When a Company Applies the Partial Equity Method in Accounting

question 63

Multiple Choice

When a company applies the partial equity method in accounting for its investment in a subsidiary and the subsidiary's equipment has a fair value greater than its book value, what consolidation worksheet entry is made to convert to full-accrual totals in a year subsequent to the initial acquisition of the subsidiary?

• A) A above.
• B) B above.
• C) C above.
• D) D above.
• E) E above.

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Definitions:

Direct Labor Rate

The cost per hour for labor directly involved in the production of goods or services.

Indirect Labor Rate

The cost of labor that cannot be directly traced to the production of goods or services, but is necessary for the process.

Variable Overhead

Overhead costs that vary directly with the level of production, such as utilities for equipment or variable labor costs.