Eliminating Entries Are Made by the _____Company to Avoid Double

question 22

Multiple Choice

Eliminating entries are made by the _____company to avoid double counting assets and _____.

• A)parent, equity
• B)parent, liabilities
• C)subsidiary, liabilities
• D)subsidiary, equity

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Definitions:

Pre-tax Net Income

The amount of income earned by a company before taxes are deducted, representing its profitability.

Incremental Cash Flows

Additional cash flows from a new project or investment, considered when evaluating the financial viability of that project.

Stand-alone Principle

An approach to evaluating investment decisions without considering any potential impacts from external projects or operations.

Sunk Cost

A cost that has already been incurred and cannot be recovered, which should not affect future investment decisions.