How the Existence of a Bargain Purchase Affects the Pre-Acquisition Entries - Assignment Example

In the year of purchase, the surplus is accounted for in the pre-acquisition entry while in the subsequent years, the excess is included in the retained earning opening balances which reduce the value of the balances accounted for any the subsidiary entity as the parent entity paid a small amount for the subsidiary unlike the fair value of the identifiable asset and liabilities of the subsidiary entity.

Question three

Some adjustment entries in the previous period’s consolidation worksheet are also made in the current period’s worksheet.

The consolidated worksheet is merely a worksheet with entries that don’t have an impact on the fundamental financial statement or on the parent accounts. As a result, where previous’s year's profits needed to be modified on consolidation, in that case, significantly the retained earning requires to be modified in the present year. Likewise, a BCVR entry to realize the land at the time of purchase at fair value is made in the consolidation worksheet for every financial period that the land is in possession by a subsidiary entity. The entries don’t have an effect from one year to another. Also, the justification is that the modification to the carrying amount of land is merely executed in the worksheet as well as not in the real records of the subsidiary entity.