Able Company Owns an 80% Interest in Barns Company and a 20

question 39

Multiple Choice

Able Company owns an 80% interest in Barns Company and a 20% interest in Carns Company.Barns owns a 40% interest in Carns Company.

• A)​Carn will not be included in the consolidation process
• B)​Carn will be included in the consolidation process; 20% of prior period amortizations will be distributed to Retained Earnings-Carns
• C)​Carn will be included in the consolidation process; 40% of prior period amortizations will be distributed to Retained Earnings-Carns
• D)​Carn will be included in the consolidation process; NCI will be allocated 6.4% of prior-period profits originated by Carns

Recognize the processes and outcomes of hedging strategies using derivative securities.

Identify the differences between forward contracts and options, and their respective valuation mechanisms.

Understand the role and operation of swap dealers within the derivatives market.

Define and explain the concept of a perfect hedge and its implications for financial risk management.

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Definitions:

Unit Costs

The investment required by a company to develop, keep, and trade one instance of a specific product or service.

Plant Size

Plant size refers to the capacity or physical extent of a manufacturing or production facility, which impacts its output and efficiency levels.

Minimum Efficient Scale

The smallest level of production at which a firm can achieve the lowest long-run average total cost, underscoring economies of scale.

Output

The quantity of goods or services produced by a firm or industry within a certain period of time.