****** ******** ******* *** **** ***** ** the ********** ** to ******* ** ******* value ****** **** ** *** ** ********** **** ** adjusted *** **** ***** *** a partial ****** ****** ********** ** an ****** ****** *****