When Preparing a Consolidation Worksheet for a Parent and Its

question 40

Multiple Choice

When preparing a consolidation worksheet for a parent and its foreign subsidiary accounted for under the equity method, which of the following statements is false?

• A) The cumulative translation adjustment included in the Investment in Subsidiary account is eliminated.
• B) The excess of fair value over book value since the date of acquisition is revalued for the change in exchange rate.
• C) The amount of equity income recognized by the parent in the current year is eliminated.
• D) The allocations of excess of fair value over book value at the date of acquisition are eliminated.
• E) The subsidiary's stockholders' equity accounts as of the beginning of the year are eliminated.

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Definitions:

Balance Sheet

A document detailing a business's resources, financial obligations, and the equity of its shareholders at a given time.

LIFO

An accounting method for valuing inventory that assumes the most recently acquired items are sold first, with costs of older inventory used for valuation.

Ending Inventory Balance

The value of unsold goods that a company holds at the end of an accounting period.

Cost Of Goods Sold

The total direct expenses related to producing goods sold by a business.