1. A parent company acquires 80 percent of the shares of a subsidiary for $400,000. The carrying amount of the subsidiary's net assets is $350,000. The fair value of the identifiable net assets of the subsidiary is $380,000.

 

Which of the following represents the amount of goodwill that should be reported at the time of the acquisition?

1. $16,000
2. $20,000
3. $96,000
4. $120,000

How does the parent company (acquirer) measure and record its investment in the subsidiary (acquiree)?

1. At the fair value of the assets received.
2. At the fair value of the assets given up.
3. At the book value of the assets received.
4. At the book value of the assets given up.

What are consolidated financial statements?

 a. Statements which are constructed by the subsidiary company.

b. Statements which show the combined assets, liabilities, revenues and expenses of a parent and its subsidiaries.

c. Statements which are prepared from the actual company books of the consolidated company, and from a working paper combining various companies.

d. Statements which are prepared for the benefit of the non-controlling interest shareholders.