When a Parent Uses the Initial Value Method Throughout the Year

question 85

Multiple Choice

When a parent uses the initial value method throughout the year to account for its 80% investment in an acquired subsidiary, which of the following statements is true at the date immediately preceding the date on which adjustments are made on the consolidated worksheet?

• A) Parent company net income equals consolidated net income.
• B) Parent company retained earnings equals consolidated retained earnings.
• C) Parent company total assets equals consolidated total assets.
• D) Parent company dividends equal consolidated dividends.
• E) Goodwill is recorded on the parent's books.

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Definitions:

Diminishing Marginal Utility

The principle stating that as a person consumes more of a good or service, the satisfaction gained from each additional unit decreases.

Utility Maximizer

An economic concept referring to consumers who select goods or services in a way that maximizes their total satisfaction or utility.

Utility From Milk

The satisfaction or benefit a consumer receives from consuming milk, assessing its nutritional value and taste preferences.

Optimal Consumption Rule

A guideline suggesting that to maximize utility, consumers should allocate their budget in a way that the last dollar spent on each good or service yields the same level of marginal utility.