Asked by anthony triguero on Jul 22, 2024
Verified
Pennant Corp. owns 70% of the common stock of Scarvens Co. Scarvens's revenues for 2020 totaled $200,000.Required: What amount of Scarvens' revenues would be included in the consolidated revenues under the acquisition method of accounting for business combinations?
Acquisition Method
A set of procedures used in accounting to consolidate the financial statements of a parent company and its subsidiaries.
Consolidated Revenues
The total earnings generated by a company and its subsidiaries, reported together as a single figure.
- Attain expertise in the procedure of merging a subsidiary’s financial accounts with the parent company’s records.
Verified Answer
HV
Himani VermaJul 25, 2024
Final Answer :
The entire amount of the subsidiary's revenues is combined with the parent's revenues to arrive at consolidated revenues. The exception to this would be the case of a midyear acquisition. If Pennant owned its shares of Scarvens for all of 2020, all of Scarvens's revenues ($200,000) would be combined. If Pennant owned its shares of Scarvens for only a portion of 2020, any of Scarvens's revenues earned prior to the acquisition would be excluded from consolidated revenues.
Learning Objectives
- Attain expertise in the procedure of merging a subsidiary’s financial accounts with the parent company’s records.
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