The Net Incomes for Parent and Sub Inc for the Year

question 23

Multiple Choice

The Net Incomes for Parent and Sub Inc for the year ended July 31, 2012 were $120,000 and $60,000 respectively. Assuming Parent purchased 80% of Sub Inc. for $180,000; the Assets section of Parent's Consolidated Balance Sheet on the date of acquisition (August 1, 2012) would total what amount under the Entity Method?

• A) $552,000
• B) $639,200
• C) $651,000
• D) $659,000

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Definitions:

Face Value

The nominal or original value stated on a coin, banknote, security, or any other financial instrument, without accounting for inflation, interest, or any other market factors.

Interest Rate

The percentage at which interest is paid by borrowers for the use of money they borrow from a lender.

Reserve Requirement

The portion of depositors' balances that banks must have on hand as cash, a regulation set by central banks to ensure liquidity.

Deposit Multiplier

The ratio that describes the potential increase in bank deposits that can result from an increase in banks' reserves through the fractional reserve banking system.