When Selling an Investment in a Subsidiary, in Order to Record

question 26

Multiple Choice

When selling an investment in a subsidiary, in order to record the appropriate gain or loss:

• A)​the investment must be adjusted to show the balance under the sophisticated equity method.
• B)​the investment must be adjusted to show the balance under the equity method.
• C)​a final consolidation must be prepared.
• D)​the unamortized balances of the excess of the purchase price over the book value of the investment must be written off.

---

Definitions:

Retained Earnings

The portion of a company's profits that is kept or retained and not paid out as dividends to shareholders, often used for reinvestment.

Without Paying

Referring to a situation or action where no monetary exchange is required to obtain a good or service.

WACC

Weighted Average Cost of Capital, a calculation that reflects the average rate of return a company is expected to pay its securities holders, balancing the cost of equity and debt financing.

Cost Of Equity

The return a company is expected to offer to its shareholders to compensate for the risk they undertake by investing in it.