One Weakness Associated with the Entity Theory Is That

question 18

Multiple Choice

One weakness associated with the Entity Theory is that:

• A) it is inconsistent with the Historical Cost Principle.
• B) Non-Controlling Interest is computed using the fair market values of the subsidiary's net assets.
• C) Non-Controlling interest is computed using the book values of the subsidiary's net assets.
• D) the presumed acquisition cost may be unrealistic when the parent purchases significantly less than 100% of the subsidiary's voting shares, or voting control is achieved incrementally.

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Definitions:

Annual Interest

Interest calculated over a 12-month period on the principal sum of a loan or deposit.

Loan Amount

The total sum of money borrowed by an individual or entity from a lender, which is expected to be repaid with interest.

Future Value

The value of a current asset at a specified date in the future based on an assumed rate of growth over time.

Present Value

The current evaluation of a forthcoming cash amount or cash flow series, considering a specific rate of financial return.