A Parent Company Uses the Partial Equity Method to Account

question 31

Multiple Choice

A parent company uses the partial equity method to account for an investment in common stock of its subsidiary.A portion of the dividends received this year were in excess of the parent company's share of the subsidiary's earnings subsequent to the date of the investment.The amount of dividend income that should be reported in the parent company's separate income statement should be

• A)zero.
• B)the total amount of dividends received this year.
• C)the portion of the dividends received this year that were in excess of the parent's share of subsidiary's earnings subsequent to the date of investment.
• D)the portion of the dividends received this year that were NOT in excess of the parent's share of subsidiary's earnings subsequent to the date of investment.

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Definitions:

Premium on Bonds Payable

Premium on Bonds Payable refers to the amount by which the bond's selling price exceeds its face value or par value.

Interest Expense

The cost incurred by an entity for borrowed funds over a period, represented as an expense on the income statement.

Bonds Before Maturity

The buying or selling of bonds in the financial markets before they have reached their specified maturity date.

Extraordinary Item

A term used in accounting to describe events and transactions that are both unusual and infrequent in nature, significantly affecting a company's financial position.