When a Parent Sells Its Interest in a Subsidiary,any Profit

question 34

Multiple Choice

When a parent sells its interest in a subsidiary,any profit or loss generated by the subsidiary:

• A) is transferred to the parent's investment in subsidiary account, and used to calculate the amount of profit or loss on the sale of the shares.
• B) is immediately transferred to the equity section of the consolidated accounts, and is then available from distribution to shareholders.
• C) is set off against any remaining balance in the goodwill on acquisition account, with any remaining amount distributed as dividends to the new owners.
• D) is to be recorded in the consolidated financial statements for the period of the year that the parent had control of the subsidiary.
• E) is to be recorded in the parent's financial statements for the period of the year that the parent had control of the subsidiary.

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Definitions:

Diversification Levels

Degrees to which an organization expands its operations or investments into new areas that are distinct from its core activities.

Human Resource Management

A methodical plan for the efficient management of personnel within a company or organization aimed at achieving a competitive edge in the business.

Acquisition

The process by which one company purchases most or all of another company's shares to gain control of that company.

Organizational Success

The achievement of the goals and objectives set by an organization, often measured by financial performance, market share, or the realization of its strategic aims.