When the Parent Company Is Fully Responsible for the Subsidiary's

question 50

Multiple Choice

When the parent company is fully responsible for the subsidiary's obligations,

• A)the independent financial structure of the subsidiary is irrelevant.
• B)potential creditors will examine the parent's overall financial condition,not the subsidiary's.
• C)the independent financial subsidiary can have the same capital structure as the parent.
• D)all of the options

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Definitions:

Units-Of-Production Method

A depreciation method in which an asset's cost is allocated based on the number of units it produces.

Salvage Value

Salvage value is the estimated residual value of an asset at the end of its useful life.

Units-Of-Production Method

A depreciation method that allocates the cost of an asset over its useful life based on the number of units it produces.

Depreciation Expense

The allocated amount of an asset's cost over its useful life, representing how much of the asset's value has been used in a given fiscal period.