#37 Introduction to Consolidated Statements

Question 1

Are the results of the consolidating process recorded in the books of the parent or the subsidiary?

Answer 1

Neither, the results of the consolidating process are not recorded on the books of the parent or subsidiary. Instead the results are presented in the form of consolidated financial statements

Question 2

Which one of the following kinds of eliminations, if any, will be required in every consolidating process?

1. Intercompany Receivables/Payables
2. Intercompany Investments
3. Intercompany Revenues/Expenses

Answer 2

Intercompany Investments

Question 3

Consolidated financial statements can be prepared for a business combination that was accounted for using which of the following accounting methods?

A. Acquisition Method
B. Pooling of Interests Method
C. Both

Answer 3

Both

Although the pooling of interests method can no longer be used (since June 30, 2001) to account for new business combinations, business combinations carried out under the pooling of interests method prior to that time still require the preparation of consolidated financial statements.

Question 4

What level of voting ownership is normally assumed to convey significant influence over an investee?

Answer 4

20%-50%

Question 5

Which method(s) may a parent use on its books to carry an investment in a subsidiary that it will consolidate?

Answer 5

A parent may use any method it chooses. The final consolidated financial statements will be the same regardless of the method the parent uses on its books.

Question 6

For the purpose of consolidating financial interests, a majority voting interest is deemed to be what?

Answer 6

Greater than 50% of the directly or indirectly owned outstanding voting shares

Question 7

On the date of a business combination, the consolidated stockholder’s equity will always equal the parent company stockholder’s equity.

True or False?

Answer 7

True