AInc. purchases 100% of the voting shares of B Inc. on July 1, 2018. On that date, A Inc. would be required to prepare which of the following statements? A) No statement preparation is required. B) A Consolidated Income Statement. C) A Consolidated Balance Sheet. D)A Consolidated Income Statement and a Consolidated Balance Sheet.
XYZ Inc. owns 55% of DEF Inc.'s 100,000 outstanding voting shares. Another company, GHI Inc., owns 40%, with the remaining shares being held by many individual investors. GHI Inc. also owns $25,000,000 worth of DEF Inc.'s $1,000 par value bonds, each of which is convertible to one voting share of DEF Inc. Which of the following statements regarding the control of DEF Inc. is correct? A) XYZ Inc. has control over DEF Inc. as it owns a majority of the latter's currently outstanding voting shares. B) XYZ Inc. does not have control over DEF Inc., as it cannot exercise control over DEF's strategic operating, investing and Financing activities without the cooperation of GHI Inc. C) XYZ Inc. has de facto control over DEF Inc. D)As long as GHI Inc. does not exercise its option to convert its bonds to voting shares, XYZ Inc. has control over DEF Inc.
Zen Inc. owns 35% of Sun Inc.'s voting shares. Zen is by far the largest single shareholder of Sun Inc.'s shares, with the rest of Sun's shares being very widely held by individual investors. There was a very poor turnout at Sun Inc.'s recent annual meeting, enabling Zen Inc. to elect the majority of Sun's Board of Directors. Does Zen control Sun under IFRS? A) No, Zen does not control Sun because it cannot exercise control over Sun without the cooperation of Sun's other shareholders. B) Yes, Zen controls Sun because it is Sun's single largest shareholder group. C) Yes, Zen is deemed to control Sun because it has elected a majority of Sun's Board members and the other shareholders are not organized in such a way to actively cooperate when they vote. D)Zen could only control Sun if it owned 50% of Sun's voting shares.
Which of the following statements is correct? A) Under the New Entity Method, both of the company's net assets are recorded at their fair market values for these assets on the date of acquisition. B) Under the Acquisition Method, the acquirer company's net assets are recorded at the price paid for the assets on the date of acquisition. C) As of January 1st, 2011, the New Entity Method must be used to account for business combinations where an acquirer can be identified. D)The Acquisition Method is consistent with the historical cost principle while the New Entity Method is not.