The Investment in a Subsidiary Should Be Recorded on the Parent's

question 12

Multiple Choice

The investment in a subsidiary should be recorded on the parent's books at the

• A) underlying book value of the subsidiary's net assets.
• B) fair value of the subsidiary's net identifiable assets.
• C) fair value of the consideration given.
• D) fair value of the consideration given plus an estimated value for goodwill.

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Definitions:

Equity Method

An accounting technique used to record an investor's proportional share of the associate company's earnings and losses.

Accounting Change

Any significant alteration in accounting policies, estimation methods, or reporting practices that impacts the financial statements of a company.

Voting Shares

Shares of a company's stock that grant the holder the right to vote on corporate matters.

Significant Influence

Refers to the power to participate in the financial and operating policy decisions of an investee but is not control or joint control over those policies.