Reglamento Único de Transporte -RUT- - ESTRUCTURA DEL SECTOR DEL GAS NATURAL EN COLOMBIA

ESTRUCTURA DEL SECTOR DEL GAS NATURAL EN COLOMBIA

2.6 Reglamento Único de Transporte -RUT-

E. U.S. GAAP and IFRS both apportion goodwill to the parent only.

AACSB: Reflective thinking AICPA BB: Critical Thinking AICPA FN: Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 2 Medium Learning Objective: 04-10 Record the sale of a subsidiary (or a portion of its shares). Topic: Parent Company Sales of Subsidiary Stock-Acquisition Method 176

Essay Questions

93. Where should a non-controlling interest appear on a consolidated balance sheet?

The non-controlling interest should appear as a part of stockholders' equity where it would be clearly identified, labeled and distinguished from the parent's

controlling interest in subsidiaries.

AACSB: Reflective thinking AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Remember Difficulty: 1 Easy Learning Objective: 04-06 Identify appropriate placements for the components of the noncontrolling interest in consolidated financial statements. Topic: Consolidated Financial Statements

acquisition. Topic: Revenue and Expense Reporting for Midyear Acquisitions 95. Beta Corp. owns less than one hundred percent of the voting common stock of

Shedds Co. Under what conditions will Beta be required to prepare consolidated financial statements?

Beta will be required to prepare consolidated financial statements if it has control of Shedds. If Beta has more than 50% of the voting common stock of Shedds, it has control and must prepare consolidated financial statements. Occasionally, ownership of less than 50% of the voting common stock can confer control. In this situation, an argument can be made that the company with control should prepare consolidated financial statements, although such reporting is not currently

required.

AACSB: Reflective thinking AICPA FN: Measurement Blooms: Understand Difficulty: 2 Medium Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. Topic: Consolidated Financial Statements and Outside Ownership 96. Where may a non-controlling interest be presented in a consolidated balance

sheet?

A non-controlling interest must be shown in the balance sheet as part of stockholders' equity. It may no longer be shown between liabilities and stockholders' equity or classified as neither.

AACSB: Reflective thinking AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Remember

AACSB: Reflective thinking AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Remember Difficulty: 2 Medium Learning Objective: 04-03 Allocate goodwill acquired in a business combination across the controlling and noncontrolling interests. Topic: Allocating Acquired Goodwill to the Controlling and Noncontrolling Interests 98. How is a non-controlling interest in the net income of an entity reported in the

income statement?

The non-controlling interest would appear as a clearly identifiable portion of consolidated net income such that the controlling portion plus the non-controlling portion equals the consolidated net income presented.

AACSB: Reflective thinking AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Remember Difficulty: 2 Medium Learning Objective: 04-04 Demonstrate the computation and allocation of consolidated net income in the presence of a noncontrolling interest. Topic: Allocating Consolidated Net Income to the Parent and Noncontrollig Interest 99. One company buys a controlling interest in another company on April 1. How

should the preacquisition subsidiary revenues and expenses be handled in the consolidated balances for the year of acquisition?

Only postacquisition revenues and expenses are included in consolidated totals. The non-controlling interest is thereby viewed as beginning as of the acquisition date.

the equity method basis in order to calculate the proper entry for the sale. Therefore, if Prevatt adjusts the carrying value of its investment, it is in order to bring an initial value method or partial equity method investment basis to an equity method basis.

AACSB: Reflective thinking AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Understand Difficulty: 2 Medium Learning Objective: 04-10 Record the sale of a subsidiary (or a portion of its shares). Topic: Parent Company Sales of Subsidiary Stock-Acquisition Method 176 101. How does a parent company account for the sale of a portion of an investment in a

subsidiary?

If control is maintained after the sale, then the difference between the sales proceeds and the book value is an adjustment to the parent's owners' equity (APIC). If control is not maintained, then such difference is a gain or loss on sale of investment. In either situation, the book value of the investment should be on the equity method basis in order to calculate the proper entry for the sale. Therefore, if the investment has been kept under the initial value or the partial equity method, the investor adjusts the book value of its investment in order to bring an initial value method or partial equity method investment basis to an equity method basis.

AACSB: Reflective thinking AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Remember Difficulty: 2 Medium Learning Objective: 04-10 Record the sale of a subsidiary (or a portion of its shares). Topic: Parent Company Sales of Subsidiary Stock-Acquisition Method 176

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-02 Describe the valuation principles underlying the acquisition method of accounting for the noncontrolling interest. Topic: Consolidated Financial Reporting in the Presence of a Noncontrolling Interest 103. Tosco Co. paid $540,000 for 80% of the stock of Martz Co. when the book value of

Martz's net assets was $600,000. For all of Martz's assets and liabilities, book value and fair value were approximately equal.

Required:

Using the acquisition method, what amount of goodwill should appear in a consolidated balance sheet prepared immediately after the combination?

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-03 Allocate goodwill acquired in a business combination across the controlling and noncontrolling interests. Topic: Allocating Acquired Goodwill to the Controlling and Noncontrolling Interests

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 1 Easy Learning Objective: 04-01 Understand that complete ownership is not a prerequisite for the formation of a business combination. Topic: Consolidated Financial Statements and Outside Ownership 105. Pennant Corp. owns 70% of the common stock of Scarvens Co. Scarvens' revenues

for 2015 totaled $200,000. Required:

What amount of Scarvens' revenues would be included in the consolidated revenues under the acquisition method of accounting for business combinations?

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-04 Demonstrate the computation and allocation of consolidated net income in the presence of a noncontrolling interest. Topic: Allocating Consolidated Net Income to the Parent and Noncontrollig Interest

and equipment with ten-year useful lives. The book value of these assets was $830,000, and the fair value was $950,000. For Club's other assets and liabilities, book value was equal to fair value. The total fair value of Club's net assets was $3,500,000.

Determine the amount of the non-controlling interest as of the date of the acquisition.

$500,000. There is no active trading market for Acron's stock. The fair value of Acron's net assets was $600,000 and Glenville accounts for its interest using the acquisition method.

Determine the value assigned to the non-controlling interest as of the date of the acquisition.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 1 Easy Learning Objective: 04-03 Allocate goodwill acquired in a business combination across the controlling and noncontrolling interests. Topic: Allocating Acquired Goodwill to the Controlling and Noncontrolling Interests

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. Topic: Partial Ownership Consolidations (Acquisition Method)

On December 31, 2015, Vacker owed $30,800 to Carper. There have been no changes in Carper's common stock account since the acquisition.

Required:

If the equity method had been applied by Vacker for this acquisition, what were the consolidation entries needed as of December 31, 2015?

From the acquisition value, $28,000 was allocated based on the fair value of the building. With a ten-year remaining life, amortization will be $2,800 per year of which $1,960 is attributed to the controlling interest.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 3 Hard Learning Objective: 04-07 Determine the effect on consolidated financial statements of a control premium paid by the parent. Topic: Illustration-Partial Acquisition with Control Premium

For internal reporting purposes, JDE employed the equity method to account for this investment.

Prepare a schedule to determine goodwill, and the amortization and allocation amounts.

For internal reporting purposes, JDE employed the equity method to account for this investment.

The following account balances are for the year ending December 31, 2015 for both companies.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 3 Hard Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. Topic: Partial Ownership Consolidations (Acquisition Method)

during 2015.

Required: Prepare a schedule of consolidated net income and apportionment to non-controlling and controlling interests for 2015.

*Amortization of $12,000 = original $8,400 for 70% grossed up to the 100% amount of $12,000.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Learning Objective: 04-09 Understand the impact on consolidated financial statements when a step acquisition has taken place. Topic: Step Acquisitions

fair value of the controlling interest and the fair value of the non-controlling interest.

_____ 6. When control of a subsidiary is acquired on a date other than the first day of a fiscal year, excess amortization expenses are pro-rated to include only the post-acquisition period.

_____ 7. For a mid-year acquisition following an equity method investment of the same company, the consolidated income statement will report consolidated revenues and expenses for the entire year.

_____ 8. In a step acquisition where the parent previously held a non-controlling interest in the acquired firm, the parent remeasures the prior interest to fair value. _____ 9. When a parent has control over a subsidiary with less than 100 percent ownership, and thereafter increases its ownership, the parent remeasures the prior interest to fair value.

(1) F; (2) F; (3) T; (4) F; (5) T; (6) T; (7) F; (8) T; (9) F

AACSB: Reflective thinking AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Understand Difficulty: 2 Medium Learning Objective: 04-02 Describe the valuation principles underlying the acquisition method of accounting for the noncontrolling interest. Learning Objective: 04-04 Demonstrate the computation and allocation of consolidated net income in the presence of a noncontrolling interest. Learning Objective: 04-08 Understand the impact on consolidated financial statements of a midyear acquisition. Learning Objective: 04-10 Record the sale of a subsidiary (or a portion of its shares). Topic: Allocating Consolidated Net Income to the Parent and Noncontrollig Interest Topic: Consolidated Financial Reporting in the Presence of a Noncontrolling Interest Topic: Parent Company Sales of Subsidiary Stock-Acquisition Method 176 Topic: Revenue and Expense Reporting for Midyear Acquisitions

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