When a Parent Company Purchases Shares in a Subsidiary Company

question 12

Multiple Choice

When a parent company purchases shares in a subsidiary company for cash and the shares are cum div,the journal entry in the parent's accounts is:

• A)Debit Shares in subsidiary Debit Dividend receivable Credit Cash
• B)Debit Shares in subsidiary Credit Cash Credit Dividend payable
• C)Debit Dividend payable Credit Cash
• D)Debit Cash Credit Dividend revenue

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Definitions:

Economic Events

Activities or occurrences that have a significant financial impact on the businesses or the economy as a whole.

Unit of Accountability

A fundamental concept in accounting and finance, referring to the smallest measurable amount for which financial activities or transactions are recorded and reported.

Insurance Expense

The cost incurred by a business to insure its assets, operations, or liabilities over a certain period.

Asset Account

An account on a company's balance sheet that represents a resource with economic value that is controlled or owned.