The Parent Company Records Its Share of a Subsidiary's Income

question 38

Multiple Choice

The parent company records its share of a subsidiary's income by:

• A) crediting Investment in S Company under the partial equity method.
• B) crediting Equity in Subsidiary Income under both the cost and partial equity methods.
• C) debiting Equity in Subsidiary Income under the cost method.
• D) none of these.

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Definitions:

Forward Interest Rate

An interest rate agreed upon now for a loan that will start at a future date, often indicative of market expectations for future interest rates.

Par Value

The nominal or face value of a stock or bond, which is the original value assigned when the security is issued.

Yield Curve

A graph showing the relationship between interest rates of bonds of equal credit quality but different maturities, often indicating economic expectations.

Short-Term Rates

The interest rates on debt securities that mature in the short term, often less than one year, which are a key indicator of the monetary policy stance of an economy.