How Would the 10% Investment in Prescott Owned by Bell

question 94

Multiple Choice

How would the 10% Investment in Prescott owned by Bell be presented in the consolidated balance sheet?

• A) The 10% investment would be eliminated and no amount would be shown in the consolidated balance sheet.
• B) The 10% investment would be reclassified in Bell's balance sheet as Treasury Stock before the consolidation process begins.
• C) The 10% investment would be eliminated and the same dollar amount would appear as treasury stock in the consolidated balance sheet.
• D) The 10% investment would be included as part of Additional Paid-In Capital because it is less than 20% and therefore indicates no significant influence is present.
• E) Prescott would treat the shares owned by Bell as if they had been repurchased on the open market, and a treasury stock account would be set up on Prescott's books recording the shares at their fair value on the date of combination.

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