Which of the Following Adjustments (If Any) to Retained Earnings

question 8

Multiple Choice

Which of the following adjustments (if any) to Retained Earnings is necessary for the preparation of the Consolidated Balance Sheet?

• A) Under both the Cost and Equity methods, the parent must record its share of its
• Subsidiary's income.
• B) Under both the Cost and Equity methods, the parent must record its share of its
• Subsidiary's income less any dividends received from the subsidiary.
• C) No adjustment is required under either the Cost or the Equity methods.
• D) No adjustment is required if the parent has been using the Equity Method.

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Definitions:

Profit-Volume Chart

A graphical representation that shows the relationship between a company's profits and its volume of sales, illustrating the break-even point and profit levels at different sales volumes.

Cost-Volume-Profit Chart

A chart that graphically shows sales, costs, and the related profit or loss for various levels of units sold. Also called a break-even chart.

Sales Mix

The combination of different products or services that a company sells, impacting its overall profitability.

Operating Leverage

The degree to which a firm can increase operating income by increasing revenue, a measure of how sales growth translates to growth in operating income.