A Inc Purchased 100% of the Voting Shares of B Inc

question 26

Multiple Choice

A Inc. purchased 100% of the voting shares of B Inc. on July 1, 2019. Which of the following statements is TRUE?

• A) The 2019 Consolidated Income Statement will include only the income of A Inc. from January 1, 2019 to June 30, 2019 and income for both A Inc. and B Inc. from July 1, 2019 to December 31, 2019.
• B) The 2019 Consolidated Income Statement will include income for both A Inc. and B Inc. for the entire year.
• C) The 2018 Income Statement (i.e. the comparative year), will retroactively include income for both A Inc. and B Inc.
• D) The Consolidated Income Statement for 2019 will only include income from A Inc.

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Definitions:

Break-even Point

The point at which total costs and total revenue are equal, leading to neither profit nor loss.

Fixed Expenses

Costs that remain constant regardless of the level of goods or services produced, such as salaries and rent.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes towards covering fixed costs and generating profit.

Contribution Format

A type of income statement where costs are segregated into variable and fixed, highlighting the contribution margin.