Before Undertaking the Consolidation Process, It May Be Necessary to Make

question 38

Multiple Choice

Before undertaking the consolidation process, it may be necessary to make the following adjustments in relation to the individual statements if the parent and the subsidiary do not use the same accounting policies for like transactions in similar circumstances:

• A) the parent will prepare its own financial statements using the same accounting policies as the subsidiary.
• B) the subsidiary will prepare its own financial statements using accounting policies that are negotiated with the parent.
• C) the subsidiary will prepare its own financial statements using the same accounting policies as the parent.
• D) all of the options are incorrect.

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Definitions:

Accrued Expenses

Expenses that have been incurred but not yet paid for, recognized in the accounting period they are incurred, not when they are paid.

Accounting Period

A specific period of time used for financial accounting purposes, during which financial statements are prepared.

Cash Payments

Outflows of cash from a company to settle obligations or purchase goods and services.

Prepaid Insurance

An asset account that represents the amount paid for insurance contracts in advance for future coverage.