Which of the Following Statements Is True Concerning Connecting Affiliations

question 90

Multiple Choice

Which of the following statements is true concerning connecting affiliations and mutual ownerships?

• A) In a mutual ownership, at least two companies in the consolidated group own portions of a third company.
• B) There are at least four companies in a connecting affiliation.
• C) In a connecting affiliation, at least one subsidiary owns stock in the parent company.
• D) In a mutual ownership, the subsidiary owns a portion of the parent's stock.
• E) There are only two companies in a connecting affiliation.

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Definitions:

Direct Write-off Method

An accounting method where uncollectable accounts receivable are directly written off against income at the time they are deemed nonrecoverable.

Uncollectible Accounts

Accounts receivable that are considered unlikely to be collected and therefore written off as an expense to the business.

Allowance Method

An accounting technique used to estimate uncollectible accounts receivable and adjusting the books accordingly.

Bad Debts

Accounts receivable that are considered uncollectible, leading to a financial loss for the company.