Which of the following consolidation adjustments will be required for a subsidiary that was acquired as a going concern, but will not be applicable for a parent-founded subsidiary?
A)Amortization of fair value increments on plant and equipment
B)Unrealized profits in ending inventory
C)Unrealized profits in beginning inventory
D)Future income tax on unrealized profits

Question

Quizplus · Accepted Answer

When a subsidiary is acquired as a going concern, the assets and liabilities are often revalued to their fair values at the acquisition date. This can lead to increments in the values of assets such as plant and equipment. These increments are then amortized over the useful life of the assets. This adjustment would not be applicable for a parent-founded subsidiary, as there would be no acquisition-date fair value adjustments to amortize.

Which of the Following Consolidation Adjustments Will Be Required for a Subsidiary