The Equity Method of Accounting Should Be Used When the Parent

question 11

True/False

The equity method of accounting should be used when the parent company owns 100% of the voting stock in its subsidiaries.

Understand the classification of activities reported on the statement of cash flows.

Prepare the statement of cash flows using the indirect method.

Identify and classify operating, investing, and financing activities.

Adjust net income for changes in operating assets and liabilities to arrive at cash flows from operating activities.

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Definitions:

360-Day Year

This is a simplified method used in some financial calculations where the year is assumed to have 360 days for ease of interest computation.

Total Amount

The complete sum or quantity of something, encompassing all components or elements.

Ordinary Interest

Interest that is calculated based on a 360-day year, often used in banking and finance for simplifying interest calculations on loans and investments.

Exact Interest

This refers to the method of calculating interest based on a 365-day year or actual number of days in a month, providing a precise interest calculation.