When a Parent Sells Its Interest in a Subsidiary,any Profit

question 34

Multiple Choice

When a parent sells its interest in a subsidiary,any profit or loss generated by the subsidiary:

• A) is transferred to the parent's investment in subsidiary account, and used to calculate the amount of profit or loss on the sale of the shares.
• B) is immediately transferred to the equity section of the consolidated accounts, and is then available from distribution to shareholders.
• C) is set off against any remaining balance in the goodwill on acquisition account, with any remaining amount distributed as dividends to the new owners.
• D) is to be recorded in the consolidated financial statements for the period of the year that the parent had control of the subsidiary.
• E) is to be recorded in the parent's financial statements for the period of the year that the parent had control of the subsidiary.

---

Definitions:

Industrial Production

The total output, often measured in physical units, of factories, mines, and utilities within an economy.

Inflation

The tempo at which the general cost of goods and services rises, weakening the purchasing strength.

Accruals

The accounting practice of recording revenues and expenses when they are incurred, regardless of when cash transactions happen.

Net Working Capital

The difference between a company's current assets and current liabilities, indicating its short-term financial health and ability to cover short-term liabilities.