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

question 77

Multiple Choice

When the parent company 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 above

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Definitions:

FIFO Method

A technique for inventory valuation and cost determination where goods first introduced into inventory are the first to be sold.

Process Costing System

An accounting method used for homogeneous products, where costs are assigned to processes or departments and averaged over the units produced.

Weighted Average Method

An inventory costing method that calculates the cost of goods sold and ending inventory based on the weighted average cost of all goods available for sale.

Finished Goods

Items that have been fully produced but are still awaiting sale or distribution to buyers.