On the Date of Formation of a 100% Owned Subsidiary

question 53

Multiple Choice

On the date of formation of a 100% owned subsidiary by the parent, which of the following statements pertaining to consolidated financial statements is TRUE?

• A) It is possible to prepare consolidated financial statements that include all the assets and liabilities of the subsidiary.
• B) Consolidated financial statements are difficult to prepare because the assets and liabilities of the subsidiary have yet to be determined.
• C) Consolidation requires the elimination of the parent's investment account against the subsidiary's share capital.
• D) Consolidation will not be required since a new legal entity will have been formed.

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Definitions:

Compulsion

The irresistible urge to perform an act repeatedly, often as a way of relieving anxiety, which constitutes part of obsessive-compulsive disorder.

Obsession

Persistent and intrusive thoughts, images, or urges that cause significant anxiety or discomfort.

Checking Behaviour

A type of compulsive behavior characterized by the need to check things repeatedly.

Hallucination

A perception in the absence of external stimuli, manifesting in any of the five senses.