Which statement is FALSE? a) Goodwill recorded as the result of an acquisition i
ID: 2512510 • Letter: W
Question
Which statement is FALSE?
a) Goodwill recorded as the result of an acquisition is defined as the purchase price less the book value of net assets
b) Under SFAS 141, accounting for acquisitions can no longer result in an increase in the consolidated entity's stockholders' equity.
c) One of the problems with purchase accounting is that there is often very little basis for comparability of financial statements before acquisition and after acquisition.
d) One of the problems with consolidated financial statements is that all intercompany transactions are not reported.
Which statement is FALSE?
a) Translation is the process under which local currency results are translated into the functional currency.
b) When using the current rate method to record foreign subsidiary results, gains and losses arising from the translation process are reported separately as a component of stockholders' equity and excluded from reported net income.
c) If the functional currency of a foreign-based subsidiary of an American company is the local currency, the current rate method of translation should be used for consolidation purposes.
d) Reported sales in US dollars of revenues from a foreign subsidiary will be the same regardless of the functional currency.
a) Goodwill recorded as the result of an acquisition is defined as the purchase price less the book value of net assets
b) Under SFAS 141, accounting for acquisitions can no longer result in an increase in the consolidated entity's stockholders' equity.
c) One of the problems with purchase accounting is that there is often very little basis for comparability of financial statements before acquisition and after acquisition.
d) One of the problems with consolidated financial statements is that all intercompany transactions are not reported.
Explanation / Answer
a) Goodwill recorded as a result of an acquisition is defined as the purchase price less the book value of the net assets FALSE When the Purchasing company pays an amount higher than the net value of the assets of the Selling Company, it means the Purchasing Company isacquiring it for a premium due to the godwill.Therefore such difference is treated as Good will. b) Translation is the process under which local currency results are translated into the functional currency. FALSE Translation is the process used for expressing the financial results of a separate entity so that it may be included in the parent entity’s consolidated financial statements when the separate entity’s functional currency is different from the parent’s.
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