Intercorporate Inv: Current Assets (Schweser vs CFA) understand, 2010, assets, current

CFA4Techie

I'm looking at the Mock 2010 FSA Merck Manufacturing Vignette

#32

After the acquisition, the current ratio would be lowest under which method. The answer is equity method. Pretty routine stuff.

Note:

equity method current assets is just parent's assets
prop consolidation current assets is parent's + 50% subsidiary
consolidation current assets is combined current current assets

I understand that

Now, I am looking at Schweser Sample exam (not sure which one) FSA: "Valley Airlines"

#97: The balance of Valley's current assets, using the consolidation method is:

The combined current assets of both companies MINUS THE PURCHASE PRICE

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In the CFA mock exam they DID NOT SUBTRACT THE PURCHASE PRICE TO COMPUTE THE CURRENT ASSETS

BUT UNDER SCHWESER THEY SUBTRACTED THE PURCHASE PRICE TO COMPUTE CURRENT ASSETS UNDER CONSOLIDATION

WHICH IS CORRECT?

Analyze_This

I remember this....I'm going off memory, but.....

I messed up I think because the BS presented in the questions are different. 1 is before the the purchase and the other is after.

tikfed

wow, you are right. One balance sheet is "historical 2008" and that one we don't subtract purchase price from current assets

very interesting

but what do we do on the exam?