C243 Advanced Financial Accounting - Chapter 3, 4, 5, Exam Review Questions and answers, Rated A+

Implied Fair Value of Subsidiary formula - -Acquisition Cost / % of Common Stock acquired (represents how much the parent corporation would have to pay if they purchase the entire subsidiary - that is all of the subsidiary's outstanding common stock) Book Value of Subsidiary = Book Value of Subsidiary's Net Assets = VB of Subsidiary's Stockholders' Equity (think A=L+SE or A-L=SE) - Calculation of Differential (excess) - -= Implied FV of Subsidiary - BV of Subsidiary -When you determine what your differential is, now you have to allocate it to identifiable assets, liabilities, and goodwill undervalued assets = fv of asset bv of asset (positive differential) overvalued asset = fv of asset book value of asset (neg differential) BV of asset = FV of asset (assign no differential to asset)