Consolidated Financial Statements

Question 1

The equity method is used to account for investments in subsidiaries when the parent owns what percentage of investee stock?

A Less than 20%

B Between 20% and 50%

C Between 50% and 80%

D Greater than 80%

Answer 1

B

Question 2

At what value are available for sale securities accounted for on the Balance Sheet?

A Purchase price

B Fair market value

C Cash realizable value

D Face value

Answer 2

B

Question 3

Minority passive investments can be classified as each of the following types of securities except:

A Available for sale securities

B Held to maturity securities

C Consolidated securities

D Trading securities

Answer 3

C

Question 4

Consolidation requires each of the following steps except:

A Eliminate minority interest from the income statement and balance sheet

B Add parent and subsidiary accounts

C Eliminate intercompany transactions

D Eliminate intercompany related assets and liabilities

Answer 4

A

Question 5

Under the equity method, what affect do dividends have on the accounts of the investing company?

A Increase cash and decrease investment

B Increase cash and increase investment

C Decrease cash and decrease investment

D Decrease cash and increase investment

Answer 5

A